SALES

NATURE AND FORM OF CONTRACT

Articles 1458 -1488

Define sale?

Sale is a contract where one party (seller/vendor) obligates himself to transfer the
ownership of and deliver the determinate thing, while the other party (buyer or
vendee) obligates himself to pay for said thing a price certain in money or its
equivalent. (Art. 1458)

Suppose art. 1458 didn’t specify that the seller must transfer the ownership of
the object, does he still have this obligation?

Yes, for after all, this transfer of ownership is clearly the fundamental aim of the
contract. A buyer is not interested in a mere physical transfer: he is after ownership.

What are the characteristics of the contract of sale?

A contract of sale is a.) Consensual; b.) Bilateral reciprocal; c.) Onerous; d.)
Commutative; e.) Principal; f.) Nominate

Why is the contract of sale an onerous contract?

A sale is onerous, because to acquire the rights, valuable considerations must be

given.

Why is the contract of sale a consensual contract?

Sale is consensual, because the contract is perfected by mere consent.

Why is the contract of sale a bilateral reciprocal contract?

Sale is bilateral consensual, because both parties are bound by obligations

dependent upon each other.

Why is the contract of sale a commutative contract?

Sale is commutative as a rule, because the values exchanged are almost

equivalent to each other.

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Why is the contract of sale a principal contract?

Sale is a principal contract, because for the contract to validly exist there is no
necessity for it to depend upon the existence of another valid contract.

Why is the contract of sale a nominate contract?

Sale is a nominate contract, because the Code refers to it by a special designation, i.e.,
the contract of sale.

What are elements of a contract of sale?

The elements of a contract of sale are a.) consent or meeting of the minds, b.)
Determinate subject matter, c.) price certain in money or its equivalent.

What are the stages in a contract of sale?

The stages of a contract of sale are a.) generation or negotiation, b.) perfection, c.)
consummation.

Distinguish sale from a lease contract?

In a sale, the seller transfer ownership; in a lease contract, the lessor or landlord
transfer merely the temporary possession and use of the property.

Classify or give kinds of a contract of sale?

Generally, they are: 1. Absolute-when the sale is not subject to any condition, 2.
Conditional- when the sale contemplates a contingency or is subject to a certain
condition.

Define natural elements of a contract of sale?

Those which are inherent in the contract, and which in the absence of any contrary
provision, are deemed to exist in the contract.

What is an accidental elements in a contract of sale?

Those which may be present or absent in the stipulation, such as place or time of
payment, or the presence of a condition.

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What are the requisites of the thing which constitutes the object of sale?

1. The thing must be existing. 2. Thing must be licit or legal. 3. thing must be
determinate or capable of being determined without the need of a new contract. 4.
The vendor must have a right to transfer ownership of the thing at the time it is
delivered.

When is a thing determinate?

It is determinate when the thing is particularly designated or physically segregated

from all others of the same class. But a thing is still determinate if at the time the
contract is entered into, the thing is capable being more determinate without
necessity of a new further agreement of the parties. (Art. 1460)

Seller sold 500 piculs of sugar to buyer. Because seller was not able to produce
500 piculs of sugar on said plantation he was not able to deliver. Is he liable?

Yes, because no specific lot of sugar can be pointed out as having been lost. Sugar
here was still generic.

Is a sale of a future thing valid?

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

Distinguish Rei Sperati from Emptio Spei?

Emptio rei sperati (sale of an expected thing), if the expected thing does not
materialize, the sale is not effective. While, emptio spei ( sale of the hope itself) it
does not matter whether the expected thing materialized or not; what is important is
that the hope itself validly existed. (Art. 1461)

What is Emptio rei speratae?

Emptio rei speratae is a sale of a future thing certain as to itself but uncertain as to its
quality or quantity. Such sale is subject to the condition that it shall come into
existence.

Give examples of things having potential existence and therefore may be

objects of valid sales?

Wine which a vineyard is expected to produce; fruits to grow; milk that a cow may
yield in the coming year: wool which may grow upon a sheep.

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What are future goods?

Future goods are those still to be a.) manufactured, b.) raised, c.) acquired by seller
after the perfection of the contract, d.) things whose acquisition depends upon
contingency which may or may not happen. (Art. 1462)

What are the goods which may form the subject of a contract of sale?

They may either be: 1. Existing goods, 2. Future goods.

May the sole owner of a thing sell an undivided interest therein?

Yes, Art, 1463 of the civil code states: The Sole owner of a thing may sell an undivided
interest therein.

What is the effect if the sole owner of a thing would sell an undivided interest in
such thing?

The buyer becomes a co-owner over the thing.

May a property subject to reserva troncal be sold?

Yes, Article 1465 of the civil code states. Things subject to a resolutory condition may
be the object of a contract of sale.

Distinguish sale from agency?

In sale, the buyer pays the price; the agent delivers the price which in turn he got
from his buyer. In sale, the buyer after delivery becomes the owner; the agent who is
supposed to sell does not become the owner, even if the property has already been
delivered to him.

Is there a distinction between a contract of sale and a contract to sell?

Yes. In the contract of sale, the title pass to the buyer upon delivery of the thing sold,
while, in contract to sell, ownership is reserved to the seller and is not to pass until
full payment of the purchase price is made.

Y acquired a booklet of 1oo sweeptake tickets directly from PCSO. Y, paid

18,000 for the booklet, less the customary discount. What kind of contract did
Y enter into?

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Y entered into a contract of purchase and sale. Y, become the agent of PCSO.

What is the rule to determine if the contract is one of sale or a piece of work?

If ordered in the ordinary course of business, Sale. If manufactured specially and not
for the market it is a contract for a piece of work. (Art. 1467)

What is a contract for a piece of work?

Contract for a piece of work- goods are to be manufactured specially for the customer
and upon his special order, and not for the general market.

If I ask someone to construct a house for me, is this a contract of sale or for a
piece of work.

It is a contract for a piece of work. But, if he will construct on his own land, and I will
get both the land and the house, it would seem that this can be very well treated as a
sale.

What is the rule to determine whether the contract entered into is one of sale or
barter?

1st rule- intent of parties. 2nd rule- if intent does not clearly appear: 1. If thing is more
valuable than money- barter, 2. 50-50- sale, 3. If thing is less valuable than money-
sale. (Art. 1468)

What is barter?

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.

If I give my truck worth 1 million to Sacra in consideration of Sacra’s giving to

me .4 million cash, and a car worth .6 million, is the transaction a sale or a
barter?

It depends on the mutual intent of the parties. If the intent is not clear, the
transaction is barter.

What are the requisites of price in the contract of sale?

Price must observe the following requisites: 1. Price must be in money or its
equivalent. 2. Price must be certain or ascertainable. 3. Price must be real not
simulated.

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When price is considered certain?

Price is considered certain when it is referred to another thing certain, or it will be

determined by a specified person.

Rey’s right in Y Company was sold in 3/100 of the entire net value of the
business. Said value was, in turn, to be fixed by a specified board of assessors.
Is the price certain?

Yes, for there was no need of any further meeting of the minds on the price.

What is the effect of gross inadequacy of price?

As a rule, it does not affect the contract of sale, except it may indicate: 1. Defect in the
consent; or 2. The parties really intended a donation or some other forms of contract;
however, if the inadequacy of price results in lesion or badge of fraud against the
creditors, then, the contract is rescissible.

May the fixing of a price left to the discretion of one of the contracting parties?

No, as a general rule. However, if the price fixed is accepted by the other party, the
sale is perfected.

If the price is simulated, what is the effect on the contract of sale?

The sale is void but the act may be shown to have been in reality a donation or some
other act or contract.

What is the effect if the simulated price is fictitious?

There being no price, there is no cause or consideration; hence, the contract is void
as a sale.

When price is considered certain?

Price is considered certain if it could be determined with reference to another thing

certain.

What could be the effect if the price of securities cannot be ascertained?

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If the price cannot really be ascertained, the sale is inefficacious because what last
clause of article 1472 provides is that price must be certain.

Delia sold to Mar a fountain pen today at the price equivalent to the stock
quotation two days from today of 100 shares of Jacks Corporation. Is the sale
valid?

Yes provided the stock quotation price two days later can be ascertained, otherwise if
it cannot be ascertained at the time or two days from today the sale is inefficacious.

Why price is cannot be left to the discretion of one of the contracting parties?

Price cannot be left to the discretion of one of the contracting parties for it cannot be
said that the other consented to the price he did not and could not previously know.
Moreover, to be just, the price must be determined impartially by both parties.

What is the effect if determination of price be left to the vendor?

If left to the judgment of the vendor, the transaction may be valid as donation if he
can share that such was the intention of both parties to the contract and if there are
no reasons of a different nature which militate against its validity.

Is the contract perfected if the price fixed by one party but accepted by the
other?

Yes, where the price fixed by one party is accepted by the other, the contract is
deemed because in this situation there exist true meeting of minds upon the price.

Almar sold to Basty his car. It was agreed that Basty would fix the price a week
later. At the appointed time Basty named the price at P500,000.00. Almar
agreed. Is the sale perfected?

Yes, for there exist a true meeting of mind between Almar and Basty when Basty
accepted the price being named by Almar.

Give the effect of failure to determine price where the contract is executor?

If the price cannot be determined in accordance with the Civil Code, or any other
manner, the contract without is without effect. Consequently, there is no obligation
on the part of the vendor to deliver the thing and the part of the vendee to pay.

What if delivery has been made what would be the effect?

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If the thing or any part thereof has already been delivered or appropriated by the
buyer, the latter must pay a reasonable price therefore. The reasonable price or value
of goods is generally the market price of the object of the contract.

Ayson and Badz entered into a contract that is complete in itself, except that
there was no agreement with reference to the price. What would be the basis of
the price of the object of the contract?

If the terms of sale are complete except for an agreement with reference to the price,
the Law implies a price equivalent to the reasonable value of the goods in case where
the buyer has appointed the thing sold. And where the buyer accepts the delivery
knowing the price claimed by the seller, he cannot thereafter refuse to pay for it at
price even when there is no agreement as to price.

If the vendor has made use of the thing delivered, is he still not obliged to pay
the vendee?

Where the goods are delivered and was used by the buyer, he should not be allowed
to enrich himself unjustly at another’s expense. So he must pay reasonable price. The
seller’s price however, must be the one to be paid if the buyer knew how much the
seller was charging and there was an acceptance of the goods delivered. This implies
that there is an implied assent to the price fixed.

What are the requisites for a perfection of a Contract of Purchase or Contact of

Sale?

The requisites for a perfection of a Contract of Purchase or Contact of Sale are:

1. From the moment the parties has agreed upon a determinate thing;
2. The object of the contract; and
3. Certain price whether in money or something representing it.

When is Contract of Sale perfected?

The Contract of Sale being a consensual contract is perfected by mere consent.

Give the effect of failure to pay price, or the non-delivery of the thing bought?

Valid. Failure to pay price, or the non-delivery of the thing bought will not render the
contract not perfected because Contract of sale is a consensual contract thus
perfected by mere consent.

Delivery of the thing bought or payment of the price is not necessary for the
perfection of the contract and failure of the vendee to pay the stipulated price after
the execution of the contract does not convert the contract into one without cause or
consideration as to vitiate the validity of the contract, it not being essential for the

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existence of the cause that payment or full payment be made at the time of the
contract. For lack of consideration act results at most in default on the part of the
vendee for which the vendee may exercise his legal remedies.

Give the exceptions where contract is perfected by mere delivery?

The exceptions are:

1. When by virtue of stipulation of parties or law of the sale is subject to suspensive
condition, the contract is perfected only from the fulfillment of the condition.
2. Where the contract was expressly made subject to the approval of higher
authorities.

What is the effect of perfection?

One’s contract is perfected, nothing is left to the parties to do except the execution of
their mutual obligation, whereby it gives the vendee the right to compel the vendor to
deliver the thing but acquire no real right over it until the delivery is made.

When is sale by auction perfected?

The sale by auction is perfected when the auctioneer announces its perfection by the
fall of the hammer or in other customary manner.

May the bidder retract his bid before the hammer falls?

Yes. Every bidding is merely an offer and, therefore, before it is accepted, it may be
withdrawn. The assent is signified on the part of the seller by knocking down the
hammer.

May the auctioneer withdraw the goods from the sale before the fall of the
hammer?

Yes, unless the auction has been announced to be without reserve. The bid is merely
an offer, not an acceptance of an offer ton sell. Therefore it can be rejected. What the
auctioneer does in withdrawing is merely reject the offer.

When seller can bid in the auction?

The seller or his agent may bid in an auction sale provided:

1. Such right was reserved;
2. Notice was given that the sale is subject to a right to bid on behalf of the seller; or
3. The right to bid by the seller is not prohibited by law or stipulation.

Can the seller employ others to bid for him?

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Yes, provided he has notified the public that the auction is subject to the right to bid
on behalf of the seller. Notice to public must not be fraudulent.

Who may attack the Auction sale?

Last sentence of paragraph 4, article 1476 does not limit the rest of paragraph that in
case seller actually buys, he only can complain. Objection to such sale is also
available to the debtor in an auction for deficiency after the sale.

When is ownership to the thing sold transferred?

Ownership is transferred from the moment there is either actual or constructive

delivery even if the price is not fully paid, when the sale is conditional and ownership
is transferred not upon delivery but payment of price.

What are the kinds of delivery?

The kinds of delivery are:

1. Actual;
2. Constructive

What is the concept of reservati domini or contractual reservation of title?

It is an stipulation where the parties agree that despite delivery, the ownership of the
t ing shall remain with the seller even the purchaser has fully paid the price.

Is the contractual reservation valid?

Yes. The parties may stipulate that despite delivery, the ownership of the thing shall
remain with the seller until the purchaser has fully paid the price.

Distinguish the concept of pactum reservati domini and contract to sell?

The distinctions are:

1. Pactum reservati domini is a form of conditional contract, while, contract to sell
is a contract preparatory to Contract of sale;
2. In the first delivery of the object of contract has been made, while in the second,
there is no delivery yet;
3. In the first non-payment the injured party may file an action for specific
performance or rescission of the contract, while, in the second there can be no
action , for it merely prevents execution of the Contract of Sale.

What are the kinds of promise (scope) provided in article 1479?

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The scopes of article 1479 are:

1. An accepted unilateral promise to sell where the promise decides to buy;
2. An accepted unilateral promise to buy when the promise decides to buy;
3. A bilateral promise to buy where the promise decides to sell reciprocally
accepted, where either party to decides to exact compliance.

Give the effect if unilateral promise is unaccepted?

A unilateral promise or offer45 to sell or to buy a thing which is not accepted creates
no juridical effect or legal bond. Such accepted offer is called policitation.

Define option?

Option is a contract granting a person the privilege to buy or not; to buy a certain
object at any time within the agreed period at a fixed time.

What is the effect of bilateral promise (mutual promise)?

When one party accepts the other’s promise to sell, a determinate thing for a price
certain, it is reciprocally demandable. It generates a binding contract of sale.

How must acceptance of unilateral promise be done?

The acceptance of unilateral promise to sell must be plain, clear, and unconditional.
Therefore, if there is a qualified acceptance with terms different from the offer, there
is no acceptance, that is no promise to buy and there is no perfected sale.

How long is the offer bound by his promise when option is granted?

The offer is bound by his promise by the stipulation of the parties. If there is no
stipulation then the Court will fix the term.

Who bears the lost or deterioration?

a. If the thing is lost before perfection, the seller and not the one who intends to
purchase bears the loss, because there was no cause or consideration, thus, there was
no contract.
b. If thing is lost at the time of perfection, the contract is void or inexistent. The legal
effect is the same as when the object is lost before the perfection of the Contract of
sale.
c. If the thing is lost after perfection but before its delivery, that is, even before the
ownership is transferred to the buyer, the risk of loss is shifted to the buyer, an
exception to the rule of res peruit domino.

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d. If the thing is lost after delivery, the buyer bears the loss fo;;owing the general rule
res peruit domino.

B bought a vessel from S on condition that S could prove he was the owner
thereof by pertinent document. Before the condition was complied with, the
vessel sank in a storm. Can s demand the price?

No, S cannot demand the price. The condition was never fulfilled, therefore the
Contract of Sale was never perfected. Thus S bears the loss.

What if the condition was fulfilled. Is the Sale been perfected?

Yes. If the condition had been fulfilled, the sale would have been perfected, and B
would have to pay the price even if it had not yet been delivered to him.

Bea’s hi-lux was sold on credit. Shortly after its delivery, it was destroyed by
fortuitous event. Is the buyer still liable for the price?

Yes, because after its delivery to him, he became the owner, and therefore it is who
bears the loss.

Define fungibles?

Fungibles are personal property which may be replaced with equivalent thing. It is
apparently same as consumables.

What is the coverage of article 1481?

The coverage of the article is as follows:

1. Sale of goods be description;
2. Sale of goods by sample; and
3. Sale of goods by description and sample

Define the coverage:

1. Sale of goods be description accrue where the seller sells things as being of
particular kind, the buyer not knowing whether the seller’s representations are
true or false, but relying on them as true; or as otherwise stated, where the
purchaser has not seen the article sold release on the description given him by the
vendor, or has seen the goods but the want of identity do not apparent on
inspection.
2. Sale of goods by sample, it is that where the seller warrants that the bulk of the
goods shall correspond with the sample in kind, quality, and character. Only the

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sample is exhibited. The bulk is not present and so there is no opportunity to

exercise or inspect it.
3. Sale of goods by description and sample, must satisfy all warranties appropriate
to either kind of sale, and it is not sufficient that the bulk of the goods correspond
with the sample if they do not also correspond with the description.

May the contract be rescinded if the bulk of goods do not correspond with the
description?

Yes. If the bulk of goods does not correspond with the description the buyer may
rescind the contract.

When may the buyer rescind a contract?

The buyer may rescind a contract when:

1. If the bulks of goods delivered do not correspond with the description;
2. If the bulks of goods delivered do not correspond with the sample.

Is it sufficient that the bulk of goods correspond with the sample, but not
correspond with the description?

No, it is not sufficient that the bulk of goods correspond with the sample, but not
correspond with the description.

Define earnest money?

Earnest money is a money given by the buyer to the seller to had the bargain. It is
actually a partial payment of the purchase price and is considered proof of perfection
of the contract.

Is earnest money deductable from the total price?

Yes, since earnest money constitutes advance payment it must be deducted from the
total price.

What is option money?

Option money is a money given as distinct consideration for the option contract.

Distinguish earnest money and option money?

Earnest money as distinguish from option money is that:

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1. the former is part of purchase while the latter is the money given as distinc
consideration for the option contract;
2. the former is given only when there is already sale, while the latter applies to a
sale not yet perfected; and
3. when earnest money is given, buyer is bound to pay balance, while when the
woud- buyer fives option money, he is not required to buy.

Can option money become earnest money?

Yes, option money can become earnest money when parties so stipulate.

What is the form of a contract of Sale?

Contract of Sale may entered into in any form provided the essential requisites for its
validity are present.

When statute of fraud applicable?

Statute of frauds is applicable only to executor contracts, where no performance has

been done and not to contracts which are totally or partially performed.

What is the reason for the rule that statute of fraud is applicable only to
executor contracts?

The reason of the rule is that partial performance, like the writing, furnishes reliable
evidence of the intention of the parties or the existence of the contract. A contrary
rule would result in injustice or unfairness to the party who has performed his
obligation.

Dan orally sold a parcel of land to Jerry. Is the sale valid?

Yes, the sale is valid but it is unenforceable but the law requires that sale of real
property must be in writing to be enforceable.

If the contract of sale is in private writing, then it is valid and binding only as
between the parties and not as against third persons without notice until sale is
registered in the Registry of Property. Dan has the right to compel Jerry to put the
contract in a public document so that it be registered to effect third person.]

In a sale of real property, if made through an agent. Is it valid?

It is void, unless the agent’s authority in writing and to be effective against third
person. And that it must be registered with the Register of Deeds.

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What are the limitations on the forms of a Contract of Sale?

The limitations are:

1. by the provision of the Statute of fraud; or
2. by the provision of applicable statute.

Enumerate the remedies of vendor in sale of personal property payable in

installment?

The vendor of personal property payable in installments may exercise any of the
following remedies:
1. elect fulfillment upon the vendee’s failure to pay;
2. cancel the sale, if the vendee shall have failed to pay two or more installment; or
3. foreclosure the chattel mortgage, if one has been constituted if the vendee shall
have failed to pay two or more installments.

Give the requisites before any of the remedies maybe applied?

The requisites are:

1. there must be a contract;
2. the contract must be one of a sale;
3. it is sale of personal property; and
4. sale must be an installment plan.

What is the purpose of the enumeration of the remedies?

The purpose is to prevent abuse of the foreclosure of chattel mortgage by selling at

low price and then suing for deficiency.

What is the nature of the remedies?

The remedies are alternative and not to be exercised cumulatively or successively and
the election of one is waiver of the right to resort to the others.

When the vendor had chosen exact fulfillment of the obligation, could he still
recover from the purchaser unpaid balance of the price?

Yes. The vendor right is not limited to the proceeds of the sale, on execution of the
mortgage goods.

He may still recover from the purchaser the unpaid balance of the price, if any or the
real and personal properties of the purchase not exempt by law, from attachment or
execution.

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What is the remedy of the vendor who chooses cancellation of the contract for
the vendee’s failure to pay two or more installments?

The remedy of the vendor who chooses cancellation of the contract for the vendee’s
failure to pay two or more installments is to demand the return of payments already
made unless there is stipulation to the contrary.

Can vendor who chooses foreclosure of chattel mortgage recover unpaid

balances?

No, if the vendor has chosen the remedy of foreclosure of chattel mortgage, he shall
have no further action against the vendee for the recovery of the unpaid balance of
the price and any agreement to the contrary is void.

How is foreclosure effected?

Foreclosure is effected by selling the mortgaged personal property at public auction

and applying the proceeds of the sale to the satisfaction of the claim secured by the
mortgage.

Give instances that the remedies can not be applied?

Remedies not applied in:

1. Real Estate Mortgage;
2. sale of personal property on straigt terms or cash basis.

Del bought a particular automobile on installment plan. Del defaulted in the

payment of one of the installment. Has the seller Sal, the right to exact
fulfillment of the obligation to pay?

Yes, specific performance does not require default in two or more installments,
unlike cancellation and foreclosure of chattel mortgage.

B bought a particular laptop, but defaulted in the payment of two installments.

May the seller ask for the cancellation of the sale?

Yes, because two installments are already in default.

What is the scope of article 1485?

It shall be applied to contracts purporting to be leases of personal property with

option to buy, when the lessor has deprived the lessee of the possession or enjoyment
of the thing.

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Give the reason for the rule on Lease of Personal Property with option to buy?

The reason is that this may really considered sale of personal property in
installments. Thus it is to prevent indirect violation of the remedies of the vendor on
sale of personal property when vendee fails to pay installment.

What is the meaning of the clause “when the lessor has deprived the lessee of
the possession or enjoyment of the thing?

This means that for failure to pay, the lessor is apparently exercising the right of an
unpaid seller, and has taken possession of the property. This is so even if the
property had been given up in obedience to the lessor’s extrajudicial demand, such
surrender not really voluntary.

When lease construed as Sale?

Even if the word lease is employed when the sale on installment is evidently
intended, it must be construed as a Sale.

May a party stipulate that the installments or rent paid shall not be returned?

Yes, In sale of personal property by installment a lease of personal property with

option to buy, the parties may stipulate that the installment or rents paid are not to
be returned. Such stipulation is valid insofar as not unconscionable.

What is the happen if the stipulation is unconscionable?

If the stipulation is unconscionable the Court has the power to order the return of a
portion of the total amount paid in installment or rents.

What happen when the parties has no stipulations the installment or rents be
returned?

If there is no stipulation that installment or rents paid be returned, the installment

be returned minus reasonable rent.

B bought a car from S on installment. It was agreed that the installments

already paid should not be returned even if then sale is cancelled. Is the
stipulation valid?

Yes. The stipulation is valid unless unconscionable.

Who pays for expenses in execution and registration?

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The vendor (seller) has the duty to pay not only expenses for execution of the sale,
but also for the registration of the same in the absence of any agreement between the
parties.

B sells his car to C, they agree that the expenses for registration be borne by C.
is the stipulation valid?

Yes. Parties may stipulate as who bears the expenses of execution and registration
provided it is not unconscionable.

Who bears the expenses incurred subsequent to the transfer of title?

Expenses incurred are to be borne by the buyer, unless caused by the fault of the
seller.

What is the nature of expropriation?

Expropriation is involuntary in nature, that is, the owner may be compelled to

surrender the property after all the essential requisites have been complied with.
Therefore, generally, expropriation does not result in a sale.

What is the exception to the rule?

In the case of Gutierrez v Court of Tax Appeals, May 31, 1957, the Supreme Court
held that the acquisition by the government of private properties thru the exercise of
eminent domain, said properties being justly compensated, is a sale or exchange
within the meaning of the income tax laws and profits derived therefrom are taxable
as capital gain; and this is so although the acquisition was against the will of the
owner of the property and there was no meeting of the minds of the parties.

When is a transaction considered sale?

If the property owner voluntarily sells the property to the government, this would be
a sale, and not an example of expropriation.

Distinguish eminent domain from expropriation.

Eminent Domain refers to the right given to the state, whereas expropriation usually
refers to the process.

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What are the essentials requisites for expropriation?

The essential requisites are the following:

a. Taking by competent authority

b. Observance of due process of law
c. Taking for public use
d. Payment of just compensation

What is just compensation?

Just compensation is the market value PLUS the consequential damages, if any,
MINUS the consequential damages, if any, MINUS the consequential benefits if any.
However, the benefits may be set off only against the consequential if any. However,
the benefits may be set off only against the consequential damages, and not against
the basic value of the property.

What is market value?

It is the price which the property will bring w is brought hen it is offered for sale by
one who desires but is not obliged to sell it, and is bought by one who is under no
necessity of having it.

Province of Camarines Sur v. CA

41 SCRA 388, 1993

The fixing of just compensation in expropriation proceedings shall be made in

accordance with rule 67 of the Rules of Court and not on the basis of the valuation
declared in the tax declaration of the subject property by the owner or assessor which
has been declared unconstitutional.

CAPACITY TO BUY OR SELL

Articles 1489 – 1492

Incapacity to buy may be absolute or relative. Distinguish.

Absolute incapacity is when a party cannot bind himself in any case. Whereas,
relative incapacity is when certain persons, under certain circumstances, cannot buy
certain property.

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What is the effect of purchase by minors?

When minors buy, the contract is generally voidable, but in the case of necessaries,
“where necessaries are sold and delivered to a minor or other person without
capacity to act, he must pay a reasonable price therefor.

Castillo v. Castillo

L-18238, Jan. 22, 1980

If the deed of sale of the land lists as purchasers both the husband and the wife, the
presumption is that it is paraphernal property.

Godinez v. Fong

120 SCRA 223, 1983

If a Filipino sells a parcel of land to a Chinese who later sells the same to another
Filipino, the second sale is VALID because the purpose of the Constitution of
preserving the land in favor of Filipinos has not been frustrated.

What is the reason why generally a husband and wife cannot sell to each other?

The reasons are:

a. to avoid prejudice to third persons

b. to prevent one spouse from unduly influencing the other
c. to avoid by indirection the violation of the prohibition against donations

What are the exceptions wherein a husband and wife can sell property to each
other during the marriage?

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

2. When there has been a judicial separation of property.

In relation to the preceding question, what is the effect of sale?

Generally, a sale by one spouse to another is void. However, not everybody can assail
the validity of the transaction. Thus, creditors who became such after the transaction
cannot assail its validity for the reason that they cannot be said to have been
prejudiced. But prior creditors as well as the heirs of either spouse may invoke the
nullity of the sale. When the proper party brings the actions, the sale should be
declared void by the courts. The spouse themselves, since they are parties to an
illegal act, cannot avail themselves of the illegality of the sale. The law will generally
leave them as they are.

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A husband and his wife were living together under the conjugal partnership
system. May the husband sell his own parcel of land to his wife?

No, because such sale expressly prohibited by law and is, therefore, considered
VOID.

In the preceding problem, who can attack the validity of the sale?

Although the sale is void, not everybody is given the right to assail the validity of the
transaction. For instance, the spouses themselves, since they are parties to an illegal
act, cannot avail themselves of the illegality of the sale, the law will generally leave
them as they are. And also, the creditors who became such only after the transaction
cannot attack the validity of the sale for the reason that they cannot be said to have
been prejudiced. Thus, only people who can question the sale are the following: heirs
of either spouse, as well as prior creditors.

A husband sold his land to his wife. Later, he borrowed money from C. The loan
matured. When C discovered that the husband did not have any cash or any
property, he decided to question the sale that had previously been made in
favor of the wife. Can the creditor go after such property?

No, for he was not yet a creditor at the time the transaction took place. Therefore, it
cannot be said that he had been prejudiced by the sale.

A husband and wife were living under the conjugal partnership system. Later,
because of a quarrel, the wife left the husband, without judicial approval. They
have thus been living apart for the last 10 years. Do you think that they can now
sell the property to each other?

They still cannot, for they are still husband and wife, and there has been no
separation of property agreed before the marriage, nor a judicial separation of
property elected during the marriage.

Would your answer to the preceding problem be the same if there has been
legal separation?

No, the answer will not be the same. One of the effects of legal separation is the
dissolution of the conjugal partnership. Once the conjugal partnership ends, the
system that will prevail is the separation of property system, and here the sale can be
validly done.

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May a husband validly sell the wife’s property for her?

Yes, but only if he acts as an agent for her, with a specific or special power of attorney
to effectuate the sale.

What is the reason for a relative incapacity to buy?

Public policy prohibits the transactions in view of the fiduciary relationship involved.

What is purchase thru another?

“Through the mediation of another”- this must be proved, that is, that there was
really an agreement between the intermediary and the person disqualified;
otherwise, the sale cannot be set aside.

What is purchase by agent himself?

An agent is not allowed, without his principal’s permission, to sell to himself what he
has been ordered to buy; or to buy for himself what he has been ordered to sell. The
fiduciary relations between them estop the agent from asserting a title adverse to that
of the principal. And therefore such a sale to himself would be ineffectual and void
because it is expressly prohibited by law.

What is purchase by attorney?

A lawyer is not allowed to purchase the property of his client which is in litigation. To
do otherwise would be a breach of pre7ofessional conduct and would constitute malpractice.
But assigning the amount of the judgment by client to his attorney, who did not take any
part in the case where said judgment was rendered is valid.

Meaning of “Any others specially disqualified by law”

This refers to those prohibited by reason of the fiduciary relationship involved. This
is so by the principle of “ejusdem generis”. While aliens cannot buy land because of
the Constitution, they do not fall under the phrase “ any others specially disqualified
by law”.

What is the status of sale under Art. 1491?

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Generally, sales entered into in disregard of the prohibition under this article are not
void but they are merely voidable.

At a mortgage foreclosure sale carried out as a result of a judicial proceeding,

A, attorney for the mortgage creditor bought the mortgaged real estate. If A had
bought the property for himself, is the sale void or voidable?

The sale is void. This is so, because it is a contract prohibited by law.

If A had bought the property for his client, did he violate the absolute terms of
Art.1491 of NCC?

If A bought the property for his client, there would be no violation of the prohibition
stated in Art. 1491 because then there would be no breach of trust or confidence in
such a case. He would be merely acting as agent of his client; and under the law, such
client is not prohibited from buying the property.

Suppose that a client executed a deed of assignment of the property which was
the object of litigation in favor of his lawyer who handled his case in said
litigation, may such deed of assignment be ratified?

The nullity of such prohibited contract is definite and permanent and cannot be
cured by ratification. In this aspect, the permanent disqualification of public and
judicial officers and lawyers grounded on public policy differs from the first thee
cases of guardians, agents and administrators, as to whose transactions, it has been
opined that they may be ratified by means of and in the form of a new contract, in
which case its validity shall be determined only by the circumstances at the time of
the execution of the contract.

Republic v Court of Appeals

L-59447, Dec. 27, 1982

The Iglesia ni Kristo, a corporation sole, is not a natural person and has no
nationality, cannot acquire alienable lands of the public domain, and cannot
therefore register the same in its name under an Original Certificate of Title. It may,
however, get a Transfer Certificate of Title since the land covered by this is no longer
“public land”. The INK should be allowed because the true owners are natural
persons.

Maharlika Publishing Corp v. Tagle

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GR 65594, July 9, 1986

The wife of the Chief of the Retirement Division of the GSIS is prohibited from
bidding for the purchase of land foreclosed by the GSIS. The sale to her of such
property, after a public bidding is void.

What is the Applicability of Relative Incapacity to Legal Redemption,

Compromises and Renunciation?

If a ward’s property is sold, the guardian, even if he be an adjacent owner, and even if
all the other requisites for legal redemption are present, cannot exercise the right of
legal redemption.

What is Cross reference?

Refer to the following articles:

a. Legal redemption (Art. 1619, NCC);

b. Compromises (Art. 2028, NCC);
c. Renunciation (Arts. 6 and 1270, NCC).

EFFECTS OF THE CONTRACT WHEN THE

THING SOLD HAS BEEN LOST

Articles 1493 – 1494

What is the effect of Loss of Object before sale?

This refers to a case of loss of the object even before the perfection of the contract. It
is evident that there would be no cause or consideration; hence, the contract is void.
Observe that it is the seller here who naturally will have to bear the loss.

Give an illustration.

I sold to Maria my house in Baguio which, unknown to both of us, had been
completely destroyed last night. The sale is null and void. There is, thus, no need of
annulling the contract because there is nothing that has to be annulled.

Distinguish Complete Loss from Partial Loss.

Note the difference in the rules –

a. When the object has been COMPLETELY LOST;

b. When the object has been PARTLY or PARTIALLY LOST;

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What are the available remedies in the preceding problem?

a. Withdrawal (or rescission);

b. Specific performance as to remainder by payment of proportional price.

What are the remedies in case of Loss of Specific Goods?

The remedies are:

a. Cancellation (avoidance);
b. Or Specific performance as to the remaining existing goods (if the sale was divisible).

OBLIGATIONS OF THE VENDOR

Articles 1495 -1581

What are the obligations of the vendor?

The following are the obligations of the vendor:

a. To transfer ownership (cannot be waived)

b. To deliver (cannot be waived)
c. To warrant the object sold (this can be waived or modified since the warranty is not an
essential element of the contract of sale)
d. To preserve the thing from perfection to delivery, otherwise he can be held liable for
damages (Art. 1163, NCC).

What are the effects of failure to deliver on time?

The effects of failure to deliver on time are:

a. If the seller promised to deliver at a stipulated period, and such period is of the essence
of the contract, but did not comply with his obligation on time, he has no right to
demand payment of the price. As a matter of fact, the vendee-buyer may ask for the
rescission or resolution of the sale.
b. If failure by seller to deliver on time is not due to his fault, as when it was the buyer who
failed to supply the necessary credit for the transportation of the goods, delay on the part
of the seller may be said to be sufficiently excused.

What is the effect of non- delivery?

If the seller fails to deliver, and the buyer has no fault, the latter may ask for the
resolution or rescission of the contract.

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What is the duty to deliver at execution sales?

When the property is sold at an execution sale, the judgment debtor is not required
to deliver the property sold right away.

What is the reason behind?

The reason is because of the redemption period. The judgment debtor has a period of
one year within which to redeem the property. In the meantime, the buyer should not
take actual possession of the property. If he does so, an action of forcible entry may
be brought against him.

What is the remedy of the judgment debtor if the buyer takes actual possession
of the property within the redemption period?

The judgment debtor would be entitled to get damages as well as possession of the
property, unless the period of redemption has already expired , in which case he can
only get damages.

When does the period of redemption commence?

The period of redemption commences to run not from the date of the auction or tax
sale but from the day the sale was registered in the office of the Register of Deed, so
that the delinquent registered owner or third parties interested in the redemption
may know that the delinquent property has been sold.

How is ownership transferred?

As a rule, in the absence of agreement, ownership is not transferred, even if sold,

unless there has been a delivery.

A sold his piano to B, who immediately paid the price. Because the piano was at
the repair shop at the time the contract was perfected, no delivery was made.
Before delivery could be made, C, a creditor of A, who has filed a suit against
him, attached the piano. What right has B over the piano?

The piano not having been delivered to him by A, B has only a personal right to
demand its delivery – for it is generally only delivery that transfers the real right of
ownership.

In the preceding problem, may B oppose the attachment levied by C?

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Not having any right or ownership over the piano, B may not legally oppose the
attachment levied thereon by C.

What is the effect of delivery to buyer (Who used another money)?

In general, delivery of the property to a person who has purchased the property in his
own name will give title to said purchaser, and not to the owner of the money used.

What is the effect if ownership is not transferred despite delivery?

The delivery of the sugar to the warehouse of the buyer transfers ownership provided
that the sale had already been perfected but ownership in not transferred, although
there has been perfection and delivery, if it was intended that no such transfer of
ownership will take place until full payment of the price.

What is the meaning of tradition?

Tradition, or delivery, is a mode of acquiring ownership, as a consequence of certain

contracts such as sale, by virtue of which, actually or constructively, the object is
placed in the control and possession of the vendee.

Albert v. University Publishing Co.

L-9300, Sept. 17, 1958

FACTS: The Plaintiff, author of a text in Criminal Law, promised to deliver the
manuscript of his book to the defendant, his publisher, on or before Dec. 31, 1948.
On Dec 16, 1948, plaintiff wrote a letter to the company stating that the manuscript
was already at its disposal, and ready for printing should the company desire to
publish it the next month; that he was however keeping the manuscript in his office
because of fear of loss, destruction, or copying by others, and because he desired to
add new decisions of the Supreme Court that might be published from time to time
before the manuscript would be actually sent to the printer. He also stated, however,
that if the company insisted on having the manuscript right away, it should let him
know because he would then actually deliver it immediately.

ISSUE: Was there already delivery?

HELD: Yes, for the above-mentioned facts constitute a delivery of the manuscript.
Delivery indeed does not necessarily mean physical or material delivery. It may be
constructive, as when it is placed at the disposal of the other.

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Roque v. Lapuz

L-32811, March 31, 1980

The fact that a formal deed of conveyance was not made indicates very strongly that
the parties did not intend to immediately transfer the ownership. What they intended
was to transfer ownership only after full payment of the price.

What are the different kinds of delivery or tradition?

The different kinds of delivery are:

a. Actual or real
b. Legal formalities
1. Legal formalities
2. Symbolical tradition or traditio simbolica
3. Traditio longa manu
4. Traditio brevi manu
5. Traditio constitutum possessorium
c. Quasi-tradition

What is an example of Symbolical tradition or traditio simbolica?

An example is the delivery of the key of the place where the movable sold is being
kept.

What is Traditio longa manu?

This is by mere consent or agreement that if the movable sold cannot yet be
transferred to the possession of the buyer at the time of the sale.

What is Traditio brevi manu?

If the buyer had already the possession of the object even before the purchase, as w
en the tenant of the car buys the car, that is, his possession as an owner.

What is Traditio constitutum possessorium?

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This is the opposite of tradition brevi manu. The possession as owner has changed,
for example, to possession as a lessee.

What is an example of traditio constitutum possessorium?

I sold my car but continued to possess it as a lessee of the purchaser.

What is Quasi-tradition?

It is the delivery of rights, credits or incorporeal property made by:

a. Placing titles of ownership in the hands of a lawyer;

b. Or allowing the buyer to make use of the rights.

Vitorias v. Leuenberger and CA

GR 31189, March 31, 1987

Where there is no express provision that title shall not pass until payment of the
price and the thing sold has been delivered, title passes from the moment the thing
sold is placed in the possession and control of the buyer. Delivery produces its
natural effects in law, the principal and most important of which being the
conveyance of ownership without prejudice to the right of the vendor to claim
payment of the price.

What is the effect of sale that is made through a public instrument?

When the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thin which is the object of the contract, if from the
deed the contrary does not appear or cannot clearly be inferred.

What is constructive delivery?

With regard to movable property, its delivery may also be made by the delivery of the
keys of the place or depository where it is stored or kept.

What are the two kinds of constructive delivery?

The two kinds of constructive delivery are:

a. Legal formalities – This applies to real and personal property since the law does not
distinguish.
b. Tradition simbolica

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Power Commercial & Industrial Corp v CA

Spouses Reynaldo & Angelito R Quimbao, and PNB

GR 119745, June 20, 1997

84 SCAD 67

Symbolic delivery, as species of constructive delivery, effects the transfer of

ownership thru the execution of a public document. Its efficacy can, however, be
prevented if the vendor does not possess control over the thing sold, in which case
this legal fiction must yield to reality.

The key word is control, not possession of the land.

In constructive delivery, what are the three requisites in order that ownership
may be transmitted?

1. The seller must have control over the thing; otherwise how can he put another in
control?
2. The buyer must be put under control
3. There must be the intention to deliver the thing for purposes of ownership( not, for
example, of merely allowing the ownership or examination of the keys, nor for the
purpose of having said keys repaired).

What are the rules on Constructive Delivery?

a. If a seller has no actual possession, he cannot transfer ownership by constructive

delivery. The reason is that in every kind of delivery, the transferee should have control,
but here control cannot be had since it is in the possession of another.
b. There can be no constructive delivery by means of a public instrument if there is a
stipulation to that effect. Hence the Supreme Court has held that if there is a clause to
the effect that the buyer “will take possession after four months,” at the end of 4 months
it cannot be said that there is an automatic delivery. At said time, there must still be a
delivery. The same is true in a case of a sale by installment, where it is stipulated that
title should not be transferred till after the payment of that last installment; or where the
vendor reserves the right to use and enjoy their property until the gathering of the crops
still growing.
c. The Civil Code does not provide that the execution of the deed is a conclusive
presumption of the delivery of possession. What it says is that the execution thereof shall
be equivalent to delivery which means that the disputable presumption established can
be rebutted by clear and convincing evidence, such as evidence of the fact that the buyer

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did not really obtain the material possession of the building. Hence, it may be said that
the execution of the contract is only presumptive delivery.

What is the effect of non-payment of the price?

Execution of the deed of sale, in the absence of any defect, transfers delivery, even if
the selling price, in whole or in part has not yet been paid, for it is not payment that
transfers ownership.

Puatu v Mendoza and David

64 Phil. 457

FACTS: Puatu sold a parcel of land to Mendoza for P39,000 in public instrument. The
amount of P14,200 was paid, leaving a balance of P24,800. The land was mortgaged to
Puatu as security for the balance. Puatu sued for the balance. Mendoza claimed that the sale
was not absolute since not all the purchase price has been paid and that therefore he should
be refunded what he had already paid.

HELD: The sale was consummated and absolute, and the defendant must now pay the
balance. The plaintiff has done all he is required to do in the contract of sale. The land has
already been delivered by the execution of the public instrument. The buyer must now
comply with his obligations.

What does delivery thru execution of a quedan mean?

If the parties in a sale intended that the copra sold should be placed then and there
under the control of the buyer the issuance of a quedan, delivery is effected upon the
execution of thje quedan, and the subsequent loss of the thing sold should be borne
by the purchaser.

A sold a piano to B by private instrument for P500,000. Who had ownership of

the piano at the moment next after B had paid the P500,000 to A? Explain.

At the moment next after B had paid the P500,000 to A, ownership over the piano
still resided in A, the execution of the private instrument not being a mode of
transferring ownership. Payment of the price without tradition or delivery is not a
mode of acquiring ownership over the piano.

A person bought in Iloilo a tractor for a certain price. It was agreed that
delivery of the tractor should be made within a certain time at the warehouse of
the purchaser in Manila, and the balance of the price should be paid at the

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moment of delivery. While enroute to Manila, the tractor was delivered by the
vendor to a third person to secure a loan obtained by him for his personal
convenience. Do you think that the purchaser can recover the tractor from the
third person? Why?

No, because no delivery was ever made to the buyer, hence he never became the
owner of the tractor. Not being the owner he had no real right over the property, so
he cannot bring an action to recover if from an individual in lawful possession of the
tractor.

If the thing sold cannot be transferred to the possession of the vendee at the
time of the sale, what is the remedy?

The delivery of movable property may likewise be made 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, or if the latter already had it in his
possession for any other reason.

What is the basis of traditio constitutum possessorium?

The basis of is traditio constitutum possessorium consent.

What is the effect if the seller continues to occupy the land as tenant?

Where a seller continues to occupy the land as tenant, the possession, by fiction of
law, is deemed to be constituted in the buyer.

How are incorporeal properties delivered?

The incorporeal properties are delivered by:

1. Constructive tradition- execution of public instrument

2. Quasi-tradition – placing of titles of ownership in the possession of the buyer, or the use
by the buyer of his rights, with the seller’s consent.

What is the effect of delivery of land title deeds?

The delivery of land title deeds is equivalent to a delivery of the property itself.

What is transaction “on sale or return”?

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When goods are delivered to the buyer "on sale or return" to give the buyer an option
to return the goods instead of paying the price, 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.

What kind of sale is the above-stated problem?

This is a sale that depends on the discretion of the buyer; it is a sale with a resolutory
condition.

What are transaction “on approval or on trial or satisfaction”?

When goods are delivered to the buyer on approval or on trial or on satisfaction, or

other similar terms, the ownership therein passes to the buyer:

(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.

What kind of sale is the above-stated problem?

This is a sale really dependent on the quality of the goods; it is a sale with suspensive
condition. Here, the buyer may in time become the owner under the conditions
specified in the law; otherwise, he seller is still the owner.

(A) S delivered to b a refrigerator “on sale or return”. Did B become owner

upon delivery?

Yes, in view of the delivery. Of course, B may revest the ownership in S by returning
or tendering the refrigerator to him within the time fixed in the contract; or if no
time has been fixed, within a reasonable time.

In the preceding problem, can B return the goods even if he finds nothing
wrong with the quality of the goods?

Yes, for discretion here is with the buyer.

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In letter (A), if B does not return the refrigerator in due time, what will be the
consequences of his inaction?

The sale will be considered absolute, and the price may be recovered since after all,
delivery had been made.

In letter (A), if B had not yet returned the goods, does he have to pay for them
even if the refrigerator has been destroyed by a fortuitous event?

Yes, for ownership has been transferred to him, and being the owner, he bears the
loss.

In a case of “on sale or return”, does the buyer has the right to return if the
thing is abused?

In case of “on sale or return”, the buyer has no right to return if he has materially
abused the condition of the thing. The sale in this case becomes absolute.

What about if the objects deteriorate without the fault of the buyer?

In case of “on sale or return”, if the objects deteriorate without the fault of the buyer,
the buyer can still return, provided the reasonable period for returning has not yet
lapsed.

Give the difference between a contract “on sale or return” and a delivery of
property with option to purchase.

In the first, ownership is transferred at once; in the second, there is no transfer of

ownership till the owner agrees to buy.

X, the owner of a certain jewelry, entrust them to Y for sale or return of the
jewelry upon a specified period of time. Y sells the jewelry to Z, but retains the
price. Can X obtain possession of the jewelry from Z? Why?

This problem calls for a distinction in view of the use of the words “ for sale or
return,” a phrase which has technical signification in the law of SALES although of
course the phrase used in SALEs in “on sale or return” but there’s no such technical
meaning in the law of AGENCY.

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What are some rules on Sale “on approval or trial or satisfaction”

Some of the rules are:

1. The risk of loss remains with seller, although there has been delivery, until the sale
becomes absolute.
2. Risk of loss remains with seller although there has been delivery, if the sale has not yet
become absolute.
3. Buyer must give goods a trial except when it is evident that it cannot perform the work
intended.
4. Period within which buyer must signify his acceptance commences to run only when all
the parts essential for the operation of the object have been delivered.
5. If it is stipulated that a third person must satisfy approval or satisfaction, the provision is
valid, but the third person must be in good faith. If refusal to accept is not justified, seller
may still sue.
6. Generally, the sale and delivery to a buyer who is an expert on the object purchased is
NOT obviously a sale on approval, trial, or satisfaction.

What is the exception in the second paragraph of the above-mentioned rules?

The exceptions are:

1. If buyer is at fault;
2. If buyer had expressly agreed to bear loss.

What is reservation of ownership despite delivery?

This applies only to the sale of “specific goods. Although delivery has been made,
seller may reserve ownership till certain conditions are fulfilled. Of course, the most
important controlling element is the intention.

Chrysler Phil. Corp. v Court of Appeals

L-55684, Dec. 19, 1984

As a general rule, the seller, as the owner, bears the risk of loss in line with the
principle of “res perit domino” (owner bears the loss).

What are the instances when seller is still owner despite delivery?

The instances are:

1. Express stipulation.

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2. If under the bill of lading the goods are deliverable to seller or agent or their order.
3. If bill of lading, although stating that the goods are to be delivered to buyer or his agent,
is kept by the seller of his agent.
4. When the buyer although the goods are deliverable to order of buyer, and although the
bill of lading is given to him, does not honor the bill of exchange sent along with it. But of
course innocent third parties (innocent holders and purchasers for value) should not be
adversely affected.

What is an example?

S sold B a radio; the radio was shipped on board a carrier. The bill of lading stated
that the radio is deliverable to the order of B. The bill of lading was sent to B,
accompanied by a bill of exchange which B was supposed to honor. If B does not
honor the bill of exchange, but wrongfully retains the bill of lading, ownership
remains with the seller. If B sells the bill of lading to X, X can obtain ownership of the
goods if he is an innocent purchaser.

Who bears the risk of loss of specific goods?

The risk of loss of specific goods shall be borne by the seller.

A agreed to sell to B his cat. Before the actual sale takes place, the cat dies thru
no fault of A. Is A liable to B for the price?

No, the destruction of the cat before ownership passed excuses performance. If the
dog had died after ownership had passed, the loss would be B’s even though there
was no delivery yet.

A sold to B a cat for 200.00. It was agreed that B will pay for and get the animal
the next day. Before B can pay the purchase price, the dog dies through
fortuitous event. Must B still pay for the animal?

Yes, since he was already the owner even if there was delivery yet. Under American
law, there is no need for delivery to transfer ownership insofar as specific goods are
concerned if the contract is one of sale, and not a contract to sell.

Who between the vendor and the vendee must bear the risk of loss after the
contract of sale has been perfected, but before the thing sold has been
delivered?

If the object of a contract is lost before delivery, it is the vendor who is still the owner
and must bear the loss and not the vendee. This is in conformity with the principle of
res perit domini. The owner of the thing must bear the risk of loss.

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What did the buyer acquires after the seller sold the thing to the former?

As a general rule, the buyer acquires only the rights which would the seller have over
the thing sold to him. This rule was based on the principle “nemo dat quod non
habet”.

Are there any exceptions to the rule?

Yes, as when, the owner of the goods by his conduct precluded from denying the
seller’s authority and under the second paragraph (1, 2, 3) of art. 1505.

A sells a parcel of land to B with the consent of the owner C. Can C declare the
sale to be null and void because A has no authority to sell such property?

No, C is stopped from denying A’s authority to sell.

A bought a pair of shoes from a shoe store and repair shop. It was later
discovered, however, that the shoes did not did not belong to the store but to a
customer who had left it there for repair. Did A acquire good title to the shoes?

Yes, although the store was not the owner of the shoes. The shoes were purchased at
a merchant’s store. A contrary rule would retard commerce.

B, in good faith, has purchase a diamond ring from C, his friend. C gave B a bill
of sale. Later on, A identified the ring as one she had lost about a year ago.
There is no question as to the veracity of O’s claim. In the meantime, C has
disappeared. What advice would you give B in reference to O’s demand that the
ring be returned to him?

I would advise B to return the ring to O, and not expect to be reimbursed by O the
amount he had paid C. the law says that one who has lost any movable may recover it
from the person in possession of the same, without such possessor being entitled to
reimbursement, except if the acquisition in good faith had been at the public sale or
auction, or at a merchant’s store, fair, or market.

What is a store?

It is the place where goods are kept and sold by one engaged in buying and selling.

A bought a car from B, an insane person, and in turn sold the car to C who is in
good faith. Was the sale valid?

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Yes, the sale is valid. C becomes the owner of the car after it has been delivered to
him. However, considering that the contract between A and B is concerned, the
contract between them is considered as voidable contract. Hence, the contract
between A and C can only be valid before the original contract has been annulled.

Can a buyer acquire title from a theft, a person who stole and then sold the
goods to him?

No, because the owner has been unlawfully deprived of the thing. Hence, the true
owner can get it back without reimbursement.

How about if the buyer acquired the stolen automobile in good faith at a public
auction? Does he have a legal title over it?

No, under the law, even if he acquired it at a public auction in good faith, he acquires
nothing over it. The true owner of the thing can get it back however the buyer is
entitled for reimbursement.

What are the documents included by art. 1507?

The documents referred to by art. 1507 are a) any bill of lading b) dock warrant c)
quedan d) warehouse receipt or order e) any other document used as proof of
possession or as authority to transfer the goods represented by the document.

When are the documents considered to be negotiable?

The documents are negotiable if the goods are deliverable to bearer or to the order of
a certain person.

What is the effect of an error or the incorrectness in the description of the

goods?

A mere typographical error or grammatical error does not affect the negotiability of
the document, for what should be considered is the intent. And also a mere
incorrectness in the description of the goods will not destroy the negotiability of the
document

How negotiable document of title is negotiated?

It is negotiated by mere delivery or endorsement plus delivery.

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When a mere delivery is sufficient?

A mere delivery is sufficient if deliverable to bearer or if deliverable to the order of a

certain person and that person has indorse it in blank by putting his name at the
back of the document and by signing his name at the back of the document.

What is the effect of indorsement and delivery?

Indorsement and delivery of a negotiable quedan ipso facto transfer possession and
ownership of the property referred to therein.

What is the effect of undated indorsement?

It is not necessary to date an endorsement because no additional protection is given

thereby to businessman. As a matter of fact, to require dating would be to impede
business transactions.

The document says “deliver to the order of Mr. X.” In order to negotiate it, what
would be the proper way of doing it?

Mr. X must sign his name at the back and then deliver. Mere delivery without signing
is not sufficient.

What is a non-negotiable instrument?

A non-negotiable instrument is an instrument which is not negotiable, an instrument

which does not meet the requirements laid down to qualify an instrument as a
negotiable one, or an instrument which in its inception was negotiable but has lost its
negotiability.

A negotiable document of title was mark “non-negotiable” by a warehouseman.

Is it still negotiable?

Yes, insofar as the various holders of the note are concerned, the note is still
negotiable. Regarding the intent and the liability of the maker, this article does not
deal with the same.

What is the effect of delivery when the document cannot be negotiated by mere
delivery?

The effect is that a non-negotiable document cannot be negotiated and the

indorsement of such document gives the transferee no additional right.

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A document of title was non-negotiable. Mat it still be given or assigned to

another?

Yes, but this does not have the effect of a negotiation. It is a mere transfer or
assignment.

A document of title contained the words “deliver to Mr. X.” May it be

negotiated?

No, but it may be transferred.

Suppose it is indorsed by Mr. X?

The indorsement is useless and does not give the indorse any additional right. There
is in this case only a transferor assignment.

What are the requirements so that a document is considered negotiable?

An instrument to be negotiable must conform to the following requirements:

a) It must be in writing and signed by the maker and drawer;
b) Must contain an unconditional promise or order to pay a sum certain in money;
c) Must be payable in demand or at a fixed or determinable future time;
d) Must be payable to order or bearer; and
e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.

Who may negotiate negotiable document of title?

The owner of the document may negotiate or by any person to whom the possession
or custody of the document has been entrusted by the owner .

A document of title contained the following words. “deliver to the order of X or

to the order of the person to whom this document has been entrusted by X.”
Later, X entrusted the document to Y. May Y negotiate the same by
indorsement?

Yes, (see art.1512, No. 2, 1st paragraph )

Who bears loss in case of unauthorized negotiation?

If the owner of negotiable document of title entrusts the document to a friend for
deposit, but the friend betrays the trust and negotiates the document by delivering it
to another in good faith, the said owner cannot impugn the validity of the

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negotiation. As between the two innocents persons, he who made the loss possible
should bear the loss, without prejudice to his right to recover from the wrongdoer.

What are the rights which are acquired by a person to whom a negotiable
document of title has been duly negotiated?

A person to whom a negotiable document of title has been duly negotiated acquires
thereby:
a) Such title to the goods as the person negotiating the document to him had or had the
ability to convey to the purchaser in good faith for value and also such title to he
goods as the person to whose order the goods were to be delivered by the terms of the
document had or had the ability to convey to purchaser in good faith for value; and
b) Those mentioned in no.2 of article 1513.

What constitute a holder in due course?

A holder in due course is a holder who has taken the instrument under the following
conditions:
a) That it is complete and regular upon its face;
b) That he became the holder of it before it was overdue, and without notice that it had
been previously dishonored, if such was the fact;
c) That he took it in good faith and for value;
d) That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument, or defect in title of the person negotiating it.

What are the rights of a person to whom document has been transferred?

The rights of a person to whom a negotiable document of title has been transferred, or of
the transferee of a non-negotiable document are as follows:
a) The title to the goods as against the transferor;
b) The right to notify the bailee of the transfer thereof; and
c) The right to acquire the obligation of the bailee to hold the goods for him.

Are these rights of a transferee absolute?

No, the right if the transferee is not absolute as it is subject to the terms of any
agreement with the transferor. He merely steps into the shoes of the transferor.

What is the effect of attachment of goods covered by non-negotiable document?

If it is a non-negotiable document of title, it does not effect the delivery of the goods
covered by it. Accordingly, before notification, the bailee is not bound to the

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transferee whose right may defeated by a levy of an attachment or execution upon the
goods by the creditor of the transferor or by a notification to such bailee of the
subsequent sale of the goods.

What is the effect of attachment of goods covered by negotiable document?

If the document is negotiable, the goods cannot be attached or be levied under an

execution unless the documents be first surrender to the bailee of its negotiation
enjoined.

What is the right of a transferee?

A mere transferee does not acquire directly the obligation of the bailee to hold for
him.

What should the transferee must do in order to acquire direct obligation?

The transferee, in order to acquire direct obligation, he must notify the bailee.

When shall a negotiation be made?

A negotiation shall take effect as of the time when the indorsement is actually made.

What is the rule where the document is subsequently indorsed?

For the purpose of determining whether the transferee is a purchaser for value in
good faith without notice, the negotiation shall take effect as of the time when the
indorsement is actually made, not at the time the document is delivered.

What are the rights of a person to whom an order document of title has been
delivered which is not properly negotiated by mere delivery?

The following are his or her rights:

a) The rights to the goods as against the transferor; and
b) The right to compel the transferor to indorse the document.

Are these rights absolute?

No, if the intention of the parties is that the document should be merely transferred,
the transferee has no right to require the transferor to indorse the document.

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What are the implied warranties of the person who negotiates a document of
title by indorsement or delivery?

A person who for value negotiates or transfers a document of title by indorsing or

delivery, including one who assigns for value a claim secured by a document of title unless a
contract intention appears, warrants:
a) That the document is genuine;
b) That he has legal right to negotiate or transfer it;
c) That he has knowledge of no fact which would impair its validity;
d) That he has a right to transfer the title if the goods and that the goods are
merchantable or fit to a particular purpose, whenever such warranties would have
been implied if the contract of the parties had been to transfer without a document of
title of the goods represented thereby.

What are the liability of a person negotiating or transferring a document which

he knows that the document was a forgery or he had stolen it, or he had the
knowledge that that the document was invalid for want of consideration, or the
goods has been damaged?

The liability of that person is limited only to a violation of the four warranties set
forth in Article 1516. One who assigns for value a claim secured by a document of title
is also liable for violation of any of the for warranties.

What is the effect of indorsee’s knowledge of fraud indorsement?

If the indorsee knows that any of the former indorsements is a forgery, he does not
acquire a valid title to the document.

What is the rule for failure of the bailee to comply with his obligation?

The bailee upon failure to comply with their obligations does not make the present
indorsers liable because indorser warrants only the things mentioned in article 1516.

When negotiation is not impaired by fraud, mistake, duress, lost, theft,

accident, or conversion?

A negotiable document maybe negotiated by any person in possession of the same ,

however such possession may have been acquired. In other words, it may be
negotiated even by theft or finder and the holder thereof would acquire a good title
thereof if he paid the value therefor in good faith without notice of the seller’s defect
of title.

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A document of title contained the words “deliver to bearer.” The document was
stolen by T.J subsequently indorse it to C.J, a purchaser in good faith. Is the
negotiation to C.J valid?

Yes, notwithstanding the theft by T.J, C.J is a purchaser in good for value in good
faith; that is, C.J did not know that the document had been stolen by T.J.

Was the theft of the goods would invalidate the transaction?

No, under article 1518, the rule speaks of a theft document and not the theft of goods
itself.

What is the rule with regards to the attachment or levy upon the goods covered
by negotiable document in possession of the bailee?

The rule is that, while the goods are in the possession of the bailee, the goods cannot be
attached or levied under an execution unless:
a) The document must be first surrender; or
b) Its negotiation is enjoined; or
c) The document is impounded by the court.

What is the effect if the depositor is not the owner?

The provisions of article 1519 do not apply if the person depositing is not the owner
of the goods or one who has no right to convey the title to the goods binding the
owner. This prohibition is for the protecti0n of the bailee since he could be made
liable to a subsequent purchaser for value in good faith.

Can they compel the bailee to surrender the goods?

No, the bailee cannot be compelled to surrender the goods except:

a) If the document is surrendered to him;
b) Or if the document is impounded by the court.

What is the right given to a creditor whose debtor is the owner of a negotiable
document of title?

Under Article 1520 of the Civil Code, a creditor whose debtor is the owner of a
negotiable document of title shall be entitled to such aid from the courts of
appropriate jurisdiction by injunction and otherwise in attaching document in
satisfying the claim by means thereof as is allowed at law or in equity in regard to
property which cannot readily be attached or levied upon by ordinary legal process.

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May the document of title of the debtor in regard to property which cannot
readily be attached or levied upon by ordinary legal process, nevertheless, be
the subject of an injunction or attachment?

Yes, provided the debtor is the owner of a negotiable document of title. In this
case, the creditor shall be entitled to such aid from courts of appropriate jurisdiction
by injunction and otherwise in attaching such document or in satisfying the claim by
means thereof as is allowed at law or in equity. (Article 1520)

X is the creditor of Y, the owner of a negotiable document of title covering

goods delivered to a bailee by the latter. Generally there can be no attachment
or levy over the goods except in those instances provided under Article 1519 of
the Civil Code. In the event that attachment or levy is allowed, what is the
protection given to X as the creditor of Y?

A creditor of the owner of a negotiable document of title, like X, has the

protection provided under Article 1520 of the Civil Code. X shall be entitled to such
aid from courts of appropriate jurisdiction by injunction and otherwise in attaching
such document or in satisfying the claim by means thereof as is allowed at law or in
equity.

X is the creditor of Y, the owner of a document of title covering goods subject of

attachment or levy. X is now claiming the protection of a creditor under Article
1520 of the Civil Code. Is X correct?

No, X is not correct. The protection granted under Article 1520 applies only to
the creditor of the owner of a negotiable document of title covering goods subject of
attachment or levy under Article 1519.

What is the requirement so that the creditor of the owner of a document of title
covering goods subject of attachment or levy is protected under Article 1520 of
the Civil Code?

It is required that the debtor is the owner of a negotiable document of title.

Angelina lent money to Brad, the owner of a negotiable document of title

covering goods delivered to a bailee by the latter. Generally there can be no
attachment or levy over the goods except in those instances provided under
Article 1519 of the Civil Code. If the bailee is forced to surrender the goods,
what is the remedy available to Angelina.

A creditor of the owner of a negotiable document of title, like X, has the

protection provided under Article 1520 of the Civil Code. X shall be entitled to such
aid from courts of appropriate jurisdiction by injunction and otherwise in attaching
such document or in satisfying the claim by means thereof as is allowed at law or in
equity.

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Angelina is the creditor of Brad, the owner of a document of title covering

goods which are now being surrendered to by Jennifer, the depositary, because
the document of title has been impounded by the court. Angelina is now
claiming the protection of a creditor under Article 1520 of the Civil Code. Is
Angelina correct?

No, Angelina is not correct. The protection granted under Article 1520 applies
only to the creditor of the owner of a negotiable document of title covering goods
subject of attachment or levy under Article 1519. The given problem does not
mention that the document of title covering the goods is negotiable

What is the condition so that the creditor of the owner of a document of title
covering goods subject of attachment or levy may avail of the protection of
injunction from the courts?

Under Article 1520 of the Civil Code, it is required that the debtor is the
owner of a negotiable document of title.

If the debtor of a creditor is the owner of a negotiable document of title, what

are his remedies under the law if the goods covered by the document is being
subjected to attachment?

Under Article 1520 of the Civil Code, a creditor whose debtor is the owner of a
negotiable document of title shall be entitled to such aid from the courts of
appropriate jurisdiction by injunction and otherwise in attaching document in
satisfying the claim by means thereof as is allowed at law or in equity in regard to
property which cannot readily be attached or levied upon by ordinary legal process.

May the document of title of the debtor in regard to property which cannot
readily be attached or levied upon by ordinary legal process, nevertheless, be
the subject of an injunction?

Yes, provided the debtor is the owner of a negotiable document of title. In this
case, the creditor shall be entitled to such aid from courts of appropriate jurisdiction
by injunction and otherwise in attaching such document or in satisfying the claim by
means thereof as is allowed at law or in equity. (Article 1520)

What will govern as to the place of delivery of the goods subject of a contract of
sale?

Under Article 1521 of the Civil, it is the agreement of the parties, express or
implied, which shall govern the place of delivery of the goods. In the absence of an
agreement, it shall be based on the usage of trade. If there is no such usage, the buyer
must get them at the seller’s business of place or residence.

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Is there an exception to the rule that in the absence of an agreement, express or

implied, as well as usage of trade, the buyer must get the goods at the seller’s
business of place or residence?

Yes, if the goods that are the subject of sale are specific and the parties know
when the contract was made that such goods were in some other place, then the
delivery shall be in the place where the specific goods are found. (Art 1521)

What prevails in case there is a disagreement as to the place of delivery of the

goods, the agreement of the parties or the usage of trade or business?

Based on the Obligatory Force of Contracts, the agreement of the parties,

whether express or implied, as to the place of delivery of the goods subject of the
contract of sale shall prevail over the usage of trade or business. (Art 1521)

Will there be sufficient delivery if the goods were delivered at a place near the
original location agreed upon by the parties?

Generally, there will be no sufficient delivery in this case. Article 1521

provides that what governs is the agreement between the parties, whether express or
implied as to the place of delivery. However, the Supreme Court has ruled in one case
that there is sufficient delivery when a fortuitous event prevents delivery at the
actual place agreed upon, forcing a delivery at a place near the original one. (Bean,
Admr. v. The Cadwallader Co., 10 Phil. 606)

If delivery was made at a different place agreed upon and the buyer accepted
the goods without complaint, can the buyer later on claim that there no
“delivery” contemplated under the law?

No, the buyer cannot later on claim breach of the obligation under the
contract of sale. In Sullivan v. Gird, 1921, 22 Ariz. 332, it was held that there is
sufficient delivery when the original place is changed, but the buyer accepted the
goods at a different place without complaint so long as the seller was in good faith.

If the contract of sale does not state the time when the seller shall send the
goods to the buyer, when must the seller send said goods?

Where by a contract of sale the seller is bound to send the goods to the buyer,
but no time for sending them is fixed, the seller is bound to send them within a
reasonable time. (Art. 1521, par 2)

What are the circumstances that may be considered when no time has been
fixed for the delivery of the goods subject of a contract of sale?

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The seller must send the goods “within a reasonable time” considering the
following factors: 1) character of the goods; 2) purpose intended; 3) ability of seller to
produce the goods; 4) transportation facilities; 5) distance thru which the goods must
be carried; and 6) usual course of business in that particular trade. (Smith, Bell and
Co. v. Sotelo Matti, 44 Phil. 874).

What is the effect on the seller’s obligation to deliver the goods if the same are
in the hands of a third person?

Article 1521 of the Civil Code provides, “where the goods at the time of sale
are in the possession of a third person, the seller has not fulfilled his obligation to
deliver to the buyer unless and until such third person acknowledges to buyer that he
holds the goods on the buyer’s behalf.” However, this rule applies only to sale of
goods already existing at the time of the sale, but in the hands of a third party, not
when the goods are still to be manufactured.

Who shall shoulder the expenses for putting the goods in a deliverable state?

The seller, unless otherwise agreed, shall shoulder the expenses (Art. 1521,
last par.) This rule also applies even if the buyer has the duty to take delivery.

In a contract of sale, when must demand or tender of delivery be made?

In the absence of agreement, demand or tender of delivery shall be made at a

reasonable hour.

What may the buyer do if the seller delivers a quantity of goods less than what
was contracted?

Under Art 1522, par. 1 of the Civil Code, the buyer may reject the goods.
However, the buyer may also accept the goods delivered at the contract rate.

If the seller delivers a quantity of goods less than what was contracted and the
buyer accepts or retains such goods knowing that the seller is not going to
perform the contract in full, at what rate must the buyer pay for the goods?

Article 1522 provides that the buyer must pay the goods delivered at the
contract rate.

If the seller delivers a quantity of goods less than what was contracted and the
buyer has used or disposed of the goods delivered before knowing that the
seller is not going to perform his contract in full, at what rate must the buyer
pay for the goods?

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In this case, the buyer shall not be liable for more than the fair value to him of
the goods so received. (Art 1522, par. 1, 2nd sentence)

Angelina bought 10 bottles of perfume from Brad, only 7 of which arrived. She
sold 5 bottles to her friends thinking that the others were coming. However,
Brad is unable to deliver the remaining 3 bottles. What price must Angelina pay
for the bottles?

Since Angelina has disposed of the goods delivered before he knows that the
seller is not going to perform his contract in full, she shall not be liable for more than
the fair value to him of the goods received. (Art 1522, par. 1, 2nd sentence)

What may the buyer do if the seller delivers a quantity of goods larger than
what was contracted?

Under Art 1522, par. 2 of the Civil Code, the buyer may accept the goods
agreed upon and reject the rest. However, the buyer may choose to accept all the
goods but he must pay for them at the contract rate.

Angelina bought from Brad 500 cans of sardines at Php 12.00 each. 1000 cans
were delivered Brad. What are the rights of Angelina?

Angelina may accept the 500 and return the other 500 cans. She may also
choose to accept all but she must pay for them at the contract price of Php 12.00 per
can.

If a buyer agrees to purchase a designated amount but actually orders a lesser

amount, can the seller complain if he decided to deliver the lesser quantity?

No, the seller cannot complain, this is a clear case of a waiver. (Quiroga v.
Parsons Phil. 501).

When is there “implied acceptance” of excess goods delivered?

Acceptance, even if not express, is implied when the buyer exercises acts of
ownership over the excess goods.

What may the buyer do if the seller delivers the goods agreed upon mixed with
goods of a different description?

Under Article 1522, par 3, the buyer may accept the goods which are in
accordance with the contract and reject the rest.

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When may the buyer reject all the goods delivered in case what was delivered is
of larger quantity or of a different quality?

Under Article 1522, par. 4, the buyer may reject the whole of the goods
delivered in these instances if the subject matter is indivisible.

When is delivery to a carrier considered as delivery to buyer?

Generally, delivery to a carrier is deemed delivery to the buyer if it is the duty

of the seller to send the goods to the buyer. This rule, however to some conditions
provided under Article 1523 of the Civil Code.

Is the seller required to enter into a contract with the carrier on behalf of the
buyer to have the effect of the required delivery?

Article 1523, par 2 of the Civil Code states that if the carrier is not authorized
by the buyer, the seller must make such contract with the carrier on behalf of the
buyer as may be reasonable, having regard to the nature of the goods and the other
circumstances of the case.

What is the effect if the seller fails to make the contract with the carrier on
behalf of the buyer if the latter has not authorized said carrier?

The 2nd sentence of Article 1523, par 2 states that if the seller omits to make
such contract when required to do so, and the goods are lost or destroyed in course of
transit, the buyer may decline to treat the delivery to the carrier as a delivery to
himself, or may hold the seller responsible in damages.

What is the duty of the seller in case the circumstances of the delivery would
usually require the goods to be insured during their transit?

Article 1523, par 3 states that unless otherwise agreed, where goods are sent
by the seller to the buyer under circumstances in which the seller knows or ought to
know that it is usual to insure, the seller must give such notice to the buyer as may
enable him to insure them during their transit.

What are the consequences if the seller fails to notify the buyer of the need to
insure the goods during their transit?

The goods shall be deemed to be at the risk of the seller during such transit.
(Art. 1253, par 3)

What are the two kinds of Delivery to Carrier? Explain each.

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Delivery to carrier may be: 1) C.I.F. (cost, insurance, freight) where the
selling price includes insurance and freight and shall be shouldered by the seller; or
2) F.O.B. (free on board) where the property passes as soon as the goods are
delivered aboard the carrier and the buyer as the owner of the goods is to bear all
expenses after they are so delivered.

What are the different kinds of F.O.B. sale and what are the consequences of
each kind?

The F.O.B. sale may be: 1) f.o.b. at the place of shipment (the buyer must
pay the freight); 2) f.o.b. alongside the vessel (from the moment the goods are
brought alongside the vessel, the buyer must pay for the freight or expenses); or 3)
f.o.b. at the place of destination (the seller must pay the freight since the
contract states “free on board till destination”).

What are the obligations of the seller and the buyer in contracts of “c.i.f.” sale?
In “f.o.b.” sale?

In “c.i.f.” (cost, insurance, freight) sales of goods, the buyer pays a fixed price,
while the seller pays the insurance and freight up to the place of destination. In other
words, the seller is responsible for all expenses, such as insurance and freight, pays
for all charges, such as export taxes and other charges or fees, and be responsible for
the goods up to the point of destination. The buyer, on the other hand, who paid a
fixed price, shall accept delivery of the goods at the point of destination, pays all
charges, such as taxes and duties at such point, and be responsible for the goods once
the seller’s responsibility ceases.

In “f.o.b.” (free on board) sales of goods, the goods are shipped by the seller to
a certain point without any expense to the buyer, but after delivery at such point all
subsequent expenses incident to the transportation and delivery shall be paid by the
buyer. Thus, if the sale is “f.o.b.” at the place of shipment, the buyer must pay the
freight, if “f.o.b.” at the place of destination, the seller must pay the freight.

What are the kinds of contract of sale when the seller is obliged to pay the
freight when goods are delivered through a carrier?

The seller is obliged to pay the freight if the sale is either 1) “c.i.f.” sale or 2)
“f.o.b.” at the place of destination.

Angelina in Baguio agrees to ship goods to Brad at Dagupan City, “F.O.B.

Dagupan City.” Before the goods reach Dagupan City, they are destroyed by a
fortuitous event. Who bears the loss?

Angelina bears the loss because ownership (title) does not pass till the goods
reach Dagupan City. Hence, the seller bears the loss. If the price has been given him,

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he must return the same. If no payment has yet been made, he cannot successfully
demand the price from the buyer.

When is the vendor not bound to deliver the goods subject of a Contract of Sale?

Under Article 1524 of the Civil Code, the vendor shall not be bound to deliver
the things sold if the vendee has not paid him the price or if no period for the
payment has been fixed in the contract.

If the vendee has not paid the vendor the price, is the latter obliged to deliver
the things sold to the former?

No, the vendor is not bound to deliver the things sold if the vendee has not
paid him the price. (Art 1524)

If no period for the payment has been fixed, is the vendor bound to deliver the
things sold?

No, the vendor is not bound to deliver the things sold if no period has been
fixed for the period of payment. (Art 1524)

What is the reason why the vendor shall not be bound to deliver the things sold
if the vendee has not paid him the price or if no period for the payment has
been fixed in the contract?

The reason is because a sale is a reciprocal contract giving rise to

reciprocal obligations.

If a period for the payment has been fixed by the parties, can the seller refuse to
deliver the things sold until the period of payment arrives?

No, the seller must deliver the things sold even if said period has not yet
arrived (Florendo v. Foz, 20 Phil. 388). He will then have to wait for the end of the
period before he can demand the price, except if the buyer has lost the benefit of the
term (see Article 1198 – instances when the debtor shall lose every right to make use
of the period).

If a period for the payment has been fixed by the parties, can the seller
nevertheless refuse to deliver the things sold until the period of payment
arrives?

Generally, no, the seller must deliver the things sold and wait for the period of
payment to arrive. However, the seller may refuse to deliver the things if the vendee

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has lost the right to make use of the period and still refuses to pay (see Arts 1536 and
1198).

If a period for payment has been agreed upon in a contract of sale, the vendor
cannot avail of the right under Article 1524. Is there an exception to this rule
such that the vendor can nevertheless refuse to deliver the things sold until
period of payment arrives?

Yes, the exception is provided under Articles 1536 and 1198. The seller may
refuse to deliver the things if the vendee has lost the right to make use of the period
and still refuses to pay

On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of
Brad. No agreement was made as to the day of payment. Angelina, despite not
giving Brad any payment, is asking for the delivery of the vehicle claiming that
Brad is obliged to deliver since the sale was perfected by mere consent. Is
Angelina correct?

No, Angelina is not correct. Under Article 1524 of the Civil Code, the vendor is
not bound to deliver the thing sold if no period has been fixed for the period of
payment.

Angelina agreed to buy the Toyota Innova (ABC 123) of Brad. Angelina, despite
not giving Brad any payment, is asking for the delivery of the vehicle claiming
that Brad is obliged to deliver even if no payment has been made yet since the
sale was perfected by mere consent. Is Angelina correct?

No, Angelina is not correct. Under Article 1524 of the Civil Code, the vendor is
not bound to deliver the thing sold if the vendee has not paid him the price. Since a
sale is a reciprocal contract, the delivery and payment are reciprocal obligations.

On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of
Brad. They agreed that payment shall be made a week later. On December 6,
2010 Angelina, despite not giving Brad any payment, is asking for the delivery
of the vehicle. Brad refused to deliver the car claiming that he is not bound to
deliver the thing sold because no payment has yet been made. Is Brad correct?

No, Brad must deliver the vehicle because Article 1524 of the Civil Code does
not apply when a period for payment has been agreed upon in the contract of sale
and said period has not yet arrived (Florendo v. Foz, 20 Phil. 388). He will then have
to wait for the end of the period before he can demand the price from Angelina,
except if the latter has lost the benefit of the term (see Article 1198 – instances when
the debtor shall lose every right to make use of the period).

When is the seller deemed to be an “unpaid seller”?

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The seller is deemed to be an unpaid seller in the following instances: 1) when

the whole price has not been paid or tendered; and 2) when a bill of exchange or
other negotiable instrument has been received as conditional payment, and the
condition on which it was received has been broken by reason of dishonor of the
instrument, the insolvency of the buyer, or otherwise (Article 1525, 1st par).

What does the term “seller” in Articles 1525-1535 include?

The term “seller” includes any person who is in the position of the seller, such
an agent of such seller to whom the bill of lading has been indorsed, or a consignor or
agent who has himself, paid, or is directly responsible for the price (Article 1525, 2 nd
par).

If only a part of the price has been paid or tendered, is the seller still an
“unpaid seller”?

Yes, he is still an unpaid seller. Article 1525 provides that a seller who has not
been paid the whole price is deemed an unpaid seller.

When is the holder of a negotiable instrument deemed an “unpaid seller”?

If the negotiable instrument has been received as conditional payment, and

the condition on which it was received has been broken by reason of dishonor of the
instrument, the insolvency of the buyer, or otherwise, the holder of such negotiable
instrument shall be deemed as an unpaid seller.

When is the agent of the seller to whom a bill of lading has been indorsed
deemed an “unpaid seller”?

If the bill of lading has been received as conditional payment and the
condition on which it was received has been broken by reason of dishonor of the
instrument, the insolvency of the buyer, or otherwise, the agent of the seller to whom
a bill of lading has been indorsed shall be deemed as an unpaid seller.

What is the reason why mere delivery of a negotiable instrument does not
extinguish the obligation of the buyer to pay?

The obligation to pay is not extinguished because the seller may still be an
unpaid seller if the negotiable instrument is dishonored.

What happens if a negotiable instrument that has been received as conditional

payment was subsequently dishonored?

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The obligation to pay is not extinguished because the seller becomes an

unpaid seller (Article 1525).

If a negotiable instrument has been received as conditional payment and the

condition on which it was received has been broken by reason of the insolvency
of the buyer, what happens to the obligation of the buyer to pay?

The obligation to pay is not extinguished because the seller becomes an

unpaid seller (Article 1525).

On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of
Brad for the price of Php 350,000.00. On the agreed date for payment,
Angelina only paid Php 250,000.00. Is Brad deemed an “unpaid seller” in this
case?

Yes, Brad is still an unpaid seller. Article 1525 provides that a seller who has
not been paid the whole price is deemed an unpaid seller. Therefore, unless Brad
receives the balance of the purchase price, he is deemed an unpaid seller.

On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of
Brad for the price of Php 350,000.00. On the agreed date for payment,
Angelina issued a negotiable instrument in favor of Brad as payment. However,
the negotiable instrument was subsequently dishonored. Is Brad deemed an
“unpaid seller” in this case?

Yes, Brad is an unpaid seller. If a negotiable instrument has been received as

conditional payment, and the condition on which it was received has been broken by
reason of dishonor of the instrument, the insolvency of the buyer, or otherwise, the
holder of such negotiable instrument shall be deemed as an unpaid seller.

What are the rights of an unpaid seller if ownership has already passed to the
buyer?

Notwithstanding that the ownership in the goods may have passed to the
buyer, the unpaid seller of goods, as such, has the following remedies: 1) possessory
lien in the nature of a pledge; 2) right of stoppage in transitu if the seller has
parted with the possession; 3) right or resale; and 4) right to rescind the sale
(Article 1526)

What are the remedies of an unpaid seller if ownership has not yet passed to
the buyer?

Where the ownership in the goods has not passed to the buyer, the unpaid
seller has, in addition to his other remedies, a right of withholding delivery similar to

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and co-existent with his rights of lien and stoppage in transitu where the ownership
has passed to the buyer (Art 1526, last paragraph).

When is the right of possessory lien available to an unpaid seller?

The right of possessory lien is available to the unpaid seller when the
ownership has already passed to the buyer but the seller still has possession over the
goods.

What is the effect to the possessory lien if the unpaid seller losses possession of
the goods?

The possessory lien is lost after the seller loses possession of the goods but his
lien (no longer possessory) as an unpaid seller remains; hence he is still a preferred
creditor with respect to the price if the specific goods sold (Article 2241, no. 3).

When is the right of stoppage in transitu available to an unpaid seller?

The right of stoppage in transitu is available to an unpaid seller if the buyer is

insolvent and the seller has already parted with the possession over the goods subject
of the sale (Article 1526, no. 2)

On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of
Brad for the price of Php 350,000.00. On the agreed date for payment,
Angelina only paid Php 250,000.00. Can Brad withhold delivery of the vehicle?

Yes, Brad is an unpaid seller in this case. Under the second paragraph of
Article 1526, an unpaid seller has the right of withholding the delivery of the goods
subject of the sale.

If a negotiable instrument has been received as conditional payment and the

condition on which it was received has been broken by reason of the insolvency
of the buyer, may the seller exercise the right of stoppage in transitu?

The right of stoppage in transitu is available to an unpaid seller if the buyer is

insolvent and the seller has already parted with the possession over the goods subject
of the sale (Article 1526, no. 2). In the given problem, the seller is deemed an unpaid
seller under the provision of Article 1525. Therefore, the remedies under Article 1526
are available to him.

On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of
Brad for the price of Php 350,000.00. On the agreed date for payment,
Angelina only paid Php 250,000.00. Claiming the right of possessory lien

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available to an unpaid seller, Brad refuses to deliver the vehicle and retains it
while he is in possession of said car. Is Brad correct?

Yes, Brad is correct. Under Article 1525, he is still an unpaid seller. Article
1526 provides that the right of possessory lien is available to the unpaid seller when
the ownership has already passed to the buyer but the seller still has possession over
the thing sold.

When is the right to retain the goods available to the unpaid seller?

The unpaid seller of goods who is in possession of them is entitled to retain

possession of them until payment or tender of the price in the following cases: 1)
where the goods have been sold without any stipulation as to credit; 2) where the
goods have been sold on credit, but the term of credit has expired; and 3) where the
buyer becomes insolvent (Article 1527, 1st par).

May the seller exercise his right of lien or retention even if he is in possession
of the goods as a mere agent or bailee for the buyer?

Yes, he may exercise his right or retention notwithstanding that he is in

possession of the goods as agent or bailee for the buyer (Article 1527, 2 nd par).

May an unpaid seller still exercise the right to retain possession of the goods
sold on credit?

Yes, under Article 1527, even if the goods were sold on credit, the unpaid
seller may still exercise the right to retain possession of the goods if the term of credit
has already expired.

If a negotiable instrument has been received as conditional payment and the

condition on which it was received has been broken by reason of the insolvency
of the buyer, may the seller exercise the right of lien or retention of the goods?

Yes, the unpaid seller of goods who is in possession of them is entitled to

retain possession of them until payment or tender of the price in the following cases:
1) where the goods have been sold without any stipulation as to credit; 2) where the
goods have been sold on credit, but the term of credit has expired; and 3) where the
buyer becomes insolvent (Article 1527, 1st par).

On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of
Brad for the price of Php 350,000.00. On the agreed date for payment,
Angelina only paid Php 250,000.00. Can Brad withhold delivery of the vehicle?

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Yes, the unpaid seller of goods who is in possession of them is entitled to

retain possession of them until payment or tender of the price in the following cases:
1) where the goods have been sold without any stipulation as to credit; 2) where the
goods have been sold on credit, but the term of credit has expired; and 3) where
the buyer becomes insolvent (Article 1527, 1st par).

Angelina agreed to buy the Toyota Innova (ABC 123) of Brad. They made no
arrangements as to credit. Angelina, despite not giving Brad any payment, is
asking for the delivery of the vehicle claiming that Brad is obliged to deliver
even if no payment has been made yet since the sale was perfected by mere
consent. Is Brad justified in withholding delivery of the vehicle?

Yes, the unpaid seller of goods who is in possession of them is entitled to

retain possession of them until payment or tender of the price in the following cases:
1) where the goods have been sold without any stipulation as to credit; 2) where
the goods have been sold on credit, but the term of credit has expired; and 3) where
the buyer becomes insolvent (Article 1527, 1st par).

Angelina sold Brad a specific diamond ring to be paid 6 months later. By

mutual agreement, Brad is made already the owner, but Angelina will act as the
depositary of the ring in the meantime. If the term expires, and Brad has not
yet paid, may Angelina still continue possessing the ring even if she is no longer
the owner?

Yes, for she has not been paid. Her no longer being the owner is not
important, for the law says: “The seller may exercise his right or retention
notwithstanding that he is in possession of the goods as agent or bailee for the buyer”
(Article 1527, 2nd par).

What is the condition for the possessory lien under Article 1527 to be available
to an unpaid seller?

This possessory lien, however, remains only so long as the property is still
with the vendor.

Can the possessory lien of an unpaid seller be exercised if there has already
been partial delivery of the goods?

Yes. Under Article 1528, where an unpaid seller has made part delivery of the
goods, he may exercise his right on the remainder, unless such part delivery has been
made under such circumstances as to show an intent to waive the lien or right of
retention.

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Angelina bought 10 bottles of perfume from Brad, only 7 of which arrived. Since
Angelina has not yet fully paid the purchase price, may Brad exercise his right
of possessory lien over the remaining 3 bottles of perfume?

Yes. Under Article 1528, where an unpaid seller has made part delivery of the
goods, he may exercise his right on the remainder, unless such part delivery has been
made under such circumstances as to show an intent to waive the lien or right of
retention.

Angelina bought 10 bottles of perfume from Brad, only 7 of which arrived. Since
Angelina has not yet fully paid the purchase price, Brad exercised his right of
possessory lien over the remaining 3 bottles of perfume Angelina claims that
Brad can no longer withhold delivery of the remainder because the right of
possessory lien is available only if the goods are still in the possession of the
seller. Is Angelina correct?

No, Angelina is not correct. Brad has the right to withhold delivery of the
remaining 3 bottles because under Article 1528, where an unpaid seller has made
part delivery of the goods, he may exercise his right on the remainder, unless such
part delivery has been made under such circumstances as to show an intent to waive
the lien or right of retention.

Under what circumstances is the unpaid seller no longer allowed to exercise the
right of retention over the remainder of the goods where partial delivery has
already been made?

The right of lien over the remainder of the goods where partial delivery has
been made is no longer available if such part delivery has been made under such
circumstances as to show an intent to waive the lien or right of retention (Article
1528).

When does the unpaid seller lose his lien on or right of retention over the
goods?

The unpaid seller loses his right of lien or retention in the following cases: 1) when he
delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer
without reserving the ownership in the goods or the right to the possession thereof; 2) when
the buyer or his agent lawfully obtains possession of the goods; and 3) by waiver thereof
(Article 1529)

Is the lien of an unpaid seller over the goods sold lost if he obtains judgment for
the price of the goods?

No, such lien is not lost. Under Article 1529, last paragraph, the unpaid seller
of goods, having a lien thereon, does not lose his lien by reason only that he has
obtained judgment for the price of the goods.

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Can an unpaid seller waive his possessory lien on or right of retention over the
goods sold?

Yes, waiver is one of the instances that would result in the loss of the
possessory lien or right of retention that the unpaid seller has over the goods (Article
1529, no. 3)

Under the circumstances mentioned under Article 1529, the possessory lien of
an unpaid seller is lost. Is the vendor’s lien also lost?

No, under the circumstances mentioned in Article 1529, the lien lost is only
the possessory lien and not the vendor’s lien.

Angelina delivered the goods to the carrier for transmission to the buyer, Brad.
She, however, reserved her right to the ownership in the goods. Does she lose
her possessory lien?

No, she does not lose her possessory lien in view of the reservation. Under
Article 1529, one of the instances when the unpaid seller’s possessory lien is lost is
when he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the ownership in the goods or the right
to the possession thereof.

An unpaid seller who is still in possession of the goods sold brought an action to
get the purchase price. Does he lose his lien?

No, the bringing of an action is not one of the ways of losing the possessory
lien. As a matter of fact, even if he has already obtained a money judgment in his
favor, the possessory lien still remains with him (Article 1529).

Brad, an unpaid seller who is still in possession of the goods sold brought an
action against Angelina to get the purchase price. Does he lose his lien by virtue
of the filing of the collection complaint?

No, the bringing of an action is not one of the ways of losing the possessory
lien. As a matter of fact, even if Brad has already obtained a money judgment in his
favor, the possessory lien still remains with him (Article 1529).

An unpaid seller, who possessed the goods through a warehouseman, delivered

to the buyer a negotiable warehouse receipt. Does the unpaid seller still have a
possessory lien?

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Not anymore. Under Article 1529, no. 2, an unpaid seller’s possessory lien is
lost when the buyer or his agent lawfully obtains possession on the goods. The
negotiable warehouse receipt automatically transferred both title and right of
possession to the goods in the buyer.

What is meant by the right of stoppage in transitu?

The right of stoppage in transitu refers to the right of the unpaid seller to
resume possession of the goods at anytime while they are in transit by virtue of which
he will then be entitled to the same rights in regard to the goods as he would have
had if he had never parted with the possession (Article 1530).

When is the right of stoppage in transitu available to the unpaid seller?

This right is available to the unpaid seller when he has already parted with
the possession of the goods and the buyer is or becomes insolvent (Article 1530).

The unpaid seller may exercise his right of stoppage in transitu when he has
already parted with the possession of the goods and the buyer is or becomes
insolvent. What is the right of stoppage in transitu?

The right of stoppage in transitu refers to the right of the unpaid seller to
resume possession of the goods at anytime while they are in transit by virtue of which
he will then be entitled to the same rights in regard to the goods as he would have
had if he had never parted with the possession (Article 1530).

What is the effect if the unpaid seller exercises his right of stoppage in transitu?

Upon exercise of the right of stoppage in transitu, the unpaid seller will then
be entitled to the same rights in regard to the goods as he would have had if he had
never parted with the possession (Article 1530).

When will the buyer’s insolvency give rise to the unpaid seller’s right of
stoppage in transitu?

The seller’s right of stoppage in transitu exists whether the buyer is insolvent
at the time of or after the sale. This is because Article 1530 provides that the right if
stoppage in transitu available when the seller has already parted with the possession
of the goods and the buyer is or becomes insolvent.

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Under Article 1530 of the Civil Code, the right of stoppage in transitu is
available to the seller when he has already parted with the possession of the
goods and the buyer is or becomes insolvent. What is the meaning of
INSOLVENCY under this provision?

The insolvency need not be judicially declared. It is enough that the

obligations exceed a man’s assets (Paras).

Angelina bought 100 cases of Manila Beer from Brad with the understanding
that the goods will be delivered by ship from Manila to Cebu. While the goods
were being transported, Brad learns that Angelina has become insolvent. Can
Brad stop the delivery of the goods and resume possession thereof?

Yes, Brad can exercise his right of stoppage in transitu. Under Article 1530,
when the buyer of goods is or becomes insolvent, the unpaid seller who has parted
with the possession of the goods has the right of stopping them in transitu, that is to
say, he may resume possession of the goods at any time while they are in transit, and
he will then become entitled to the same rights in regard to the goods as he would
have if he had never parted with the possession.

Angelina bought 100 cases of Manila Beer from Brad with the understanding
that the goods will be delivered by ship from Manila to Cebu. While the goods
were being transported, Brad learns that Angelina has become insolvent. Brad
wants stop the delivery of the goods and resume possession thereof. Angelina,
on the other hands, claims that the right of stoppage in transitu is not available
to Brad because she has not yet been judicially declared insolvent. Is Angelina
correct?

No, Angelina is not correct and Brad can exercise his right of stoppage in
transitu. Under Article 1530, when the buyer of goods is or becomes insolvent, the
unpaid seller who has parted with the possession of the goods has the right of
stopping them in transitu, that is to say, he may resume possession of the goods at
any time while they are in transit, and he will then become entitled to the same rights
in regard to the goods as he would have if he had never parted with the possession.
The insolvency need not be judicially declared. It is enough that the obligations
exceed a man’s assets (Paras).

When are goods considered “in transit”?

Goods are in transit within the meaning of Article 1530 in the following
instances: 1) from the time when they are delivered to a carrier by land, water, or air,
or other bailee for the purpose of transmission to the buyer, until the buyer, or his
agent in that behalf, takes delivery of them from such carrier or other bailee; or 2) if
the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to receive them back (Article 1531).

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When are goods no longer considered “in transit”?

Goods are no longer in transit within the meaning of Article 1530 in the
following instances: 1) if the buyer, or his agent in that behalf, obtains delivery of the
goods before their arrival at the appointed destination; 2) if, after the arrival of the
goods at the appointed destination, the carrier or other bailee acknowledges to the
buyer or his agent that he holds the goods on his behalf and continues in possession
of them as bailee for the buyer or his agent; and it is immaterial that further
destination for the goods may have been indicated by the buyer; or 3) if the carrier or
other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that
behalf (Article 1531).

If the goods already reached the place of destination, can they still be
considered “in transit”?

Yes, goods that have reached the place of destination are still considered” “in
transit” if the good are rejected by the buyer and the carrier or other bailee continues
in possession of them (Article 1531).

If the goods are rejected by the buyer but the seller refuses to receive them
back, are the goods considered “in transit”?

Yes, goods that have reached the place of destination are still considered” “in
transit” if the good are rejected by the buyer provided the carrier or other bailee
continues in possession of them, even if the seller has refused to receive them
back (Article 1531).

Despite not having arrived at the appointed place of destination, can the goods,
nevertheless, be considered as no longer “in transit”?

Yes, goods that have not yet reached the place of destination may already be
considered as no longer “in transit” if the buyer, or his agent in that behalf, has
obtained delivery of the goods (Article 1531).

If the goods have arrived at the appointed destination but the carrier or other
bailee continues possession of them, are the goods still “in transit”?

Not necessarily. If, after the arrival of the goods at the appointed destination,
the carrier or other bailee acknowledges to the buyer or his agent that he holds the
goods on his behalf and continues in possession of them as bailee for the buyer or his
agent, the goods are no longer “in transit” (Article 1531).

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If the goods have arrived in the appointed destination and the carrier or other
bailee continues possession of them as bailee for the buyer or his agent but the
buyer has indicated a further destination, are the goods still “in transit”?

Not anymore. Under Article 1531, if, after the arrival of the goods at the
appointed destination, the carrier or other bailee acknowledges to the buyer or his
agent that he holds the goods on his behalf and continues in possession of them as
bailee for the buyer or his agent; and it is immaterial that further destination
for the goods may have been indicated by the buyer.

If upon arrival of the goods the buyer unjustifiably refuses to receive the goods,
may the seller still exercise the right of stoppage in transitu?

Yes, because in this instance, the goods are still considered “in transit” and
therefore, the seller may still exercise the right of stoppage.

If the goods are delivered to a ship, freight train, truck, or airplane chartered
by the buyer, are the goods still considered “in transit” or not anymore?

Under Article 1531, if the goods are delivered to a ship, freight train, truck, or
airplane chartered by the buyer, it is a question depending on the circumstances of
the particular case, whether they are in possession of the carrier as such or as agent
of the buyer.

If part delivery of the goods has been made to the buyer, or his agent in that
behalf, is the right of stoppage in transitu still available to the unpaid seller?

Yes, the remainder of the goods may be stopped in transitu, unless such part
delivery has been under such circumstances as to show an agreement with the buyer
to give up possession of the whole of the goods (Article 1531).

How is the right of stoppage in transitu exercised?

The unpaid seller may exercise his right of stoppage in transitu either by
obtaining actual possession of the goods or by giving notice of his claim to the carrier
or other bailee in whose possession the goods are (Article 1532, 1 st par).

What is required in the exercise of the right of stoppage in transitu?

There must be intent to repossess the goods (Paras).

If the right of stoppage in transitu is exercised by giving a notice of the claim, to

whom should the unpaid seller give such notice?

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The notice must be given either 1) to the person on actual possession of the
goods; or 2) to his principal (Article 1532, 1st par).

If the notice of the seller’s exercise of the right of stoppage in transitu is given
to the principal, what is the condition required by law?

If the notice is given to the principal, it must be given at such time and under
such circumstances that the principal, by the exercise of reasonable diligence, may
prevent a delivery to the buyer (Article 1532, 1st par).

If notice of stoppage in transitu is given by the seller to the carrier, or other

bailee in possession of the goods, what is the obligation of the latter?

Upon receipt of the notice of stoppage in transitu, the carrier, or other bailee
in possession of the goods, must deliver the goods to, or according to the directions
of, the seller (Article 1532, 2nd par).

Who shall bear the expenses if the goods are delivered back to the seller
exercising his right of stoppage in transitu?

The expenses for such delivery must be borne by the seller (Article 1532, 2 nd par).

If a negotiable document of title representing the goods has been issued by the
carrier or other bailee, what is required for the unpaid seller to exercise his
right of stoppage in transitu and order the redelivery of the goods?

Under the last sentence of Article 1532, if a negotiable document of title

representing the goods has been issued by the carrier or other bailee, he shall not be
obliged to deliver or justified in delivering the goods to the seller unless such
document is first surrendered for cancellation.

What are the effects of the exercise of the right of stoppage in transitu?

After the exercise of the right of stoppage in transitu, the consequential effects
are: 1) the goods are no longer in transitu; 2) the contract of carriage ends and the
carrier now becomes a mere bailee and he will be liable as such; 3) the carrier should
not deliver anymore to the buyer or the latter’s agent; otherwise, he will be liable for
damages (Paras); and 4) the carrier must redeliver to, or according to the directions
of, the seller (Article 1532, 2nd par).

When is the right of resale available to the unpaid seller?

The right of resale is available to the unpaid seller of goods in the following
cases: 1) where the goods are of perishable nature; 2) where the seller has expressly

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reserved the right of resale in case the buyer should make default; and 3) where the
buyer has been in default in the payment of the price for an unreasonable time. It is,
however, essential before the resale can be made that the unpaid seller should have a
right of lien or should have stopped the goods in transitu (Article 1533, 1st par).

What are the preconditions before the unpaid seller may exercise the right of
resale in the instances allowed by law?

In the exercise of the right of resale, Article 1532, 1 st paragraph requires that
the unpaid seller should have a right of lien or should have stopped the goods in
transitu.

What is the effect of a resale under Article 1533?

Where a resale is made, as authorized under Article 1533 (par 2), the buyer
acquires a good title as against the original buyer.

What is the rule regarding any deficiency in the price after the resale?

The deficiency in the price may be obtained as damages from the buyer, as
when the resale price is lower than the original selling price.

Is notice of an intention to resell the goods essential to the validity of a resale?

Notice of an intention to resell the goods is not essential to the validity of the
resale. However, where the right to resell is not based on the perishable nature of the
goods or upon an express provision of the contract of sale, the giving or failure to give
such notice shall be relevant in any issue involving the question whether the buyer
had been in default for an unreasonable time before the resale was made (Article
1533, 3rd paragraph).

Is notice of the time and place of the resale of goods essential to the validity of
such resale?

No, it is not essential to the validity of a resale that notice of the time and
place of such resale should be given by the seller to the original buyer (Article 1533,
4th paragraph).

May the seller buy the goods subject of the resale?

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No, the seller cannot, directly or indirectly, buy the goods (Article 1533, last
paragraph).

When is the right to rescind the sale available to an unpaid seller?

The right to rescind the transfer of title is available when an unpaid seller has
the right of lien or has stopped the goods in transitu and if he expressly reserved to
do so in case the buyer should be in default or where the buyer has been in default for
an unreasonable time (Article 1534, 1st paragraph).

What is the effect of the exercise of the right to rescind?

The buyer who exercises the right to rescind the transfer of title shall resume
the ownership in the goods.

What should be done in order to rescind the transfer of title?

The unpaid seller must manifest by notice to the buyer or by some other overt
act an intention to rescind (Article 1534, 2nd paragraph).

Is it necessary that the overt act showing an intention to rescind be

communicated to the buyer?

It is not necessary that such overt act should be communicated to the buyer,
but the giving or failure to give notice to the buyer of the intention to rescind shall be
relevant in any issue involving the question whether the buyer had been in default for
an unreasonable time before the right of rescission was asserted (Article 1534, 2 nd
paragraph).

What is the effect of any sale or disposition of the goods by the buyer on the
unpaid seller’s right of lien or stoppage in transitu?

Generally, the unpaid seller’s lien or stoppage in transitu remains even if the
buyer has sold or otherwise disposed of the goods. The exceptions are when the
unpaid seller has given his consent thereto or when the purchaser or buyer is a
purchaser for value in good faith of a negotiable document of title.

If the buyer has already sold the goods, may an unpaid seller still exercise his
right of lien or stoppage in transitu over the goods?

Yes, the unpaid seller may still exercises right of lien or stoppage in transitu
over said goods. This is because under Article 1535, the unpaid seller’s right of lien or

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stoppage in transitu is not affected by any sale, or other disposition of the goods
which the buyer may have made, unless the seller has assented thereto.

May the unpaid seller’s right of lien or stoppage in transitu still be exercised if a
negotiable document of title has been issued in favor of a purchaser for value in
good faith?

No. Under Article 1535, 2nd paragraph, if a negotiable document of title has
been issued for goods, no seller’s lien or right of stoppage in transitu shall defeat the
right of any purchaser for value in good faith to whom such document has been
negotiated, whether such negotiation be prior or subsequent to the notification to the
carrier or other bailee who issued such document, of the seller’s claim to a lien or
right of stoppage in transitu.

If a negotiable document of title has been issued for goods and has been
negotiated in favor of a purchaser for value in good faith subsequent to the
notification to the bailee of the unpaid seller’s claim to a lien, which shall
prevail, the unpaid seller’s right of lien or the purchaser’s right under the
negotiable document of title?

The right of the purchaser in good faith for value shall prevail over the unpaid
seller’s right of lien. Under the second paragraph of Article 1535, if a negotiable
document of title has been issued for goods, no seller’s lien or right of stoppage in
transitu shall defeat the right of any purchaser for value in good faith to whom such
document has been negotiated, whether such negotiation be prior or subsequent to
the notification to the carrier or other bailee who issued such document, of the
seller’s claim to a lien or right of stoppage in transitu.

When shall the debtor lose every right to make use of the period?

The debtor shall lose every right to make use of the period when:

1. When after the obligation has been contracted, he becomes insolvent, unless he
gives a guaranty or security for the debt or price;

2. When he does not furnish to the creditor the guaranties or securities which he has
promised;

3. When by his own act he has impaired said guaranties or securities after their
establishment, and when through fortuitous event they disappear, unless he
emmediately gives ones equally satisfactory;

4. When the debtor violates any undertaking, in consideration of which the creditor
agreed to the period;

5. When the debtor attempts to abscond.

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A purchased goods from B. A promised to give certain securities, as a result of

which, A was given one year within which to pay. A failed to give the securities.
Can B be compelled to deliver?

No. for failure of A to give the securities he loses the right to make use of the period.
But if B so desires, he may voluntarily deliver.

Sam sold to Muel a car on credit. Does Sam have the right to withhold the
delivery of the car?

Yes, Sam may withhold delivery, unless Muel gives sufficient guaranty or security.

Give other instances where seller may withhold delivery of the thing sold?

1. Seller promise to mortgage his house to secure the purchase price and he fails to
furnish said security as promised;

2. If the payment of the purchase price is secured by a mortgage on the house of buyer,
but the house was partially burned because of the buyer’s fault;

3. Where the buyer shows intent not to pay the price after the thing is delivered to him.

Define accessions and accessories?

Accessions are fruits of a thing; or additions or improvements upon a thing

such as the young of an animals, house or trees on a land.

Accessories are anything attached to the principal thing for its completion,
ornament,or better use such as picture frame, key of a house.

What is the duty of the vendor in delivering the thing sold?

The vendor is bound to deliver the thing sold in the condition in which they were
upon the perfection of the contract including its accessions and accessories. The
vendor is, therefore obliged to preserve the thing pending its delivery.

Who owns the fruit after the contract is perfected?

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All the fruits shall pertain to the vendee from the day on when the contract was
perfected, but it is evident that a contrary stipulation may be agreed upon, or a later date
may be set.

***The term fruits include natural, industrial, and civil fruits.

Give the effect of loss, deteriorstion or improvement before delivery?

It is that from the time of perfection to delivery, risk is to be borne by the buyer.

What are t6he rules in case of loss, deterioration or improvement of the thing
before delivery?

The following rules shall be observed:

1. If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;
2. If the thing is lost through fault of the debtor, he shall be obliged to pay damages to
damages; it is understood that the thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence is unknown or cannot be
recovered;
3. When the thing deteriorates without t5he fault of the debtor, the impairment is to be
borne by the creditor;
4. If it deteriorates through the fault of the debtor, the creditor may choose between the
rescission of the obligation and its fulfillment, with indemnity for damages in either
case;
5. If the thing is improved by its nature, or by time, the improvement shsll inure to the
benefit of the creditor;
6. If it is improve at the expense of the debtor, he shall have no other right than that
granted to the usufructuary.

S sold to B a car. Before delivery the car was lost without the fault of S. Is the
obligation to deliver extinguished?

Yes. The obligation to deliver is extinguish and b shall be oblige to pay the price if he
has paid the same.

How sale of Real Estate by unit is should be made?

Sale of real property by unit shall be made with the statement of its area, at the rate
of certain price for a unit of measure or number, the caused of the contract with
respect to the vendee is the number of such units, and that the entire area stated in
contract must be delivered.

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What are the rules if;

a. The delivery is less than what is stated:

1. Proportional reduction in the price regardless of the extent of deficiency.

2. Rescission of contract:
*if deficiency is at least 1/10 of area stated
*regardless of the extent of deficiency, if the buyer would not have
bought the property had he known that the area was smaller.

b. Delivery of inferior quality:

1. Proportional reduction in the price, regardless of extent of inferiority.

2. Rescission of contract:
*if inferior value exceeds 1/10 of the price agreed upon;
* regardless of extent of inferiority (inferior value), if the buyer would
not have bought the property had he known the inferiority.

Alvin buys from Dale a piece of land supposed to contain 1,000 square meters
at the rate of P10,000 a square meter, but the land has only 800 sq.m. Can Dale
ask for rescission?

Yes, 200 sq.m. is 2/10 of 1,000. The additional 200 must be given to Dale should he
demand them, otherwise Dale may pay only P 8 million (for 800 sq. m.) or rescind
the contract.

What is the right of the buyer if there is greater area or number of real property
stated in the contract?

1. Accept the area included in the contract and reject the rest

2. Accept all at a contract price

Sally buys from Garry a piece of land to contain 1,000 sq. m. at the rate of
P1,000 a sq. m. but the land really contains 1,599 sq. m. What can Sally do?

Sally may accept 1,000 sq.m. and reject the extra 500, in which case he will pay only
P10 million. However, sally is allowed to accept all of the 1,500 sq. m., but he must
pay P15 million. Sally is in no case allowed to rescind the contract, for such a remedy
is not allowed him under this article.

Where is the right of the buyer when immovable sold is lack in area, or is of
inferior quality, or is greater than that stated in the contract applicable?

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It is applicable to both private and judicial sales when immovable sold is lack in area,
or is of inferior quality, or is greater than that stated in the contract.

Give the rule when sale of real estate is made through lump sum (Cuerpo Cierto
or Por Precio Alzado)?

In the sale of real estate, made for a lump sum and not at a rate of a certain sum for a
unit measure or number, there shall be no increase or decrease in the agreed price
whether actual area is greater or lesser than that stated area.

Enumerate the guidelines in a sale real estate made for a lump sum?

The guidelines are:

 What is mentioned are the boundaries, e.i., the technical description of

the property which is indispensable requirement in the sale of real
property.
 If area or number should likewise be designated, all the area designated
within the boundaries either actually greater in number of area sated
should be delivered.
 If the area with in boundaries is smaller than that stated, vendor should
deliver only that included in the boundaries

For failure to deliver all area within the boundaries even is said area is more
than that stated, what is the remedy of the buyer?

The remedies of the buyer are:

1. Reduction in price proportionate to the area not delivered; or

2. Rescission of the contract.

Jun buys a piece of land a cuerpo cierto. The contract states certain number of
square meters but the land included in the boundaries happen to be Less. Is jun
entitled to pay reduced price?

No. the law presumes that the purchaser had in mind a determinate piece of land and
that he ascertained its area and quality before the contract was perfected. If he did nit
do so, or if having done so, he made no objection and consented to the transaction,
he can blame no one but himself.

When action for sale of real estate by unit or lump sum commenced?

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In action of real estate by unit or lump-sum, action arising therefrom should be

commenced within six (6) months from the day of delivery real or constructive.

Give the rules as to preference of ownership in case double or multiple sale?

The rules are:

1. If the property is sold by the movable (personal property), the ownership shall be
acquired by the vendee who first takes possession in good faith.
2. If property sold is immovable (real property), the ownership shall belong to:
 The vendee who first registers the sale in good faith in the Registry of
Property (registry of Deeds);
 In the absence of registration, the vendee who first takes possession in
good faith; and
 In the absence of both registration and possession, the vendee who
presents the oldest title ( who first bought the property) in good faith
*** These applies also to double donation

As with regards to the provision of Civil code what is meant by:

a. Registration – refer to registration under the Torrens System. requires the

actual recording. If the property was never registered as when the registrar forgot to
do so although he has been handed the document, there is no registration.

b. Possession – either actual or constructive.

c. Title – means title because of the sale, and not any other tirtle or mode of
acquiring property.

What is the basis of the right or priority of the first buyer?

The basis that prius tempore, potior jure or first in time, stronger in right. The rule
can be invoked by the first buyer only. In order to preserve this right, he must
register the deed of sale with the registry of Property ahead of any registration in
good faith by a second or subsequent buyer.

Who is a buyer in good faith?

He is one who buys the property of another without notice that some other person
has a right or interest in such property and pays a full and fair price for the same at
the time of such purchase or before he has notice of the claim or interest of some
other person in the property.

Good faith is innocence or lack of knowledge of the first sale until his contract ripens
into full ownership through registration.

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Enumerate the application of mirror doctrine on the law on double sale?

The applications of the mirror doctrine are:

1. The mirror doctrine will apply where person purchased a lot with knowledge of
facts and circumstances that should have put him upon inquiry and investigation
as might be necessary to acquint him with the defects in the title of the owner.
2. A purchaser cannot close his eyes to facts that should put reasonable man on his
guard and then claim that he acted in good faith under the belief that there was
no defect in the title of the vendor.
3. His mere refusal to believe that such defect exists or the willful closing of eyes to
the possibility of the existence of a defect in the vendor’s title will not make him
an innocent purchaser for value if afterwards it develops that the title is in fact
defective and it appears that he has such notice of the defects as would have led
to its discovery had he acted with the measure of precaution which may
reasonably be required of a prudent man in like situation.
4. Actual possession of land by person other than the vendor would have been
enough to arouse the suspicion as to the ownership of the land about the
purchased.
5. A buyer of a real property which is in possession other than a seller must be wary
and should investigate the rights of those in possession. Without such inquiry,
the buyer can hardly be regarded as in good faith.
6. As a general rule, buyer’s can rely on the face of the title. This is, however,
inapplicable especially when the property is in possession of a person or persons
other than the vendor. In this case, the mirror doctrine applies.

Is double sale applicable to unregistered lands?

No. Since properties are of unregistered lands, subsequent buyer thereof bought the
properties at their peril. The object of double sale must be registered so that the good
faith can be invoked. For this turns out that seller did not own the property at the
time of the sale.

One who buys from unregistered owner is not a purchaser in good faith.

Define Condition Sale?

Condition Sale condition upon which the obligation of either party in a contract of
sale depends, when not performed.

What is the effect of the condition?

1. If conditions are not fulfilled the party may either:

 Refuse to proceeds with the contract; or

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 Proceed with the contract, waiving the performance of the condition

2. If the condition is in the nature of a promise that it should happen, the non-
fulfillment of such condition may be treated by the other party as breach of warranty.

What is condition as used in article 1545?

Conditions means uncertain event or contingency on the happening of which the

obligation of the contract depends.

What is express warranty?

Express warranty is any affirmation of facts 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, thus purchased the same. It includes all warranties
derived from the language of the contract, so long as the language is express.

When is there a warranty?

The good tests on warranties are:

a. If the buyer is ignorant, there is warranty;

b. If the buyer is expected to have an opinion and the seller has no special opinion,
there is no warranty

Give the effect of expression of opinion?

Dealer’s talk like “excellent” cannot be considered as an express warranty. Sales talk
like “little exaggerations allowed under by the law as a concession to human nature.
This is in accordance with the civil law maxim “simplex commendation non obligat”
or the principle of caveat emptor (let the buyer beware).

Give the natural element of a contract of sale?

Natural element of a contract of sale is implied to be part of the contract unless

otherwise expressly stipulated or waived.

When actions based on implied warranties prescribed?

The actions based on implied warranties prescribe in 10n years since these obligation
are imposed by7 law.

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When is implied warranty not applicable?

It is not applicable in:

1. The sale where the phrase is “as is and Where is”.

2. Sale of second-hand articles.
3. Sale by virtue of authority in fact or law.

What does the seller warrant in

a. Warranty against eviction?

Seller warrants:

1. His right to sell at the time the ownership is to pass

2. Buyer will have to enjoy legal and peaceful possession of the thing.

b. Warranty against hidden defects?

1. Free from any hidden faults or defects

2. Free from any charge or encumbrance not declared or known to the
buyer.

Define eviction?

Eviction is defined as 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
based on a right prior to the sale or an act imputable to the vendor.

Enumerate the essential elements of the warranty against eviction?

The essential elements are:

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

2. He is so deprived by virtue of a final judgment;
3. The judgment is based on a right prior to the sale or an act imputable to the
vendor;
4. The vendor was summoned in the suit for eviction at the instance to the vendee;
and
5. There is no waiver on the part of the vendee.

Is seller liable for violation of warranty against eviction in case of double sale?

Yes, the fact that he sold the same land twice makes him responsible for his fraud or
bad faith in depriving any of the purchasers. Provided, however, that the deprivation
be upon final judgment byb a court of competent authority.

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May a warranty against eviction be waived?

Yes. It could be:

 Consciente where renunciation without knowledge of the risk, seller pays

only the value of the thing at the time of eviction.
 Intencionada where renunciation with knowledge.
** if waiver is unclear, it is presumed to be consciente. Intencionada must be proved.

** waiver is void if seller acted in bad faith.

Is government liable for the eviction of the purchaser at a tax sale?

No. government is not liable for the eviction of the purchaser at a tax sale but still the
owner of the property sold under execution at the instance of the judgment creditor
is liable for the eviction, unless otherwise decreed in the judgment.

Neshia sells a parcel of land to Fe. Subsequently, Fernando files an action for
the recovery of possession claiming that he is the owner of the land. At the
instance of Fe, Neshia was summoned to defend his title. The court renders
final judgment declaring that Fernando has a better right. Fe is evicted. Is
Neshia liable to Fe?

Yes, Neshia is liable to Fe for failure to comply with his warranty against eviction.
Here, the judgment is based on a right of third person prior to the sale.

What are the responsibilities of the seller?

The seller is responsible for:

1. His own acts;

2. Those of his predecessors-in-interest.

He is not responsible for:

1. Acts imputable to the buyer himself;

2. Fortuitous event.

Is there a need for a vendee to appeal from decision in order that vendor be
held liable?

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No. the vendee need not appeal from the decision in order that the vendor may
become liable for eviction. Therefore, vendee can sue vendor for damages. Provided,
however, that the decision is final.

Give the effect of prescription?

By prescription, one acquires ownership and the other real rights through the lapse
of time in the manner and under the conditions prescribed by law. In the same way,
rights and actions are lost by prescription.

What can the vendee enforce in case of prescription if:

a. Completed before sale?

The vendee may lose the thing purchased to a third person who has acquired title
thereto by prescription. When prescription has commenced to run against the vendor
and was completed before the sale, the vendee can enforce the warranty against
eviction. In this case, the deprivation is based on a right prior to the sale and an act
imputable to the vendor.

b. Completed after sale?

Even if prescription has started before the sale but has reached the limit prescribed
by law after the sale, the vendor is not liable for eviction. The reason is because the
vendee could easily interrupt the running of the prescriptive period by bringing the
necessary action.

Is the vendor liable for eviction when the property is sold for non-payment of
taxes due and not made known to the vendee?

Yes. 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.

A sells a land to B, the taxes of the land was not paid. The land was sold at a
public auction for non-payment of taxes. B is evicted. Is A liable?

Yes. A is responsible to B, provided, however, that at the time of the Sale, the non-
payment of taxes was not known to B, the vendee.

In case of failure of title, what is the remedy of the purchase in good faith?

It has been held universally that in case of failure of title, a purchaser in good faith at
a judicial sale is entitled to recover the purchase one from the officer if the funds are

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still in his hands or from the judgment debtor (Banzon & Standard Oil Co, v Osorio,
27 Phil 142).

What are the effects of this article:

In Bobis v. Provincial Sheriff of Camarines Norte, it states as follows:

(1) A buyer at an execution sale acquires nothing if the judgment debtor had already
assigned or transferred the property to another before the levy or execution;

(2) A sheriff who merely adheres to the terms or a writ of execution is not liable for
damages. The same is true of the buyer at the public auction,

(3) The buyer at an execution sale is a purchaser in bad faith (and not for value) if he
had prior knowledge of a third party claim filed with the sheriff before the
scheduled execution sale.

What are the effects of stipulation waiving liability for eviction?

The effects are:

(1) If seller was in good faith – the exemption is valid, but without prejudice to Art.
1554

(2) If seller was in bad faith – the stipulation is VOID

What is the rule regarding cost of suit?

Paragraph 3 does not include transportation and other incidental expenses.

Is the right to hold the vendee liable for eviction waivable?

Yes, waiver is allowable. Waiver of evection may partake of two forms, namely:

(1) Waiver consciente – without knowledge of eviction;

(2) Wiaver intencionada – without knowledge of the risk of eviction

What is the presumption in waivers ?

The presumption that the waiver was only in consciente. The waiver intencionada
must be clearly proved.

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In waiver consciente, what value should be returned?

The value at the time of eviction should be returned. This is a case of solution
indebiti, “undue payment.”

In waiver intencionada, what value should be returned?

Nothing need be returned. This is aleatory in nature, and buyer assumes the
consequences. This is so even if there is a stipulation that the warranty against
eviction exist, provided that said stipulation is understood by the parties mere pro
forma.

What are the requisites for reasonable in hidden defects? (redhibitory defects)

The requisites are:

(1) The defects must be hidden (not known and could not have been known)

(2) The defect must exist at the time the sale was made;

(3) The defect must ordinarily have been excluded from the contract;

(4) The defect must be important;

(5) The action must be instituted within the prescribed time – i.e., six months from the
delivery of the thing sold or within 40 days form the date of delivery in case of
animals, and

(6) There must be no waiver of warranty on the part of the vendee.

Under the law, warranty against eviction may be waived. What are the two
kinds of warranty against eviction and what are their effects?

The waiver may be “consciente” or “intencionada”. In the first, there is merely a

voluntary renunciation made by the vendee of the right to warranty in case of
eviction. The effect of such renunciation is that the liability of he vendor in case of
eviction shall extend only to the payment of the value of the thing sold at the time of
eviction. In the second, there is a voluntary renunciation by the vendee of the right
to warranty against eviction, with knowledge of the risk of eviction and assuming the
consequences thereof. The effect of such renunciation in case of eviction is to relieve
the vendor of any liability whatsoever. (Art 1554 NCC)

What is the effect of stipulation waiving liability for Eviction?

The effects are:

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(1) If seller is in good faith – the exemption is valid, but without prejudice to Art
1554,

(2) If seller was in good faith – the stipulation is VOID.

What must the seller give in case of eviction?

V I C E D : Value, Income ( or fruits), costs, expenses and damages (and interest and
ornamental expenses) if seller was in bad faith.

What is the rule as to income or fruits?

If the court does not order the buyer to deliver the income or fruits to the winner,
said buyer would be entitled to them. This is fair for after all, in the meantime, the
seller was using the price money without interest.

If there is no agreement with regard to warranty in case of eviction, what is the

extent of the liability of the vendor?

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 or less than the price of the 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 cost 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, ornamental expenses, if the sale was made in bad faith
(Art 1555, CC).

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 that 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 have purchased one without the other (Art 1556, CC).

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What is the rule regarding damages?

The interest in paragraph 5 refers to interest on costs, expenses, and damages. The
sale must have been made in BAD FAITH, which must be proves (Pascual v Lesaca,
May 30, 1952)

Why is rescission not a remedy in case of TOTAL eviction?

The remedy of rescission contemplates that the one demanding is able to return
whatever he has received under the contract; and when this cannot be done,
rescission cannot be carried out. It is for this reason that the law on sales does not
make rescission a remedy incase the vendee is totally evicted from the thing sold, for
he can no longer restore the subject matter of the sale to the vendor. Of course,
incase of partial eviction, rescission may still be allowed with respect to the subjected
matter that remains, as in the case contemplated in Art 1556.

What is the remedy of the vendee in case of partial eviction?

The vendee’s remedy is either:

(1) Rescission, or

(2) Enforcement of warranty.

Are there any other remedies to be attached with rescission?

If he chooses rescission, there should be no new encumbrances, like a “mortgage.”

(Andaya v Manansala, April 30, 1960).

When is enforcement of the warranty the proper remedy?

If the circumstances set forth in paragraph 1 of Art 1556 are not present (as when
there are new encumbrances), the only remedy is to enforce the warranty

When is judgment deemed to be final and what is its necessity?

A judgment becomes final if on appeal, the decision decreeing the eviction is

affirmed; or if within the period within which to appeal, no appeal was made. It
should be noted that under Art 1549 CC, the vendee need not appeal from the

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decision of the lower court. Thus, it is sufficient that the judgment be FINAL before
the warranty can be enforced.

What is the necessity for summoning the seller in the suit for the eviction of the
buyer?

The importance are:

(1) This is the preparation for the suite – a condition sine qua non;

(2) It is immaterial whether or not the seller has good defense or means of defense.
The summons and notice must nevertheless be given. Once this is done, the
buyer has done all that he had to do;

(3) The notice must be the notice for the suit fir eviction, NOT the notice in the suit
for breach of warranty. The notice need not be given in a case where the buyer is
an applicant for registration in land registration proceedings. Here it is
sufficient that the buyer notifies the seller of: (a) his application; (b) any
opposition thereto.

What is the reason for summoning?

Its object is to give the vendor opportunity to show that the action against the buyer
is unjust.

The seller was notified but did not appear. The buyer won in the suit filed by
the third person. Can the buyer recover expenses?

No, because there really was no breach of warranty.

In an eviction suit, is it permissible for the buyer to file a cross claim against
the seller?

Yes, it is permissible for the buyer to file a cross claim against the seller for the
enforcement of the warranty should the buyer likes. This can be done in some cases
to save time and to prevent inconvenience. The suit against the seller may be in the
form of a third party complaint if the vendor has not been made a co-defendant.

What is the rule in registration proceedings?

This article applies only when the buyer is the defendant, hence when the buyer is the
petitioner in a registration proceedings and he loses, the formal notice here is not a

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condition precedent. It is enough that he advice the seller of the application for
registration and the opposition thereto.

How does the Rules of Court apply?

The buyer can make use of the Rules of Court in bringing the seller to the case.

What is the rule in case of non-apparent servitudes?

The defect contemplated in this Article is really a sort of “hidden defect” but remedy
is similar to that provided in the case of eviction. The servitudes contemplated are
not legal easements for these exist by virtue of the law. Therefore, it cannot be
claimed that the buyer was ignorant thereof.

What are the remedies if made within one year?

The remedies are:

(1) rescission;

(2) damages.

What is the remedy if made after one year?

The remedy is only Damages.

What is the effect if burden or easement is registered?

There is not remedy if burden is registered except if there is an express warranty that
the thing is free from all burdens and encumbrances.

What is the effect of form of sale?

This article is applicable whether sale is:

(a) in public instrument;

(b) in private instrument;

(c) made orally.

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There is not need to first compel the seller to execute a public instrument before the
action is brought.

What are the requisites to recover because of hidden defects?

The requisites are:

(1) The defects must be hidden (not known and could not have been known)

(2) The defect must exist at the time the sale was made;

(3) The defect must ordinarily have been excluded from the contract;

(4) The defect must be important (renders thing UNFIT or considerably decreases
FTINESS);

(5) The action must be instituted within the prescribed time – i.e., six months from
the delivery of the thing sold or within 40 days form the date of delivery in case of
animals, and

(6) There must be no waiver of warranty on the part of the vendee.

What is the meaning o “unfit for the use intended”

The use must have been stated in the contract itself, or can be inferred from the
nature of the object or from the trade or occupation of the buyer.

What is the meaning of “hidden”

“Hidden” means:

(a) What may be hidden with respect to one person may not be hidden with respect to
another;

(b) Just because there is a difference in grade or quality, it does not necessarily mean
that the defect is hidden;

(c) Defects are sometimes referred to as “redhibitory defects”

What is the effect of long inaction?

If the buyer examines the tobacco at time of purchase, and questions only after 3
years, and the seller has not made any misrepresentation, there is no breach of
warranty. In fact under Art 1571, the action prescribes in six months.

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A lease purchase agreement was entered into between Filinvest and Philrock
over a rick crushing machine. It was agreed that after payment of the price,
Philrock would become the owner of the same. After testing the machine,
Philrock complained that it could process only 5 tons of rock a day instead of
the agreed 10 to 20 tons a day, hence it demanded that Filinvest should make
good of the same. Philrock went to court seeking for rescission of the lease,
damages and injunction. Filinvest contented that it is not liable for warranty.
Decide.

Filinvest is not liable. Philrock inspected and tested the machine, and it is more
knowledgeable, if not, and expert on the object of the contract; hence, Philrock
cannot hold Filinvest liable for damages. It is true that Art 1561, NCC, vendor shall
be responsible for warranty against hidden defects which the thing sold may have
should they render the thing unfit for the use it is intended or diminish its fitness for
such use, yet the law likewise states that the vendor shall not be answerable for
patent defects or those which are 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. (Art 1561, NCC).

What are the requisites of the warranty against hidden encumbrances?

The requisites for this warranty are:

(1) The encumbrance must be so important;

(2) The encumbrance is not registered;

(3) The vendee has no knowledge of such encumbrance; and

(4) Action brought within the reglementary period – one year from the execution of
the deed of sale. (Art 1561 CC)

When is defect deemed to be important?

The defect is important when:

(1) It renders the thing sold unfit for the use for which it is intended;

(2) If it diminishes or decreases its fitness to such an extent that the vendee would
not have acquired it had he been aware or would have given a lower price for it.

In what cases where the vendor may not be held liable for the defects of the
thing sold?

When the defects are so patent 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, he
should have known them (Art 1561 CC).

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Raymundo sold a parcel of land to IDI for P122,769.00 payable in three

installments, the last installment ot be paid within one year from the date of
issuance of the Original Certificate of Title over the property which Raymundo
obligated himself to secure. After the OCT was issued, the TCT was issued in
the name if IDI. IDI later sold the land to Agencia for P456,000. As a result,
the TCT was issued in the name of Agencia. The land was later transferred to
Aguirre. In the meantime, the tenant on the property was forced to stop
cultivating the land because of the buildozing caused by the present owner.
The tenant sued IDI and Aguirre for disturbance compensation. IDI in turn
filed a cross-claim against Raymundo in case of a judgment adverse to it.
Agencia and Aguirre filed a cross-claim against IDI. The trial court rendered
judgment in favor of the tenant and ordered Aguirre to pay the tenant
disturbance compensation in the amount of P24,000. It also ordered IDI to pay
Aguirre P24,000 as damages. Hence this appeal. If you were the ponente, how
would you decide? Why?

I would decide against the petitioner. The SC had the occasion to hold that “hidden
faults or defects” pertain only to those that make the object of sale until for use for
which it was intended at the time of the sale. If the object of the sale is an
agricultural land, the existing tenancy relationship with respect to the land cannot be
a “hidden fault or defect”. It is not a lien or encumbrance that the vendor’s warrant
did not exist at the time of the sale. It is a relationship which any buyer of
agricultural land would reasonable expect to be present and which it is its duty to
specifically look into and provide for.

If a person sells a second-hand motor vehicle, is he liable for damages in case

there are defects or it is unfit for the purpose intended? Is there any exception?

Explain.

Generally, in the sale of a designated and specific article sold as second hand, there
is no implied warranty as to its quality or fitness for the purpose intended, at least
where it is subject to inspection at the time of the sale. On the other hand, there is
also authority that in sale of articles, there may be, under some circumstances, an
implied warranty of fitness for the ordinary purpose of the article sold for the
particular purpose of the buyer.

There is no implied warranty as to the condition, adaption, fitness, or suitability for

the purpose for which a thing was made or the quality of an article sold as and for a
second-hand article.

The exception to the rile is found in Art 1562, NCC, which provides that in sale of
goods, there is an implied warranty or condition as to the quality or fitness of the
goods as follows: 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 a\the grower or
manufacturer or not), there is an implied warranty that the goods shall be reasonably
fit for such purpose.

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What is the meaning of merchantible quality?

For general purpose of a thing, and not necessarily the particular purpose for which
it has been acquired.

What is the effect of sale under patent name or trade name?

There is generally NO warranty as to the article’s fitness for any particular purpose.’

What is the significance of the usage of trade?

The parties are presumed to be acquainted with the usages of trade.

In the case of a contract of sale by sample, is there an implied warranty the

goods shall be free from any hidden defect rendering them unmerchantable
which would not be apparent or reasonable examination of the sample?

Yes, if the seller is a dealer in goods old by sample. (Art 1565 CC)

Why is the seller responsible for hidden defects even if he is in good faith?

Because he has to repair the damage done. The object of the law is reparation, not
punishment. Thus for example, the seller of an unworthy vessel is liable for hidden
defects even if he did not know of them.

Seller and buyer agreed that seller would be exempted from hidden defects.
But seller knew of hidden defects. Would seller be liable?

Yes, because of his bad faith. To hold otherwise would be to legalize fraud.

Who is a purchaser in good faith and for value?

A purchaser in good faith and for value is one who buys property of another, without
notice that some other person has a right to or interest in such property and pays a
full and fair price for the same, at the time of such purchase or before he has notice of
the claim or interest of some other person in the property.

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What does good faith consist of?

Good faith consist of an honest intention to abstain from taking unconscientious

advantage of another. Good faith is the opposite of fraud and of bad faith, and its
non-existence must be established by competent proof. One cannot be said to be a
buyer in good faith if he had notices of the claim of third person aside from the claim
or right of the registered owner, especially if the claims were annotated on the title
are the lots which were shown to be they buyer together with the decision of the
Court of Appeals, and the buyers were fully aware that the subject were under
litigation. A purchaser of a valued price of property cannot just close is eyes to facts
which should put a reasonable man upon his guard and then claim that he acted in
good faith under the belief that there were no defect in the title of the vendors.

X is the owner of a parcel of land. He sold it to Y who did not register the deed
of sale. Later on, X mortgaged the same land to Z. Between the two contracts,
which shall prevail? Explain.

An unrecorded sale shall prevail because the owner has already parted with his
property at the time of the mortgage, and the mortgage is always subject to the better
rights of third parties.

Spouses Victoriano and Crisanta dela Rosa were the registered owners of a
parcel of land. On May 4, 1931, Victoriano sold ½ of the land to Juliana Salazar
who constructed a house. The document was not registered. On June 6, 1961,
the children of the spouses sold the entire land to Nuguid. It was registered on
March 10, 1964 and a title was issued. Between the first and the second buyer,
who has a better right? Why?

The ownership should belong to the vendee who in good faith first recorded it in the
Registry of Property. Although the second sale was made by the heirs of Dela Rosa,
the said heirs are deemed the continuation of the personality of the decedent. Hence,
the second buyer is the owner. Petitioner was a purchaser in good faith and for
value. The title was free from any annotation or encumbrance. If the property sold is
registered land, the purchase in good faith has a right to rely on the certificate of the
title and is under no duty to go behind it to look for laws, for previous registration is
required to be coupled with good faith.

In action for annulment of documents and reconveyance with damages,

Francisco Veloso contended that he never authorized anyone to sell his real
property. He alleged that his wife was in possession of the title; but when his
wife went abroad, he found out that his title was missing. He discovered that
there was a sale by his wife over the said property supported by a General
Power of Attorney. His title was cancelled under the name Aglaloma Escario.
Can he recover the property? Why?

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No because she was a buyer in good faith and for value. She relied on the power of
attorney presented by the wife of the plaintiff. Being the wife if the owner and having
with her the title of the property, there was no reason for the private respondent not
to believe in her authority. Moreover, the power of attorney was notarized and as
such carried with it the presumption of its due execution. This, having had no
inkling on any irregularity and having not participation thereof, private respondent
was a buyer in good faith . It has been consistently held that a purchaser in good
faith is one who buys property of another without notice that some other person has
a right to ir interest in such property and pays a full and fair price of the same, at the
time of such purchase, or before he has notice of the claim or interest of some other
person in the property.

A property was mortgaged but there was an annotation of the right of usufruct.
The obligation was not paid, hence, there was foreclosure of the mortgage.
Finally, there was sale. Is the morgagee-buyer, a buyer in good faith? Why?

Yes, it is well-established rule that every person dealing with registered land may
safely rely on the correctness of the certificate of title issued and the law will in no
way oblige him to go behind the certificate to determine the condition of the
property. An innocent purchaser for value ins one who buys the property of another
without notice that some other person has a right to or interest in such property and
pays a full and fair price for the same at the time of such purchase or before he has
notice of the claim of another person. The annotation of usufructuary rights does not
impose upon the mortgagee-buyer the obligation to investigate the validity of its
mortgagor’s title. Usufruct have a right to enjoy the property of another with the
obligation of preserving its form and substance.. (Art 562).

Can a forged or fraudulent document vest title? Why?

Yes, in Spouses Romulo and Sally Eduarte vs CA, it was said that the rights of an
innocent purchase for value must be respected and protected notwithstanding the
fraud employed by the seller in securing his title.

Define “accion redhibitoria” and “accion quantu minoris”

“Accion redhibitoria” is an action instituted by the vendee against the vendor to

avoid a sale on account of some vice or defect in the thing sold which renders it unfit
for the use intended or which will diminish its fitness for such use to such an extent
that, had the vendee been aware thereof, he would hot have acquired it. “accion
quantu minoris”, on the other hand, is an action to procure him return of a part of
the purchase price paid by the vendee to the vendor by reason of such defect. (Arts
1561, 1562, 1564, 1565, 1567, CC)

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If there is a breach by the vendor of the implied warranty against hidden

defects of or encumbrances upon the thing sold, what are the remedies of the
vendee? What is the period of prescription for such remedies?

The vendee may elect between withdrawing from the contract (accion redhibitoria)
and demanding a proportionate reduction of the price (accion quantu minoris), with
dames in either case (Art 1567, CC). Generally, the period of prescription is six
months (Art 1571, CC). However, in redhibitory actions based on the faults or defects
of animals, the period is forty days (Art 1577, CC). Whether six months or forty days,
the period must be counted from the date of delivery to the vendee.

What are the remedies in case of hidden defects?

The remedies are:

(1) Withdrawal or rescission (accion redibitoria) plus damages;

(2) Proportionate reduction (accion quanti minors o estimatoria) – reduction in the

price, plus damages.

Is this warranty applicable in lease?)

Yes, this warranty in sales is applicable to lease. (Yap v. Tiaoqui)

On June 10,2010, S sold to B a specific a car which S acquired from a friend last
June 1, 2010. On August 10, 2010, the car was totally destroyed which was
traced to a crack in the engine block. S was not aware of the defect. Is S, the
seller, liable to B?

a. No, because S was innocent and a seller in good faith.

b. No, because S has all the opportunity to examine the car before buying it.

c. Yes, S is liable to return the price and expenses incurred by B.

d. Yes, S is liable to return the price, expenses and damages actually suffered by B.

On February 15, 2010, A sold to B a specific car. On March 3, 2010, the car was
totally destroyed which was traced to a crack in the engine block. A, the
vendor, was aware of the defect. Is A, the vendor, liable to B?

Yes, A shall bear the loss and is liable to return the price, expenses and damages
actually suffered by B.

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Statement No. 1: 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.

Statement No.2: If the vendor was not aware of the hidden defects , he shall
only return the price and interest thereon, and reimburse the expenses of the
contract which the vendee might have paid.

a. Both are true

b. Both are false

c. No. 1 is true, No. 2 is false

d. No. 1 is false, No. 2 is true

What is the effect of loss of thing on account of hidden defects when the vendor
was aware of such hidden defects?

The vendor shall bear the loss and the vendee hall have the right to recover the price
paid, expenses of the contract, with damages.

What is the effect of loss of thing on account of hidden defects when the vendor
was not aware of such hidden defects?

The vendor shall be obliged to return the price paid, interest thereon and expenses of
the contract if paid by the vendee.

If the thing sold was lost on account of hidden defects and the vendor was
aware of such hidden defects, the vendee can recover the following except:

a. the price paid

b. interest thereon

c. expenses of the contract

d. damages

If the thing sold was lost on account of hidden defects and the vendor was not
aware of such hidden defects, the vendee can recover the following except:

a. the price paid

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b. interest thereon

c. expenses of the contract if paid by the vendee

d. damages

Statement No. 1: If the thing sold was lost on account of hidden defects and the
vendor was aware of such hidden defects, the vendee can recover the price
paid, interest thereon, expenses of the contract, with damages.

Statement No.2: If the thing sold was lost on account of hidden defects and the
vendor was not aware of such hidden defects, the vendee can recover the price
paid, interest thereon, and expenses of the contract if paid by the vendee.

a. Both are true

b. Both are false

c. No. 1 is true, No. 2 is false

d. No. 1 is false, No. 2 is true

If the thing sold should be lost in consequence of the hidden faults and the
vendor was aware of them. The following are his obligations except:

a. he shall bear the loss

b. he shall be obliged to return the price

c. he shall refund the expenses of the contract, with damages

d. he shall return the price and interest thereon, expenses of the contract
which the vendee might have paid.

If the thing sold should be lost in consequence of the hidden faults and the
vendor was not aware of them. The following are his obligations except:

a. he shall return the price

b. he shall return the interest thereon

c. he shall reimburse the expenses of the contract which the vendee might have paid

d. he shall return the price and refund the expenses of the contract, with
damages

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If the thing sold has hidden faults at the time o f sale and should thereafter be
lost by a fortuitous event or through the fault of the vendee, the vendor has the
following obligation:

a. the vendor pays the price which the vendee paid as is

b. the vendor pays the price which the vendee paid less the value which
the thing had when it was lost

c. the vendor pays only the value which the thing had when it was lost

d. the vendor pays damages to the vendee regardless of whether or not the vendor
had acted in bad faith

Statement No. 1: If the thing sold has hidden faults at the time o f sale and
should thereafter be lost by a fortuitous event or through the fault of the
vendee, the vendor has the obligation to pay only the value which the thing had
when it was lost.

Statement No. 2: If the thing sold has hidden faults at the time o f sale and
should thereafter be lost by a fortuitous event or through the fault of the
vendee, the vendor pays damages to the vendee regardless of whether or not
the vendor had acted in bad faith.

a. Both are true

b. Both are false

c. No. 1 is true, No. 2 is false

d. No. 1 is false, No. 2 is true

S sold a car for P300,000 to B. Unknown to B, the car then had a cracked
engine block, the replacement of which would cost P75,000. Despite his
knowledge of this defect, S obtained a waiver from B of the latter’s right under
the warranty against hidden defects. Subsequently, the car was wrecked due to
the recklessness of B who only then discovered the defects. What right, and to
what extent, if any, has B against S?

B can recover approximately P75,000, which may represent the difference between
the purchase price and the true value. The waiver is void because S knew of the defect.

S sold a car for P300,000 to B. Unknown to B, the car then had a cracked
engine block, the replacement of which would cost P75,000. Despite his
knowledge of this defect, S obtained a waiver from B of the latter’s right under
the warranty against hidden defects. Subsequently, the car was wrecked due to
the recklessness of B who only then discovered the defects. Which of the
following statements is true?

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a. S still liable to reimbursed B of P75,000 the difference between the

purchase price and true value.

b. The waiver is void because B has no knowledge of the defect.

c. S is not liable anymore because the car got loss due to the recklessness of B.

d. The liability of S remains to be 300,000 because of breach of warranty against

hidden defects.

If the thing with hidden defect was lost through fortuitous event or through the
fault of the vendee, what right, and to what extent, if any, has the vendee
against the vendor?

The vendee 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.

What is the effect if the thing with hidden defect was lost due to fortuitous
event or fault of the vendee and the vendor has no knowledge of such hidden
defect?

The vendor is liable to return the difference between the price paid and the value of
the thing when it was lost. Such that, if the price is P10,000 and at the time of the
loss of the thing sold as only P8,000, the vendee may still recover from the vendor
P2,000.

Statement No. 1: If the thing with hidden defect was lost through fortuitous
event or fault of the vendee and the vendor has no knowledge of such hidden
defect, the vendor is obliged to return the price paid less the value which the
thing had when it was lost.

Statement No.2: If the vendor acted in bad faith (with knowledge of the hidden
defect), the vendor shall pay damages to the vendee.

a. Both are true

b. Both are false

c. No. 1 is true, No. 2 is false

d. No. 1 is false, No. 2 is true

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If the thing with hidden defect was lost through fortuitous event or fault of the
vendee and the vendor has no knowledge of such hidden defect, the vendor is
obliged to return:

a. the price paid less the value which the thing had when it was lost

b. the price paid, expenses of the contract, with damages

c. price paid, interest thereon and expenses of the contract if paid by the vendee

d. the original price paid only

Antonio sold a car for P200,000 to Bartolome. Unknown to Bartolome, the car
then had a break defect, the replacement of which would cost P15,000. Despite
his knowledge of this defect, Antonio obtained a waiver from Bartolome of the
latter’s right under the warranty against hidden defects. Subsequently, the car
was wrecked due to the recklessness of Bartolome who only then discovered
the defects. What right, and to what extent, if any, has Bartolome against
Antonio?

Bartolome can recover approximately P15,000, which may represent the difference
between the purchase price and the true value. The waiver is void because Antonio
knew of the defect.

Allan sold a car for P200,000 to Bart. Unknown to Bart, the car then had a
break defect, the replacement of which would cost P15,000. Subsequently, the
car was wrecked due to the recklessness of Bart who only then discovered the
defects. What right, and to what extent, if any, has Bart against Allan?

a. the vendor pays the price which the vendee paid as is

b. the vendor pays the price which the vendee paid less the value which
the thing had when it was lost

c. the vendor pays only the value which the thing had when it was lost

d. the vendor pays damages to the vendee regardless of whether or not the vendor
had acted in bad faith

Do the provisions under Articles 1561 to 1569 of the Civil Code applicable also to
judicial sales?

Yes, under Article 1570 of the Civil Code, the provisions under articles 1561 to 1569 of
the Civil Code shall be applicable to judicial sales, except that the judgment debtor
shall not be liable for damages.

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What are the actions that shall be barred after six months from the delivery of
the thing sold?

The following are the actions that shall be barred after six months from the delivery
of the thing sold:

1. breach of warranty against hidden defects

2. rescission of contract because of hidden defects

3. proportionate reduction in the price because of hidden defects

The following are the actions that shall be barred after six months from the
delivery of the thing sold. Which is the exception?

a. breach of warranty against hidden defects

b. rescission of contract because of hidden defects

c. proportionate reduction in the price because of hidden defects

d. redhibitory action, based on the frauds or defects of animals

For what causes of action, if any, does the new Civil Code provide a period of
limitation of six months?

The following causes of action have a period of limitation of six months:

1. breach of warranty against hidden defects

2. rescission of contract because of hidden defects

3. proportionate reduction in the price because of hidden defects

What is the prescriptive period for actions arising from breach of warranty
against hidden defects, rescission of contract because of hidden defects, and
proportionate reduction in the price because of hidden defects?

The prescriptive period for actions arising from breach of warranty against hidden
defects, rescission of contract because of hidden defects, and proportionate reduction
in the price because of hidden defects is six months from delivery of the thing sold.

B bought from S two carabaos for P50,000 to be used for breeding purposes.
The male carabao in infected with mouth and foot disease (not contagious),
while the female carabao is in sound state. What right, and to what extent, if
any, has B against A?

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The right of B is to ask for the rescission of the contract because the two carabaos are
bought in “set” for breeding purposes. However if these carabaos will not be used for
breeding purposes, the only right of B is to ask for rescission or reduction in the price
pertaining to the male carabao, or unless it is shown that he would not have bought
the sound animal without the other.

What is the effect of sale of two or more animals when one of the animals has
redhibitory defect?

In sale of animals, the redhibitory defect of one animal shall give rise only to its
redhibition and this will not apply to the other sound animal, unless the buyer could
prove that he would not have purchased the sound animal or animals without the
defective one. This proof is unnecessary when animals are bought as team, yoke, pair
or set, even if a separate has been fixed for each one of them.

In sale of animals, the redhibitory defect of one animal shall give rise only to its
redhibition and this will not apply to the other sound animal, unless the buyer
could prove that he would not have purchased the sound animal or animals
without the defective one. What are the exceptions when proof by the buyer
that he would not have purchased the sound animal or animals without the
defective one is not necessary?

The exceptions are when the animals are bought as team, yoke, pair or set, even if a
separate has been fixed for each one of them.

If two or more animals are sold together, does the redhibitory defect of one
shall only give rise to its redhibition, and not of the others whether the price
was a lump sum?

Yes, under Article 1572 of the Civil Code, 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 of the others; unless it
should appear that the vendee would not have purchased the sound animal or
animals without the defective one.

Statement No. 1: If two or more animals are sold together, the redhibitory
defect of one shall only give rise to its redhibition, and not of the others when
the animals are bought only for a separate price for each of them and not for a
lump sum.

Statement No. 2: In sale of animals, the redhibitory defect of one animal shall
give rise only to its redhibition and this will not apply to the other sound
animal, regardless of whether or not the buyer could prove that he would not
have purchased the sound animal or animals without the defective one.

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a. Both are true

b. Both are false

c. No. 1 is true, No. 2 is false

d. No. 1 is false, No. 2 is true

Is Article 1572 of the Civil Code applicable also to sale of other things?

Yes, under Article 1573 of the Civil Code, it provides that the provisions of the
preceding article (article 1572) with respect to the animals shall in like manner be
applicable to the sale of other things.

What are the instances when there is no warranty against hidden defects of
animals sold?

The following are the instances when there is no warranty against hidden defects of
animals sold:

1. Animals sold at fairs

2. Animals sold at public auctions

3. Livestock sold as condemned, declared known to the buyer

In three of the following there is no warranty against hidden defects of animals.

Which is the exception?

a. Animals sold at fairs

b. Animals sold at public auctions

c. Livestock sold as condemned, declared known to the buyer

d. Livestock sold as is

Which of the following statements is not true?

a. There is no warranty against hidden defects of animals sold at fairs.

b. Ther e is no warranty against hidden defects of animals sold at public auctions.

c. There is no warranty against hidden defects of livestock sold as

condemned regardless of whether or not communicated to the buyer.

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d. There is no warranty against hidden defects of livestock sold as condemned

provided it is communicated to the buyer.

Which of the following statements is true?

a. There is warranty against hidden defects of animals sold at fairs.

b. Ther e is warranty against hidden defects of animals sold at public auctions.

c. There is warranty against hidden defects of livestock sold as condemned regardless

of whether or not communicated to the buyer.

d. There is warranty against hidden defects of livestock sold as

condemned when such fact is not communicated to the buyer.

What are the two kinds of void sales with respect to animals?

The two kinds of void sales with respect to animals are the following:

1. Sale of animals suffering from contagious disease

2. Sale of animals which are found to be unfit for the use or service stated in the
contract for which they are acquired

Statement No. 1: The sale of animals suffering from contagious disease shall be
void.

Statement No. 2: 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.

a. Both are true

b. Both are false

c. No. 1 is true, No. 2 is false

d. No. 1 is false, No. 2 is true

Which of the following statements is not true?

a. The sale of animals suffering from contagious disease shall be void.

b. The sale of animals suffering from contagious disease shall be

voidable.

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c. The sale of animals which are found to be unfit for the use stated in the contract for
which they are acquired shall be void.

d. The sale of animals which are found to be unfit for the service stated in the
contract for which they are acquired shall be void.

Which of the following statements is true?

a. The sale of animals suffering from any disease whether contagious or not shall be
void.

b. The sale of animals suffering from contagious disease shall be voidable.

c. The sale of animals which are found to be unfit for the use or service
stated in the contract for which they are acquired shall be void.

d. The sale of animals which are found to be unfit for the use or service stated in the
contract for which they are acquired shall be voidable.

B manifested to S that he is buying a male carabao for breeding purposes. S

offered to B his carabao for P20,000, a “tested bore” for breeding. However, it
turns out that the carabao is castrated. What is the effect of such sale?

The sale is void because the carabao will be unfit for breeding purposes. Under
Article 1575 of the Civil Code, 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.

What is a redhibitory defect?

It is a defect of such a nature that expert knowledge, even in case of professional

inspection, is not sufficient to discover.

What is the nature of the defect to be redhibitory?

To be redhibitory, it is not sufficient if the defect was not discovered by an expert.

What is required is that the defect would not have been discovered even with the aid
of an expert. However, if the expert through ignorance failed to discover it, or
through bad faith, failed to reveal the same to the vendee, he shall be held liable for
damages.

B bought from S a male carabao for P20,000 to be used for breeding purposes.
The service of a veterinarian was engaged to check if the carabao was in good

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condition for breeding purposes. Unfortunately, the carabao has a redhibitory

defect. What is the liability, if any, of the veterinarian?

The veterinarian shall be liable for damages if through ignorance or bad faith has
failed to discover or disclose the defect to the vendee.

For what causes of action, if any, does the new Civil Code provide a period of
limitation of forty (40) days?

The redhibitory action, based on faults or defects of animals, must be brought within
forty (40) days from the date of their delivery to the vendee.

What is the action that shall be barred after forty (40) days from the delivery of
the thing sold?

The redhibitory action, based on faults or defects of animals, shall be barred after
forty (40) days from the date of their delivery to the vendee.

What is the prescriptive period for redhibitory action based on faults or defects
of animals?

The prescriptive period for redhibitory action based on faults or defects of animals is
forty (40) days from the date of their delivery to the vendee.

When can redhibitory action be exercised?

Redhibitory action can only be exercised with respect to faults and defects
which are determined by law or by local customs.

Statement No. 1: The redhibitory action, based on faults or defects of animals,

must be brought within forty (40) days from the date of their delivery to the
vendee.

Statement No. 2: Redhibitory action can only be exercised with respect to faults
and defects which are determined by law or by local customs.

a. Both are true

b. Both are false

c. No. 1 is true, No. 2 is false

d. No. 1 is false, No. 2 is true

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Which of the following statements is true?

a. The redhibitory action, based on faults or defects of animals, must be brought

within six (6) months from the date of their delivery to the vendee.

b. The redhibitory action, based on faults or defects of animals, must be

brought within forty (40) days from the date of their delivery to the
vendee.

c. Redhibitory action can only be exercised with respect to faults and defects which
are stipulated by the parties.

d . The redhibitory action, based on faults or defects of animals, must be brought

within forty (40) days from the date of payment of the price.

Which of the following statements is not true?

a. The redhibitory action, based on faults or defects of animals, must be

brought within six (6) months from the date of their delivery to the
vendee.

b. The redhibitory action, based on faults or defects of animals, must be brought

within forty (40) days from the date of their delivery to the vendee.

c. Redhibitory action can only be exercised with respect to faults and defects which
are determined by law.

d. Redhibitory action can only be exercised with respect to faults and defects which
are determined by local customs.

What are the requisites to concur before the vendor is liable in sale of animals?

The following are the requisites to concur before the vendor is liable in sale of animals:

1. Existence of the disease at the time of sale.

2. That disease must have been the cause of death.

3. Death of the animal should take place within three days after purchase.

What is the effect if the animal should die within three days after its purchase?

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.

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The vendor shall be liable for the death of animal after its purchase when the
following requisites are present. What is the exception?

a. Existence of the disease at the time of sale.

b. That disease must have been the cause of death.

c. That disease must have been contagious.

d. Death of the animal should take place within three days after purchase.

Is the vendor liable if the animal should die after its purchase?

The vendor shall be liable only if the animal should die within three days after its
purchase and the disease which causes the death of the animal existed at the time of
the contract.

What is the effect if the sale of the animal is rescinded?

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.

What is the liability of the vendee if the sale of the animal is rescinded?

If the sale be rescinded, the vendee shall be answerable for any injury due to his
negligence, and not arising from the redhibitory fault or defect.

If the sale of animal be rescinded, what is the condition of the animal when it
shall be returned?

If the sale be rescinded, the animal shall be returned in the condition, in which it was
sold and delivered.

Which of the following statements is not true?

a. If the sale be rescinded, the animal shall be returned in the condition in which it
was sold.

b. If the sale be rescinded, the animal shall be returned in the condition in which it
was delivered.

c. If the sale be rescinded, the vendee shall be answerable for any injury due to his
negligence, and not arising from the redhibitory fault or defect.

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d. If the sale be rescinded, the vendee shall not be answerable for any
injury.

What are the remedies of buyer of animals with redhibitory defects?

The following are the remedies of buyer of animals with redhibitory defects:

1. withdrawal or rescission (plus damages)

2. proportionate reduction in price (plus damages)

What is the prescriptive period for the remedies of buyer of animals with
redhibitory defects?

The prescriptive period shall be 40 days from the date of delivery to the buyer.

What shall govern the form of sale of large cattle?

The form of sale of large cattle shall be governed by special laws.

OBLIGATIONS OF THE VENDEE

Articles 1582 – 1593

What are the principal obligations of the buyers?

The following are the principal obligations of the buyers:

1. to accept the delivery of the thing sold

2. to pay the price of the sale

On January 5, A sold and delivered his truck, together with the corresponding
certificate of public convenience to B for the sum of P600,000, payable within
sixty (60) days. Two weeks after the sale, and while the certificate of public
convenience was still in the name of A, it (the certificate) was revoked by the
Public Service Commission through no fault of A. Upon the expiration of the
^0-day period, A demanded payment of the price from B. B refused to pay,
alleging that the contract of sale was void for the reason that the certificate of
public convenience which was the main consideration of the sale no longer
existed. Is the contention of B tenable? Reasons.

Under the circumstances, the contention of B is not tenable.

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(a) Firstly, it cannot be correctly contended that the sale is void, since the
consideration actually existed at the time of the perfection of the sale. The
subsequent revocation of the certificate thru no fault of A is immaterial.

(b) Secondly, what B should have done immediately after the sale was to take steps to
have the Public Service Commission transfer the certificate to his name. (Serrano v.
Miave, et al., L-14678, March 31, 1965)

(c) Thirdly, while the Public Service Law requires that the sale or assignment of a
certificate of public convenience, together with the property used in the operation of
the same, should be approved by the Public Service Commission – for the protection
of the public, still as between A and B, the contract is efficacious as all the essential
requisites of the contract were present at the time of perfection thereof.

What is the effect of delivery when no time has been fixed for payment of the
price?

If the seller has delivered but no time has been fixed for the payment of the price, the
seller may require the payment to be made at anytime after delivery. The buyer here
has the duty to pay the price immediately upon the demand. (Ocejo v. Int. Bank, 37
Phil. 631)

What is the effect of deviations from the provisions of the contract of sale?

If the seller is forced to deviate from the provision of the contract, but the purchaser
consents or agrees to such deviations, the purchaser should still pay the price. ( Engel
v. Velasco & Co., 47 Phil. 15)

Statement No. 1: The vendee is bound to accept delivery and to pay the price of
the thing sold at the time and place of stipulated in the contract.

Statement No. 2: If the time and place should not have been stipulated, the
payments must be made at the time and place of the delivery of the thing sold.

a. Both are true

b. Both are false

c. No. 1 is true, No. 2 is false

d. No. 1 is false, No. 2 is true

A sold to B the former’s horse for P5,000. No date is fixed by the parties for the
performance of their respective obligations. The obligation of A is

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a. to deliver the horse immediately as there is a perfected contract

b. to deliver the horse upon payment by B of P5,000

c. to deliver the horse upon within a reasonable time of two months from the contract
date

d. to rescind the contract as there is no time fixed for the delivery and payment

Where and when must payment be made in the absence of any stipulation?

If the time and place should not have been stipulated, the payment must be made at
the time and place of the delivery of the thing sold. (Art. 1583)

What is the obligation of the vendee when the thing is sold to him?

The vendee is bound to accept delivery and to pay the price of the thing sold at the
time and place stipulated in the contract.(Art. 1583)

Why is there no delivery if payment is made in installments?

The reason is because performance must generally be complete. (Art. 1583)

Is the buyer of goods bound to accept delivery thereof by installments?

No, he is not bound to accept delivery thereof by installments unless otherwise

stipulated.

What is the effect in case when there is a separate price for each installment
and there is a breach thereof by any of the parties?

Breach in any installment affects the whole contract. The injured party may sue for
breach of entire contract. (Art. 1583)

What is the rule in the case of installment deliveries and there is a separate
price for each installment?

If the breach affects the whole contract, the injured party may sue for breach of entire

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contract when seller makes defective or incomplete deliveries; or buyer wrongfully

neglects or refuses to accept delivery; or buyer fails to pay any installment. If breach
is severable, only claim for compensation for particular breach may be allowed. (Art.
1583)

What is the effect when the goods are delivered to the buyer without him having
previously examined them?

Where goods are delivered to the buyer, which he has not previously examined, he is
not deemed to have accepted them unless and until he has had a reasonable
opportunity of examining them for the purpose of ascertaining whether they are in
conformity with the contract if there is no stipulation to the contrary. (Art. 1583)

In what instance/s is the buyer is deemed to have accepted the goods which he
has not previously examined?

Where goods are delivered to the

buyer, which he has not previously examined, he is deemed to have accepted them if
he has had a reasonable opportunity of examining them for the purpose of
ascertaining whether they are in conformity with the contract if there is no
stipulation to the contrary. (Art. 1584)

Is the seller bound to afford the buyer a reasonable opportunity to inspect the
goods for the purpose of ascertaining whether they are in conformity with the
contract?

Yes, when the seller tenders delivery of goods to the buyer, he is bound, on
request, to afford the buyer a reasonable opportunity of examining the goods for the
purpose of ascertaining whether they are in conformity with the contract, unless
otherwise agreed. (Art. 1584)

What are the buyer’s rights in relation to the examination of goods?

Upon ACCEPTANCE, the buyer may assent to become owner of the specific
goods when delivery of them is offered to the buyer.

Upon EXAMINATION , examination is a condition precedent to transfer ownership.

(Art. 1584)

Is the vendor bound to offer the thing for examination before delivery without
the request of the vendee?

Examination before delivery should be made by request. Vendor is not bound to offer
the thing for examination before delivery without the request of the vendee. (Art.

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1584)

When is the thing considered accepted?

When the thing is delivered, the thing is considered accepted if the vendee
has examined it or has reasonable opportunity to examine it. (Art. 1584)

What is the rule in case of COD (collect on delivery)?

The buyer is not entitled to examine until payment is made, EXCEPT when there is
an agreement or that the usage of trade permits the same. In COD, goods are not to
be delivered by the carrier to the buyer unless the latter pays. (Art. 1584)

When does the buyer have the right to examine?

Generally, the buyer is entitled to examine the goods prior to delivery. This is true
even if the goods are shipped “free on board”.

In what instances does the buyer have no right to examine?

The buyer has a right to examine if there is a stipulation to this effect and when the
goods are delivered C.O.D- unless there is an agreement or usage of trade permitting
such examination.

When is there acceptance of the goods?

There are three ways of acceptance of goods:

a.) express acceptance of goods
b.) when buyer does an act which only an owner can do
c.) failure to return after reasonable lapse of time (Art. 1585)

When a buyer accepted goods despite delay and also promised later on to pay,
may the buyer subsequently ask for damages on account of delay?

No, the buyer is stopped because of the acceptance without reservation at the time of
acceptance. (Art. 1585)

What are the modes of manifesting acceptance?

The modes of manifesting acceptance are:

1. EXPRESS ACCEPTANCE – the buyer intimates to the seller that he accepts the
thing
2. IMPLIED ACCEPTANCE – may be either of the following:

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a. Buyer does an act inconsistent with the seller’s ownership; or

b. Buyer’s retention of goods without intimating rejection after the lapse of
reasonable time.

Does acceptance of the goods by the buyer discharge the seller from liability in
damages or other legal remedy for breach of any promise or warranty in the
contract of sale?

No, acceptance is not a bar to action for damages. However, notice must be given to
the seller within a reasonable time. (Art. 1586)

When is the buyer’s refusal to accept justified?

He is justified in refusing to accept when the risk of loss is still with the seller. (Art.
1586)

In a contract of sale is the buyer is liable as a depositary?

Buyer is not liable as DEPOSITARY unless he voluntarily constitutes himself as such.

What are the effects if the buyer justifiably refuses to accept the delivery?

The buyer has no duty to return the goods to the seller. Mere notification to seller of
refusal will suffice but the buyer may make himself a voluntary depositary-in which
case he must safely take care of them in the meantime.(Art. 1587)

What is the effect if the buyer unjustifiably refuses to accept the delivery?

Title passes to the buyer the moment it is placed at his disposal.

What is the exception to the rule that title passes to the buyer when he
unjustifiably refuses to accept delivery?

The exception is when there is a contrary stipulation or when the seller reserves the
ownership as a sort of security for the payment of the price. (Art. 1588)

When is the vendee liable for interest on the price?

The vendee is liable for interest on the price in the following cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income; and
(3) Should he be in default, from the time of judicial or extrajudicial demand for the

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payment of the price. (Art. 1589)

When is the buyer said to be in default with regards to legal interest?

If the buyer fails to give the money after the contract is notarized, although he
had previously promised to do so, there is default with liability for legal interest.
(Art. 1589)

If it has been stipulated that vendee shall owe interest, is demand still
necessary?

No demand is needed. Fruits or income is sufficient to warrant the payment

of interest. (Art. 1589)

Should it have been so stipulated that the vendee shall owe interest for the
period between the delivery of the thing and the payment of the price, must the
stipulation be in writing?

The stipulation on interest may be oral. Interest which must be in writing

refers only to loan.

When may the buyer suspend the payment of the price?

The buyer may suspend payment of the price when:

a) there is well-grounded fear
b) the fear is because of:
1. a vindicatory action or action to recover
2. foreclosure of mortgage (Art. 1590)

When may the vendee suspend the payment of the price?

The vendee may suspend the payment of the price in the following cases:
1) Should he be disturbed in the possession or ownership of the thing sold;
or
2) Should he have reasonable grounds to fear such disturbance by a
vindicatory action or by a foreclosure of mortgage. (Art. 1590)

SS sold and delivered to BB a parcel of land for 2 Million pesos payable within
30 days from the date of contract. Soon after the sale, XX claims ownership
over the land by virtue of a prescriptive title. May BB suspend the payment of
the price?

Yes, B may suspend the payment of the price because of a reasonable fear that
an action reinvidicatoria will be brought against him. It is not necessary that the

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vindicatory action has already been brought: reasonable fear thereof is

sufficient.(Art. 1590)

What are the exceptions to the right of a vendee to suspend payment of the
price?

The exceptions are:

1) Should there be a stipulation to that effect;
2) Should the vendor give security for the return of the price;
3) Should the vendor have caused the disturbance or danger to cease; or
4) Should the disturbance consist of only of a mere act of trespass. (Art. 1590)

A sold a parcel of land to B. Thereafter, C filed a suit against A and B for

quieting of title. During pendency, may B suspend payment?

Yes. B has reasonable ground to fear that his possession or ownership would
be disturbed by a vindicatory action. (Art. 1590)

Suppose in the problem aforementioned, C only claims for a part of the land.
May there be suspension of payment?

Yes, B may still suspend payment for the entire amount.

Should the vendee be disturbed in the possession or ownership of the thing

acquired, or should he have reasonable grounds to fear such disturbance, may
the vendee recover what has already been paid?

No, the vendee may retain only the price that has not been paid to the vendor.
He is not entitled to recover what has already been paid.

May the seller immediately sue for the rescission of the sale?

The seller must have reasonable grounds to fear the loss of the immovable
property and the loss of the price. (Art. 1591)

What are the requisites in order for the vendor to rescind sale of immovable
property or in cases of anticipatory breach?

The REQUISITES are :

(a) There is delivery of immovable property

(b) Vendee has not paid the price

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(c) Vendor has reasonable ground to fear the:

a. LOSS of PROPERTY; AND
b. LOSS of PRICE

What is the rule if in the previous question neither ground exists?

The provisions of Article 1191 shall apply. The article says:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period. This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles 1385 and 1388 and
the Mortgage Law.

A and B entered into a contract of sale whereby A bound himself to deliver a

parcel of land through a public document on1 July 2010, and B bound himself
to pay on 31 December 2010. B did not pay A on 31 December 2010. What is/are
the remedy/ies of A?

A may choose between fulfillment and rescission of the obligation with payment of
damages in either case on the ground that B does not comply with what is incumbent
upon him (Article 1191). Should there be a reasonable ground to fear the loss of
property sold and its price, A may immediately sue for rescission of the sale. (Article
1591)

A and B entered into a contract of sale whereby A bound himself to deliver a

parcel of land through a public document on 1 July 2010, and B bound himself
to pay on 31 December 2010. A real estate mortgage was constituted on the
property, having A as the mortgagee. B did not pay A on 31 December 2010. May
A rescind the sale?

No. Upon the constitution of Real estate mortgage, the contract has been changed
into one of payment of a loan.

On July 1, AA sold BB a piece of land, payment and delivery to be made on July

15. It was stipulated that should payment not be made on July 15, the contract
would automatically be rescinded. On July 20, can BB still pay?

Yes, as long as there has been no judicial or notarial demand for the rescission of
the contract. But if, for example on July 18, AA had made a notarial demand for such
a rescission then BB will not be allowed o pay anymore, and the court may not grant

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him a new term. (Art. 1592)

What is the demand needed for the rescission of the contract after expiration of
the term agreed upon?

The demand is not for the payment f the price inasmuch as the seller precisely
desires to rescind the contract. It is, therefore a demand for rescission; the term
having expired, the seller does not want to continue with the contract. (Art. 1592)

May the vendee still pay even if there is no judicial or notarial demand?

Yes, the vendee may still pay when there is no judicial or notarial demand Offer to
pay is sufficient to defeat vendor’s prerogative. (Art. 1592)

Is the vendor’s right to rescind absolute?

No, the vendor’s right to rescind is not absolute. Art. 1191, par. 3 provides that the
court may grant vendee a new term. However, if there is already a demand, the court
may no longer fix a term.

In what instances may the vendee no longer pay the price after the expiration of
the time agreed upon although no demand has yet been made upon him by suit
or notarial act?

The vendee may no longer pay the price in the following instances:

1. Sale on installment of real estate (Caridad Estates vs Santero)– governed by

Maceda Law
2. Mere promise to sell real estate / Conditional sale– there can be no rescission in
contract to sell
3. Cases under RA 6552 (RA 6552 recognizes the vendor’s right to cancel
unqualifiedly in case of industrial lots, commercial buildings, etc. with a refund of
certain percentages of payments made on account of cancelled contract)

Does Article 1592 apply to a promise to sell?

No, it does not apply to a promise to sell. Article 1592 speaks only of the rescission
of contracts of sale of real property and does not apply to contracts to sell real
property on installments. (Roque vs. Lapuz, March 31, 1980)

AA failed to pay the price of a parcel of land within the agreed period. BB
cancelled the contract before the period to pay arrived. Is AA guilty of failure to
pay the price of land within the period agreed upon?

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No, Article 1592 contemplates of a situation where the buyer who fails to pay the
price at the time agreed upon, may still pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon him either
judicially or by a notarial act.

What are the rights of the vendor where automatic rescission of sale of movable
property is stipulated?

Vendor can rescind the contract as a matter of right if the vendee does not:
(a) Accept; or
(b) Pay unless credit period for payment is stipulated. (Art. 1593)

ACTIONS FOR BREACH OF CONTRACT

OF SALE OF GOODS

Articles 1594 – 1599

What actions are available to the seller in case of breach of contract of sale of
goods?

His remedies are:

1.Action for the price / Specific performance (Art. 1595)
(a) when the ownership of the goods has passed to the buyer and he wrongfully neglects or
refuses to pay for the goods according to the terms of the contract;
(b) when price is payable on certain day, irrespective of delivery or transfer of title, and the
buyer wrongfully neglects or; refuses to pay [BUT: it is a defense to such action that seller
has manifested an inability or lack of interest to perform his obligation before judgment]
(c) if goods cannot readily be resold for a reasonable price, although transfer of ownership
has not passed– seller may offer to deliver the goods to the buyer; if buyer refuses to receive,
seller may notify the buyer that he holds the goods as bailee for the buyer. Thereafter, the
seller may treat the goods as buyer’s and may maintain an action for the price.

When may a seller institute an Action for Damages in case of breach of contract
of sale of goods?

A seller may institute an action for damages when buyer wrongfully neglects or
refuses to ACCEPT and PAY for the goods.

The measure of damages should be the estimated loss directly and naturally
resulting in the ordinary course of events from the buyer’s breach.

When may a seller rescind in case of breach of contract of sale of goods?

When there is no delivery of goods yet the seller may totally rescind by giving
notice of his election to do so to the buyer if:

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(1) Buyer has repudiated the contract of sale;

(2) Buyer has manifested his inability to perform obligations; or
(3) Buyer committed a breach (Art. 1597)

What is the measure of damages when there is an available market?

The MEASURE OF DAMAGES (WHEN THERE IS AVAILABLE MARKET) should

be the difference between the contract price and the market or current price at the
time the goods ought to have been accepted, or at the time of refusal to accept when
there is no time fixed.

The seller and the buyer agreed that payment and delivery would be made on
July 15, at the buyer’s house. What is the consequence if f the buyer does not
appear on said day, or having appeared, he should not have tendered the prices
at the same time?

The sale can be considered as automatically rescinded.

SS sold BB a piano. What is SS's remedy if B wrongfully refuses to accept and

pay for the goods?

SS may bring an action against him for damages for non-acceptance. (Art. 1596)

What is the measure of damages where the buyer wrongfully neglects or

refuses to accept and pay for the goods ?

The measure of damages is the estimated loss directly and naturally resulting in the
ordinary course of events from the buyer's breach of contract. (Art. 1596)

What actions are available to the seller of the goods?

His remedies are:

1. Maintain an action for damages.
2. Hold the goods as bailee for the buyer and bring an action for the price.
3. Ask for the resolution of the contract for failure of the buyer to fulfill his
obligations.

Is there such thing as an automatic rescission?

Yes, but such rescission requires notice thereof to the buyer.

What are the instances when seller may totally rescind the contract of sale?

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The buyer may totally rescind the contract where the goods have not been delivered
to the buyer, and the buyer has repudiated the contract of sale, or has manifested his
inability to perform his obligations thereunder, or has committed a breach thereof.

How does Technical Rescission take place?

Technical rescission takes place when the seller may totally rescind by giving notice
of his election to do so to the buyer provided there is no delivery of goods yet. (Art.
1597)

What is the remedy of the buyer in case the seller has broken a contract to
deliver a specific or ascertained goods?

Where the seller has broken a contract to deliver specific or ascertained goods, a
court may, on the application of the buyer, direct that the contract shall be performed
specifically, without giving the seller the option of retaining the goods on payment of
damages. The judgment or decree may be unconditional, or upon such terms and
conditions as to damages, payment of the price and otherwise, as the court may deem
just. (Art. 1598 NCC)

What is the remedy of the buyer when there is a breach of warranty by the
seller?

Where there is a breach of warranty by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty by
way of recoupment in diminution or extinction of the price;

(2) Accept or keep the goods and maintain an action against the seller for damages
for the breach of warranty;

(3) Refuse to accept the goods, and maintain an action against the seller for damages
for the breach of warranty;

(4) Rescind the contract of sale and refuse to receive the goods or if the goods have
already been received, return them or offer to return them to the seller and recover
the price or any part thereof which has been paid.

When the buyer has claimed and been granted a remedy in anyone of these ways, no
other remedy can thereafter be granted, without prejudice to the provisions of the
second paragraph of Article 1191.

Where the goods have been delivered to the buyer, he cannot rescind the sale if he
knew of the breach of warranty when he accepted the goods without protest, or if he
fails to notify the seller within a reasonable time of the election to rescind, or if he
fails to return or to offer to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was transferred to the buyer. But

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if deterioration or injury of the goods is due to the breach or warranty, such

deterioration or injury shall not prevent the buyer from returning or offering to
return the goods to the seller and rescinding the sale.

Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be
liable for the price upon returning or offering to return the goods. If the price or any
part thereof has already been paid, the seller shall be liable to repay so much thereof
as has been paid, concurrently with the return of the goods, or immediately after an
offer to return the goods in exchange for repayment of the price.

Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses
to accept an offer of the buyer to return the goods, the buyer shall thereafter be
deemed to hold the goods as bailee for the seller, but subject to a lien to secure
payment of any portion of the price which has been paid, and with the remedies for
the enforcement of such lien allowed to an unpaid seller by Article 1526.

(5) In the case of breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the difference
between the value of the goods at the time of delivery to the buyer and the value
they would have had if they had answered to the warranty. (Art. 1599 NCC)

Can the buyer exercise all the remedies granted to him under Article 1599?

No, under Article 1599, the law provides when the buyer has claimed and been
granted a remedy in anyone of those enumerated, no other remedy can thereafter be
granted, without prejudice to the provisions of the second paragraph of Article 1191.

Can the buyer rescind the sale if the goods have been delivered?

Where the goods have been delivered to the buyer, he cannot rescind the sale if he
knew of the breach of warranty when he accepted the goods without protest, or if he
fails to notify the seller within a reasonable time of the election to rescind, or if he
fails to return or to offer to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was transferred to the buyer. But
if deterioration or injury of the goods is due to the breach or warranty, such
deterioration or injury shall not prevent the buyer from returning or offering to
return the goods to the seller and rescinding the sale. (Art. 1599 NCC)

When the buyer is entitled to rescind the sales and elects to do so, is he still
liable for the price of the thing delivered?

Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be
liable for the price upon returning or offering to return the goods. If the price or any
part thereof has already been paid, the seller shall be liable to repay so much thereof

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as has been paid, concurrently with the return of the goods, or immediately after an
offer to return the goods in exchange for repayment of the price. . (Art. 1599 NCC)

What is the remedy of the buyer in case he is entitled to rescind the sale and
elects to do but the seller refuses to accept an offer of the buyer to return the
goods?

Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses
to accept an offer of the buyer to return the goods, the buyer shall thereafter be
deemed to hold the goods as bailee for the seller, but subject to a lien to secure
payment of any portion of the price which has been paid, and with the remedies for
the enforcement of such lien allowed to an unpaid seller by Article 1526. (Art. 1599
NCC)

How can you determine loss in case of breach of warranty of quality in the
absence of special circumstances showing proximate damage of greater
amount?

In the case of breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the difference
between the value of the goods at the time of delivery to the buyer and the value they
would have had if they had answered to the warranty. (Art. 1599 NCC)

EXTINGUISHMENT OF SALE

Articles 1600 -1623

How can sales are extinguished?

Sales are extinguished by the same causes as all other obligations, by those stated in
the preceding articles of this Title, and by conventional or legal redemption. (Art.
1600 NCC)

When does conventional redemption take place?

Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article
1616 and other stipulations which may have been agreed upon. (Art. 1601 NCC)

What is the obligation of the vendor to the vendee in case of conventional

redemption?

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The vendor is obligated to return the price delivered as well as the expenses of the
contract and necessary and useful expenses made on the thing.

Is it necessary that the right to repurchase be reserved in the same instrument

of sale? Why?

Yes, the right to repurchase must be reserved in the same deed of sale. If it is
reserved in a separate instrument, then the document is not a sale with right to
repurchase. The same is merely a promise to sell which is discretionary on the part
of the vendee a retro. ( Sy vs. CA, 131 SCRA 116).

What is the effect of reserving the right to repurchase in a separate instrument

instead of reserving it in the same instrument?

If it is reserved in a separate instrument, then the document is not a sale with right to
repurchase. The same is merely a promise to sell which is discretionary on the part
of the part of the vendee a retro. ( Sy vs. CA, 131 SCRA 116).

The contract of sale with right to repurchase provided that the repurchase price
shall be P 14,000.00 plus all costs of money equivalent to 30%, real estate and
documentary stamps, and other incidental expenses. The question is whether
the amount to be paid in case of repurchase is limited to those under Art. 1616,
NCC.

As a rule, yes, unless otherwise agreed upon. In fact, Art 1601, NCC provides:

“Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article
1616 and other stipulations which may have been agreed upon.”
It is clear, therefore, that the provisions of Art. 1601 require petitioner to “comply
with xxx the other stipulations” agreed upon.

May a check be tendered when the vendor a retro exercise the right to
repurchase? Why?

Yes, because the exercise of the right to repurchase is a right not an obligation. The
tender of a check is sufficient to compel redemption, but it is not in itself a payment
that relieves the redemptioner from his liability to pay the redemption price.
(Fortunato, et al. vs. CA, et al., G. R. no. 78566, April 25, 1991).

When is a contract deemed to be an equitable mortgage?

The contract shall be presumed to be an equitable mortgage, in any of the following

cases:

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(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption is granted or an agreement
granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of
the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the
vendee as rent or otherwise shall be considered as interest which shall be subject to
the usury laws. (Art. 1602 NCC)

A contract of sale over a parcel of land was entered into by and between the
parties for only P80,000.00. It was being questioned, as the intention was one
of equitable mortgage. It was found out that the payments amounted to
P120,000.00, but evidence was shown that the amount of P 80,000.00 was
placed in the contract to reduce the documentary stamps, transfer tax, etc.

Is the conveyance one of sale or merely a security for the payment of a loan?

It is one of sale. The presumption of equitable mortgage will apply only if it is clearly
shown that the consideration was unusually inadequate such that the mind revolts at
it and such that a reasonable man would neither directly nor indirectly be likely to
consent to it. ( Vda. De Alvarez vs. CA, et al., G.R. no. 110970, March 16, 1994, 49
scad 663)

When can a contract be a presumption that a contract of sale is one of

equitable mortgage?

They are:

1. The parties must have entered into a contract denominated as a contract of

sale;

2. The intention of the parties was to secure an existing debt by way of

mortgage. (Lustan vs. CA, et al., G.R. no. 111924, January 27, 1997, 78 scad 351).

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X and Y entered into a contract of sale with right to repurchase over a parcel of
land. Despite the sale, X, the seller, retained possession. The contract also
provides for a monthly escalation of the repurchase price. What is the nature of
the contract? Why?

It is an equitable mortgage. In Bundalian vs. CA, 129 SCRA 645, it was said that an
equitable mortgage exists where vendors are given the right to possess property
pending redemption. In the same case, the SC said that monthly escalation of
repurchase price indicates a loan transaction secured by an equitable mortgage.

How can you a construe a contract purporting to be a sale with a right to

repurchase?

In case of doubt, a contract purporting to be a sale with right to repurchase shall be

construed as an equitable mortgage. (Art. 1603 NCC)

What rule shall apply to a contract purporting to be an absolute sale?

The provisions of Article 1602 shall also apply to a contract purporting to be an

absolute sale. (Art. 1604 NCC)

What is the effect of the execution of contract extending a contract of sale with
right to repurchase?

The extension can be construed as indicative of an equitable mortgage. (Claravall vs.

CA, 190 SCRA 439).

What is the remedy of the vendor in cases referred to in Articles 1602 and
1604?

In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for
the reformation of the instrument. (Art. 1605 NCC)

Within what period should the vendor a retro repurchase the property?

The right referred to in Article 1601, in the absence of an express agreement, shall
last four years from the date of the contract. Should there be an agreement the
period cannot exceed ten years. (Art. 1606 NCC)

Should there be an agreement regarding the period of right to repurchase, what

is the maximum period allowed by law?

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Should there be an agreement, the period cannot exceed ten years. (Art. 1606 NCC)

What is the essence of a sale with right to repurchase? Explain

The essence of a sale with right to repurchase is that title and ownership of the
property sold are immediately vested in the vendee a retro subject to the resolutory
condition of repurchase by the vendor a retro within the period stipulated. Failure to
perform said resolutory condition vests upon the vendee by operation of law absolute
title or ownership over the property sold.

Failure of the vendee a retro to consolidate ownership does not impair such title, for
the method prescribed under article 1607 is merely for the purpose of registration of
the consolidated title.

Can the vendor still exercise the right to repurchase after a finality of a
judgment declaring the contract one with right to repurchase?

Yes, the law provides that the vendor may still exercise the right to repurchase within
thirty days from the time final judgment was rendered in a civil action on the basis
that the contract was a true sale with right to repurchase. (Art. 1606 NCC)

Under article 1606, NCC, the vendor may still exercise the right to repurchase
within 30 days from the finality of a judgment declaring the contract one with
right to repurchase. How does this apply?

The rule applies where the party denies that the sale is one with right to repurchase,
not in those cases where the contract is conclusively a sale with right to repurchase. (
Adorable vs. Inacala, 103 Phil. 481)

On January 02, 1980, A and B entered into a contract whereby A sold to B a

parcel of land for and in consideration of P 10,000.00 with A reserving to
himself the right to repurchase the same. Because they were friends, no period
was agreed upon for the repurchase of the property.

Until when must A exercise his right of repurchase?

A must exercise the right to repurchase within four (4) years from the execution of
the contract because there was no contract providing for the period to repurchase.
(Art. 1606 NCC)

X sold a parcel of land to Y a retro providing that X should exercise the right
within two years from the execution of the contract. One month after the
expiration of the period, X filed a suit to compel Y to resell the parcel of land.

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The RTC of Manila ruled in favor of X holding that the contract is a sale with
right repurchase; hence, X was allowed to repurchase within 30 days from the
finality of the decision. Y appealed. If you were the ponente on appeal, how
would you decide the case? Explain.

I would reverse the decision of the lower court. The right to repurchase has already
expired. To allow the vendor a retro to exercise the right to repurchase would set a
naught a pacto de retro or resurrect an expired right of repurchase by simply
instituting an action to reform the contract. It would thus be made a tool to spawn,
protect, and even reward fraud and bad faith, a situation never contemplated by law.
( Felimen vs. Orias, G.R. No. L- 33182, December 18, 1987).

What is the effect of failure of the vendor to comply with the provisions of Art.
1616 in case of consolidation of ownership in the vendee with respect to real
property?

In case of real property, the consolidation of ownership in the vendee by virtue of the
failure of the vendor to comply with the provisions of article 1616 shall not be
recorded in the Registry of Property without a judicial order, after the vendor has
been duly heard. (Art. 1607 NCC)

The seller a retro failed to redeem within the period agreed upon, hence, the
buyer a retro filed a petition for registration of the consolidation of ownership,
but did not name the respondents.

What is the effect of the failure to redeem and to name and notify the
respondents? Explain.

In case of failure to redeem, there shall be consolidation of ownership in the vendee a

retro. Consolidation is a matter of law. ( Art 1607, NCC; BAyquen vs. Balaoro, L-
28161, August 13, 1986). Such failure results in the loss of the right to repurchase. (
Cruz vs. Leis, et al., G.R. No. 125233, March 09, 2000)
Registration of the consolidated ownership requires a judicial order after the vendor
shall have been notified.

On January 02, 1980, A and B entered into a contract whereby A sold to B a

parcel of land for and in consideration of P 10,000.00 with A reserving to
himself the right to repurchase the same. Because they were friends, no period
was agreed upon for the repurchase of the property. If A fails to redeem the
property within the allowable period, what would you advise B to do for his
better protection?

I would advise B to consolidate his ownership and file a petition in court for the
registration of the consolidated ownership with notice to A. (Art. 1607 NCC)

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Can the vendor bring his action against every possessor whose right is derived
from the vendee even if in the second contract no mention should have been
made of the right to repurchase?

Yes, The vendor may bring his action against every possessor whose right is derived
from the vendee, even if in the second contract no mention should have been made of
the right to repurchase, without prejudice to the provisions of the Mortgage Law and
the Land Registration Law with respect to third persons. (Art. 1608 NCC)

What is the effect of legal redemption with respect to the vendee?

The vendee is subrogated to the vendor’s rights and actions. (Art. 1608 NCC)

When can the creditor make use of the right of redemption against the vendee?

The creditors of the vendor cannot make use of the right of redemption against the
vendee, until after they have exhausted the property of the vendor. (Art. 1610 NCC)

In a sale with a right to repurchase, can the vendee compel the vendor to
redeem the whole property?

In a sale with a right to repurchase, the vendee of a part of an undivided immovable

who acquires the whole thereof in the case of article 498, may compel the vendor to
redeem the whole property, if the latter wishes to make use of the right of
redemption. (Art. 1611 NCC)

If several persons, jointly and in the same contract, should sell an undivided
immovable with a right of repurchase, can anyone of them exercise this right
for more than their respective share?

No, If several persons, jointly and in the same contract, should sell an undivided
immovable with a right of repurchase, none of them may exercise this right for more
than his respective share. (Art. 1612NCC)

Can the heirs of the person who sold an immovable redeem more than what
they may have acquired?

No, The same rule shall apply if the person who sold an immovable alone has left
several heirs, in which case each of the latter may only redeem the part which he may
have acquired. (Art. 1612 NCC)

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Can a vendee compel a co-owner to redeem the whole of the property sold?

A vendee cannot compel the co-owner to redeem the whole property sold because
each one of the co-owner may independently exercise the right repurchase.

May a co-owner exercise his right to repurchase independently from the co-
owner?

Yes, he may exercise his right to repurchase independently as regards his own share.

Can an action of redemption be bought against all the heirs of the vendee
should he leave several heirs?

No, the redemption should pertain only to each share of the heir.

Can the vender avail the right of repurchase without returning the price of the
sale?

No, the vender must return the amount of the price to avail the right to repurchase as
well as the expenses on the contract and the necessary expenses made.

What is a legal redemption?

It is the right to be subrogated upon the terms and conditions stipulated in the
contract in one who acquires the thing by purchase or dation in payment or other
transaction whereby ownership is transferred by onerous title.

Can a co-owner of a thing exercise the right of redemption in case the shares of
the other co-owner are sold to third person?

Yes, a co-owner may exercise the right to redemption in case the share of other co-
owner are sold to third person.

When is the right of legal redemption be exercised?

It must be exercised within 30 days from notice in writing by the prospective vendor
or by the vendor as the case maybe.

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ASSIGNMENT OF CREDITS

AND OTHER INCORPOREAL RIGHTS

Articles 1624 -1635

When is assignment of credit deemed perfected?

It is deemed perfected from the moment there is meeting of the minds between the
parties.

Is an assignment of credit in a private document binding?

An assignment of credit to be binding must appear in a public instrument.

Is a debtor be released from his obligation should he pays his creditor before
knowledge of assignment of credit?

Yes a debtor is released from obligation should he pay his creditor before knowledge
of assignment of credit.

What does the assignment of credit includes?

It includes all the accessory rights such as guarantee mortgage, pledge or preference.

Can an action for redemption be enforced against all the heir in case the
inheritance has been divided and the thing sold has been awarded to one of the
heirs?

The action for redemption may be instituted only to the heir where the thing sold is
awarded.

Is the vendor who recovers the thing sold be liable from all charges and
mortgages constituted by the vendee?

The vendor shall be free from all charges and mortgages constituted by the vendee.

What is the extent of the co-owners’ right of redemption in case both wants to
redeem the property co-owned?

They can only do so to the extent of the share they own in the co-owned property.

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Is the assignment of credit that involves real property requires to be binding

registration with the registry of property?

Yes, it must be registered with the registry of property to be binding.

Is mortgage and pledge included in the assignment of credit?

The assignment of credit includes all accessory rights such as mortgages and pledges.

What are the kinds of warranties in the assignment of credit?

The following are the kinds of warranties:

1) The existence and legality of credit;
2) The solvency of the debtor.

Distinguish between the liabilities of the seller in food faith and the seller in
bad faith.

The vendor in good faith shall be liable for the price received and for the expenses of
the contract and any other legitimate payments made by reason of the sale, and the
necessary and useful expenses made on the thing sold; while, the vendor in bad faith
shall be answerable for the payment of all expenses and for damages.

Alt owes Ben. Ben assigns the credit to Cozy. Ben is in good faith. But Alt is
insolvent. Is Ben liable?

No, unless it was so expressly stipulated or unless the insolvency was prior to the sale
and of common knowledge.

Suppose the credit really did not exist anymore at the time of assignment. Is
Ben still liable?

Yes, unless the credit was sold as doubtful, such as a credit in litigation.

What does the creditor warrants when he assigns his credit?

The creditor warrants only the existence and legality of the credit at the perfection of
the contract.

D owes C P10,000.00 which represents the purchase price of a car bought by D.

C assigns the credit to T. If at the time of the assignment, the credit has already
prescribed or has already been paid and its nullity is subsequently declared, is
C liable to T?

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Yes because C warrants the existence and legality of the credit.

What are the rules on the duration of the warranty for the debtor’s solvency?

The following are the rules on the duration of the warranty for the debtor’s solvency:
1) Within the time agreed upon;
2) If no time was agreed upon-
a) One year from assignment if debt was already due.
b) One year from maturity if debt was not yet due.

If the assignor acted in bad faith, are the rules on the duration of the warranty
for the debtor’s solvency applicable?

No, article 1629 on the duration of assignor’s liability does not apply if the assignor
acted in bad faith.

D owes C P10,000.00 payable on May 10,2010.C assigns his credit to T with C

making himself responsible for the solvency of D for one year from May
10,2010, When shall the guaranty of debtor’s solvency last?

The guaranty of C’s liability for the solvency of D shall last within one year as agreed
upon between C and T.

What if there is no stipulation and the assignment is made on June 22, 2010.
What is the duration of the assignor’s liability?

The liability is limited to one year from assignment.

R owes S. S assigns the credit to L. S is in good faith. It was agreed that S would
be responsible for R’s solvency. The party did not agree on the duration of the
liability. If the debt was due June 22, 2010 and the assignment was made July
10, 2010, until when is the guaranty?

Until July 10, 2011. The law says, “one year from the time of the assignment” if the
period has already expired.

What if the debt was due June 22, 2010 and the assignment was made May 10,
2010, is the one year counted from the time of assignment?

No. The one year will be counted from the time when the debt becomes due. Hence,
the liability shall cease one year after the maturity, which is on June 22, 2011.

What is the rule as to the sale of an enumerated list of future inheritance?

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As a rule, the sale of an enumerated list of future inheritance is prohibited.

Can an heir sell his share of the common estate even prior to judicial approval
of the partition?

Yes. As a matter of fact, the part of an estate assigned to an heir by the will of the
deceased can be sold by such heir even before the partition of the estate is approved
by the court. Indeed there is no legal provision which prohibit such heir from selling
to a stranger his share of the common estate.

Is the sale of future inheritance without specification of the properties, valid?

Yes. If the future inheritance is sold without specification of the properties, this
would only be a sale of future hereditary rights, and hence, permissible.

In the sale of an inheritance, what does the seller warrants?

The seller of an inheritance warrants only the facts of his heirship but he does not
warrant the objects which makes up his inheritance.

What is the liability of a seller of an inheritance?

One who sells an inheritance without enumerating the things of which it is

composed, shall only be answerable for his character as an heir.

X and Y are the heirs of the estate left by Z. Before partition and without
specifying his definite share in the inheritance, X sold his share to B for
P100,000.00. If upon partition, X’s share is onlyP75,000.00, is he liable to B
for his balance?

No. In this case, X only warrants the fact that he is an heir of Z. He is not liable for B
should his share after partition be less than P100,000.00

What is the subject matter in the sale of the whole of certain rights, rents, or
products for a lump sum?

The subject matter is the totality of such rights, rents, or products.

What does the vendor warrants in the sale of such rights, rents, or products?

The vendor warrants only the legitimacy of the whole and not the various parts of
which it may be composed.

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Is there an exception to the rule that the vendor is not liable for eviction of each
of the various parts of the rights, rents, or products?

Yes and that is if the eviction involves the whole or the part of greater value.

S is a partner in a partnership. He sells all his interest to B for a lump sum of

P150,000.00.Upon dissolution of the partnership, B received the share of S in
its assets consisting of P50,000, some office equipment, and a car.
Subsequently, the car was recovered by C, a creditor of the partnership. Is S
liable to B?

No, S is not liable to B because S does not warrant each of the various parts of his
interest in the partnership but only the legitimacy of his rights as partner taken as a
whole.

In the above-stated case, what if the value of the car exceeds P75,000.00. Is S
liable to B?

Yes. S will be liable because B is evicted from the part of greater value.

Are the fruits of an inheritance included in the sale?

Yes, unless otherwise stipulated, the fruits of an inheritance are included in the sale.

What are the rules with regard to the obligation of the vendor regarding the
fruits of an inheritance?

The following are the rules regarding the obligation of the vendor as to the fruits of
an inheritance:
1) If the vendor merely received the fruits he must deliver them to the vendee.
2) If the fruits were consumed by the vendor, he must reimburse the vendee.
3) If the fruits were sold by the vendor, he is obliged to deliver the price to the vendee.

What is the rule as to the liability of the vendor for anything received from the
inheritance sold?

The liability of the vendor for anything received from the inheritance sold is
subject to any contrary agreement.

What is the obligation of the vendee after the vendor has paid for the debts and
charges of the estate?

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The vendee is required to reimburse the vendor for all that the latter may have paid
for the debts and charges on the estate and satisfy the credits he may have against the
same.

Is an agreement between the vendor and the vendee that the latter may not
reimburse the former, valid?

Yes, because the liability of the vendee for the debts and charges is subject to any
agreement to the contrary.

In what instance is Article 1634 applicable?

Article 1634 applies only to a claim in litigation, the meaning of which is not a claim
open to litigation but one which is actually litigated, that is to say, disputed or
contested which happens only after an answer is interposed in a suit. (Robinson vs.
Garry, 8 Phil. 275)

In what contract does Article 1634 applies to?

Article 1634 applies only in the case of sale. Hence, it does not apply to a barter or a
donation.

Can a credit or other incorporeal right sold in litigation, be redeemed?

Yes, a credit or other incorporeal right sold in litigation can be redeemed by the debtor.

What kind of redemption does the debtor exercise when he redeems a credit or
other incorporeal right sold in litigation?

When the debtor redeems a credit or other incorporeal right sold in litigation he is
exercising his right of legal redemption.

What are the requisites before the right of legal redemption can be exercised?

The following are the requisites before the right of legal redemption can be exercised:
1) There must be a sale or assignment of a credit;
2) There must be a pending litigation at the time of the assignment. The complaint
by the assignor must have been filed, and answered by the debtor before the sale
of the credit;
3) The debtor must pay the assignee of all his expenses required by law;
4) The right must be exercised by the debtor within 30 days from the date the
assignee demands payment from him.

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What are the expenses that the debtor must pay the assignee when the former
exercises his right of legal redemption?

The debtor must pay the assignee:

1) The price paid by him;
2) The judicial costs incurred by him; and
3) The interest on the price from the date of payment.

X sues Y to recover a credit of P1M. Pending litigation, X sells the credit to a 3 rd

party A for P300,000.00. Can Y redeem the credit from A?

Yes, Y may redeem the credit from A by paying A the sum of P300,000.00

Within what period should Y exercise his right of legal redemption?

Within 30 days from the time A demands payment of the P1M.

What is the purpose of the law in granting the right of legal redemption to the
debtor?

The purpose of the law in granting the right of redemption to the debtor is equity and
to avoid the purchase by a 3rd person of credits in litigation merely for speculation.

When is a credit or other incorporeal right be considered in litigation?

A credit or other incorporeal right shall be considered in litigation from the

complaint concerning the same is answered.

Can the debtor exercise the right of redemption even if the credit was sold not
in litigation?

No. The debtor cannot redeem if the credit is not in litigation when the same is sold.

What are the instances when legal redemption is denied?

When the assignment or sale was made to:

1) A co-debtor or co-owner of the right assigned;
2) A creditor in payment of his credit;
3) A possessor of a tenement or piece of land which is subject to the right in
litigation assigned.

Why does the law prohibit redemption of the sale made to co-heir or co-owner?

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The law prohibit redemption of the sale made to co-heir or co-owner because the law
does not favor co-ownership or pro-indivision.

Give an example when the debtor is prohibited from redeeming the property
conveyed to a co-heir or co-owner.

D is indebted to B and C in the amount of P50,000.00. For failure to pay his debt, B
sues D. If B transfers his credit to C during the pendency of the litigation, D cannot
redeem.

What is the reason of the law in not allowing the debtor to exercise his right of
redemption when the assignment or sale was made to a creditor?

The reason is that there is a lawful basis for the assignment as the assignee cannot be
considered as a vendee of a right in litigation and as a speculator.

What is the reason for the exception of the right of the debtor to exercise
redemption in case of assignment of credit?

The reason for the exception is that the assignee is moved by a desire to preserve the
property and not to speculate at the expense of the debtor.

Give an example of the 3rd exception.

An example is where a vendee (assignee) of a property subject to a mortgage acquires

the mortgage credit of the assignor (mortgage-creditor) against the vendor (mortage-
debtor).

D owes P P50,000.00. Which is secured by a mortgage on a land owned by D. If

D sells the land to C and P assigns his credit in litigation to D against B to C, is D
entitled to redeem?

No, D is not entitled to redeem. A debtor cannot redeem the assignmentmade to the
possessor of a tenement or piece of land which is subject to the right in litigation
assigned.

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GENERAL PROVISIONS

Articles 1636 – 1637

What does the “document of title to goods” include?

Document of title to goods include any bill of lading, dock warrant, quedan, or
warehouse receipt or order for the delivery of goods or any other document used in
the ordinary course of business in the sale or transfer of goods, as proof of the
possession or control of the goods, as authorizing or purporting to authorize the
possessor of the document to transfer or receive either by indorsement or by delivery,
goods represented by such document.

What does the term “goods” include?

“Goods” includes all chattels personal but not things in action or money of legal
tender in the Philippines. The term includes growing fruits or crops.

What is an “order”?

“Order” relating to documents of title means an order by indorsement on the

documents.

What does “quality of goods” include?

“Quality of goods” includes their state or condition.

What is meant by “specific goods”

“Specific goods” means goods identified and agreed upon at the time a contract of
sale is made.

What constitute value?

An antecedent or pre-existing claim, whether for money or not, constitutes “value”

where goods or documents of title are taken either in satisfaction thereof or as a
security thereof.

When is a person insolvent?

A person is insolvent if he has ceased to pay his debts in the ordinary course of
business or cannot pay his debts as they become due, whether insolvency
proceedings have been commenced or not.

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When are goods in a “deliverable state”

Goods are in a “deliverable state” when they are in such a state that the buyer would,
under the contract, be bound to take delivery of them.

What is a thing or chose in action?

A “thing or chose in action” is any claim or right which may be pleaded in a suit at
law, such as claim of reparation for a tort (civil wrong) or right guaranteed under
certain types of contract.

What is legal tender?

Legal tender is that currency which a debtor can legally compel a creditor to accept in
payment of a debt in money when tendered by the debtor in the right amount.

What laws govern the registration of document or title pertaining to immovable

property?

Immovable property is subject to the rule laid down by the Mortgage Law and the
Land Registration Law.

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