BLR MIDTERM REVIEWER • While a sale of a determinate thing (e.g.

, land) includes all

its accessions (e.g., house) and accessories even though
they may not have been mentioned (see Art. 1166.), a sale
Meaning of unpaid seller.
of the latter is not sufficient to convey title or right to the
• An unpaid seller is one who has not been paid or tendered
former.
the whole price or who has received a bill of exchange or
• Note: Accessions are the fruits of a thing; or additions to,
other negotiable instrument as conditional payment and
or improvements upon, a thing such as the young of
the condition on which it was received has been broken by
animals, house or trees on a land, etc. Accessories are
reason of the dishonor of the instrument.
anything attached to a principal thing for its completion,
• The term “unpaid seller” within the scope of Articles 1525
ornament, or better use such as picture frame, key of a
up to 1535 includes: (1) an agent of the seller; (2) a
house, etc.
consignor or agent who has himself paid or is directly
Right of vendee to the fruits.
responsible for the price; or (3) any other person in the
(1) When vendee entitled. — The vendee has a right to the fruits
position of the seller. A seller is unpaid within the
of the thing sold from the time the obligation to deliver it arises.
definition whether title has or has not passed
(Art. 1164.) The obligation to deliver arises upon the perfection
Where whole of price has not been paid.
of the contract of sale.
(1) Tender of payment by buyer. — Although tender of payment
(2) When vendee not entitled. — In the following cases, the
is not the same as performance, and a seller to whom the price of
vendee is not entitled to the fruits:
goods has been tendered is strictly unpaid, and can, therefore,
a. When the rule provided in Article 1537 (par. 2.) is modified
bring an action subsequently for the price, which he has refused,
by agreement of the parties, their agreement shall, of
yet tender destroys the seller’s lien. Accordingly, so far as concerns
course, govern;
his rights against the goods, he is not an unpaid seller after
b. If the vendee rescinds the contract of sale instead of
the tender of the price.
exacting the fulfillment thereof, he is entitled only to
(2) Payment of part of price. — Payment of a part only of the
damages like interest, attorney’s fees and costs but he may
price does not destroy a seller’s lien. (2 Williston, op. cit., pp. 96-
not also claim the fruits of the thing sold
97.) The seller remains an unpaid seller even if title has passed to
c. In a contract of promise to sell, the vendee is not entitled
the buyer.
to the fruits. The only right of the contracting parties is to
(3) Payment by negotiable instrument. — According to paragraph 2
reciprocally demand the fulfillment of the contract. Prior
of Article 1249 (Civil Code), “the delivery of promissory
to the sale and conveyance of the subject matter of the
notes payable to order, or bills of exchange or other mercantile
contract, the promise or would-be vendee acquires no
documents shall produce the effect of payment only when they
right to the fruits
have been cashed or when through the fault of the creditor they
Rules in case of loss, deterioration, or improvement of thing before
have been impaired.”
delivery.
Special remedies of an unpaid seller of goods.
(1) If the thing is lost without the fault of the debtor, the obligation
(1) A lien on the goods or right to retain them for the price
shall be extinguished;
while in his possession (Arts. 1527-1529.);
(2) If the thing is lost through the fault of the debtor, he shall be
(2) A right of stopping the goods in transitu in case of insolvency of
obliged to pay damages; it is understood that the thing is lost when
the buyer (Art. 1530.);
it perishes, or goes out of commerce, or disappears in such a way
(3) A right of resale (Art. 1533.); and
that its existence is unknown or it cannot be recovered;
(4) A right to rescind the sale. (Art. 1534.)
(3) When the thing deteriorates without the fault of the debtor, the
If the unpaid seller still retains ownership in the goods, he
impairment is to be borne by the creditor;
cannot be said to have a lien (on his goods). But he does have, in
(4) If it deteriorates through the fault of the debtor, the creditor may
addition to his other remedies, right of withholding delivery
choose between the rescission of the obligation and its fulfillment,
Right of vendor to withhold delivery in sale on credit.
with indemnity for damages in either case;
“The debtor [vendee] shall lose every right to make use of
(5) If the thing is improved by its nature, or by time, the
the period:
improvement shall inure to the benefit of the creditor;
(1) When after the obligation has been contracted, he becomes
(6) If it is improved at the expense of the debtor, he shall have no
insolvent, unless he gives a guaranty or security for the
other right than that granted to the usufructuary.”
debt [price];
Sale of real property by unit of measure or number.
(2) When he does not furnish to the creditor [vendor] the
(1) Entire area stated in contract must be delivered. — If the sale of
guaranties or securities which he has promised;
real estate should be made with a statement of its area, at the rate
Art. 1536
of a certain price per unit of measure or number, the cause of the
253
contract with respect to the vendee is the number of such units or, if
(3) When by his own acts he has impaired said guaran-ties
you wish, the thing purchased as determined by the stipulated
or securities after their establishment, and when through a
number of units. The vendor must deliver the entire property agreed
fortuitous event they disappear, unless he immediately gives new
upon. Thus, if the parcel of land is stated in the contract as having an
ones equally satisfactory;
area of 500 square meters and sold at P1,000.00 per square meter,
(4) When the debtor [vendee] violates any undertaking,
the vendor must deliver the entire area as stated Furthermore, the
in consideration of which the creditor agreed to the period;
immovable must be of the quality specified in the contract. (par. 3.)
(5) When the debtor [vendee] attempts to abscond.”
(2) Where entire area could not be delivered. — If all that is included
Condition of thing to be delivered.
within the stipulated boundaries is not delivered, then the object of
• In entering into a contract of sale, the parties take into
the contract, its cause as far as the vendee is concerned, is not
consideration not only the particular thing which is the
delivered. Hence, he is entitled to rescind it. He may, however,
subject matter of the contract, but also its condition at the
enforce the contract with the corresponding decrease in price.
time such was perfected.
When vendee entitled to rescind sale of real property.
• The vendor is, therefore, obliged to preserve the thing
(1) If the lack in area is at least 1/10th than that stated or stipulated.
pending delivery (see Arts. 1163, 1164.) because the thing
(par. 2.) The 1/10th mentioned must be based on the area stipulated
sold and its accessions and the accessories must be in the
in the contract, and not on the real area which the thing may
condition in which they were upon the perfection of the
actually have
contract. (Art. 1537, par. 1.)
(2) If the deficiency in the quality specified in the contract exceeds
• It is the seller’s duty to deliver the thing sold in a condition
1/10th of the price agreed upon (par. 3.);
suitable for its enjoyment by the buyer for the purposes
(3) If the vendee would not have brought the immovable, had he
contemplated.
known of its smaller area or inferior quality irrespective of the extent
• Thus, a subdivision lot seller should not shift to the buyer
of the lack in area or quality.
the burden of providing access to and from the
• Note that in case of fulfillment, the vendee is entitled only
subdivision.
to a proportionate reduction of the price where there is a
• It is seller’s duty to construct the necessary roads in the
deficiency in area or number.
subdivision that could serve as outlets. Proper access to
the residence is essential to its enjoyment
Rules as to preference of ownership in case of a double sale. contagious diseases and those found unfit for the use or
If the same property is sold by the same vendor to different vendees, service stated.
the conflicting rights of said vendees shall be resolved in accordance • The sale of such animals is void as against public interest
with the following rules: and not merely subject to rescission or reduction of the
(1) If the property sold is movable, the ownership shall be acquired price. It is to be governed by the rules relating to nullity of
by the vendee who first takes possession in good contracts.
(2) If the property sold is immovable, the ownership shall belong, in • Even if the animals are found fit for the use or service
the order hereunder stated, to: stated in the contract, the vendee may still rescind the
a. The vendee who first registers the sale in good faith in the contract. This article contemplates a sale that has been
Registry of Property (Registry of Deeds) has a preferred perfected and consummated.
right over another vendee who has not registered his title What constitutes redhibitory defect of animals?
even if the latter is in actual possession of the immovable • To be considered redhibitory, the defect must not only be
property. More credit is given to registration than to actual hidden. It must be of such a nature that expert knowledge
possession. However, the mere registration is not enough; is not sufficient to discover it. However, if the veterinarian
good faith must concur with the registration. To be entitled failed to discover it through his ignorance, or failed to
to priority, the second purchaser must have also acted in disclose it to the vendee through bad faith, he shall be
good faith, without knowledge of the previous alienation liable for damages. The responsibility is his and not the
by the vendor to another. The requirement of the law then vendor’s.
is two-fold: acquisition in good faith and registration in Responsibility of vendor where animal dies.
good faith. Knowledge by the first buyer of the second sale • If the animal sold is suffering from any disease at the time
cannot defeat the first buyer’s right except when the of the sale, the vendor is liable should it die of said disease
second first registers in good faith the second sale. within three days from the date of the sale (not date of
Conversely, knowledge gained by the second buyer of the delivery).
first sale defeats his rights even if he is first to register, • This claim of the vendee must be based on a finding of an
since such knowledge taints his registration with bad faith. expert that the disease causing the death existed at the
b. In the absence of registration, the vendee who first takes time of the contract.
possession in good faith; and • If the death occurs after three days or the defect is patent
c. In the absence of both registration and possession, vendee or visible, he is not liable.
who presents the oldest title (who first bought the • If the loss is caused by a fortuitous event or by the fault of
property) in good faith. the vendee, and the animal has vices, Article 1569 should
Meaning of condition. be applied.
A condition, as used in Article 1545, means an uncertain event or Principal obligations of vendee.
contingency on the happening of which the obligation (or right) of (1) to accept delivery; of the thing sold; and
the contract depends. In such a case, the obligation of the contract (2) to pay the price1 of the thing sold at the time and place
does not attach until the condition is performed. stipulated in the contract; and
(1) The term, in the context of a perfected contract of sale, pertains, (3) to bear the expenses for the execution and registration of the
in reality, to the compliance by one party of an undertaking, the sale and putting the goods in a deliverable state, if such is the
fulfillment of which would beckon, in turn, the demandability of the stipulation.
reciprocal prestation of the other party. A grace period granted the vendee in case of failure to pay the
(2) The term is not used in the sense of a “promise” with the amount/s due is a right, not an obligation.
possible exception of the buyer’s promise to accept and pay for the Rules governing delivery in installments.
thing sold which is conditioned on the seller’s performance of his (1) General rule. — In an ordinary contract for the sale of
promise to deliver the thing as described and warranted. goods, the buyer is not bound to receive delivery of the
Meaning of warranty. goods in installments. He is entitled to delivery of all the
A warranty is a statement or representation made by the seller of goods at the same time and, it may be added, is bound to
goods, contemporaneously and as a part of the contract of sale, receive delivery of all the same time. Similarly, a buyer has
having reference to the character, quality, or title of the goods, and no right to pay the price in installments. Neither can he be
by which he promises or undertakes to ensure that certain facts are required to make partial payments. By agreement,
or shall be as he then represents them however, the goods may be deliverable by installments or
Meaning of express warranty. the price payable in installments.
• An express warranty is any affirmation of fact or any (2) Where separate price has been fixed for each installment.
promise by the seller relating to the thing, the natural — Where the contract provides for the delivery of goods
tendency of which is to induce the buyer to purchase the by installments and a separate price has been agreed upon
thing and the buyer thus induced, does purchase the for each installment, it depends in each case on the terms
same. of the contract and the circumstances of the case whether
Meaning of implied warranty. the breach thereof is severable or not.
• An implied warranty is that which the law derives by (a) Where breach affects whole contract. — If the seller
implication or inference from the nature of the transaction makes defective, partial or incomplete deliveries or the
or the relative situation or circumstances of the parties, buyer wrongfully neglects or refuses to accept delivery or
irrespective of any intention of the seller to create it. fails to pay any installment, the injured party may sue for
Implied warranties in sale. damages for breach of the entire contract if the breach is
(1) Implied warranty as to seller’s title. — that the seller so material (e.g., breach of one installment prevents the
guarantees that he has a right to sell the thing sold and to further performance of the contract) as to affect the
transfer ownership to the buyer who shall not be disturbed contract as a whole.
in his legal and peaceful possession thereof (b) Where breach severable. — Where the breach is
(2) Implied warranty against hidden defects or unknown severable, it will merely give rise to a claim for
encumbrance. — that the seller guarantees that the thing compensation for the particular breach but not a right to
sold is free from any hidden faults or defects or any charge treat the whole contract as broken.
or encumbrance not declared or known to the buyer. Buyer’s right to examine the goods.
(3) Implied warranty as to fitness or merchantability. — that (1) Actual delivery contemplated. — The delivery referred to
the seller guarantees that the thing sold is reasonably fit in said article, as can be gathered from its context, is actual
for the known particular purpose for which it was acquired delivery. In other words, the ownership of the goods shall
by the buyer or, where it was bought by description, that it be transferred only upon actual delivery subject to a
is of merchantable quality. reasonable opportunity of examining them to determine if
When sale of animals void. they are in conformity with the contract. The right of
• The article declares the class of animals which cannot be examination or inspection under paragraph 1 is thus a
the object of commerce — animals suffering from condition precedent to the transfer of ownership unless
there is a stipulation to the contrary.
 (2) Goods delivered C.O.D./not C.O.D. — Where, in pursuance Seller’s right of action for the price.
of a contract of sale, the seller is authorized or required to (1) when the ownership of the goods has passed to the buyer and he
send the goods to the buyer, delivery of the goods to a wrongfully neglects or refuses to pay for the price (par. 1.);
carrier for the purpose of transmission to the buyer is (2) when the price is payable on a certain day and the buyer
deemed to be delivery to the buyer. wrongfully neglects or refuses to pay such price, irrespective of
(a) Although title passes to the buyer by the mere delivery delivery or of transfer of the title (par. 2.); and
to the carrier, the buyer unless the goods are sent C.O.D. (3) when the goods cannot readily be resold for a reasonable price
which is the normal procedure in importations, has the and the buyer wrongfully refuses to accept them even before the
right to examine the goods before paying. In this case, the ownership in the goods has passed.
right to examine the goods is a condition precedent to Seller’s right of action for damages.
paying the price after ownership has passed. (1) If the buyer without lawful cause neglects or refuses to accept
(b) It should be noted that even in a C.O.D. sale, the buyer and pay for the goods he agreed to buy, the seller may maintain an
is allowed to examine the goods before payment of the action against him for damages for non-acceptance. (par. 1.)
price should it have been so agreed upon or if it is (2) In an executory contract, where the ownership in the goods has
permitted by usage. not passed, and the seller cannot maintain an action to recover the
(3) Right of examination not absolute. — The buyer does not price (see Art. 1595.), the seller’s remedy will be also an action for
have an absolute right of examination since the seller is damages.
bound to afford the buyer a reasonable opportunity of (3) If the goods are not yet identified at the time of the contract or
examining the goods only “on request.” (par. 2.) If the subsequently, the seller’s right is necessarily confined to an action
seller refused to allow opportunity for the inspection, the for damages.
buyer may rescind the contract and recover the price or Seller’s right of rescission before delivery.
any part of it that he has paid. (1) when the buyer has repudiated the contract of sale;
(4) Right to be exercised within reasonable time. — While (2) when the buyer has manifested his inability to perform his
Article 1584 accords the buyer the right to a reasonable obligations thereunder; and
opportunity to examine the goods to ascertain whether (3) when the buyer has committed a breach of the contract of sale.
they are in conformity with the contract, such opportunity Article 1481 provides for a special cause for rescission of the contract
to examine should be availed of within a reasonable time of sale of goods.
in order that the seller may not suffer undue delay or Article 1534 (2nd par.) speaks of the rescission of title. In a case, the
prejudice. seller was not allowed to totally rescind a contract to sell two lots, it
(5) Waiver of right to examine before payment. — The right of appearing that the installments paid by the buyer were more than
inspection may, of course, be given up by the buyer by the value of one lot. The conveyance to the buyer of one of the two
stipulation. (Ibid.) The waiver, however, need not be in lots was ordered. If the goods have been delivered, the seller may
express terms. An illustration of a bargain inconsistent with recover the value of what he has given.
examination of the goods before payment is a contract by Buyer’s right to specific performance.
which goods are to be sent to the buyer C.O.D. (par. 3.) But • In reciprocal obligations, it is the injured party who has a
the buyer is still entitled to examine the goods after their right to choose between fulfillment (see Art. 1165, par. 1.)
delivery and payment of the price. (par. 1.) Here, the right and rescission, with the payment of damages in either
of examination is a condition subsequent after transfer of case.
ownership and payment of the price. • Consequently, the right of the injured party to demand
Modes of manifesting acceptance. specific performance cannot be defeated by the guilty
(1) Express acceptance takes place when the buyer, after delivery of party’s choice to rescind the contract.
the goods, intimates to the seller, verbally or in writing, that he has • This is also the rule in Article 1598 which grants to the
accepted them. buyer, as a matter of right, the remedy of specific
(2) Implied acceptance takes place: performance in case the seller should violate his obligation
(a) when the buyer, after delivery of goods, does any act inconsistent to make delivery.
with the seller’s ownership, as when he sells or attempts to sell the • The seller cannot retain the goods on payment of damages
goods, or he uses or makes alteration in them in a manner proper because damages are imposed by law to insure
only for an owner; or fulfillment of contract and not to substitute for it.
(b) when the buyer, after the lapse of a reasonable time, retains the • In granting specific performance, the court may impose
goods without intimating his rejection. Thus, the failure of the buyer such terms and conditions as to damages, payment of the
to interpose any objection to the invoices issued to it, to evidence price and otherwise, as it may deem just
delivery of the materials ordered as per agreement with the seller Remedies of buyer for breach of warranty by seller.
and which contained the conditions in question, should be deemed This article applies both to implied warranties and to express
as an implied acceptance by the buyer of the said conditions. warranties, whether of quality or of title.
(1) accept the goods and set up the seller’s breach to reduce or
The retention of the goods is a strong evidence that the buyer has extinguish the price;
accepted ownership of the goods. While retention may be (2) accept the goods and maintain an action for damages for the
considered an act inconsistent with the ownership of the seller, it is breach of the warranty;
stated as a separate mode of manifesting acceptance as it is merely a (3) refuse to accept the goods and maintain an action for damages
negative indication which may be due merely to carelessness for the breach of the warranty; and
Delivery and acceptance, separate acts. (4) rescind the contract of sale by returning or offering the return of
(1) Acceptance, not a condition to complete delivery. — Delivery is the goods, and recover the price or any part thereof which has been
an act of the vendor. Thus, one of the obligations of the vendor is paid.
the delivery of the thing sold. (Art. 1495.) The vendee has nothing to (Nos. 1-4.) The remedies open to the buyer under the article may be
do with the act of delivery by the vendor. On the other hand, grouped into three, to wit:
acceptance is an obligation on the part of the vendee. (Art. 1582.) (a) recoupment (No. 1.);
Consequently, acceptance cannot be regarded as a condition to (b) action (No. 3.) or counterclaim for damages (No. 2.); and
complete delivery. In other words, the seller must comply with his (c) rescission. (No. 4)
obligation to deliver although there is no acceptance yet by the When rescission by the buyer not allowed.
buyer. (1) if the buyer accepted the goods knowing of the breach of
(2) Acceptance and actual receipt do not imply the other. — warranty without protest;
Acceptance of the buyer may precede actual delivery. There may be (2) if he fails to notify the seller within a reasonable time of his
an actual receipt without any acceptance and there may be election to rescind; and
acceptance without any receipt. (3) if he fails to return or offer to return the goods in substantially as
good condition as they were in at the time of the transfer of
ownership to him. But where the injury to the goods was caused by
the very defect against which the seller warranted, the buyer may
still rescind the sale.
Rights and obligations of buyer in case of rescission. on the period. The mere fact that the agreement is obtained by
(1) In case of rescission, the buyer shall cease to be liable for the inference does not argue in favor of its non-existence.
price, his only obligation being to return the goods; (6) Final judgment that contract is pacto de retro. — “From the time
(2) If he has paid the price or any part thereof, he may recover it final judgment was rendered in a civil action on the basis that the
from the seller contract was a true sale with right to repurchase,” the vendor a retro
(3) He has the right to hold the goods as bailee for the seller should has 30 days within which to exercise the right to repurchase
the latter refuse the return of the goods; and (a) As set forth in this provision, there must be an express finding
(4) He has the right to have a lien on the goods for any portion of the that the transaction is one of pacto de retro. The application of the
price already paid which lien he may enforce as if he were an unpaid third paragraph of Article 1606 is predicated upon the bona fides of
seller the vendor a retro. It must appear that there was belief on his part,
Conventional redemption defined. founded on facts attendant upon the execution of the contract,
• Conventional redemption is the right which the vendor honestly and sincerely entertained, that it was in reality a mortgage,
reserves to himself, to reacquire the property sold one not intended to affect the title to the property sold, but merely
provided he returns to the vendee the price of the sale, to give it as security for a loan or other obligation and because of
the expenses of the contract, any other legitimate such belief, he had not redeemed the property within the proper
payments made therefor and the necessary and useful period. In short, the judgment was rendered in a civil action where
expenses made on the thing sold and fulfills other the issue was whether the contract entered into by the parties was a
stipulations which may have been agreed upon pacto de retro sale or an equitable mortgage.
Equitable mortgage defined. (b) The thirty-day period is peremptory because the policy of the law
• An equitable mortgage is one which lacks the proper is not to leave the purchaser’s title in uncertainty beyond the said
formalities, form or words, or other requisites prescribed period. It is not a prescriptive period but is more a requisite or
by law for a mortgage, but shows the intention of the condition precedent to the exercise of the right of legal redemption.
parties to make the property subject of the contract as (c) The grant of the right of repurchase in accordance with the third
security for a debt and contains nothing impossible or paragraph of Article 1606 is not found in the old Civil Code. The
contrary to law legislative intent behind this article, along with is “to accord the
When contract with right to repurchase presumed an equitable vendor a retro the maximum safeguards for the protection of his
mortgage. legal rights under the true agreement of the parties. Experience has
• For a presumption of an equitable mortgage to arise, there demonstrated too often that many sales with right of repurchase
are two (2) requisites, namely: that the parties entered have been devised only to circumvent or ignore our usury laws and
into a contract denominated as a contract of sale with a for this reason, the law looks upon them with disfavor.’’
right of repurchase or purporting to be an absolute sale Legal redemption defined.
(Art. 1604.) and that their intention was to secure an • Article 1619 gives the definition of legal redemption. As
existing debt by way of mortgage. the word “thing” is employed without qualification, the
• Article 16026 enumerates six distinct and separate right applies to both movable and immovable property
circumstances the presence of any (not a concurrence) of Exercise of right of pre-emption or redemption.
which is sufficient to give rise to the presumption that a • While the co-owner’s right of legal redemption is a
contract, regardless of its nomenclature, is an equitable substantial right, it is exceptional in nature, limited in its
mortgage in consonance with the rule that the law favors duration and subject to strict compliance with legal
the last transmission of property rights. requirements.
Period for exercise of right of redemption. • One of these is that the redemptioner should tender
For conventional redemption to take place, the vendor should payment of the redemption money within 30 days from
reserve, in no uncertain terms, the right to repurchase the thing written notice of the sale by the co-owner.
sold. Thus, the right to redeem must be expressly stipulated in the • One who purchases an undivided interest in a property is
contract of sale in order that it may have legal existence. Accordingly, charged with notice that this acquisition is subject to
where the contract provides: “In case of sale” by the buyer of the redemption by any other co-owner within the statutory
property (sold) to the seller, the Supreme Court held that the 30-day period.
stipulation does not grant the right of repurchase. The quoted • The right of redemption of co-owners is preferred over
phrase should be construed to mean “should the buyer wish to sell” that of adjoining owners.
which is the plain and simple import of the words, and not “the • In other words, the law attaches more importance to the
buyer should sell.” necessity to put an end to tenancy in common than to the
(1) No agreement granting right. — If there is no agreement in a purpose of encouraging the development of agriculture.
contract of sale granting the vendor the right to redeem, there is no • Under Article 484 of the Civil Code, there is co-ownership
right of redemption since the sale should be considered an absolute whenever the ownership of an undivided thing or right
sale. belongs to different persons.
(2) Agreement merely grants right. — If the parties agreed only on • There is no longer co-ownership when the different
the right to redeem on the part of the vendor but there is a total portions owned by different people are already concretely
absence of express stipulation as to the time within which the determined and separately identifiable, even if not yet
repurchase should be made, then the period of redemption shall be technically described.
four (4) years from the date of the contract. (par. 1.)
(3) Definite period of redemption agreed upon. — If the parties
agreed on a definite period of redemption, then the right to
redeem must be exercised within the period fixed provided it does
not exceed 10 years. (par. 2.) It has been held that the non-payment
by the vendee a retro of the balance of the purchase price does not
suspend the running of the period of redemption agreed upon (5
years) in the absence of a stipulation to that effect. A sale is
consummated upon the execution of the document and the delivery
of the subject matter thereof to the vendee. Failure to pay part of
the price does not in any way affect the cause or consideration of the
contract
(4) Period agreed upon exceeds ten years. — Where the agreed
period exceeds 10 years, the vendor a retro has 10 years from the
execution of the contract to exercise his right of redemption.
(5) Period of redemption not specified. — If the parties agreed that
the vendor shall have a right to redeem and they intend a period
which, however, is not specified, then the redemption period is 10
years. In order to be applicable, paragraph 2 of Article 1606 requires
the existence of an agreement, not a definite and clear agreement
Credit Transaction (5) When there are two or more bailees to whom a thing is loaned in
• These include all transaction involving the purchase or the same contract, they are liable solidarily.
loan of goods, services, or money in the present with a Obligations of the Bailor
promise to pay or deliver in the future. (1) The bailor cannot demand the return of the thing loaned until
• Further, contracts or agreements based on trust or after: a. The expiration of the period stipulated; or b. The
credit are credit transactions. accomplishment of the use for which commodatum has been
Kinds of Security constituted.
(1) Personal Security – an individual becomes a surety or (2) The bailor may demand the immediate return of the thing if the
guarantor bailee commits any act of ingratitude under Art. 765 of the New Civil
(2) Property or Real Security – a mortgage, pledge, antichresis, Code of the Philippines.
charge, lien, or other device is used to have property held, (3) Generally, the bailor shall refund the extraordinary expenses
out of which the person can be compensated for loss. during the contract for the preservation of the thing loaned
Parties (4) The bailor, who, knowing the flaws of the thing loaned, does not
(1) Bailor – the GIVER or the party who delivers the possession advise the bailee of the same, shall be liable to the latter for the
or custody of the thing bailed. damages which he may suffer by reason thereof.
(2) Bailee – the RECIPIENT or the party who receives the (5) The bailor cannot exempt himself from the payment of expenses
possession or custody of the thing thus delivered. or damages by abandoning the thing to the bailee.
Definition and Kinds Simple Loan or Mutuum
Under Article 1933 of the New Civil Code of the Philippines, by the • Mutuum is a contract whereby one of the parties delivers
contract of loan: to another money or other consumable thing with the
(1) One of the parties delivers to another, either something not understanding that the same amount of the same kind and
consumable so that the latter may use the same for a certain time quality shall be paid.
and return it, in which case the contract is called a commodatum; or • As such, mutuum involves the return of the equivalent
(2) Money or other consumable thing, upon the condition that the only and not the identical thing since the borrower
same amount of the same kind and quality shall be paid, in which acquires ownership thereof.
case the contract is simply called a loan or mutuum. Fungible Things
Commodatum vs. Mutuum • Those which are usually dealt with by number, weight or
(1) Commodatum involves something not consumable; in Mutuum, measure, so that any given unit or portion is treated as the
the subject matter is money or other consumable thing equivalent of any other unit or portion.
(2) In Commodatum, ownership of the thing loaned is retained by Mutuum and Commodatum vs. Barter
the lender; in Mutuum, the ownership is transferred to the borrower (1) In Mutuum, it is money or any other fungible things; in Barter,
(3) Commodatum is essentially gratuitous; Mutuum may be non-fungible things.
gratuitous or onerous (with stipulation to pay interest) (2) In Commodatum, the bailee us bound to return the identical
(4) In Commodatum, the borrower must return the same thing thing borrower; in Barter, the equivalent thing is given in return for
loaned; in Mutuum, the borrower need only pay the same amount what has been received.
of the same kind and quality (3) Mutuum may be gratuitous and commodatum is always
(5) Commodatum may involve personal or real property; Mutuum gratuitous; Barter is an onerous contract.
refers only to personal property Form of Payment
(6) Commodatum is a loan for use; Mutuum is a loan for (1) Loan of Money – payment must be made in the currency which is
consumption legal tender in the Philippines
(7) In Commodatum, the bailor may demand the return of the thing (2) Loan of Fungible Thing – the borrower should pay the lender
loaned before the expiration of the term in case of urgent need; in another thing of the same kind, quality and quantity. If impossible,
Mutuum, the same may not be made the barrower shall pay its value at the time of the perfection of the
(8) In Commodatum, the loss is suffered by the bailor, being the loan
owner; in Mutuum, the borrower suffers the loss Monetary Interest
Characteristics Requisites for recovery of monetary interests:
(1) Real Contract – Delivery of the things is necessary for the (1) The payment must be expressly stipulated;
perfection of the contract (2) The agreement must be in writing; and
(2) Unilateral Contract – Once the subject matter has been delivered, (3) The interest must be lawful.
it creates obligations on the part of only one of the parties, the Exception: (1) indemnity for damages; and (2) interest accruing from
borrower unpaid interest.
Commodatum Interest – the compensation allowed by law or fixed by the parties
• The bailee in commodatum acquires the use of the thing for the loan or forbearance of money, goods, or credits.
loaned but not its fruits (unless there is a stipulation to the Kinds of Interest
contrary); if any compensation is to be paid by him who (1) Simple Interest – this is paid for the principal at a certain
acquires the use, the contract ceases to be a rate fixed or stipulated by the parties.
commodatum. (2) Compound Interest – this is imposed upon interest due
Subject Matter of Commodatum and unpaid.
• The subject matter, which is generally nonconsumable, (3) Legal Interest – this is what the law directs to be charged in
may be real or personal properties. the absence of any agreement as to the rate between the
• But, if the purpose of the contract is merely for exhibition parties.
of the object, consumable goods may be the subject of Notes on Interest
commodatum. (1) Generally, interest due and unpaid shall not earn interest.
Commodatum: Purely Personal in Character Exception: (a) Judicially demanded; and (b) agreement of
(1) The death of either the bailor or the bailee extinguishes the the parties.
contract; (2) Interest is not chargeable if not expressly stipulated, not in
(2) The bailee can neither lend nor lease the object of the contract to writing, and not lawful.
a third person, except for the members of the bailee’s household, (3) If the borrower paid interest even without stipulation
unless there is a stipulation to the contrary, or unless the nature of thereto, the latter may still recover as this would be a
the thing forbids such use. cause of solution indebiti or undue payment
Obligations of the Bailee
(1) The bailee is obliged to pay for the ordinary expenses for the use
and preservation of the thing loaned.
(2) The bailee is liable for the loss of the things, even if it should be
through a fortuitous event in specific instances.
(3) The bailee does not answer for the deterioration of thing loaned
due only to the use thereof and without his fault.
(4) Generally, the bailee cannot retain the thing loaned.