LAW ON SALES

Definition:

Art 1458. By the contract of sale, one of the contracting

parties (called the vendor or seller) obligates himself to
transfer the ownership and to deliver a determinate thing,
and the other party (also known as the vendee or buyer) to
pay therefore a price certain in money or its equivalent (also
known as the price).
The nature of a contract of sale is the transfer of ownership
or that the recipient has the ability to alienate the thing
transferred to him. Ownership is acquired through delivery:
a.Actual delivery – object is actually delivered to the buyer.
b.Constructive delivery – there is no actual delivery but is
deemed delivered by operation of law.
Sale is a Title

A sale merely gives the buyer a TITLE to the thing sold.

With such title or right, there is a correlative obligation to
deliver the thing.

Upon delivery, the ownership is acquired by the buyer.

Characteristics
a.Consensual – a contract of sale is perfected by mere consent
(meeting of minds) of the parties upon the thing which is the object
of the sale and upon the price. Upon perfection of the contract
between the parties, they are expected to comply with their
respective obligations.
b.Reciprocal – both parties in a contract of sale have
corresponding obligations to each other. The Buyer should give the
price and the Seller should deliver the object of the sale.
c.Onerous – the parties in a contract of sale acquire rights for a
valuable consideration.
d.Commutative – things of similar value are exchanged
between the seller and the buyer.
e.Nominate – the law specifies a name for the contract,
which is a “contract of sale”.
f.Principal – its existence is not dependent on another
contract. A contract of sale can stand on its own without the
need of other contracts.
Form of a contract of sale

General rule:

A contract of sale can take any form, thus, it may be in

writing, by word of mouth, or partly in writing or partly by
word of mouth, or may even be inferred from the actions or
conduct of the parties.
Exceptions:
As a rule there are certain instances where a contract of sale needs
to be in writing such as the following:

Contracts covered under the statute of frauds, namely:

i.If the sale is to be performed after 1 year from perfection of the
contract it must be in a written instrument.

ii.If the sale involves real property (e.g. land) it must be in a written
public instrument
iii.If the sale involves personal property with a value
exceeding P500 it must be in a written instrument.

iv.In the sale of large cattle (cows, horses, etc.) the sale
must be in a written instrument.

v.In the sale of a piece of land the power to sell (agency)

must be in writing.
Kinds of Contracts of Sale

1.Absolute – the sale upon is not based on any condition

and ownership of the object is transferred to the buyer
immediately upon delivery.

2.Conditional – ownership of the object remains with the

seller until the condition/s are fulfilled.
a.Sale or Return – the buyer is given the option to return
the object of the sale instead of paying for the price.
Ownership will transfer to the buyer upon delivery but he
may revest ownership of the object to the seller within the
time provided, or if not provided, within a reasonable time.

Risk of loss is by the buyer

b. Sale on approval – goods are delivered to the buyer on
approval or no trial or on satisfaction, or other similar terms.
Ownership will pass to the buyer signifies his approval or
acceptance expressly or impliedly. He does not signify his
acceptance or approval but if the time given to signify or a
reasonable time, if no time was stipulated, has expired.

Risk of loss by the seller

Requisites of a Contract of
Sale
Essential Elements
1.Consent – consent is the meeting of minds between the parties where the
seller consents to transfer ownership of the object and the buyer to pay the
price certain.

In essence, consent is the conformity of the parties on the terms of the

contract. It is the acceptance by one (buyer) of the offer made by the other
(seller). In some instance the acceptance of payment by a party is an indication
of his consent to a contract of sale, thereby precluding him from rejecting its
binding effect.

Consent must be freely given by those who are legally capacitated by absolute
acceptance of an offer.
As a contract, a contract o sale is perfected by mere
consent of the parties. However, the ownership of the thing
is transferred only upon the delivery thereof.
Note:

a.Both spouses must give consent in a sale involving

conjugal property.

b.Both parties in a contract of sale must be capacitated to

give consent.
2. Object – the object of a sale maybe something which is
determinate or determinable. This refers to the determinate thing
which is the object of the contract.

The thing must be determinate or at least capable of being made

determinate because if the seller and the buyer differ in regard to
the thing sold, there is no meeting of the minds; in effect there will
be no contract of sale.

The subject matter may be personal or real property. The object

may be of things of potential existence, future goods, fungible
goods, or things subject to resolutory condition.
Requisites of a valid object in a contract of sale
a. Determinable - a thing is determinable if is capable of
being determinate without the need for the parties in the
sale to enter into a new agreement. For example Jose sells
Brian a car, it is determinate if Jose and Brian can
determine what car it is among the cars owned or being
sold by Jose.
b.Potential Existence – things that may come into existence
can be the object of a sale, but the sale of a mere hope or
expectancy is valid only if the hope or expectancy actually
comes into existence. (Art 1461)
i.Future Goods – the object of the contract maybe one that
is yet to be acquired, manufactured, or raised after the
perfection of the contract.

ii.Things subject to a resolutory condition (extinguishes the

obligation) can be the subject of a contract.

iii.A contract of sale may involve and object depends upon a

contingency (Emptio rei and Emptio rei speratei)
 EMPTIO REI SPERATAE EMPTIO SPEI
Sale of thing havingpotential existence Sale of mere hope or expectancy

Uncertainty is w/ regard to quantity & quality Uncertainty is w/ regard to existence of thing

Contract deals w/ future thing Contract deals w/ present thing – hope or expectancy

Sale is valid only if the expected thing will exist. Sale is valid even though expected thing does not
come intoexistence as long as the hope itself validly
existed. (eg. lotto)
General Rule:
A person cannot sell a thing he does not have or own.

XPN:
1. Sale of a thing with potential existence
2. Sale of future goods
3. Articles which the vendor manufactures or procures whether for
the general market whether the same is on hand or not.
c.The object of the sale must be Licit (lawful) and the seller
must have the right to transfer ownership of the thing to be
sold.

Examples of Void Sale:

1. Sale of animals with contagious diseases
2. Sale of future inheritance
3. Sale of Land to Aliens
3. Consideration / price
Consideration – the consideration in a contract of sale is the
price certain in money or its equivalent.

Requisites of a valid price/consideration in a contract of

sale:
a. Certain
b. Money or its equivalent
c. Real
a.Certain
It must be certain or ascertainable at the time of the perfection of the
contract.

i.It is a fixed amount

ii.With reference to another thing certain, or
iii. The determination of the price is left to the judgment of a
third person/s.

Note: The fixing of the price cannot be left to the discretion of one of the parties.
However if one of the parties fixes the price but it is accepted by the other, then
the sale is valid. (Art 1473)
b.Money or its equivalent

– the price should refer to money or legal tender or its

equivalent, e.g. checks,
c.Real
• There must be actual payment of the price. If the price is
completely simulated, the sale is void but it can be proven to be
another contract.

• If the price is only partially simulated, the sale remains to be

valid, gross Inadequacy of the price will not affect the contract of
sale.

• If the price given is false, the sale is void but it can be proven that
the sale is founded on another true and lawful price. If no price
can be agreed upon the sale is inefficatious or without any effect.
Gross Inadequacy of the price
General rule:
Gross inadequacy of the price does not invalidate a contract of sale.

XPN:
If it shows a defect in the consent or that it was intended as a
donation.

Law on Contracts:
Inadequacy of cause will not invalidate a contract unless there has
been fraud, mistake or undue influence.
d. Manner of payment must be agreed upon

The parties must also agree on the manner of payment of

the price, a disagreement on the manner of payment is
equivalent to a failure of the price.
Contract of Sale as
differentiated from other
similar contracts
1.Contract to Sell – a contract where the seller reserves
the right of ownership over the thing despite delivering it to
the prospective buyer , and promises to sell the thing to the
buyer upon fulfillment of the condition which is the full
payment of the price.

In a contract to sell, there is yet no sale.

2.Agency to Sell – the agent, person to whom the thing is
delivered, does not become the owner and he holds it
merely in trust the agent does not pay the price but is bound
to remit whatever he may receive from a third person who is
the buyer.
3.Contract for a Piece of Work – if the object to be acquired is not
in existence and one which would never be in existence if not for the
buyer’s desire to acquire it, the contract is for a piece of work. In a
Contract for a Piece of Work the thing is manufactured SPECIALLY
for the customer and would not exist if not for the customer.

If the object to be acquired is not yet in existence but will exist even
without any order or desire from the buyer to acquire it, the contract
is sale.
4.Option – a contract where the prospective buyer is given
the right to purchase the thing to be sold for a specific
period given or a reasonable time for a separate
consideration from the purchase price.

An option is an unaccepted offer.

If offeree must manifest his acceptance to the offeror

otherwise there can be no contract between them.
Option Money – money paid in advance that is not part of
the price because it is a consideration in a separate
contract of option/option contract.

Earnest Money – money paid in advance that is part of the

purchase price and presupposes that there is a binding
contract of sale.
5.Contract for a right of first refusal – this contract gives
first priority to the person to whom the right is given to
purchase the property should the owner decide to sell the
same; the owner should first offer the property to such
person.

6.Dacion en pago/Dation in payment – a special form of

payment where the obligor will deliver an equivalent of the
original object of a pre-existing obligation.
7.Double Sale – sale of a single object to two or more buyers. The
earliest sale is valid provided that it does not have any defect.
8. 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 the consideration is partly in money and partly exchange
the intention of the parties will determine whether the
contract is sale or barter. If the manifest intention of the
parties is not clear, when the value of the exchange is
greater than or equal to the money paid it is barter,
otherwise sale. The laws of Sale shall govern barter.
SALE BARTER

A thing is given in exchange of money or its A thing is given in exchange of another thing
equivalent

If the consideration is partly in money and partly in another thing

1. The transaction will be characterized based on the intention of the parties

2. If the Intention cannot be determined

a. Barter if the value of the thing is more valuable b. Sale if the thing is equal or less than the amount
than money of the money.
Rights and Obligations of
Vendor and Vendee
OBLIGATIONS OF THE
VENDOR
1. Transfer Ownership of the thing sold
2. Deliver the thing
3. Warrant against eviction and hidden defects
4. Take care of the thing pending delivery
5. Pay for expenses for the execution and registration of the
contract unless otherwise stipulated.
Delivery

The principal obligation of the vendor is to transfer the

ownership, deliver, and warrant the object of the sale.

The primary purpose of delivery is to transfer ownership of

the object from the seller to the buyer. The buyer will only
become the owner of the thing sold after the object is
delivered to him.
KINDS OF DELIVERY
• I.Actual Delivery - Actual delivery means that the thing
bought is placed in the possession and control of the
buyer/vendee or his agent. It may also presuppose that
the buyer/ vendee will have the physical disposition of the
thing sold to him.
II.Constructive(Legal) Delivery – In Constructive delivery
the thing is not actually placed in in the control and
possession of the buyer or his/her agent but the law treats it
as delivered. Constructive delivery is the delivery of the
object of sale without actual physical delivery of the thing
sold. It may be effected through the execution of a
document to transfer ownership or some other symbolic
manner.
Kinds of Constructive Delivery
i.Execution of a public instrument – the delivery of a thing sold
may be made by executing a document to evidence its delivery
especially if there is impossibility of actual delivery. For example, in
selling a house, the parties execute a Deed of sale in order to
represent the transfer of ownership and delivery since the house
cannot be physically delivered or brought to the buyer

Under our law, executing a public instrument in order to effect a

sale can also be considered as delivery. A public instrument is a
document which is notarized by a notary public in the presence of
the parties (buyer and seller).
ii.Symbolical tradition (traditio symbolica)- what is
delivered to the buyer is a thing that symbolizes the object
for the sale. For example; instead of delivering a car you
deliver the keys to the car.

iii.Mere consent of parties (traditio longa manu) - This

refers to the delivery by mere consent or agreement of the
parties where the seller points out to the buyer the object of
the sale without actually delivering it, or by pointing out
where the object is located.
iv.Previous possession not in the concept of owner
(traditio brevi manu) - This occurs when the would be
buyer already had the possession of the object of the
contract of sale even before the parties had a contract of
sale by virtue of a title other than ownership. For example, a
tenant already has possession of the house by virtue of a
title (lease contract) but later on acquires ownership of the
house through a contract of sale.
v.Retains possession in different concept (traditio
constitutum possessorium) - This is the manner of
delivery where the seller still has the possession of goods
but is not the owner of it anymore. The seller retains
possession of the object of the sale but in another title such
as a tenant or lessee. For example, if a seller sells his
house to a buyer but he still remains in the house as the
Buyer’s tenant, then this is Constitutum Possesorium.
What should be delivered?

i.Object of the Sale – In a contract of sale, the object that

was agreed upon by the seller and buyer must be the one
which will be delivered by the seller. Thus, in the sale of a
car the car is the object of the contract, thus the car should
be delivered.
Delivery of Goods (Personal Property)

a. Delivery of Lesser Quantity

b. Delivery of different quality
c. Delivery of mixed goods
Delivery of Lesser Quantity

The buyer may reject delivery .

Retention of Lesser Quality - If the buyer accepts or retains

knowing that the seller is not going to perform the contract
in full, he must pay FULL PRICE.
Delivery of different quality
• When the seller delivers goods different in quality as
agreed, the buyer can reject all that is delivered.
Delivery of mixed goods
• but if the seller delivers goods lesser in quality mixed with
goods within the quality agreed, the buyer can reject the
goods with a lesser or different quality, however, if they
cannot be separated the buyer can reject all goods
delivered.
Delivery of Real Property

1. Sale Per Unit

2. Lump Sump Sale
Sale Per Unit

In the sale of real property in units, e.g.; per square meter,

square foot, hectare, and etc., vendor is obliged to deliver
all that is stated in the contract

When the seller delivers a lower amount or quality as

agreed the price is reduced according to the deficiency, but
if more is delivered the buyer can reject the excess and
accept only the agreed portion.
Lump Sump Sale

In the sale of real property in lump sum, the buyer should

accept what is delivered regardless of size and quality.

For example; A will sell to B all of his real property because

A will migrate to Canada, B should accept delivery of all of
A’s property regardless of quality and quantity.
ii. Accessions and Accessories of the Object
Accessions are the fruits of, or additions to, or improvements upon, a thing (the
principal).

Accessories are things joined to, or included with, the principal thing for the
latter’s embellishment, better use, or completion.

In a personal computer, the monitor, keyboard, and mouse are accessories

because they are necessary for the complete use of the object, while a
webcam, lighting, and mic are accessions because they are not necessary for
the complete use of the object.
iii. Fruits
• All fruits derived from the contract of sale is perfected up
to the time of delivery should also be delivered along
with the object of the sale.
• For example; a lot was sold and is to be delivered only 6
months after the sale was perfected, during those six
months vines bushes grew on the lot, those should also
be delivered to the buyer even if it was not stated in their
agreement.
To Whom Should the Seller Deliver?

In a contract of sale, the Seller must deliver to the following

persons:

i.The BUYER;
ii. The Agent/Authorized Representative of the Buyer; or
iii. The CARRIER in goods delivered in/by transit/shipping
The General rule is that delivery to the Carrier is delivery to
the Buyer, thus, ownership is transferred to the buyer upon
delivery to the carrier. For example, A sold goods to B to be
shipped by ABS Express Courier Service, once A delivers
the goods to the Carrier, B is now the owner of the goods
and bears the risk of loss.
Exceptions to the General Rule:

In the following instances, even though the Seller has

already delivered to the object or goods to the carrier, the
Seller shall retain ownership:

a.The Seller makes a reservation as to the ownership of the

goods. This is when the Seller makes a declaration that
he/she will maintain ownership of the goods even after
delivery to the Carrier.
b.The Seller makes a reservation as to the possession of
the goods. This is when the Seller makes a declaration that
he/she will maintain possession of the goods even after
delivery to the Carrier, here delivery to the carrier will not
transfer ownership of the goods to the Buyer.
c.Where the agreement of the parties including the bill of
lading contains provisions that indicates that the goods are
still at the sellers risk.

A Bill of Lading defines the rights and liabilities of parties in

contracts of carriage (Shipping, freight, or passenger
vehicles), it is a document that serves as evidence of
receipt of goods for shipment issued by a common carrier.
a.F.O.B. (Free on Board):
i.F.O.B. point of destination – when the bill of lading states this the
Seller assumes the risk until the point of destination of the goods as
ownership transfers to the Buyer only at that point.

For example; A is in Manila and shipped goods bought by B who is

in Baguio, the bill of lading says F.O.B. Point of Destination, A will
assume the risk of loss until the goods have reached Baguio.

ii.F.O.B. point of shipment – when the bill of lading states this the
Buyer will assume the risk of loss as ownership is transferred at the
point where the goods have been shipped.
b.F.A.S. (Free Alongside)
• b.F.A.S. (Free Alongside) – this is a variant of F.O.B point
of shipment and is only used when the goods are shipped
by water. The Seller loses the risk of loss once the goods
are placed on the vessel.
c.C.I.F. (Cost, Insurance, Freight)
• c.C.I.F. (Cost, Insurance, Freight) – this indicates that the
price said by the seller includes the Cost of insurance and
freight, thus the buyer assumes all the risk of loss while
the goods are being shipped.
What if the Seller is not the Owner of the object of
the contract of sale?
• The General Rule is that ownership will not be transferred
to the Buyer even after delivery if the Seller is not the
owner of the object or is not selling them under the
authority or consent of the owner.
Exceptions to the General Rule
(ownership is transferred to the buyer even if the Seller is not the owner of the
object or is not authorized by the owner to sell the same):

a.Estoppel – the owner of the goods by his acts and conduct is now preclude
from denying the Seller’s authority to sell.
b.When the law, existing or future, states that the ownership has passed. (Ex
law on agency)
c.The sale is declared to be a valid by a judicial decision. (Ex. public sale)
d. Sale made in merchants store
e. Where the seller subsequently acquires title
f. If the seller has voidable title to the object.
Effects of Loss of the Thing Sold

Remember: If it is a generic thing there is no effect

because a generic thing can always be replaced (genus
nunquam perit).
Loss of a Determinate / Specific Thing

1. Loss before Perfection of the contract : SELLER BEARS

2. If the loss is after the perfection of the contract of sale

but before delivery: SELL BEARS THE LOSS. Here, since
the object is still with the seller, the seller still has the duty to
take care of the thing. Thus, if the thing is lost before he
delivers it, then the seller must bear the risk of loss;
3. Object is lost AFTER DELIVERY: BUYER BEARS THE
LOSS.
iv. When the object of the sale is a determinate thing and it
has partially perished or deteriorated in quality, without the
knowledge of the seller, and in a manner that would
substantially change the character of the object, the buyer
can choose to:

a.Avoid/Withdraw from the sale if the object is indivisible;

b.treat the sale valid and in all of the exisiting goods that have not
deteriorated and pay the price for the goods in which ownership
will pass if the object is indivisible.
RIGHTS OF THE VENDOR
UNPAID SELLER

An unpaid seller is one where:

a. Where the whole price has not been paid to the seller or
his agent; or

b. Where conditional payment in the form of a bill of

exchange (e.g. checks) or other negotiable instrument (e.g.
negotiable promissory note, negotiable documents of title)
has been broken by any reason. (Art. 125, New Civil Code)
• Bill of exchange – is an unconditional promise order in
writing addressed by one person to another, signed by the
person giving it, requiring the person to whom it is
addressed to pay on demand or at a fixed or determinable
future time a sum certain in money to order or to bearer.
(Sec. 126, Negotiable Instruments Law)
Ordinary Remedies
• The ordinary remedies of an unpaid seller are the action
for the price that is stipulatedbetween him and the buyer
and the action for damages against the buyer.

• (1) The action for price is exercised when the ownership

has passed to the buyer;
• (2) The action for damages is exercised in cases of
wrongful neglect or refusal by the buyer to accept and pay
for the thing sold.
Rights of unpaid seller BEFORE DELIVERY
(Special Remedies)
1. An unpaid seller has the right to suspend delivery of the
object (Art. 1524, New Civil Code); (Art. 1524, New Civil
Code)

2. If no price or period for payment has been agreed upon

the seller can suspend delivery of the object (Ibid.);
3. Retain the possession and exercise his right of lien over
the object until whole payment or tender of payment in the
following instances:

a. In sale where there was no agreement as to payment on

credit;
b. In sale on credit but the term of credit has expired; and
c. When the buyer becomes insolvent (Art.1527, New Civil Code)
A lien on property is a burden or encumbrance on the
property for where the creditor holds possession of the
property until the debtor fulfills his obligation.

Where only part of the goods have been delivered to the

buyer, the seller may still exercise his right of lien the
remaining goods still in his possession. (Art. 1528, New
Civil Code)
For example, A sold 1 box of sanitizers to B wherein
delivery is one week from now. One week has passed and
B still has not paid. A will exercise his right of lien over the
property by keeping possession of the box until B pays the
purchase price, with damages if any have been incurred.
4. Withhold delivery when the ownership has not passed to
the buyer (Article 1527, Par. 2, New Civil Code).
Remedies of Unpaid Seller of Goods After Delivery or
Parting of Posession
The unpaid seller who still possesses the object of the sale even if
ownership had already passed to the buyer shall have the right to:

1. Exercise a lien over the goods while he is in possession of them;

Where only part of the goods have been delivered to the buyer, the
seller may still exercise his right of lien the remaining goods still in
his possession. (Art. 1528, New Civil Code)

2. Retain possession of the goods;

3. STOPPAGE IN TRANSITU

3. Where the buyer had become insolvent, exercise his right

of stoppage in transitu (ordering the stoppage of the
transport or passage of the goods) if he had already
delivered it to the carrier.
Goods are considered in transit in the following
instances:
a. Whether by land, water, or air, from the time it has been
delivered to the carrier or other bailee for purposes of
transmission to the buyer until the buyer or his agent has
received the goods; or

b. When the possession of the goods remains with the

carrier or other bailee after the buyer had rejected the
goods. (Art. 1531, Par. 1, New Civil Code)
Goods no longer in transit in the following instances:

a. When the buyer or his agent have obtained the goods

before they have arrived at their intended destination;

b. When the carrier or other bailee had already informed the

buyer or his agent that the goods have already arrived at
their destination, even if the buyer stated another place for
delivery;
c. When the carrier or other bailee refuses to deliver to the
buyer or his agent without any justifiable reason.
If the goods are delivered to a ship, freight train, truck, or
airplane which was rented by the buyer for the purpose of
transport to him, the question of who possesses the goods,
whether by the carrier on its own or the carrier as the agent
of the buyer will be decided by the circumstances
surrounding the case.( Art. 1531, Par. 2, New Civil Code)
HOW DO YOU EXERCISE RIGHT OF STOPPAGE
IN TRANSITU?
a. Obtaining actual possession of the goods as shipped at a
reasonable time before the carrier could deliver the goods;

b. Giving notice to the carrier, whether the principal or the

person who has actual possession of the goods, of his
claim over the goods at a reasonable time before the carrier
could deliver the goods (Art. 1532, Par. 1, New Civil Code);
and
c. If the goods are covered by a negotiable document of
title, by surrendering the same to the carrier or bailee who
had issued it (Art. 1532, Par. 2, New Civil Code).
The right of stoppage in transit can only be exercised while
the goods are considered to be in transit. From the moment
the right is exercised and the seller had recovered
possession of the goods, he shall also recover all rights that
he had over the goods as if it was not sold. (Art. 1530, New
Civil Code)

Expenses incurred in the delivery of the goods from the

carrier/bailee back to the seller shall be borne by the seller
(Ibid.).
Where only a part of the goods are in transit.

Where only part of the goods are in transit and the other
parts have already been delivered to the buyer, the seller
may still exercise his right of stoppage in transitu for the
remaining part. (Art. 1531, Par. 3, New Civil Code)
Example

A sold a cellphone to B to be shipped by the carrier ABC.

Before ABC could deliver the cellphone to B, A learned that
B had become insolvent, he can either take possession of
the goods or give notice to ABC of his claim, as long as
ABC could still prevent delivery to B at a reasonable time.
Suppose that ABC issued a negotiable bill of lading
representing the goods, A must also surrender such to ABC.
4. Exercise his right of resale in the following
instances:
a. Where the goods are perishable in nature;
b. The seller had made a reservation that in case of default
of the buyer he can resell;
c. When an unreasonable amount of time had lapsed and
the buyer still has not paid;
d. After the exercise of the sellers right of stoppage in
transitu. (Art. 1533, New Civil Code)
In exercising the right to resale notice is not necessary for
subparagraphs a and b, but for subparagraph c giving of notice is
essential in determining what an unreasonable amount of time is.

Resale without notice to the original buyer is still valid. And in the
case of a valid resale the seller will not be liable to the original buyer
for any damages. The resale can be through a public sale or a
private sale.

The seller cannot buy his own goods in a resale whether directly or
indirectly (Ibid).
5. Rescind the Contract

5. If having the right of lien or stoppage in transit, rescind

the contract of sale in the following instances and recover
ownership of the goods (Art. 1526, New Civil Code):

a. When the seller made an express reservation to do so in

case of default on the buyer(Art. 1534, Par. 1, New Civil
Code); and

b. When the buyer has not paid even after the lapse of an
unreasonable amount of time (Ibid).
The seller shall recover ownership of the goods once a
manifestation through notice or an overt act the intent to
rescind. The notice is not necessary to exercise the right to
rescind but will determine what an unreasonable amount of
time is, while the overt act need not be made known to the
buyer. (Art. 1534, Par. 2, New Civil Code)
The unpaid seller loses his lien on the goods, if:

1. Delivery to the carrier or other bailee for transport to the

buyer has been made and he did not make a reservation as
to the ownership or possession of the goods;
2. When the buyer or his agent lawfully obtains possession
of the goods; and
3. When the seller waives such right.
WARRANTIES
A warranty is a statement or representation made by the
seller of the goods with regards to the character, quality, or
title of the goods, and by which he promises or undertakes
to insure that such representations are true as how he had
represented them. The warranty given by the seller is made
simultaneous and a part of the contract of sale. (De Leon,
2005)
For example: Jose sold a car to Brian. He told Brian that the
car “had no defects”. His statement in saying that the car
has no defects is called a warranty.
Kinds of Warranties
1. EXPRESS WARRANTY

1. Express Warranty - any affirmation of fact or any promise

by the seller relating to the thing where the natural tendency
of such affirmation or promise is to induce the buyer to
purchase the object.(Art. 1546, New Civil Code).

An express warranty is a statement or promise about

character, quality, or title of the object made by the seller
which the buyer had relied upon in buying the object. It is
express because it is either made orally or in writing.
Example:

Jose sold a car to Brian. He told Brian that the car “had no
defects”. His statement in saying that the car has no defects
is an express warranty because it is a promise or statement
about the quality of the car.
A warranty being a part of the contract of sale, it is
immaterial whether the seller did not know that it was true
or false. The intention of the seller in his warranty is not
important. It is the natural consequences of what the seller
says and the reliance thereon by the buyer that alone are
important.

If the buyer relied on what the seller had promised then the
seller is automatically liable. (De Leon 2010)
Misrepresentation in good faith

A misrepresentation in good faith is not fraudulent but may

constitute error.
Expression of Opinion

A mere expression of an opinion is not in itself a warranty. It

only becomes a warranty if the seller is considered an
expert and that his opinion was relied upon by the buyer.
Usual exaggerations in trade
• Usual exaggerations in trade, when the other party had
the opportunity to know the facts are not in themselves
fraudulent.
A condition is considered as an express warranty when it
should be performed and that there is failure to do so.
Where the condition is to be performed prior to delivery and
delivery has already been made, the buyer may treat
delivery as fulfillment of the condition. (Art. 1545, New Civil
Code)
Example:

Jose is selling a car to Brian. Jose and Brian agreed that

Brian will buy it if Jose will register the car for Brian. This
promise of registering the car is a condition. If Jose fails to
register the car, it will be deemed as if he failed to comply
with a warranty.
Requisites to Establish an Express Warranty
a. The express warranty must be an affirmation of fact or any
promise by the seller relating to the subject matter of the sale;

b. The natural effect of the affirmation or promise is to induce the

buyer to purchase the thing; and

c. The buyer purchases the thing relying on that affirmation or

promise. (Carrascoso v. Court of Appeals, G.R. No. 123672,
December 14, 2005)
2. IMPLIED WARRANTY
Forms part of every contract of sale, except if there is an agreement
stating otherwise.
The following warranties are implied warranties as provided by the
law:

a. Warranty that the seller has a right to sell

b. Warranty Against Eviction
c. Warranty Against Hidden Defects (Art. 1547, New Civil Code)
d. In sales of goods, Warranty of fitness or quality (Art. 1562, New Civil Code)
e. warranty against redhibitory defects in animals.
These warranties are considered as required by law to be
automatically included in a contract of sale even though not
expressed by the seller or not expressly agreed upon by the
seller and the buyer. Thus, even though there was no
agreement that these warranties will be included in the
contract of sale, it is already considered as automatically
included.
Warranty that the seller has a right to sell

Art 1505. Where goods are sold by a person who is not the
owner thereof, and who does not sell them under authority
or with the consent of the owner, the buyer acquires no
better title to the goods than the seller had, unless the
owner of the goods is by his conduct precluded from
denying the seller's authority to sell.
WARRANTY AGAINST EVICTION

The seller in every sale shall warrant that he has a right to

sell the thing at the time when he delivers the object, and
that the buyer from that time shall enjoy the legal and
peaceful possession of the thing without the fear of being
dispossessed of the object. (Art. 1547, Sub Par. 1, New
Civil Code)
When is there Eviction?
• There is Eviction whenever by a final judgment the buyer is
deprived of the whole or of a part of the thing purchased. The
final judgment by the court which deprived the buyer of the object
may have been caused by 2 things, either there is another person
who has a better right to the object or that the seller does an act
which will cause the buyer to be dispossessed of the object.

• Here the seller guarantees that he has a right to sell the thing sold
and to transfer ownership to the buyer who shall not be disturbed
in his legal and peaceful possession thereof.(De Leon 2010)
Requisites for Breach of Warranty Against Eviction
1. The buyer has been deprived of the whole or part of the thing
sold;
2. This eviction is by a final judgment of the court;
3. The basis thereof is by virtue of a right prior to the sale made by
the seller; and
4. The seller has been summoned and made co-defendant in the
suit for eviction at the instance of the vendee. (Ang v. Court of
Appeals, G.R. No. 177874, September 29, 2008; Art. 1557, 1558,
and 1559, New Civil Code)
EXAMPLE:

S sells a parcel of land to B. Subsequently, C files an action

in court for the recovery of possession of the parcel of land,
claiming that he is the owner of the land. At the instance of
B, S was summoned to defend his title.The court renders
final judgment, declaring that C has a better right.
Accordingly, B is evicted from the land. In this case, S is
liable to B for failure to comply with his warranty against
eviction. Here, the judgment is based on a right of a third
person prior to the sale. (De Leon 2010)
Rules in Determining Liability in case of Breach of
Warranty Against Eviction
1. In cases where the property is already possessed
adversely by a third person before the sale and one year
had lapsed after the sale and the third person still
possesses the property, the seller will not be liable. (Art.
1550, New Civil Code);

2. In case that the buyer is evicted due to non-payment of

taxes and he is unaware of such fact, the seller is liable for
eviction. (Art. 1551, New Civil Code);
3. The Buyer can renounce the warranty against eviction,
and the buyer is later evicted, the seller is only liable for the
value of the thing at the time of eviction, but if the buyer is
aware of any encumbrance or burden on the thing when he
renounced the warranty the seller will not be liable. (Art.
1554, New Civil Code)
Waiver Consciente

The waiver is made by the buyer without the

knowledge of the risk of eviction. The seller shall be liable to
pay or return the value of the thing at the time of eviction.

In waiver consciente, the seller was in good faith not

knowing of the possibility of eviction.
Waiver Intencionada

The waiver is made by the buyer with the knowledge

of the risk of eviction and still assumed its consequences.
The vendor shall not be liable.

In waiver intencionada, the seller is still in good faith

when he sold the property as when he informed the buyer
of the risk.
4. An agreement exempting the seller from liability in case
of eviction is void if the seller acted in bad faith. (Art. 1553,
New Civil Code)
Rights of the Buyer in Case of Eviction
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 costs of the suit which caused the eviction, and, in a proper case, those
of the suit brought against the vendor for the warranty;

4. The expenses of the contract, if the vendee has paid them;

5. The damages and interests, and ornamental expenses, if the sale was made
in bad faith. (Art. 1555, New Civil Code)
Partial Eviction
If the buyer is evicted to only part of the thing which is not
substantial, then the rights as stated above shall apply.

If the buyer is evicted to a part of the thing with such importance

with relation to the whole thing, that without which he would not
have bought it; or when two or more things are sold jointly or for
separate prices and the buyer would not have bought it if not for the
other, an additional right to rescind the contract is available to him,
with the corresponding obligation to return the thing at the state in
which he acquired it.(Art. 1556, New Civil Code)
WARRANTY AGAINST HIDDEN DEFECTS

The seller shall be responsible for warranty against the

hidden defects which the thing sold may have, if it renders it
unfit for the use for which it is intended, or

if the defect will diminish its fitness for such, and if the
buyer/vendee had been aware of such defect, he would not
have acquired it or would have given a lower price for it.
The seller/ vendor shall not be answerable for patent
defects or those which may be visible, or in case the defect
is not visible if the buyer/ vendee is an expert who, by
reason of his trade or profession, should have known them.
(Art. 1561, New Civil Code)
Requisites to Recover from Breach of Warranty of
Hidden Defects

a.The defect must be hidden;

b. The defect must exist at the time the sale was made;
c. The defect must ordinarily have been excluded from the
contract;
d. The defect, must decrease fitness or render the thing unfit;
and
e. The action must be instituted within the statute of limitations.
(Nutrimix Feeds Corporation v. Court of Appeals, G.R. No. 152219,
October 25, 2004)
C. Implied Warranties as to Fitness and Quality in
Sale of Goods
1. When the buyer informs the seller, whether expressly or impliedly,
his purpose of buying the goods and he relies on the seller’s skill or
judgment (regardless if he is not the seller/manufacturer) there is an
implied warranty that the goods are reasonably fit for that purpose
(Art. 1562, Sub Par. 1, New Civil Code);

Here, the buyer bought the items for a specific purpose or reason.
As such, the warranty from the seller is that the object he is selling
will be fit for the specific purpose for which the buyer had bought the
object.
2. When the buyer buys goods based on description by a
seller who sells by description of such goods, there is an
implied warranty that the goods are of merchantable quality
(Art. 1562, Sub Par. 2, New Civil Code);

Here, the warranty of the seller is that the goods are

merchantable or fit for the general purpose for which it is
sold.
Warranty of merchantability distinguished from warranty of
fitness.

A warranty of merchantability is a warranty that goods are

reasonably fit for the general purpose for which they are
sold. On the other hand, a warranty of fitness is a warranty
that the goods are suitable for the special purpose of the
buyer which will not be satisfied by mere fitness for general
purposes. (Dunfor Bros. Co. vs. Consolidated Iron-Steel
Mfg. Co., C.C.A. Comm. 1928, 23 F. 2nd 461.)
Example:
A hair blower is used for hair drying has the general purpose of hair
drying. Thus, if a buyer buys a hair blower, there is a warranty
merchantability that the hair blower can indeed dry hair. If it does not
dry hair then it is not merchantable. The seller may be sued for
breach of warranty of merchantability.

If the buyer wants to by a hair blower to clean the insides of his

computer and the seller assures him that he can indeed use the hair
blower to clean the insides of the computer, then there is a warranty
of fitness because the object was bought for a specific purpose and
NOT for its general purpose.
3. An implied warranty can be established depending on how a thing
is traditionally used in trade or business (Art. 1564, New Civil Code);

4. There is an implied warranty that goods are free from any defect
that would render them unmerchantable if the seller is a dealer of
those goods when the contract of sale is by sample (Art. 1565, New
Civil Code);
5. If the seller is not aware of the hidden fault or defect, he
is still liable, unless there is an agreement stating otherwise
(Art. 1566, New Civil Code).

In case of breach of these implied warranties the buyer can

choose to withdraw from the contract of sale or demand a
reduction of the price, both with damages. (Art. 1567, New
Civil Code)
Sale by sample and Sale by Description (Art 1481)
Sale by sample - a small quantity or “sample” is presented to the
buyer where the rest of the quantity is no present and there is no
chance to check.

Sale by description - a seller represents the quality of the goods

which are not present at the moment. The buyer relies on the
description of the seller.

If the goods does not correspond to the sample or to the description,

the buyer may Rescind the contract.
Redhibitory Defects in Sale of
Animals
Redhibitory Defect - An imperfection or defect of such
nature which would render the thing useless or diminish its
fitness (Moles v. Intermediate Appellate Court, G.R. 73913,
January 31, 1989).
Here are some rules regarding the sale of animals
which have redhibitory defects.
1. Sale of animals with contagious diseases are void (Art. 1575,
New Civil Code);

2. Sale of animals where they are unfit for the purpose of which they
were bought is void (Ibid.);

3. If when professional inspection of the animal has been made and

the hidden defect is still not discovered due to the expert knowledge
being insufficient, the defect would be redhibitory. The veterinarian
would be liable if he was negligent or acted in bad faith (Art. 1576,
New Civil Code);
4. Condemned animals sold at fairs or public auctions will
not give rise to any warranty against hidden defects (Art.
1574, New Civil Code);

5. The seller would be liable to the buyer if an animal dies

within three days from sale if the animal suffered from a
disease which was existing at the time of the sale (Art.
1578, New Civil Code);
• 6. The buyer of an animal with a redhibitory defect has the
right to withdraw from the contract or ask for a reduction
of the price within forty days from the date of delivery (Art.
1580, New Civil Code)
WARRANTIES UNDER THE
CONSUMER ACT
The Consumer Act of the Philippines added stricter rules for the
enforcement of warranties to protect the welfare of consumers.

Additional Provisions for Express Warranties

Any seller who gives an express warranty shall:

1. Set the terms of warranty in a clear and understandable language

to the buyer;
2. Identify the party to whom the warranty is given;
3. State the product and parts that are covered by the warranty;

4. State what steps the warrantor has to do to enforce the warranty

in case of defect, malfunction or failure to conform to the written
warranty and who shall bear the expenses;

5. Stipulate the period after notice of the defect, malfunction or

failure to conform to the warranty, that the warrantor will perform
their obligations under the warranty. (Art. 68, The Consumer Act of
the Philippines)
Liabilities of the Parties Issuing Warranties
• 1. Express warranties made by manufacturers, producers, or
importers are effective from the moment of sale;

• 2. Distributors must make a sales report to the producer,

manufacturer or importer within 30 of the sale of their products to
hold them liable for their warranties over the products;
3. Retailers are subsidiarily liable in case of failure of the
producer, manufacturer or importer to honor their warranty.
In that instance the retailer shall be liable for any expenses
to enforce the warranty. The Retailer can go after the
producer, manufacturer or importer for expenses incurred;

4. The buyer need only present the official receipt or

warranty card to enforce warranty over the product;
5. If the direct seller is also the producer, manufacturer, importer or distributor
the warranty should immediately be honored;

6. If the direct seller is a retailer other than the distributor, he shall be

responsible to claim the warranty from the distributor without any cost to the
buyer;

7. Any agreement contrary to warranties provided by the Consumer Act of the

Philippines is void (Ibid.).

8. Service firms shall guarantee workmanship and replacement of spare parts

for a period not less than ninety (90) days which shall be indicated in the
pertinent invoices. (Art. 71, The Consumer Act of the Philippines)
Minimum Standards of Warranties
A warranty is either a “Full Warranty” or a “Limited Warranty”.
A warranty is a Full Warranty if it meets the following minimum
standards:
1. Remedy such consumer product within a reasonable time and
without charge in case of a defect,malfunction or failure to conform
to such written warranty;

2. Permit the consumer to elect whether to ask for a refund or

replacement without charge of such product or part, as the case
may be, where after reasonable number of attempts to remedy the
defect or malfunction, the product continues to have the defect or to
malfunction. (Ibid.)
Duration of Warranty

1. Express warranties shall last for as long as they have

been agreed or stipulated;

2. If an Implied warranty is accompanied by an express

warranty, the implied warranty will last as long as the
express warranty;

3. Other implied warranties shall last for not less than 60

days but not more than one year from the date of sale
(Ibid.).
Rights of Buyer in case of Breach of Warranty

1. Breach of express warranty – the buyer may choose to refund the

price or to have the product repaired. If repair is chosen the work
thereon must be done within thirty (30) days, which may be
extended due to factors outside the control of the warrantor;

2. Breach of implied warranty – the retain the goods and recover

damages, or reject the goods, or cancel the contract and recover
the purchase price with damages (ibid.)
Warranties in Supply of Services
1. If the seller is in the course of a business, services provided by the
seller is with an implied warranty that it shall be done with due care and
skill and that any material that is supplied by virtue of the service shall be
fit for its purpose;

2. If the buyer makes known to the seller in the course of a business the
purpose for which the services are needed, there is an implied warranty
that the services provided and any material supplied thereto shall be
reasonable fit and has a nature and quality that would achieve the
purpose stated. Unless the buyer did not rely on the seller’s judgment.
(Art. 69, The Consumer Act of the Philippines)
Warranties in Professional Services

The warranties found in The Consumer Act of the

Philippines do not apply to any professional service.
(doctors, engineers, architects, etc.)
Prohibited Acts Under the
CONSUMER ACT
The following acts are prohibited:
1. Refusal without any valid legal cause by the total manufacturer or any person
obligated under the warranty or guarantee to honor a warranty or guarantee
issued;

2. Unreasonable delay by the local manufacturer or any person obligated under

the warranty or guarantee in honoring the warranty;

3. Removal by any person of a product's warranty card for the purpose of

evading said warranty obligation;

4. Any false representation in an advertisement as to the existence of a

warranty or guarantee. (Art. 72, The Consumer Act of the Philippines)
RIGHTS AND OBLIGATIONS
OF THE VENDEE
OBLIGATIONS OF THE BUYER

The obligations of the buyer are as follows:

1. To accept delivery of the object; The principal obligation

of the buyer is to accept delivery and pay the price. (Art.
1582, New Civil Code)
The buyer is deemed to have accepted the thing when:

a. There is notice given to the seller of acceptance;

b. The goods have been delivered to the buyer;

c. An act is done to the goods which is inconsistent with the ownership of the
seller; and

d. The goods are retained and no notice has been given to the seller after an
unreasonable amount of time (Art. 1585, New Civil Code); and

e. The refusal to accept is without just cause and the goods are placed at his
disposal (1588, New Civil Code).
2. To pay the price (Art. 1582, New Civil Code);

3. Give notice to the seller of the breach in any promise of

warranty within a reasonable time after the buyer knows, or
ought to know of such breach after the sale to enforce the
warranty (Art.1586, New Civil Code);
4. Give notice to the seller of the refusal to accept the
goods (Art. 1587, New Civil Code);

5. Take care of the thing when acceptance is refused and

he appoints himself as the depositary of the thing (Ibid.);
6. Pay interest from the time of delivery up to actual
payment in the following instances:

a. If it has been agreed upon;

b. If the object of the sale as delivered produces fruits or
income; and
c.If the buyer is in default, from the time of demand whether
judicial or extrajudicial. (Art. 1589. New Civil Code).
7. Pay immediately in the sale of movable property and no
extended period for payment has been agreed upon
(Art.1593, New Civil Code).
RIGHTS OF THE BUYER
1. Refuse acceptance of delivery by installments if there is no
agreement thereto;

Rules when there is an agreement of delivery by installments:

a. If the buyer refuses to accept a delivery without justifiable cause or fail to pay
on or more installments or when what is delivered by the buyer in an installment
is defective, it will depend on the materiality and severity of the damage
cause to the injured party on whether only that part is considered as invalid and
the rest of the contract is valid or if the whole contract is void (Art. 1583, New
Civil Code);

b. If only the part which is unpaid or defective is invalid and separated from the
rest of the contract, the injured party may recover compensation from the party
at fault (ibid.).
2. The right to reasonably examine to object of the sale
upon delivery before acceptance is made

If the goods have been delivered through a carrier and that

the carrier will not deliver the goods to the buyer until he
has paid, the buyer can only examine the goods if there is
an agreement stating so (Art. 1584, New Civil Code)
3. Suspend the payment to the seller if his possession
over the thing acquired is disturbed by lawful means by any
other party until such disturbance is cured by the seller (Art.
1590, New Civil Code);
4. Immediately file a case for rescission of the contract if
there is a reasonable ground to fear loss of the thing and
the price (Art. 1591, New Civil Code);
5. In the sale of immovable property pay, the price even
after the delivery of the of the property even when there is
no agreement as to an extended period of payment but
before a demand for rescission whether judicial or
extrajudicial has been made (Art. 1592, New Civil Code).
Recto Law (Act 4122) - Art
1484
Rights and Obligations in sale by installments of personal property
The Recto Law was incorporated into the New Civil Code
as Article 1484 which stated that (Filipinas Investment and
Finance Corp. v. Ridad, G.R. No. L-27645, November 28,
1969):
Recto Law Applies to:

1. Sale of Personal property in installments

2. Lease of personal property with an option to buy, wherein
the lessor has deprived the lessee of the possession or
enjoyment of the thing.
“In a contract of sale of personal property, the price of which is payable in
installments, the vendor may exercise any of the following remedies:

1. Exact fulfillment of the obligation, should the vendee fail to pay;

2. Cancel the sale, should the vendee's failure to pay cover two or more
installments;

3. Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case,
he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void.”
Specific Performance

Exact fulfillment should the buyer fail to pay (Atleast 1

installment)

General Rule: If availed of, the unpaid seller cannot

anymore choose other remedies;
Rescission

Cancel the sale if buyer fails to pay 2 or more installments

Deemed chosen when:

a. Notice of rescission is sent

b. Takes possession of subject matter of sale
c. Files action for rescission
Foreclosure

Foreclosure: Foreclose on chattel mortgage if buyer fails to

pay 2 or more installments.

*He shall have no further action against the purchaser to

recover any unpaid balance of the price. Any agreement to
the contrary shall be void.

A creditor is not obliged to foreclose a chattel mortgage

even if there is one.
• The remedies under the Recto Law is alternative and are
no to be exercised cumulatively or successively. The
election of one is a waiver of the right to resort to the
other.
Maceda Law (Republic Act
6552)
Rights and Obligations in sale by installments of residential real property
The Maceda law also known as “Realty Installment Buyers
Act” was enacted to protect the buyers of residential real
property from unfair and oppressive terms.
Exclusions

Maceda law excludes the following:

1. Industrial Lots
2. Commercial Buildings
3. Sales to tenants under the Land Reform law
Under the Maceda law, the buyer of residential real
property has the following rights:

1. To pay without any additional interest unpaid installments within

the grace period earned by the buyer, to be exercised only once in
every five years of the existence of the contract;

2. The buyer will earn a one-month grace period for every one year
paid if at least two years of installments have been paid;

3. If less than one year of installments are paid, the buyer is to be

given not less than sixty (60) days grace period from the date the
installment is due;
4. Assign or sell his right to another person or reinstate the contract
by updating his payments during the grace period;

5. Pay in advance any installment or the full unpaid balance anytime

before they are due;

6. A return of the 50% of the total of the installments paid if less than
five years of installments are paid;
7. If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent of
the total payments made, and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the total payments
made;

8. Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made;

9. To be notified at least 30 days before the actual cancellation of the contract of

such cancellation by the seller.
If Less than two years of installments were paid.

In case where less than two years of installments were

paid, the seller shall give the buyer a grace period of not
less than sixty days from the date the installment became
due.

If the buyer fails to pay the installments due at the

expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the
contract by a notarial act.
Presidential Decree No. 957, Section 24 made the Maceda
Law to apply to sales of condominiums and subdivisions.
Further, Sec. 23 installments paid will not be forfeited if the
developer fails to develop the condominium or subdivision,
the buyer has the option to be reimbursed for the total
amount paid including amortization.
EXTINGUISHMENT OF THE
CONTRACT OF SALE
The contract of sale is extinguished by:
1. The same causes as found in Book IV, Title 1, Chapter IV, of the New Civil Code;
a. Payment or performance of obligations;
b. Loss of the thing due;
c. Condonation or remission of debt;
d. Confusion or merger of rights;
e. Compensation
f. Novation
g. Others

2. Conventional Redemption; and

3. Legal Redemption.(Art. 1600, New Civil Code)
Conventional Redemption

Conventional Redemption is a contract of sale where the

seller has the right to repurchase the goods sold. It is also
known as a pacto de retro sale. The seller is known as the
vendor a retro, while the buyer is known as the vendee a
retro.
Conventional redemption is when the seller expressly makes a
reservation to repurchase the thing (Art. 1601, New Civil Code) by
returning:

a. The price of the sale;

b. The expenses of the contract;
c. Legitimate payments made by reason of the sale;
d. The necessary and useful expenses made on the thing sold (Art.
1616, New Civil Code).
Rules in the exercise of the right of conventional
redemption
1. The right to repurchase in a contract of sale shall only
last four years if there is no period agreed upon;

2. If a period for the right to repurchase by the seller is

agreed upon, such period can only last ten years;
3. The seller may still exercise his right of redemption after
30 days from the final judgment of a civil action where the
issue is whether the contract of sale is one with the right to
repurchase (Art. 1606, New Civil Code);
For example, A, the buyer, entered into a contract of sale
with “Option to buy” with the seller B. Unsure of whether the
contract is a pacto de retro sale or a one with a mortgage, A
filed a case in court against B. The court after 11 years
ruled that it is indeed a pacto de retro sale. B can still
exercise his right to repurchase the 30 days after the
judgment was rendered/promulgated.
4. The seller may exercise the right to repurchase against
any person who is in possession of the property even if the
possessor’s contract does not mention of the right to
repurchase, without prejudice over the rights of the
possessor according to existing laws at the time of
redemption (Art. 1608, New Civil Code);
For example, A and B entered into a pacto de retro sale
over a piece of land where A is the seller and B is the buyer.
B then later transferred the property to C. A can still
exercise his right to repurchase by filing a civil action
against C, without prejudice of the rights provided by law to
C.
LEGAL REDEMPTION
Legal redemption is the right to be subrogated, upon the same
terms and conditions stipulated in the contract, in the place of one
who acquires a thing by purchase or dation in payment, or by any
other transaction whereby ownership is transmitted by onerous title.
(Art. 1619, New Civil Code)

Legal redemption in simpler terms means the acquisition of a person

of the right to repurchase of another person. In legal redemption, it
is called such, because it is the law which gives the right to
repurchase.
What are the instances of legal redemption?

1. Sale of a co-owner of his share to a stranger (Art. 1620)

2. Sale of adjacent rural lands not exceeding 1 hectare
3. Sale of adjacent small urban lands bought merely for
speculation.
Redemption by co-owners

1. Sale of a co-owner of his share to a stranger (Art. 1620)

When the shares of some or all others of the co-owners

have been sold to a third person, a co-owner may exercise
his right of redemption over those portions. The co-owner
exercising his right of redemption shall only pay a
reasonable price for the portions sold if the price of the
transfer is grossly excessive.
When two or more co-owners want to exercise their right of
redemption, they can only do so in proportion to their
respective shares and not for all shares which have been
transferred. (Art. 1620, New Civil Code)
Redemption of Adjoining Land Owners in Rural Land
Adjoining owners of rural land sold has the right of redemption if:

1. The area of the rural land sold is less than one hectare;

2. The transferee of the rural land sold already owns rural land; and

3. The adjacent lands are not separated by rooks, drains, ravines,

roads and other apparent servitudes for the benefit of other estates.
(Art. 1621, New Civil Code)
Pre-emption by Adjoining Land Owners in Urban
Land
• An owner of Urban land has the right of redemption over
urban land that is so small that it has no practical use or
purpose, that it was bought merely for speculation, and is
about to be re-sold. (Art. 1622, New Civil Code)