An absolute sale is one made and completed without any condition whatever.

A conditional sale is one

which dFor an assignment of contract rights to take place, it must not be prohibited in the contract; it
must not involve the assignment of a personal duty; and the assignment mus not affect the other original
party to the contract. epends for its validity upon the fulfilment of some condition.
"ART. 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the
contract of sale, or has manifested his inability to perform his obligations, thereunder, or has committed a
breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do
to the buyer."
NATURE AND FORM OF THE CONTRACT
Sources of the Law on Sales 
Sales are governed by the provisions of the Civil Code: 
1. Book IV, Title VI, Articles 1458-1637 (Sales)
2. Title I, Arts. 1156-1422 (Obligations and Contracts)
3. Opinions of Commentators 
Concept of Contract of Sale 
The contract of sales is an agreement whereby one of the parties (called the seller or vendor) obligates
himself to deliver something to the other (called the buyer or purchaser or vendee) who, on his part, hinds
himself to pay therefore a sum of money or its equivalent (known as the price). 
The transfer of title to property or the agreement to transfer title for a price paid or promised, not mere
physical transfer of the property, is the essence of sale. 
Characteristics of a Contract of Sale 

1. Consensual - perfected by mere consent of the parties without

further acts.
2. Bilateral - both the contracting parties are bound to fulfill
correlative obligations towards each other (the seller to
deliver and transfer ownership of the thing sold, and
the buyer to pay the price).
3. Onerous - the thing sold is conveyed in consideration of the
price and vice versa.
4. Commutative - the thing sold is considered the equivalent of the price
paid and vice versa.
5. Aleatory - in the case of sale of hope, one of the parties or both
reciprocally bind themselves to give or to do something
in consideration of what the other shall give or do upon
the happening of an event which is uncertain, or which
is to occur at an indeterminate time.
6. Nominate - the contract is given a special name or designation in
the Civil Code.
7. Principal - the contract does not depend for its existence and
validity upon another contract. 

Essential Requisites of a Contract of Sale

1.   Consent or meeting of the minds – refers to the conformity of the parties to the terms of the contract,
the acceptance by one of the offer made by the other.  As a bilateral contract, 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 [Clarin vs. Rulova, 127 SCRA 512]. 
 There may be a sale against the will of the owner in case of expropriation and the three different
kinds of sale under the law – ordinary execution sale, judicial foreclosure sale, and extra-judicial
foreclosure sale.
2.  Object or subject matter – refers to the determinate thing which is the object of the contract; 
 Even a future thing not existing at the time the contract is entered into may be the object of sale,
provided it has a potential or possible existence, that is, it is reasonably certain to come into
existence as the natural increment or usual incident of something in existence already belonging
to the seller, and the tile will vest the buyer the moment the thing comes into existence (Art.
1461). 

Emptio rei speraate Rei spetae

(sale of thing expected)
- the sale of a thing not yet in - the sale of hope itself that the thing
existence, subject to the condition will come into existence, where it is
that the thing will exist and on failure agreed that the buyer will pay the price
of the condition, the contract even if the thing does not eventually
becomes ineffective and hence, the exist;
buyer has not obligation to pay the
price;
- the future thing is certain as to itself - like the sale of a sweepstake ticket, it
but uncertain as to its quantity and is not certain that the thing itself
quality; (winning a prize) will exist, much less it
quantity and quality;
- contract deals with a future thing; - contract relates to a thing which
exists or is present – the hope or
expectancy;
- sale is subject to the condition that - produces effect even though the thing
the thing should exist, so that if it does not come into existence because
does not, there will be no contract by the object of the contract is the hope
reason of the absence of an itself, unless it is a vain hope or
essential element. expectancy (like the sale of a falsified
sweepstakes ticket which can never
win).

 3.   Cause or consideration – refers to the price certain in money or its equivalent. 
Natural Elements – those which are deemed to exist in certain contracts, in the absence of any contrary
stipulations, like warranty against eviction; 
Accidental Elements – those which may be present or absent depending on the stipulations of the parties,
like conditions, interest, penalty, time or place of payment. 
Kinds of a Contract of Sale
1.  As to presence or absence of conditions 
Absolute – where the sale is not subject to any condition whatsoever and where the title passes to the
buyer upon delivery of the thing sold.
Conditional – where the sale contemplates a contingency and where the contract is subject to certain
conditions, usually in the case of the vendee, for the full payment of the agreed purchase price. 
2.  Other kinds 
As to the nature of the subject matter – real or personal, tangible or intangible
As to the manner of payment – cash or installment
As to its validity – valid, rescissible, unenforceable, void 
Contract of Sale Distinguished from Contract to Sell 

  Contract of Sale Contract to Sell

Transfer of - passes to the buyer upon - remains with the seller until
title: delivery of the thing sold. full payment of the agreed
price.
Payment of - non-payment of the price is - full payment is a positive
price: a negative resolutory suspensive condition, the
condition, and the remedy is failure of which is not a
to exact fulfillment or to breach, casual or serious, of
rescind the contract. the contract but simply an
event that prevents the
obligation of the vendor to
convey title from acquiring
binding force.
Ownership - vendor loses and cannot - title remains in the vendor
of vendor: recover ownership of the until full payment of price.
thing sold and delivered,
actually or constructively
until and unless the contract
of sale itself is resolved and
set aside.

Sale Distinguished from Dation in Payment: 

Sale Dation in Payment

- no pre-existing credit - there is pre-existing credit
- gives rise to obligation - extinguishes obligation
- cause or consideration is the price, or - cause of consideration is
the acquisition of title to the property extinguishment of the debt (from the
point of view of the offeror), and the
acquisition of the object offered (from
the point of view of the creditor) in lieu
of the original credit
- there is greater freedom in the - less freedom
determination of the price
- giving of the price may generally end - the giving of the object in lieu of the
the obligation of the buyer credit may extinguish completely or
partially the credit (depending on the
agreement)

Sale of goods by description Sale of goods by sample

   
-      occurs where the purchaser has - the parties contracted solely with
not seen the article sold and relies on reference to the sample, with the
the description given him by the understanding that the bulk was like
vendor, or has seen the goods but the it.-  the vendor warrants that the thing
want of identity is not apparent on sold and to be delivered by him shall
 inspection.-          If the bulk of the conform with the sample in kind,
goods delivered  does not correspond charater, and quality.
with the description, the contract may
be rescinded. (Art. 1481.)
 

Form of Contract of Sale 

Generally, a contract may be entered into in any form provided all the essential requisites for its validity
are present (Art. 1356).  It may be in writing, oral, or partly in writing and party oral.  It may even be
inferred from the conduct of the parties, since sale is a consensual contract that is perfected by mere
consent. 
However, in case the contract of sale should be covered by the Statute of Frauds, the law requires that
the agreement be in writing subscribed by the party charged, or by his agent; otherwise, the contract
cannot be enforced by action [see Art. 1403]. 
 Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the following contracts must
be in writing to be enforceable:
(a)    sale of personal property at a price not less than P500;
(b)    sale of real property or an interest therein regardless of the price involved; and
(c)    sale of property not to be performed within a year from the date thereof regardless of the nature of
the property and the price involved.
 The Statute Frauds specifies three (3) ways in which contracts of sales of goods within its terms
may be made binding: 
(a)    the giving of a memorandum;
(b)    acceptance and receipt of part of the goods (or things in action) sold and actual receipt of the same
(Art. 1585); and
(c)    payment or acceptance at the time some part of the purchase price. 
 The Statute of Frauds is applicable only to executory contracts (where no performance, i.e.,
delivery and payment, has as yet been made by both parties), and not to contracts which are
totally consummated or partially performed [Vda. De Espiritu vs. CFI of Cavite, 47 SCRA 354]. 
Recto Law (Art. 1484) – Remedies of Vendor in Sale of Personal Property Payable in Installments: 
(a)    elect fulfillment upon the vendee’s failure to pay;
(b)    cancel the sale, if the vendee shall have failed to pay two or more installments;
(c)    foreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to pay two
or more installments. 
 These remedies are alternative and are not to be exercised cumulatively or successively and the
election of one is a waiver of the right to resort to the others [Pacific Commerial Co. vs De la
RAma, 62 Phil. 380; Nonato vs. IAC, 140 SCRA 255]. 
 In transactions involving the sale of financing of real estate on installment payments, including
residential condominium apartments, the following are the rights given to the buyer who has paid
at least two (2) years of installments in case he defaults in the payment of succeeding payments
(a)    to pay without additional interest the unpaid installments due within the total grace period earned by
him fixed at the rate of one-month grace period for every one year of installment payments made – this
right shall be exercised by him only once in every five (5) years of the life of the contract and its
extension, if any; and
(b)   if the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to 50% of the total payments made and, after 5 years of
installments, an additional 5% of every year but not to exceed 90% of the total payments made. [Sec. 3,
RA 6552 or the Realty Installment Buyer Protection Act; see Layug vs. IAC, 67 SCRA 627].
(c)    The buyer has the right to sell his right or assign the same before actual cancellation of the contract
and to pay in advance any unpaid installment anytime without interest and to have such full payment of
the purchase price annotated in the certificate of title covering the property. 
II.                CAPACITY TO BUY OR SELL 
Persons Who May Enter Into a Contract of Sale 
As a general rule, all persons, whether natural or juridical, who can bind themselves, have the legal
capacity to buy and sell. 
Persons Who Are Incapacitated to Enter Into a Contract of Sale 
1.  
1. Absolute Incapacity – pertains to persons who cannot bind themselves 
(a)    Minor
(b)    Insane or demented persons
(c)    Deaf-mutes who do not know how to read and write 
 Contracts entered into by a minor and other incapacitated persons are voidable.  However, where
the necessaries are sold and delivered to him (without the intervention of the parent or guardian),
he must pay a reasonable price therefor.  The contract is therefore valid, but the minor has the
right to recover any excess above a reasonable value paid by him. 
 Sale of real property by minors who have already passed the ages of puberty and adolescence
and are now in the adult age, when they pretended to have already reached their majority, while
in fact they have not, is valid, and they cannot be permitted afterwards to excuse themselves from
compliance with the obligations assumed by them or to seek their annulment.  This is in accord
with the doctrine of estoppel [Mercado and Mercado vs. Espiritu, 37 Phil. 265]. 
1.  
 1. Relative Incapacity – where it exists only with reference to certain persons or class of
property (Art. 1490-1491).  The prohibition extends to sales by virtue of legal redemption,
compromises, and renunciations. 
(a)    Husband and wife to each other – except when a separation of property was agreed upon in the
marriage settlements, or when there has been a judicial separation of property
(b)    Guardian – as to the property of his ward
(c)    Agents – as to the property whose administration or sale has been entrusted to them, unless
consent of the principal is given
(d)    Executors or administrators – as to the state under their administration
(e)    Public officers and employees – as to the property of the State or any subdivision thereof, or of the
government-owned or controlled corporations, the administration of which is entrusted to them
(f)     Judges and government experts who take part in the sale of the property and rights under litigation 
 The prohibition is based on the fiduciary relationship (based on trust), to prevent fraud and undue
and improper influence.
 With respect to (b) to (d), the sale shall only be voidable because in such cases only private
interests are affected.  The defect can be cured by ratification by the seller. With respect to (e)
and (f), the sale shall be null and void, public interests being involved therein.   
(g)    Aliens who are disqualified to purchase private agricultural lands under Art. XII, Secs. 3 and 7 of the
Constitution
(h)   Unpaid seller having a right of lien or having estopped the goods in transitu
(i)      Officer holding the execution or his deputy 
III.             EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST 
 Where the thing is entirely lost at the time of perfection, the contract is inexistent and void
because there is no object.  There being no contract, there is no necessity to bring an action for
annulment.
 Where the thing is only partially lost, the vendee may elect between withdrawing from the contract
and demanding the remaining part, paying its proportionate price.
 The thing is lost when it perishes or goes out of commerce or disappears in such a way that its
existence is unknown or it cannot be recovered. 
IV.              OBLIGATIONS OF THE VENDOR 
1. Principal Obligations of the Vendor 
to transfer the ownership of the determinate thing sold (Art. 1495);
 The vendor need not be the owner of the thing at the time of perfection of the contract; it is
sufficient that he has a right to transfer the ownership thereof at the time it is delivered (Art.
1459).
 If the seller promised to deliver at a stipulated period and such period is of the essence of the
contract but did not comply with his obligation on time, he has no right to demand payment of the
price.  The vendee-buyer is fact may ask for the rescission or resolution of the sale.
 If the failure of the seller to deliver on time is not due to his fault, as when it was the buyer who
failed to supply the necessary credit for the transportation of the goods, delay on the part of the
seller may be said to be sufficiently excused.
to deliver the thing, with its accessions and accessories, if any, in the condition in which they were upon
the perfection of the contract (Art. 1537);
to warrant against eviction and against hidden defects (Arts. 1495, 1547);
to take care of the thing, pending delivery, with proper diligence (Art. 1163);
to pay for the expenses of the deed of sale, unless there is a stipulation to the contrary (Art. 1487).
 
Delivery or Tradition 
Tradition or delivery is a derivative mode of acquiring ownership by virtue of which one has the right and
intention to alienate a corporeal thing, transmits it by virtue of a just title to one who accepts the same. 
 Duty to Deliver at Execution Sale: a judgment debtor is not obliged to deliver right away; he has
one (1) year within which to redeem the property.
Kinds of Delivery or Tradition
1.   Actual or Real (Art. 1497) – the thing sold is placed in the control and possession of the vendee
or his agent.  This involves the physical delivery of the thing and is usually done by the passing of
a movable thing from hand to hand.
2.   Legal or Constructive (Arts. 1498-1501) – through the execution of a public instrument 
Legal formalities – applies to real and personal properties, where the delivery is made through the
execution of a public document;
Traditio simbolica – to effect delivery, the parties make use of a token symbol to represent the thing
delivered;
Traditio longa manu – movable property is delivered by mere consent by the contracting parties if the
thing sold cannot be transferred to the possession of the vendee at the time of the sale;
Traditio brevi manu – the vendee already has the possession of the thing sold by virtue of another title as
when the lessor sells the thing leased to the lessee;
Constitotum possessorium – the vendor continues in possession of the property sold not as owner but in
some other capacity (e.g., as tenant of the vendee). 
        3.   Quasi-Traditio (Art. 1501) – delivery of rights, credits or incorporeal real property, made by
placing the titles of ownership in the hands of the vendee or lawyer, by execution of a public instrument,
or by allowing the vendee to use his rights as new owner with the consent of the vendor. 
 Requisites in constructive delivery before ownership may be transferred :
(a)    Seller must have control over the thing; otherwise, can he put another in control?
(b)    Buyer must be put under control;
(c)    There must be the intention to deliver the thing for purposes of ownership. 
  Rules of constructive delivery: 
1.  
1. If a seller has an actual possession, he cannot transfer ownership by constructive
delivery.
2. There can be no constructive delivery by means of a public instrument if there is a
stipulation to the contrary.
3. The execution of a deed or contract is only presumptive delivery. 
An Unpaid Seller is one who has not been pair or rendered the whole price or who has received a bill of
exchange or other negotiable instrument as conditional payment and the condition on which it was
received has been broken by reason of the dishonor of the instrument.
 
 Rights of an unpaid seller: 
A lien on the goods or right to retain them for the price while in his possession
A right of stopping the goods in transitu in case of insolvency of the buyer; requisites:
(a)    the seller must be unpaid;
(b)    the buyer must be insolvent;
(c)    the goods must be in transit;
(d)    the seller must either actually take possession of the goods sold or give notice of his claim to the
carrier or other person in possession;
(e)    the seller must surrender the negotiable document of title, if any, issued by the carrier or bailee; and
(f)     the seller must bear the expenses of delivery of the goods after the exercise of the right.
A right of resale
A right to rescind the sale
 
 Rules in case of loss, deterioration, or improvement of thing before delivery   
1. If the thing is lost without the fault of the debtor, the obligation shall be extinguished.
2. If the thing is lost through the fault of the debtor, he shall be obliged to pay damages, if is
understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such
a way that its existence is unknown or it cannot be recovered.
3. When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the
creditor.
4. If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of
the obligation and its fulfillment, with indemnity for damages in either case.
5. If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the
creditor.
6. If it is improved at the expense of the debtor, he shall have no other right than that granted to the
usufructuary. 
 Rules as to preference of ownership in case of double sale   
1. If the property sold is movable, the ownership shall be acquired by the vendee who first takes
possession in good faith [Villa Rey Transit, Inc. vs Ferrer, 25 SCRA 861].
2. If the property sold is immovable, the ownership shall belong to:
(a)    the vendee who first registers the sale in good faith in the Registry of Deeds has preferred right over
another vendee who has not registered his title even if the latter is in actual possession of the immovable
property – governed by the principle prius tempore, patior jure (first in time, stronger in right) – knowledge
by the first buyer of the  second sale cannot defeat the first buyer’s right except when the second first
registers in good faith the second sale;
(b)    in the absence of registration, the vendee who first takes possession in good faith; and
(c)    in the absence of both registration and possession, the vendee who presents the oldest title (who
first bought the property) in good faith. 
 Article 1544 has no application to lands not registered with the Torrens system. 
V.                 CONDITION AND WARRANTIES 
Condition means an uncertain event or contingency on the happening of which the obligation (or right) of
the contract depends. 
Warranty is a statement or representation made by the seller of goods, contemporaneously and as a part
of the contract of sale, having reference to the character, quality, or title of the goods, and by which he
promises or undertakes to insure that certain facts are or shall be as he then represents them. 
If the obligation of either party is subject to any condition and such condition is not fulfilled, such party
may either (1) refuse to proceed with the contract, or (2) proceed with the contract, waiving the
performance of the condition. 
If the condition is in the nature of a promise that it should happen, the non-performance of such condition
may be treated by the other party as a breach of warranty. 
Implied warranty as to seller’s title (Art. 1548) – that 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. 
Implied warranty against hidden defects or unknown encumbrance (Art. 1562) – that the seller guarantees
that the thing sold is reasonably fit for the known particular purpose for which it was acquired by the buyer
or, where it was bought by description, that it is of merchantable quality. 
 Essential elements of warranty against eviction 
1. the vendee is deprived in whole or in part of the thing purchased;
2. the vendee is so deprived by virtue of a final judgment ;
3. the judgment is based on a right prior to the sale or an act imputable to the vendor;
4. the vendor was summoned in the suit for eviction at the instance of the vendee; and
5. there is no waiver on the part of the vendee. 
 Kinds of waiver of eviction 
 1. Consciente – the waiver is voluntarily made by the vendee without the knowledge and
assumption of the risks of eviction. If the waiver was only conscious, the vendor shall pay only the
value which the thing sold had at the time of eviction – this is a case of solution indebiti – the
effect is to deprive the purchaser of the benefits mentioned in Nos. 2, 3, 4 and 5 of Article 1555.
2. 2.        Intencionada – the waiver is made by the vendee with knowledge of the risks of eviction
and assumption of its consequence. The vendor is exempted from the obligation to answer for
eviction, provided he did not act in bad faith [Andaya vs. Manansala, 107 Phil. 1151]. 
 Rights of the vendee against the vendor in case eviction occurs (Art. 1555)  
1. return of the value of the thing sold at the time of eviction;
2. income or fruits if he has been ordered to deliver them to the party who won the suit against him;
3. costs of the suit;
4. expenses of the contract;
5. damages and interests and ornamental expenses if the sale was made in bad faith. 

Redhibition Redhibitory action Redhibitory vice or

defect
  - an action instituted to - a defect in the article
- the avoidance of a avoid a sale on account of sold against which defect
sale on account of some vice or defect in the the seller is bound to
some vice or defect in thing sold which renders warrant.  The vice or
the thing sold, which its use impossible, or so defect must constitute an
renders its use inconvenient and imperfection, a defect in
impossible, or so imperfect that it must be its nature, of certain
inconvenient and supposed that the buyer importance; and a minor
imperfect that it must be would not have purchased defect does not five rise
supposed that the it had he known of the to redhibition.  The mere
buyer would not have vice. The object is the absence of a certain
purchased it had he rescission of the contract. quality in the thing sold
known of the vice. If the object is to procure which the vendee thought
the return of a part of the it to contain is not
purchase price paid by the necessarily a redhibitory
vendee, the remedy is defect.  One thing is that
known as accion minoris is positively suffers from
or estimatoris. certain defects.

Doctrines of caveat venditor and caveat emptor 

Caveat venditor Caveat emptor

(Let the seller beware) (Let the buyer beware)
- the vendor is liable to the vendee - applies in sheriff’s sale, sales of
for any hidden faults or defects in the animals, and tax sales, for there is no
thing sold, even though he was not warranty of title or quality on the part of
aware thereof (Art. 1566). the seller in such sales.-          Also
-  Based on the principle that a applies in double sales of property
sound price warrants a sound article. where the issue is who between two
vendees has a better right to the
property .-          Requires the
purchaser to be aware of the supposed
title of the vendor and one who buys
without checking the vendor’s title
takes all the risks and losses
consequent to such failure [Solvoso
vs. Tanega, 87 SCRA 349].

Alternative remedies of the buyer to enforce warranty (Art. 1567):

1. Accion redhibitoria – to withdraw from the contract
2. Accion quanti minoris – demand a proportionate reduction of the price, with a right to damages in
either case 
 Effect of loss of thing sold on account of hidden defects (Art. 1568) 

If the vendor was aware of the (a)    the expenses of the price paid
hidden defects in consequence of b)    the contract; and
which the thing sold was lost, he (c)    damages.
shall bear the loss because he acted
in bad faith. In such case, the vendee
has the right to recover:
If the vendor was not aware of them, (a)    the price paid
he shall be obliged only to return: (b)    interest thereon; and
(c)    expenses of the contract if paid
by the vendee.  He is not made liable
for damages because he is not guilty
of bad faith.
VI.              OBLIGATIONS OF THE VENDEE 
 The vendee is obliged to (1) accept delivery; and (2) pay the price of the thing sold.
 The following rules must be borne in mind: 

1. In contract of sale, the vendor is not required to deliver the thing sold until
the price is paid nor the vendee pay the price before the thing is delivered in
the absence of an agreement to the contrary [La Font vs. Pascacio, 5 Phil.
591].
2. If stipulated, then the vendee is bound to accept delivery and to pay the
price at the time and place designated.
3. If there is no stipulation as to the time and place of payment and delivery,
the vendee is bound to pay at the time and place of delivery.
4. In the absence also of stipulation, as to the place of delivery, it shall be
made wherever the thing might be at the moment the contract was perfected
(Art. 1251).
5. If only the time for delivery of the thing sold has been fixed in the contract,
the vendee is required to pay even before the thing is delivered to him; if only
the time for payment of the price has been fixed, the vendee is entitled to
delivery even before the price is paid by him (Art. 1524).

Instances when the vendee may suspend the payment of the price: 
a) should he be disturbed in the possession or ownership of the thing sold;
b) should he have reasonable grounds to fear such disturbance by a vindicatory action or by a foreclosure
of mortgage; 
These rights do not exist in the following cases: 
(a)    should there be a stipulation to that effect; or
(b)    should the vendor give security for the return of the price; or
(c)    should the vendor have caused the disturbance or danger to cease; or
(d)    should the disturbance consist only of a mere act or trespass. 
VII.           ACTIONS FOR THE BREACH OF CONTRACT OF SALE OF GOODS 
Goods – include all chattels personal but not things in action or money of legal tender in the Philippines.
The term includes growing fruits or crops. 
 Actions available for breach of the contract of sale of goods : 
Action by the seller for payment of the price (Art. 1595)
Action by the seller for damages for non-acceptance of the goods (Art. 1596)
Action by the seller for rescission of the contract for breach thereof (Art. 1597)
Action by the buyer for specific performance (Art. 1598)
Action by the buyer for rescission or damages for breach of warranty (Art. 1599) 
 Remedies allowed to the buyer when the seller has been guilty of a breach of promise or
warranty (Art. 1599): 

1 Recoupment – accept the goods and set up the seller’s breach to reduce
or extinguish the price.The theory of recoupment is that the seller’s
damages are cut down to an amount which will compensate him for the
value of what he has given.
2 Set-off or Counterclaim for damages – accept the goods and maintain an
action for damages for the breach of the warranty. Both sides of the
contract are enforced in the same litigation.  The buyer (defendant) does
not seek to avoid his obligation under the contract but seeks to enforce the
seller’s (plaintiff’s) obligation and to deduct it from his liability for the price
for breach of warranty.
3 Action for damages – refuse to accept the goods and maintain an action
for damages for the breach of the warranty.
4 Rescission – rescind the contract of sale by returning or offering the return
of the goods, and recover the price or any part thereof which has been
paid. This remedy is not available in the following cases:(a)    if the buyer
accepted the goods knowing of the breach of warranty without protest;(b)   
if he fails to notify the seller within a reasonable time of his election to
rescind; and
(c)    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.

VIII.        EXTINGUISHMENT OF SALE 

 Classification of modes or causes of extinguishing the contract of sale: 
Common – those causes which are also the means of extinguishing all other contracts like payment, loss
of the thing, condonation, etc. (Art. 1231).
Special – those causes which are recognized by the law on sales (those covered by Arts. 1484, 1532,
1539, 1540, 1542, 1556, 1560, 1567, and 1591).
Extra-special – conventional redemption and legal redemption. 

Conventional Redemption Legal Redemption

 (Arts. 1601-1618) (Arts. 1619-1623)
It is the right which the vendor It is the right to be subrogated, upon
reserves to himself, to reacquire the the same terms and conditions
property sold provided her returns to stipulated in the contract, in the place
the vendee the price of the sale, the of one who acquires a thing by
expenses of the contract, any other purchase or dation in payment, or by
legitimate payments made therefore any other transaction whereby
and the necessary and useful ownership is transmitted by onerous
expenses made on the thing sold, and title.  
fulfills other stipulations which may
have been agreed upon.
Nature:  Nature: 
(a)    it is purely contractual because it (a)     identical with conventional
is a right created, not by mandate of redemption, except for the source of
the law, but by virtue of an express the right – conventional redemption
contract [Ordoñez vs. Villaroman, 78 arises from the voluntary agreement of
Phil. 116]; the parties; legal redemption proceeds
(b)    it is an accidental stipulation and, from law;
therefore, its nullity cannot affect the (b)     it is not predicated on proprietary
sale of itself since the latter might be right but on a bare statutory privilege to
entered into without said stipulation be exercised only by the person
[Alojado vs. Lim Siongco, 51 Phil. named in the statute – the statute does
339]; not make actual ownership at the time
(c)    it is a real right when registered, of sale or redemption a condition
because it binds third persons precedent, the right following the
[Mortera vs. Martinez, 14 Phil. 541]; person and not the property [Magno
(d)    it is a resolutory condition vs. Viola and Sotto, 61 Phil. 80];
because when exercised, the right of (c)     it is in the nature of a mere
ownership acquired by the vendee is privilege created partly for reason of
extinguished [Aquino vs. Deal, 63 Phil. public policy and partly for the benefit
582]; and convenience of the redemptioner
(e)    it is potestative because it to afford him a way out of what might
depends upon the will of the vendor; be a disagreeable or inconvenient
(f)     it is a power or privilege, not an association into which he has been
obligation, that the vendor has thrust – it is intended to minimize co-
reserved for himself [Ocampo vs. ownership [Basa vs. Aguilar, 117
Potenciano, CA 48 OG 2230]; SCRA 128; Tan vs. CA, 172 SCRA
(g)    it is reserved at the moment of 660].
the perfection of the contract for if the  
right to repurchase is agreed upon Instances of Legal Redemption:
afterwards, there is only a promise to  
sell which produces different rights (a)    Under the Civil Code, those
and effects and is governed by Art. found in Arts. 1620-1622, 1634, and
1479 [Diamante vs. CA, 206 SCRA 1088;
52];  
(h)    the person entitled to exercise (b)    Under special laws:
the right of redemption necessarily is (1)    redemption by owner of real
the owner of the property sold and not property sold for delinquent taxes –
any third party [Gallar vs. Husain, 20 period is within 1 year from date of
SCRA 186]; sale;
(i)      it gives rise to reciprocal (2)    repurchase by homesteader of
obligation that of returning the price of homestead sold under the Public Land
sale and other expenses, on the part Act – period is 5 years [Tupas vs.
of the vendor, and that of delivering Damasco, 132 SCRA 593];
the property and executing a deed of (3)    redemption by judgment debtor
sale therefore, on the part of the or redemptioner or real property sold
vendee [Pandaquilla vs. Gaza, 12 Phil. on execution – period is 12 months;
663]. (4)    redemption by mortgagor after
mortgaged property has been judicially
foreclosed and sold – period is 90 days
but before confirmation of sale by the
court (in all cases of extra-judicial
foreclosure sale, the mortgagor may
redeem the property within 1 year from
the date of registration of the sale);
(5)    redemption by an agricultural
lessee of landholding sold by the
landowner – period is 180 days from
notice in writing which shall be served
by the vendee on all lessees affected
by DAR upon the registration of the
sale.
An equitable mortgage is one which lacks the proper formalities, form of words, or other requisites
prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of
the contract as security for a debt and contains nothing impossible or contrary to law [Cachola vs. CA,
208 SCRA 496]. 
Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as the
accepted equivalent of the performance of an obligation. 

Pacto de retro Mortgage

Ownership is transferred but the Ownership is not transferred but the
ownership is subject to the condition property is merely subject to a charge
that the seller might recover the or lien as security for the compliance of
ownership within a certain period of a principal obligation, usually a loan.
time.
If the seller does not repurchase the The mortgagor does not lose his
property upon the very day named in interest in the property if he fails to pay
the contract, he loses all interest the debt at its maturity.
thereon.
There is no obligation resting upon the It is the duty of the mortgagee to
purchaser to foreclose; neither does the foreclose the mortgage if he wishes to
vendor have any right to redeem the secure a perfect title thereto, and after
property after the maturity of the debt. the maturity of the debt secured by the
mortgage and before foreclosure, the
mortgagor has a right to redeem
[Basilio vs. Encarnacion, 5 Phil. 360].

Instances when conventional redemption is presumed to be an equitable mortgage:

1. when the price of a sale with right to repurchase is unusually inadequate;
2. when the vendor remains in possession as lessee or otherwise;
3. when upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;
4. when the purchaser retains for himself a part of the purchase price;
5. when the vendor binds himself to pay the taxes on the thing sold;
6. in any other case where it may be fairly inferred the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation; and
7. when there is a doubt as to whether the contract is a contract of sale with right or repurchase or
an equitable mortgage. 

  Requisites before legal redemption can be exercised:

1 There must be a sale or assignment of credit.  The concept of sale must be
understood in its restricted sense.  The right cannot be exercised if the
transaction is exchange or donation.
2 There must be a pending litigation at the time of the assignment.  The
complaint by the assignor must have been filed and answered by the
creditor before the sale of the credit.
3 The debtor must pay the assignee (a) the price paid by him, (b) the judicial
costs incurred by him, and (c) the interests on the price from the date of
payment.
4 The right must be exercised by the debtor within 30 days from the date the
assignee demands (judicially or extra-judicially) payment from him.

  Redemption Pre-emption
1 The sale to a third person has already The sale to a third person has not yet
been perfected been perfected
2 Has a much broader scope Narrower in scope – may be
exercised only where there is a
prospective resale of a small piece of
urban land originally bought by the
prospective vendor merely for
speculation
3 Directed against the third person who Directed against the prospective
bought the property vendor who is about to resell the
property
4 Effect is to extinguish a contract that Effect is to prevent the birth or
has already been perfected or even perfection of a contract
consummated

IX.              ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS 

Assignment of credit – a contract by which the owner of a credit transfers to another his rights and actions
against a third person in consideration of a price certain in money or its equivalent (Art. 1458). 
Assignment of credit and other incorporeal rights are consensual, bilateral, onerous, and commutative or
aleatory contracts.  The assignment involves no transfer of ownership but merely effects the transfer of
rights which the assignor has at the time to the assignee [Casabuena vs. CA, 286 SCRA 594]. 
It may be done gratuitously, but if done onerously, it is really a sale.  Thus, the subject matter is the credit
or right assigned; the consideration is the price paid for the credit or right; and the consent is the
agreement of the parties to the assignment of the credit or right at the agreed price. 
Renunciation – the abandonment of a right without a transfer to another. 
Agency – involves representation, not transmission wherein the agent acts for the principal. 
Substitution – the change of a new debtor for the previous debtor with the credit remaining in the same
creditor. 
Subrogation – the change in the person of the creditor with the credit being extinguished. 

  Binding effects of assignment:

1 As between the parties, the assignment is valid although it appears only in
a private document so long as the law does not require a specific form for
its validity.
2 To affect third persons, the assignment must appear in a public instrument,
and in case it involves real property, it is indispensable that it be recorded
in the Registry of Deeds [Lopez vs. Alvarez, 9 Phil. 28].
3 The assignee merely steps into the shoes of the assignor, the former
acquiring the credit subject to defenses (fraud, prescription, etc.) available
to the debtor against the assignor.  The assignee is deemed subrogated to
the rights as well as to the obligations of the seller.  He cannot acquire
greater rights than those pertaining to the assignor. [Koa vs CA, 219
SCRA 541].

 X.                 BARTER OR EXCHANGE 

Barter – a contract whereby one person transfers the ownership of non-fungible things to another with the
obligation on the part of the latter to give things of the same kind, quantity, and quality. 
The contract is perfected from the moment there is a meeting of the minds upon the things promised by
each party in consideration of the other.  It is consummated from the time of mutual delivery by the
contracting parties of things they promised. 
Effect where the giver is not the lawful owner of the thing delivered:  the aggrieved party cannot be
compelled to deliver the thing he has promised.  He is entitled to claim damages (Art. 1639). [Biagtan vs.
Viuda de Oller, 62 Phil. 933]. 
Remedy in case of eviction: the injured party is given the option to recover the property he has given in
exchange with damages or only claim an indemnity for damages.  The right to recover is, however,
subject to the rights of innocent third persons (Art. 1640). 
XI.              THE BULK SALES LAW 
Purpose of the law (Act No. 3952) is to prevent the defrauding of creditors by the secret sale or disposal
or mortgage in bulk of all or substantially all of a merchant’s stock of goods. 
The general scheme is to declare such bulk sales fraudulent and void as to creditors of the vendor, or
presumptively so, unless specified formalities are observed, such as the demanding and the giving of a
list of creditors, the giving of actual and constructive notice to such creditors, by record or otherwise, and
the making of an inventory. 
A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer, mortgage, or assignment –  
(a)              of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the
ordinary course of trade and the regular prosecution of the business; or
(b)              of all or substantially all, of the business or trade; or
(c)              of all or substantially all, of the fixtures and equipment used in the business of the vendor,
mortgagor transferor, or assignor.
 
Acts punished by the law: 
1. knowingly or willfully making or delivering a statement as required by the Act which does not
include the names of all the creditors of the vendor, etc. with the correct amount due and to
become due or which contains any false or untrue statement; and
2. transferring title to a any stock of goods, wares, merchandise, provisions or materials sold in bulk
without consideration of for a nominal consideration only.
 - – O – -
 Reference: 
De Leon, Comments and Cases on Sales;
Paras, Civil Code of the Philippines Annotated, Book V;
Jurado, Civil Law Reviewer.

C.
Legal Redemption
a.
Under the Civil Code
Article 1619, Civil Code 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 purchaseor
– dation in paymentor
– by any other transaction whereby ownership is transmitted by onerous title.
 Only applies to transfer of ownership through onerous title, HENCE, not applicable to:
○
Barter
○
Transfers by gratuitous title
○
Hereditary succession
 It can apply to sales with pacto de retro
 It arises from the moment of the sale, and once exercised by the redemptioner, the subsequent rescission of
the sale cannot prejudice the redemptioner.
 If redemption price is grossly excessive it can be reduced by the court where the redemption is made by:
○ a co-owner - only pay a reasonable one (Art 1620)
○
adjoining land-owner of an urban land
○
minor or his guardian
LEGAL REDEMPTION BY CO-OWNERS
1st Par, Article 1620, Civil Code A co-owner of a thing may exercise the right of redemption in case the shares ofa ll
the
other co-owners ora ny of them, are sold to a third person. If the price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.
 “Third person” or “stranger” – anyone who are not heirs of the vendor, by will or intestate succession.
Anyone
who is not a co-owner.
 Basis of the law:
○ To reduce the number of co-owners until the community is done away with on the grounds that co-
ownership is a hindrance to the development and administration of the property
○ For the benefit of the redemptioner to keep strangers out of a joint family ownership if the presence of
the outsider is undesirable
○ To afford a co-owner a way out of what might be a disagreeable and inconvenient association into
which he has been thrust
 Right is not only available to original co-owners but to those who had later acquired the share of a co-
owner. But it cannot apply where the share of the co-owner was:
○
Merely mortgaged
○
Sold to another co-owner
2n d Par, Article 1620, Civil Code Should 2 or more co-owners desire to exercise the right of redemption, they may
only
do so in proportion to the share they may respectively have in the thing owned in common.
 c.f. with Art 1088 (two different situations give rise to same effct)
Article 1088, Civil Code Should any of the heirs sell his hereditary rights to a stranger before the partition, any
OR all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of
sale, PROVIDED they do so within the period of 1 month from the time they were notified in writing of the
sale by the vendor.
LEGAL REDEMPTION BY LAND-OWNERS OF ADJOINING RURAL LAND
1st Par, Article 1621, Civil Code The owners of adjoining lands shall also have the right of redemption when a piece
of
RURAL LAND, the area of which does not exceed 1 hectare, is alienated, UNLESS the grantee does not own any
rural land.
 “Rural” means pertaining to the country, as distinguished from a city or town. It is to be determined from the
character of the locality and vicinity (e.g. neighboring and surrounding properties) (Ortega v Orcine) E.g.
Buildings and improvements in the neighborhood are few and scattered, if they partake the character