LAW 1301

Contract of Sales

Module 4

Week 10-11

ATTY. JOHNSON A.H. ONG, CPA, MBA

 Chapter 6
Actions for Breach of Sale of goods
Breach of contract
Seller
1. Action for payment of the price (1595)
2. Action for damages for non acceptance of the
goods (1596)
3. Action for rescission of the contract (1597)
Buyer
1. Action for specific performance (1598)
2. Action for rescission or damages for breach of
warranty (1599)
Remedies of the buyer if seller
commit a breach of warranties (Art.
1599)
1. Accept or keep the goods and set up against the
seller, the breach of warranty by way of
recoupment in diminution or extinction of the
price;
2. Accept or keep the goods and maintain an action
against the seller for damages for the breach of
warranty;
3. Refuse to accept the goods, and maintain an
action against the seller for damages for the
breach of warranty;
Remedies of the buyer if seller commit a breach of
warranties (Art. 1599)

4. Rescind the contract of sale and refuse to receive the

goods.
Chapter 7
Extinguishment of Sales
Extinguishment of sales
1. Common - Same causes as in other
extinguishment
2. Special – those recognized by the law of sales.
3. Extra special - By redemption
Conventional redemption
• That which takes place when vendor reserves the
right to purchase the thing sold with the obligation
to reimburse to the vendee the price of the sale,
expenses of the contract, other legitimate
payments made by reason of the sale, as well as
necessary and useful expenses on the thing sold
(Arts. 1601, 1616, CC).
Absolute Sale

Seller P1,000,000 Buyer

Conditional Sale

Seller P1,000,000 Buyer

With right of repurchase

 Seller
A B C
Sale with
right of
repurchase

X
Buyer
Art. 1608. The vendor may bring his action against
every possessor whose right is derived from the
vendee, even if in the second contract no mention
should have been made of the right to repurchase,
without prejudice to the provisions of the Mortgage
Law and the Land Registration Law with respect to third
persons.

Sale with
Right of
repurchase Sale
Seller Buyer Buyer

Exercise right of repurchase

Art. 1610. The creditors of the vendor cannot make
use of the right of redemption against the vendee, until
after they have exhausted the property of the vendor.

Sale with Right

of repurchase

Seller Buyer

Creditor
 Problem
• A, B, and C, are co-owners of an undivided parcel of land.
On May 1, A sold his share to X; on June 1, B sold his
share to X; and on July 1, C sold his share also to X. Each
sale was with a right-to repurchase.
a. X may compel A, B and C to come to an agreement to
repurchase the whole land.
b. Each co-owner may exercise his right of redemption
the whole property including the share of the other
two co-owners.
c. Each co-owner may exercise his right of redemption
only with respect to his share.
d. Any two of the three co-owners may redeem the
property proportionately.
Answer: C
Period to redeem (1606)
• In the absence of an express agreement, shall last
four years from the date of the contract.
• Should there be an agreement, the period cannot
exceed ten years.
• However, the vendor may still exercise the right to
repurchase within thirty days (30) from the time
final judgment was rendered in a civil action on the
basis that the contract was a true sale with right to
repurchase.
 Instances where CONVENTIONAL REDEMPTION
is PRESUMED to be an EQUITABLE MORTGAGE
1. Price of sale is unusually inadequate;
2. Vendor remains in possession as lessee or otherwise;
3. Another instrument extending period of redemption or
granting a new period is executed;
4. Purchaser retains part of the purchase price;
5. Vendor bound to pay taxes;
6. Real intent is to secure the payment of a debt or
performance of other obligation (Art. 1602, CC); and
7. When there is doubt as to whether the contract is a
contract of sale with right to repurchase or an equitable
mortgage (Art. 1603, CC).
Legal redemption
• Legal redemption – 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, CC)
 Legal redemption – Co-owner
• A co-owner of a thing may exercise the right of
redemption in case the shares of all the other co-
owners or of any 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. (1620)
• Should two 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. (2nd par 1620)
• The right of redemption of co-owners exclude that of
adjoining owners. (2nd par 1623)
 Legal redemption – Rural land
• 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 one hectare, is alienated,
unless the grantee does not own any rural land.
(1621)
• This right is not applicable to adjacent lands which are
separated by brooks, drains, ravines, roads and other
apparent servitudes for the benefit of other estates.
• If two or more adjoining owners desire to exercise the
right of redemption at the same time, the owner of
the adjoining land of smaller area shall be preferred;
and should both lands have the same area, the one
who first requested the redemption.
 Legal redemption – Urban land
• Whenever a piece of urban land which is so small and
so situated that a major portion thereof cannot be
used for any practical purpose within a reasonable
time, having been bought merely for speculation, is
about to be re-sold, the owner of any adjoining land
has a right of pre-emption at a reasonable price.
• If the re-sale has been perfected, the owner of the
adjoining land shall have a right of redemption, also
at a reasonable price.
 Legal redemption – Urban land
• When two or more owners of adjoining lands wish to
exercise the right of pre-emption or redemption, the
owner whose intended use of the land in question
appears best justified shall be preferred. (1622)
• The right of legal pre-emption or redemption shall not
be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as
the case may be. The deed of sale shall not be recorded
in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice
thereof to all possible redemptioners. The right of
redemption of co-owners excludes that of adjoining
owners. (1623)
Problem
• A and B are co-owners of a rural lot not exceeding 1
hectare. The lot is surrounded on its four sides as
follows: on the North, by the road; on the East, by the
lot of X consisting of 2 hectares; on the South, by the
lot of Y consisting of 2 ½ hectares; and on the West,
by Z's lot consisting of 2 ¾ hectares. A sells his
undivided interest in the agricultural lot to T, who
owns several hectares of rural land in the area. Who
has the right of legal redemption over the undivided
interest in the lot sold by A to T?
a. B c. Y
Road

b. X ZA&B X d. Z
Y
Answer: A
 Law 1301
Contract of Sale
End of Module 4