Sales

V. SALES b. Sale of a right (assignment of a right, or a

V. SALES credit or other intangibles such as
A. Nature and Form ...................................................................................................................................................................................358 copyright, trademark, or good will);
1. Essential Requisites ............................................................................................................................................................361
2. Perfection ................................................................................................................................................................................362 NOTE: An intangible object is a chose in
3. Contract of Sale v. Contract to Sell ...............................................................................................................................364 action.
B. Capacity to Buy or Sell.........................................................................................................................................................................372 A. NATURE AND FORM
C. Effects of the Contract when the Thing Sold has been Lost ................................................................................................387 4. Validity or defect of the transaction:
D. Obligations of Vendor ..........................................................................................................................................................................389 a. Valid;
E. Obligation of Vendee ............................................................................................................................................................................400 NATURE b. Rescissible;
F. Breach of Contract ................................................................................................................................................................................404 c. Voidable;
1. Remedies .................................................................................................................................................................................404 Sale d. Unenforceable; and
2. Recto Law and Maceda Law ............................................................................................................................................409 e. Void.
G. Extinguishment ......................................................................................................................................................................................416 Sale is a contract where one party (seller or vendor)
1. General Provisions ..............................................................................................................................................................416 obligates himself to transfer the ownership of and to 5. Legality of the object:
2. Pacto De Retro Sale..............................................................................................................................................................417 deliver a determinate thing, while the other party a. Licit object; and
3. Equitable Mortgage .............................................................................................................................................................418 (buyer or vendee) obligates himself to pay for said b. Illicit object.
H. Assignment of Credits .........................................................................................................................................................................425 thing a price certain in money or its equivalent. (Art.
1458, NCC; 2001 BAR) 6. Presence or absence of conditions:
VI. LEASE a. Absolute; and
The primary consideration in determining the true b. Conditional.
A. General Provisions ................................................................................................................................................................................428 nature of a contract is the intention of the parties. If
B. Rights and Obligations of the Lessor ............................................................................................................................................440 the words of a contract appear to contravene the 7. Wholesale or retail:
C. Rights and Obligations of the Lessee ............................................................................................................................................443 evident intention of the parties, the latter shall a. Wholesale; or
prevail. Such intention is determined not only from b. Retail.
VII. PARTNERSHIP the express terms of their agreement, but also from
the contemporaneous and subsequent acts of the 8. Proximate inducement for the sale:
A. General Provisions ................................................................................................................................................................................451 parties. (Liam v. UCPB, G.R. No. 194554, 15 June a. Sale by description;
B. Obligations of the Partners ...............................................................................................................................................................468 2016) b. Sale by sample; and
C. Dissolution and Winding Up .............................................................................................................................................................478 c. Sale by description and sample.
D. Limited Partnership .............................................................................................................................................................................485 Kinds
9. When the price is tendered:
VIII. AGENCY As to: a. Cash sale; and
1. Nature of the subject matter: b. Sale on installment plan.
A. Nature, Form and Kinds .....................................................................................................................................................................492 a. Sale of real property; and
B. Obligations of the Agent .....................................................................................................................................................................502 b. Sale of personal property. Characteristics
C. Obligations of the Principal...............................................................................................................................................................512
D. Modes of Extinguishment ..................................................................................................................................................................514 2. Value of the things exchanged: 1. Consensual – A sale is perfected by mere
a. Commutative sale; and consent, which is manifested by the meeting of
IX. CREDIT TRANSACTIONS b. Aleatory sale. the minds as to the offer and acceptance thereof
on the subject matter, price and terms of
A. Loan .............................................................................................................................................................................................................518 3. Tangibility of the object: payment.
B. Deposit .......................................................................................................................................................................................................530 a. Sale of property (tangible or corporeal);
C. Guaranty and Suretyship ...................................................................................................................................................................539
NOTE: Delivery of the thing bought or payment
D. Quasi-Contracts ......................................................................................................................................................................................557 NOTE: A tangible object is also called of the price is not necessary for the protection
chose in possession. of the contract; and failure of the vendee to pay
the price after the execution of the contract
does not make the sale null and void for lack of
consideration but results at most in default on

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the part of the vendee, for which the vendor transfer or affect ownership, what it does is to pay the purchase price in full. Will the complaint Instance when a Conditional Sale considered an
may exercise his legal remedies. (Rabuya, 2017) create the obligation to transfer ownership. prosper? Absolute Sale

2. Bilateral – The seller will deliver and transfer a NOTE: A contract of sale may be absolute or A: NO, because the agreement is a mere contract to A deed of sale is absolute in nature although
determinate thing to the buyer and the latter conditional. sell, the full payment of the purchase price partakes denominated as a “Deed of Conditional Sale” where
will pay an ascertained price (or its equivalent). of a suspensive condition. The non-fulfillment of the nowhere in the contract in question is a proviso or
It imposes obligations on both the seller and Absolute Sale condition prevents the obligation to sell from stipulation to the effect that title to the property
buyer. The obligations of each party are the arising; thus, ownership is retained by the seller sold is reserved in the vendor until full payment of
cause for the obligation of the other. A sale is absolute when no condition is imposed and without further remedies by the buyer. Without full the purchase price, nor is there a stipulation giving
ownership passes to the vendee upon delivery of payment, there can be no breach of contract to the vendor the right to unilaterally rescind the
Each party is simultaneously a debtor and the thing subject of the sale. (Art. 1497, NCC) speak of because the vendor has no obligation yet to contract the moment the vendee fails to pay within
creditor of the other. (Villanueva, 2018) turn over the title. JCEC has no right to compel Sps. a fixed period. (Dignos v. CA, G.R. No. L-59266, 29 Feb.
A contract of sale is absolute when the title to the Mendoza to deliver the titles over the subject 1988)
3. GR: Commutative – The thing sold is property passes to the vendee upon delivery of the property because it failed to pay the purchase price
considered the equivalent of the price paid and thing sold. (Rabuya, 2017) in full. (Jovil Construction and Equipment Corp. v. Q: A contract of sale of a lot stipulates that the
the price paid is the equivalent of the thing sold. Sps. Mendoza, G.R. Nos. 250321 & 250343, 03 Feb. “payment of the full consideration based on a
(De Leon, 2014) Instance when a Deed of Sale considered 2021) survey shall be due and payable in 5 years from
Absolute in Nature the execution of a formal deed of sale.” Is this a
NOTE: There is no requirement that the price Conditional Sale v. Absolute Sale (2001 BAR) conditional contract of sale?
should be equal to the exact value of the subject- A deed of sale is considered absolute in nature
matter of the sale. All that is required is that the where there is neither a stipulation in the deed that CONDITIONAL SALE ABSOLUTE SALE A: NO, it is not. The stipulation is not a condition
parties believed that they will receive good title to the property sold is reserved in the seller which affects the efficacy of the contract of sale. It
The title to the property
value in exchange for what they will give. until the full payment of the price, nor one giving the The seller is granted the merely provides the manner by which the full
is not reserved to the
(Villanueva, 2018) vendor the right to unilaterally resolve the contract right to unilaterally consideration is to be computed and the time within
seller or if the seller is
the moment the buyer fails to pay within a fixed rescind the contract which the same is to be paid. But it does not affect in
not granted the right to
XPN: However, the contract may be aleatory as period. predicated on the any manner the effectivity of the contract. (Heirs of
rescind the contract
in the case of the sale of a hope such as fulfillment or non- Jesus Mascuña v. CA, G.R. No. 158646, 23 June 2005)
based on the fulfillment
sweepstakes ticket. (De Leon, 2014) Conditional Sale fulfillment, as the case
or non-fulfillment, as
may be, of the Q: MTCL sent a letter-proposal for the delivery
the case may be, of the
Aleatory – The consideration is not equivalent It is conditional where the sale contemplates a prescribed condition. and sale of the machines to be installed at
prescribed condition.
of what has been received in the case of contingency, and in general, where the contract is various offices of ACE Company to which the
purchase of a lotto ticket. If the ticket wins, the subject to certain conditions, usually in the case of latter agreed for a purchase price of ₱5,000,000.
Effect of the Non-performance of the Condition
prize is much more than the price of the ticket. the vendee, the full payment of the agreed purchase Thereafter, it delivered several machineries at
or if the Condition did NOT Take Place
price, and in the case of the vendor, the fulfillment ACE Company’s premises and installed the same.
4. Principal – Its existence does not depend upon of certain warranties. (De Leon, 2013)
Where the obligation of either party to a contract of
the existence and validity of another contract. MTCL Company demanded payment from ACE
sale is subject to any condition which is not
(De Leon, 2014) The full payment of the purchase price partakes of a Company. However, they have sent a letter to
performed, such party may:
suspensive condition, and non-fulfillment of the MTCL Company stating that they have been
5. Onerous – The thing sold is conveyed in condition prevents the obligation to sell from returning the machines to them thru one of their
1. Refuse to proceed with the contract; or
consideration of the purchase price, and vice arising. (Nuñez v. Moises-Palma, G.R. No. 224466, 27 sales representatives who has agreed to pull the
2. Waive performance of the condition.
versa. (De Leon, 2014) Mar. 2019) machines out but failed to do so.
Unlike in a non-fulfillment of a warranty which
would constitute a breach of the contract, the non-
6. Nominate –It is given a special name or Q: JCEC filed a Complaint for Specific ACE Company filed a complaint against MTCL
happening of the condition, although it may
designation in the Civil Code, namely, “sale”. (De Performance with Damages against Sps. Company praying that the latter pull out from its
extinguish the obligation upon which it is based,
Leon, 2014) Mendoza which sought the delivery of the clean premises the subject machines. In its defense,
generally does not amount to a breach of a contract
certificates of title and peaceful possession of six MTCL Company posits that ACE Company
of sale.
7. Title, not a mode – The contract of sale is not a (6) contiguous parcels of land registered in the refused to pay the purchase price therefor
mode, but merely a title. The sale itself does not name of Sps. Mendoza. It must be noted the despite the latter’s use of the machines. As such,
contract is a contract to sell and JCEC failed to MTCL Company prays that ACE Company be

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compelled to pay the purchase price. Should ACE c. Sale of property not to be performed A: YES. DHLFMC should be held liable for the notarization of a document does not guarantee its
Company pay MTCL for the purchase price of the within a year from the date thereof; or interest and attorney’s fees stipulated in the validity because it is not the function of the notary
machines? d. When an applicable statute requires that delivery invoices, although the attorney’s fees public to validate an instrument that was never
the contract of sale be in a certain form. should properly be reduced to 10%. These delivery intended by the parties to have any binding legal
A: YES. Considering its consensual nature, a (Art. 1403 (2), NCC) invoices formed part of the Contract of Sale, given effect. Neither is the notarization of a document
contract of sale had been perfected at the precise that a contract need not be contained in a single conclusive as to the nature of the transaction, nor is
moment ACE Company accepted the latter’s 3. Sale of large cattle which requires that the writing but may be collected from several different it conclusive of the true agreement of the parties
proposal to sell the machines in consideration of the same be recorded with the city/municipal writings which do not conflict with each other and thereto. (Uy v. Heirs of Uy-Renales, G.R. No. 227460,
purchase price of ₱5,000,000. treasurer and that a certificate of transfer be which, when connected, show the consent of the 05 Dec. 2019, J. Caguioa)
issued. Otherwise, the sale is not valid. (Art. parties, subject matter, terms and consideration, as
From that point in time, the reciprocal obligations of 1851, NCC) in contracts entered into by correspondence. Instances where the Statute of Frauds is NOT
the parties – i.e., on the one hand, of MTCL to deliver Essential for the Enforceability of a Contract of
the said machines to ACE Company, and, on the NOTE: The contract of sale of REAL PROPERTIES A contract may be encompassed in several Sale
other hand, of ACE Company to pay the purchase even if not complete in form, so long as the essential instruments even though every instrument is not
price therefor after delivery – already arose and requisites of consent of the contracting parties, signed by the parties, since it is sufficient if the 1. When there is a note or memorandum in writing
consequently may be demanded. From that object, and cause of the obligation concur and they unsigned instruments are clearly identified or and subscribed to by the party or his agent
moment, the parties may reciprocally demand were clearly established to be present, is valid and referred to and made part of the signed instrument (contains essential terms of the contract) (Art.
performance, subject to the provisions of the law effective between the parties. or instruments. Similarly, a written agreement of 1403, NCC);
governing the form of contracts. (Ace Foods, Inc. v. which there are two copies, one signed by each of
Micro Pacific Technologies, G.R. No. 200602, 11 Dec. Under Art. 1357 of the NCC, its enforceability is the parties, is binding on both to the same extent as 2. When there has been partial
2013) recognized as each contracting party is granted the though there had been only one copy of the performance/execution (seller delivers with the
right to compel the other to execute the proper agreement and both had signed it.) (DHLFMC, v. intent to transfer title/receives price) (Art. 1405,
FORM public instrument so that the valid contract of sale Asiamed, G.R. No. 205638, 03 Aug. 2017) NCC);
of registered land can be truly registered and can
Formal Requirement for the Validity of a bind third persons. (Rabuya, 2017) Q: Labnao had two children, Pablo and Julita. 3. When there has been failure to object to
Contract of Sale Labnao died intestate, leaving behind a parcel of presentation of evidence aliunde as to the
Q: On 2 Aug. 2002, Dee Hwa Liong Foundation land. Julita died after some time, leaving behind existence of a contract without being in writing
GR: A contract of sale may be made in writing, or by Medical Center (“DHLFMC”) entered into a heirs. Later, Pablo filed a complaint for and which is covered by the Statute of Frauds
word of mouth, or partly in writing and partly by contract to purchase a GammaMed Plus reconveyance against the Heirs of Julita, seeking (Art. 1405, NCC); or
word of mouth, or may be inferred from the conduct Brachytheraphy machine and a Gammacell Ellan to recover one-half of the property left behind
of the parties. (Art. 1483, NCC) 3000 blood irradiator from Asiamed Supplies by Labnao. The Heirs of Julita, however, asserted 4. When sales are effected through electronic
and Equipment Corporation (“Asiamed”) at a absolute ownership of the property by virtue of commerce. (Villanueva, 2014; Sec. 12, R.A. No.
Contracts shall be obligatory, in whatever form they total price of P31,000,000.00. The machines a Deed of Absolute Sale (DOAS) allegedly 8792 [Electronic Commerce Act of 2000])
have been entered into, provided all the essential were delivered on 20 May 2003 and on 17 July executed by Labnao in favor of Julita when the
requisites for their validity are present. (Art. 1356, 2003, whereupon two delivery invoices that former was alive. The DOAS was notarized, but NOTE: Rules on forms, and of validity and
NCC) provided for a 12% annual interest and 25% it was later found out the notarization was enforceability of contracts of sale, are strictly kept
attorney’s fees charge on overdue accounts, irregular since the parties presented no within the contractual relationship of the seller and
XPNs: were signed by petitioner Anthony Dee (“Dee”) competent evidence of identity before the buyer pursuant to the characteristic of relativity of
1. If the law requires a document or other special and DHFLMC Vice President for Administration. Notary Public. The RTC dismissed Pablo's every contract, and do not necessarily apply to third
form, the contracting parties may compel each complaint, giving full faith to the notarized parties whose rights may be affected by the terms of
other to observe that form. (Art. 1357, NCC) After the demand for the collection of the unpaid DOAS due to the fact of its notarization. Was the a sale.
remaining balance of P25,700,000.00 went RTC correct?
2. Under Statute of Frauds, the following unheeded, Asiamed was constrained to file a 1. ESSENTIAL REQUISITES
contracts must be in writing; otherwise, they complaint for sum of money against the DHLFMC A: NO. The existence of an alleged notarized deed of
shall be unenforceable: and Dee before the RTC. Should DHLFMC be held sale is not decisive as to the existence and validity 1. Essential elements – for validity:
a. Sale of personal property at a price not liable for 12% interest and 25% attorney’s fees of a contract of sale. Since the Deed of Absolute Sale
less than P500; stipulated in the delivery invoices? was not properly notarized, it cannot be a. Consent – meeting of the minds to transfer
b. Sale of a real property or an interest presumed to have been regularly executed. Even ownership in exchange for the price (Art.
therein; assuming that the document was notarized, the 1475, NCC);

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NOTE: There could be sale against the will 2. PERFECTION NOTE: From the point of perfection, parties Consummation Stage
of the owner in case of expropriation of may reciprocally demand performance, subject
property for public use. GR: It is deemed perfected at the moment there is to the provisions of the law governing the form Consummation stage in a contract of sale takes place
meeting of minds upon the thing which is the object of contracts. by the delivery of the thing together with the
b. Determinate subject matter – of the contract and upon the price. (Art. 1475(1), payment of the price.
determinate thing which is the object of the NCC; 2002, 2006 BAR) Not all contracts of sale becomes automatically
contract (Art. 1460, NCC); and and immediately effective upon perfection. A NOTE: The ownership of the thing is acquired by the
NOTE: The acceptance of the offer must be absolute. suspensive condition or period suspends the buyer in any of the ways specified by law or in any
c. Consideration – price certain in money or It must be plain, unequivocal, unconditional and demandability of the obligation, but the manner agreed upon by the parties.
its equivalent. (Art. 1458, NCC) This without variance of any sort from the proposal. contract is still perfected. (Villanueva, 2018)
includes the manner of payment and it is The Buyer is Deemed to have Accepted the
presumed that a contract has sufficient Upon the perfection of the contract, the parties may 3. Consummation – occurs when the parties Goods
consideration. (De Leon, 2014) reciprocally demand performance. (Rabuya, 2017) fulfill or perform the terms agreed upon in the
contract culminating in the extinguishment 1. When he communicates to the seller that he has
2. Natural elements – inherent in the contract and XPN: When the sale is subject to a suspensive thereof. (SM Investments Corp. v. Posadas, G.R. accepted them;
are deemed to exist in the contract in the condition by virtue of law or stipulation. No. 200901, 07 Dec. 2015) 2. When the goods have been delivered and he
absence of any contrary provision. (De Leon, does any act inconsistent with the ownership of
2014) Stages of a Contract of Sale PERFECTION CONSUMMATION the seller; and
From the moment 3. When, after the lapse of reasonable time, he
Examples: 1. Negotiation (or Policitacion) Stage – begins there is a meeting of From the time of retains the goods without intimating to the
a. Warranty against eviction; and from the time the prospective contracting minds upon the things mutual delivery by the seller that he rejected them. (Art. 1585, NCC)
b. Warranty against hidden defects. parties manifest their interest in the contract promised by each contracting parties of
and ends at the moment of agreement of the party in consideration the things promised Rule on Refusal to Accept Goods by Buyer
3. Accidental elements – dependent on parties’ parties. A negotiation is formally initiated by an of the other
stipulations; (De Leon, 2014) offer, which must be certain; The buyer is not bound to return the goods to the
Rules in the Conception Stage about the Offer seller and it is sufficient that he notifies the seller of
Examples: To convert the offer into a contract, the his refusal in the absence of a contrary stipulation.
a. Conditions; acceptance must be absolute and must not (Art. 1587, NCC)
RULES
b. Payment of Interest; qualify the terms of the offer; it must be plain,
c. Time and Place of Payment; and unequivocal, unconditional and without Prior to acceptance, may be NOTE: If the refusal is without just cause, the title
d. Penalty. variance of any sort form the proposal. (Heirs of Offer is passes to the buyer from the moment the goods are
withdrawn at will by offeror but no
Fausto C. Ignacio v. Home Bankers Savings and floated placed at his disposal. (Art. 1588, NCC)
authority to modify it.
Effect of Absence of Any of the Essential Trust Company, G.R. No. 177783, 23 Jan. 2013)
Elements Must be accepted within the period, Effect of a Qualified Acceptance
It is important to consider that at this stage, otherwise, extinguished at the end of
With a
The contract of sale is void. Absent proof of the there is freedom to contract, which signifies period and may be withdrawn at will It constitutes merely a counter-offer which must in
period
concurrence of all the essential elements of a the right to choose with whom to contract and by offeror but must not be arbitrary, turn be accepted to give rise to a valid and binding
contract of sale, the giving of earnest money cannot what to contract. Thus, an owner of a property otherwise, liable for damages. contract. (Villanueva, 2009)
establish the existence of a perfected contract of is free to offer the subject property for sale to With a Extinguished by happening/ non-
sale. (Manila Metal Container Corp. v. PNB, G.R. any interested person, and is not duty bound to condition happening of condition. Q: Licup, through a letter, offered to buy parcels
No. 166862, 20 Dec. 2006) sell the same to the occupant thereof, absent of land to The Holy See and Philippine Realty
Without Continues to be valid depending
any prior agreement vesting the occupants the Corporation (PRC). He enclosed a check for
period/ upon circumstances of time, place
Effect of Reluctant Consent right of first priority to buy. (Villanueva, 2018) P100,000.00 to “close the transaction” and
condition and person.
accepted the responsibility of removing
Consent when reluctantly given is not vitiated 2. Perfection or birth – takes place when the With a informal settlers. Msgr. Cirilos, representative
consent. There is no difference in law where a parties agree upon the essential elements of the counter- Original offer is extinguished. of the Holy See and PRC signed the conforme
person gives his consent reluctantly and even contract; and offer portion of the letter and accepted the check. A
against his good sense and judgment as when he stop-payment order was issued by Licup and the
acts voluntarily and freely. (De Leon, 2014)

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latter requested that the titles to the land There is therefore consent on her part as the Payment as a condition Q: Dolores Ventura entered into a Contract to
instead be given to SSE. consent need not be given in any specific form. Sell with Spouses Eustacio and Trinidad Endaya
Hence, her consent may be given by implication, for the purchase of two parcels of land located in
Full payment of the
Msgr. Cirilos wrote SSE requesting to remove the especially since she was aware of, and participated Marian Road II, Marian Park, Parañaque City.
purchase price is a
informal settlers, otherwise, the P100,000.00 in the sale of the property (Pelayo v. Perez, G.R. No. The contract to sell provides that the purchase
positive suspensive
would be returned. SSE replied with an “updated 141323, 08 Jun. 2005). Her action for moral and price of P347,760.00 shall be paid by Dolores
condition that gives
proposal” that they will comply provided that exemplary damages will also not prosper because through: (a) down payment of P103,284.00
rise to the prospective
the purchase price is lowered. The proposal was the case does not fall under any of those mentioned upon execution of the contract; and (b) the
seller’s obligation to
rejected. The parcel of land was sold to another in Arts. 2219 and 2232 of the Civil Code. Non-payment of the balance of P244,476.00 within a 15-year period,
convey title.
third person. Is there a perfected contract of sale purchase price is a plus 12% interest per annum on the outstanding
between the two parties? 3. CONTRACT OF SALE V. CONTRACT TO SELL resolutory condition balance and 12% interest per annum on
NOTE: Failure to fully
that entitles the seller arrearages.
pay the price is not a
A: NO. When Msgr. Cirilos affixed his signature on to rescind the sale.
CONTRACT OF SALE CONTRACT TO SELL breach but an event
that letter, he expressed his conformity to the terms Dolores’ children, Frederick Ventura, Marites
that prevents the
of Licup’s offer appearing on it. There was meeting As regards transfer of ownership Ventura-Roxas, and Philip Ventura filed a
obligation of the
of the minds as to the object and consideration of Complaint and, thereafter, an Amended
vendor to convey title
the contract. But when Licup ordered a stop- Complaint for specific performance, seeking to
from becoming
payment on his deposit and proposed in his April compel Sps. Endaya to execute a deed of sale
Ownership is effective.
26, 1988 letter to Msgr. Cirilos that the property be over the subject properties. They argued that
instead transferred to SSE, a subjective novation transferred to the Ownership is their parents’ close friendship with Sps. Endaya,
took place. The proposed substitution of Licup by buyer upon delivery of transferred upon full Remedies available allowed widowed Dolores to pay the down
SSE opened the negotiation stage for a new contract the object to him. payment of the payment stated in the contract to sell and,
1. Specific
of sale as between SSE and the owners. (Starbright purchase price. instead, allowed her to pay amounts as her
Performance 1. Rescission; or
Sales v. Phil. Realty Corp., G.R. No. 177936, 18 Jan. NOTE: Vendor has lost means would permit.
2. Rescission; or 2. Damages
2012) and cannot recover NOTE: Prior to full
3. Damages
ownership until and payment, ownership is The total payments made by Dolores and
Q: Spouses Biong and Linda wanted to sell their unless the contract is retained by the seller. petitioners amounted to P952,152.00, more
house. They found a prospective buyer, Ray. resolved or rescinded. Contract to Sell than the agreed purchase price of P347,760.00,
Linda negotiated with Ray for the sale of the including the 12% interest p.a. thereon
property. They agreed on a fair price of P2 A bilateral contract whereby the prospective seller, computed on the outstanding balance.
Million. Ray sent Linda a letter confirming his while expressly reserving the ownership of the
As to numbers of contracts involved
intention to buy the property. Later, another subject property despite delivery thereof to the When Dolores’ children demanded the
couple, Bernie and Elena, offered a similar prospective buyer, binds himself to sell the said execution of the corresponding deed of sale, Sps.
house at a lower price of P1.5 Million. But Ray property exclusively to the prospective buyer upon Endaya refused. Should Sps. Endaya execute a
insisted on buying the house of Biong and Linda fulfillment of the condition agreed upon, that is, full deed of sale over the subject properties in favor
There are two payment of the purchase price. (Solid Homes, Inc. v.
for sentimental reasons. Ray prepared a deed of of Dolores’ children?
contracts: Sps. Jurado, G.R. No. 219673, 20 Sept. 2019)
sale to be signed by the couple and a manager’s
1. The contract to
check for P2 Million. After receiving the P2 A: NO. Spouses Endaya had no obligation to
sell, i.e., NOTE: In a contract to sell, the payment of the
Million, Biong signed the deed of sale. However, petitioners to execute a deed of sale over the subject
There is only one preparatory sale purchase price is a positive suspensive condition
Linda was not able to sign it because she was properties. A contract to sell is defined as a bilateral
contract executed 2. The deed of that gives rise to the prospective seller's obligation
abroad. On her return, she refused to sign the contract whereby the prospective seller, while
between the seller and absolute sale to convey title. However, non-payment is not a
document saying she changed her mind. Linda expressly reserving the ownership of the subject
the buyer. breach of contract but “an event that prevents the
filed suit for nullification of the deed of sale and property despite delivery thereof to the prospective
NOTE: The principal obligation of the vendor to convey title from
for moral and exemplary damages against Ray. buyer, binds himself to sell the said property
contract is executed becoming effective.” The contract would be deemed
Will the suit prosper? (2006 BAR) exclusively to the latter upon his fulfillment of the
after full payment of terminated or cancelled, and the parties stand “as if conditions agreed upon, i.e., the full payment of the
the purchase price. the conditional obligation had never existed.”
A: NO, the suit will not prosper. The contract of sale purchase price and/or compliance with the other
was perfected when Linda and Ray agreed on the (Racelis v. Sps. Javier, G.R. No. 189609, 29 Jan. 2018) obligations stated in the contract to sell.
object of the sale and the price (Art. 1475, NCC).

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Given its contingent nature, the failure of the for a free patent over the entire lot and was When the price of sale is simulated, the sale is void, Revocability
prospective buyer to make full payment and/or eventually issued an OCT in his name. but the act may be shown to be a donation or some May be revoked
Not unilaterally
abide by his commitments stated in the contract to other act, other than, Art. 1471 of the NCC (relative unilaterally even
revocable.
sell prevents the obligation of the prospective seller Sabug, Jr., through the 1999 Deed of Absolute simulation). without ground.
to execute the corresponding deed of sale to effect Sale, sold the lot to Aguado for P2,500,000.00, As to Profit
the transfer of ownership to the buyer from arising. who, in turn, caused the cancellation of the OCT Relative simulation – that the contract may be Agent is not allowed to
(Ventura v. Heirs of Sps. Endaya, G.R. No. 190016, 02 and the issuance of a TCT. Aguado obtained an called a sale, but it may turn out to be really a Seller receives profit.
profit.
Oct. 2013) P8,000,000.00 loan from the Land Bank secured donation and will govern as such. (Villanueva, 2018) As to Contract
by a mortgage over the lot. When she failed to Real contract Personal contract
Instances when a Contract to Sell may be pay her loan obligation, Land Bank commenced 2. Sale v. Barter
Resorted to: extra-judicial foreclosure proceedings and NOTE: To differentiate Sale and Agency to sell, the
eventually tendered the highest bid in the SALE BARTER essential clauses of the whole instrument shall be
1. Where subject matter is indeterminate; (Arts. auction sale. Upon Aguado’s failure to redeem Nature considered. (Art. 1466, New Civil Code)
1458 & 1460, NCC) and the subject property, Land Bank consolidated its A thing is given in
2. Sale of future goods except future inheritance. ownership and a TCT was issued in its name. A thing is given in
exchange of a price 4. Sale v. Dacion en Pago
(Art. 1462, NCC) Spouses Roque then filed an action for exchange of another
certain in money or its
reconveyance before the RTC. Will the action for thing.
equivalent. SALE DACION EN PAGO
Q: Project Movers Realty and Development reconveyance prosper?
If consideration is partly in money and partly Existence of Credit
Corporation (PMRDC) was indebted to Keppel
in another thing
Bank for P200M. To pay the debt, PMRDC A: NO. This case involves a contract to sell. The Contract where
The transaction is characterized by the manifest property is alienated to
conveyed to the bank 25 properties. Adao Court held that where the seller promises to execute
No pre-existing credit.
intention of the parties. extinguish pre-existing
occupies one of the properties conveyed. The a deed of absolute sale upon the completion by the
bank demanded Adao to vacate the property but buyer of the payment of the purchase price, the If intention is not clear, credit/debt.
If intention is not clear,
he refused. Hence, an ejectment case was filed contract is only a contract to sell even if their and the value of thing is Relationship
and the value of thing is
against him. In his defense, Adao claimed that he agreement is denominated as a Deed of Conditional equal or less than Novates creditor-
more than amount of Buyer-seller
entered into a Contract to Sell with PMRDC. To Sale, as in this case. In a contract to sell, there being amount of money = debtor relationship
money = Barter relationship.
prove full payment of the property, he no previous sale of the property, a third person Sale into seller-buyer.
presented an affidavit. Is Keppel bank bound by buying such property despite the fulfillment of the Applicable Law Obligation
the contract to sell between PMRDC and Adao? suspensive condition such as the full payment of the Both are governed by law on sales. Obligations are Obligations are
purchase price, for instance, cannot be deemed a created. extinguished.
A: NO. The contract to sell does not by itself give buyer in bad faith and the prospective buyer cannot Consideration
3. Sale v. Agency to Sell
Adao the right to possess the property. Unlike in a seek the relief of reconveyance of the property. The On the part of the debtor:
contract of sale, here in a contract to sell, there is yet action for reconveyance shall fail. Roque v. Aguado, Extinguishment of the
no actual sale nor any transfer of title, until and G.R. No. 193787, 07 Apr. 2014) SALE AGENCY TO SELL On the part of the
debt;
unless, full payment is made. The payment of the Obligation as Regards the Price seller: Price;
purchase price is a positive suspensive condition. DISTINCTIONS OF CONTRACT OF SALE Agent not obliged to On the part of the
Adao’s lone affidavit is self-serving, and cannot be WITH OTHER CONTRACTS Buyer pays for price of pay for price; must On the part of the
creditor: The
considered as substantial evidence to prove that object. account for the buyer: Acquisition of
acquisition of the object
there was full payment made. (Keppel Bank Phils. 1. Sale v. Donation proceeds of the sale. the object.
offered in lieu of the
Inc., v. Adao, G.R. No. 158227, 19 Oct. 2005) Transfer of Ownership original credit.
SALE DONATION Principal remains the Determination of the Price
Q: Spouses Roque and the original owners of an Generally Buyer becomes owner owner even if the Greater freedom. Limited freedom.
unregistered lot executed a 1997 Deed of Onerous Gratuitous/onerous of thing. object delivered to
Payment of Price
Conditional Sale over a portion of a lot for (Art. 726, NCC) agent.
The debtor receives the
P30,775.00. After the deed’s execution, Spouses Consensual Formal contract Warranty Buyer still has to
payment before the
Roque took possession and introduced Law on Sales Law on Donation Agent assumes no pay the price.
contract is perfected.
improvements on the subject portion which personal liability as
they utilized as a balut factory. Sabug, Jr, applied Seller warrants.
NOTE: It is important to know the distinction when long as within
the consideration for the transfer is not clear. authority given.

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5. Sale v. Lease Rules in Determining if the Contract is One of fixed price within a certain time, or under, or in a. The option contract is not deemed
Sale or a Piece of Work compliance with, certain terms and conditions, or perfected; and
SALE LEASE which gives to the owner of the property the right to b. Offer may be withdrawn at any time prior
1. Sale sell or demand a sale. (Villanueva, 2009) to acceptance.
Use of thing is for a. If ordered or manufactured in the
Obligation to
specified period only ordinary course of business (Art. 1467, Nature of an Option Contract NOTE: Even though the option was not supported
absolutely transfer
with obligation to NCC); by a consideration, the moment it was accepted,
ownership of thing.
return. b. It involves the sale of a thing or right; and An option contract is a separate and distinct contract of sale is perfected. (Art. 1324, NCC)
c. The obligation of seller is a real obligation contract from a contract of sale. It is a preparatory
Consideration is the Consideration is the
or an obligation to give. contract in which one party grants to another, for a An option imposes no binding obligation on the
price. rental.
fixed period and at a determined price, the privilege person holding the option aside from the
Seller needs to be 2. Piece of work to buy or sell, or to decide whether or not to enter consideration for the offer. Until accepted, it is not
owner of thing to a. If manufactured especially for the into a principal contract. treated as a sale. (Tayag v. Lacson, G.R. No. 134971,
transfer ownership. customer and upon his special order, and NOTE: If the option is perfected, it does not result in 25 Mar. 2004)
not for the general market (Art. 1469, the perfection or consummation of the sale. It is
Lessor need not be NCC);
NOTE: Lease with binding upon the promissor if the promise is Elements of a Valid Option Contract
owner. b. It involves lease of service; and supported by a consideration distinct from the
option to buy – really a
contract of sale but c. The obligation of seller is personal or price. 1. Consent;
designated as lease in obligation to do.
name. Period within which to Exercise the Option 2. Subject Matter – An option right to an
NOTE: Distinction is important when it comes to the unaccepted unilateral offer to sell/ accepted
6. Sale v. Contract for piece-of-work remedy needed in case of non-performance. In a 1. Within the term stipulated; and unilateral promise to sell or an unaccepted
Sale (real obligation), action for specific 2. If there is no stipulation, the court may fix the unilateral offer to buy/ accepted unilateral
performance is applicable since what is involved is term. promise to buy a determinate or determinable
CONTRACT FOR the obligation to give a determinate thing. While in object for a price certain including the manner
SALE
PIECE-OF-WORK a contract for Piece-of-work (personal obligation), Exercise of an Option of payment; and
Existence an action for specific performance is NOT applicable
since what is involved is an obligation to do. In an option to buy, the party who has an option may 3. Prestation – A consideration separate and
Manufacturing in the Manufacturing upon
(Villanueva, 2018) validly and effectively exercise his right by merely distinct from the purchase price for the option
ordinary course of special order of a
notifying the owner of the former’s decision to buy given. (Villanueva, 2009)
business. customer.
7. Contract of Sale v. Option Contract and expressing his readiness to pay the stipulated
To Whom Made price. (De Leon, 2011) Obligations of the Offeror
Not for the general CONTRACT OF SALE OPTION CONTRACT
For the general market. market, but especially A notice of acceptance must be communicated to 1. Not to offer to any third party the sale of the
Consideration
for the customer. offeror even without actual payment as long as object of the option during the option period;
Applicability of Statute of Frauds Must be a price certain May be anything of
payment is delivered in the consummation stage 2. Not to withdraw the offer or option during the
in money value
provided it still within the period provided. option period; and
Governed by the Not within the Statute Bilateral/ Unilateral 3. To hold the subject matter for sale to the offeree
Statute of Frauds. of Frauds.
Bilateral Contract Unilateral Contract Effect of the Presence and Absence of a Separate in the event that the latter exercises his option
Risk of Loss Subject Matter Consideration in an Option Contract during the option period.
Borne by the worker or The “option to
Subject matter if the
Borne by the buyer. contractor, not by the purchase” is the 1. With separate consideration: Effect of Acceptance and Withdrawal of the Offer
contract of sale itself
employer. subject matter. a. Contract is valid;
b. Offeror cannot withdraw offer until after If the offer had already been accepted and such
Option Contract (2002, 2005 BAR) expiration of the option; and acceptance has been communicated before the
c. Is subject to rescission and damages but withdrawal is communicated, the acceptance
An option contract is a continuing offer or contract not specific performance. creates a perfected contract, even if no
by which the owner stipulates with another that the consideration was as yet paid for the option. In
latter shall have the right to buy the property at a 2. Without separate consideration: which case, if the offeror does not perform his

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obligations under the perfected contract, he shall be of first refusal to purchase the property at any Offer to Sell government contracts. (PSALM Corp., v. Pozzolanic,
liable for all consequences arising from the breach time during the lease, if Dux decides to sell the There is no offer to sell, G.R. No. 183789, 24 Aug. 2011)
thereof based on any of the available remedies such property at the same price that the property is but only an
as specific performance, or rescission with damages offered for sale to a third party. opportunity for the There is an offer to sell. Right of First Refusal may be Waived
in both cases. buyer to enter into a
23 months after execution of the lease contract, contract of sale. Like other rights, the right of first refusal may be
Right of First Refusal Dux sold the house. Dux said there was no waived. For a waiver of right to exist, three elements
Subjectivity to Specific Performance
breach because the property was sold to his are essential: (a) existence of a right; (b) the
It is a contractual grant, not of the sale of a property, mother who is not a third party. Iris filed an Not subject to specific Subject to specific knowledge of the evidence thereof; and (c) an
but of the first priority to buy the property in the action to rescind the sale and to compel Dux to performance performance intention to relinquish such right. (Sps. Valderama v.
event the owner sells the same. (PUP v. Golden sell the property to her at the same price. Macalde, G.R. No. 165005, 16 Sept. 2005)
Horizon Realty Corp., G.R. Nos. 183612 and 184260, Alternatively, she asked the court to extend the
Right of First Refusal must be Contained in a
15 Mar. 2010) lease for another 2 years on the same terms. Can Availment of Sublessee of the Right of First
Written Contract
Iris seek rescission of the sale of the property to Refusal of the Lessee
NOTE: Where a time is stated in an offer for its Dux’s mother? (2008 BAR)
The right of first refusal be embodied in a written
acceptance, the offer is terminated at the expiration GR: The sublessee is a stranger to the lessor who is
contract and the grant of such right must be clear
of the time given for its acceptance. (Pineda, 2010) A: YES. The right of first refusal is included in the bound to respect the right of first refusal in favor of
and express.
contract signed by the parties. Only if the lessee the lessee only.
Basis of the Right of First Refusal failed to exercise the right of first refusal could the
NOTE: It is applicable only to executory contracts XPN: When the contract of lease granted the lessee
lessor lawfully sell the subject property to others,
and not to contracts which are totally or partially the right to assign the lease, the assignee would be
It is based on the current offer to sell of the seller or under no less than the same terms and conditions
performed. entitled to exercise such right as he steps into the
offer to purchase of any prospective buyer. Only previously offered to the lessee. Granting that the
after the optionee fails to exercise its right of first mother is not a third party, this would make her shoes of the original assignee. (Villanueva, 2009)
Q: Pozzolanic entered into a long-term contract
priority under the same terms and within the period privy to the agreement of Dux and Iris, aware of the
with the National Power Corporation (NPC) for Q: Tess leased her 1,500 sq. m. lot in Antipolo
contemplated could the owner validly offer to sell right of first refusal. This makes the mother a buyer
the purchase of all fly ash to be produced by the City to Ruth for a period of three (3) years to
the property to a third person, again, under the in bad faith, hence giving more ground for rescission
latter’s future power plants. In the contract, NPC February 2013. On March 19, 2011, Tess sent a
same terms as offered to the optionee. (Tanay of the sale to her. (Equatorial Realty Development,
granted Pozzolanic a right of first refusal to letter to Ruth, part of which read as follows:
Recreation Center & Development Corp. v. Fausto, Inc. v. Mayfair Theater, Inc., supra)
purchase the fly ash that may be generated in
G.R. No. 140182, 12 Apr. 2005)
the future. When NPC’s two new power plants
Option Contract v. Right of First Refusal “I am offering you to buy the property you are
started operation, it published an invitation to
Effect of Sale of a Property in Violation of the presently leasing at P5,000.00 per sq. m. or for a
interested buyers for the purchase of the fly ash.
Right of First Refusal RIGHT OF FIRST total of P7,500,00.00. You can pay the contract
OPTION CONTRACT Pozzolanic sent letters to NPC reminding its
REFUSAL price by installment for two (2) years without
right of first refusal. NPC deferred its public
The resulting contract is rescissible by the person in Nature interest. I will give you a period of one (1) year
bidding with the first power plant’s fly ash but it
whose favor the right of first refusal was given and from the receipt of this letter to decide whether
Principal contract; Accessory; cannot nevertheless continued with the bidding of the
even though no particular price is stated in the you will buy the property.”
stands on its own stand on its own second power plant’s fly ash. Pozzolanic filed a
covenant granting the right of first refusal, the same
complaint, but during the pendency of the case,
price by which the third-party buyer bought the Consideration After the expiration of the lease contract, Tess
NPC decided to likewise dispose the fly ash from
property shall be deemed to be the price by which sold the property to her niece for a total
Needs separate Does not need separate the first power plant without allowing
the right of first refusal shall therefore be consideration of P4 Million. Ruth filed a
consideration consideration Pozzolanic to exercise its right of first refusal.
exercisable. (Equatorial Realty Development, Inc. v. complaint for the annulment of the sale,
Can Pozzolanic exercise its right of first refusal?
Mayfair Theater, Inc., G.R. No. 106063, 11 Nov. 1996) reconveyance and damages against Tess and her
Subject matter and Price
niece. Ruth alleged that the sale of the leased
There must be subject A: NO. The right of first refusal granted in favor of
Q: Dux leased his house to Iris for a period of 2 Subject matter and property violated her right to buy under the
matter but price not Pozzolanic is invalid for being contrary to public
years, at the rate of P25,000.00 monthly, price must be valid. principle of right of first refusal. Is the allegation
important. policy as the same violates the requirement of
payable annually in advance. The contract of Ruth tenable? (2014 BAR)
competitive public bidding in the award of
stipulated that it may be renewed for another 2- Condition
government contracts. In this jurisdiction, public
year period upon mutual agreement of the A: NO, the allegation of Ruth is not tenable. The
Not conditional Conditional bidding is the established procedure in the grant of
parties. The contract also granted Iris the right letter written by Tess did not grant a right of first

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refusal to Ruth. At most, it is to be construed as an XPNs: Nullity is permanent. Prohibition applies only
option contract whereby Ruth was given the right to B. CAPACITY TO BUY OR SELL a. When a separation of property was to a sale or assignment to the lawyer by a client
buy or not to buy the leased property. An option is agreed upon in the marriage settlement; of the property which is the object of litigation.
itself not a purchase, but it merely secures the or (Rabuya, 2017)
privilege to buy. However, the option is not valid b. When there is a judicial separation of
Persons who may Enter into a Contract of Sale
because it was not supported by cause or property under Art. 135 of the Family Q: Sps. Peter and Elizabeth Kingsman owned the
consideration distinct from the price of the Code has been decreed. (Art. 1490(2), contested parcels of land. Elizabeth died
GR: All persons, whether natural or juridical, who
property. (Art. 1479, NCC) Also, Ruth does not NCC) intestate and was survived by Peter and her
can bind themselves, have legal capacity to buy and
appear to have exercised her option before the offer eight children. Peter subsequently passed away,
sell. (Art. 1489(1), NCC)
was withdrawn by the subsequent sale of the 5. Sale between guardians and wards – the followed by Danny. Subsequently, Atty. Greg,
property to the niece of Tess. contract is void and not merely voidable. The President of petitioner Lite and Light Corp.
XPNs:
prohibition exists only when the guardianship informed the Kingsmans that their parents had
1. Minors, insane and demented persons and
Parties to a Contract of Sale exists. already sold the contested parcels of land to Lite
deaf-mutes who do not know how to write;
and Light for P400,000.00 as evidenced by two
(Art. 1327, NCC)
1. Seller – one who sells and transfers the thing 6. Sale between agents and principals with undated Deeds of Absolute Sale and that the
2. Persons under a state of drunkenness or
and ownership to the buyer; and respect to property under administration (Art. titles to the properties have already been
during hypnotic spell;
2. Buyer – one who buys the thing upon payment 1491(2), NCC) transferred to Lite and Light’s name.
3. Persons who are senile (Art. 24 in relation to
of the consideration agreed upon.
Art. 1332, NCC)
XPN: The prohibition does not apply if the Thus, Kingsmans filed a Complaint against Lite
principal consents to the sale of the property in and Light alleging forgery and fraud since
GR: A senile person may enter into contracts,
the hands of the agent or administrator. Elizabeth could not have signed the documents
he is not incompetent merely because of his
and given her consent thereon since she has
advanced years, or by reason of his physical
After the termination of the affairs of the been dead for seven years before the alleged
infirmities.
agency, the prohibition no longer applies. execution of the said contracts. Lite and Light
Neither is the agent prohibited from buying denied employing fraud contending that the
XPN: When such age or infirmity have
properties of the principal which are not Deeds were already signed and notarized when
impaired his mental faculties so as to prevent
included among the properties of which he was Peter and Danny delivered them to the office of
him from properly, intelligently, and firmly
commissioned to sell. The transaction may be Atty. Greg. Moreover, Lite and Light averred that
protecting his rights, then he is undeniably
ratified by way of a new contract which will Kingsmans’ claims are barred by prescription.
incapacitated.
become valid only from its execution and will
not retroact to the date of the first contract. On rebuttal, Peter, Jr. insisted that during the
The sale is void, and not mere voidable. The
lifetime of Felicidad, the Kingsmans formed a
essence is that there was never any meeting of
7. Sale between executors and administrators of family corporation in order to consolidate the
the minds, and no real consideration.
estate of the deceased (Art. 1491(3), NCC) properties under the said company through the
(Villanueva, 2018)
waivers. However, only one property was
XPN: Hereditary rights are not included in the transferred since Efren sold all the others. To
4. Husband and wife – sale by and between
prohibition. whom should the subject properties be
spouses. (Art. 1490, NCC)
adjudicated?
8. Sale involving property of the government (Art.
Rationale for the prohibition:
1491(4), NCC) A: THE KINGSMANS. If any one party to a supposed
a. To prevent a spouse from defrauding his
contract was already dead at the time of its
creditors by transferring his properties
The nullity of such prohibited contracts is execution, such contract is undoubtedly simulated
to the other spouse; and
definite and permanent and cannot be cured by and false, and, therefore, null and void by reason of
b. To avoid a situation where the dominant
ratification. The public interest and public its having been made after the death of the party
spouse would unduly take advantage of
policy remain paramount and do not permit of who appears as one of the contracting parties
the weaker spouse.
compromise or ratification. therein. Considering that Elizabeth’s signatures
were forged, the Deeds of Absolute Sale are null and
9. Sale of property in litigation (Art. 1491(5), NCC) void and convey no title to Lite and Light. Also, Art.
1410 of the Civil Code states that "the action or

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defense for the declaration of the inexistence of a PROPERTY INVOVLED STATUS OF SALE RATIFICATION
contract does not prescribe." Hence, the Kingsmans
could assail the validity of the Deeds of Absolute Agents
Sale, in spite of Lite and Light’s claim that they failed
to question the sale several years after Lite and Can be ratified after the inhibition has ceased.
Light secured the titles to the properties.
Reason: the only wrong that subsists is the private
Moreover, to prevent unjust enrichment, the Property entrusted to them wrong to the ward, principal or estate; and can be
Kingsmans should return the amount of for administration or sale. condoned by the private parties themselves.
P400,000.00 with legal interest. (Arakor Const. and
Dev. Corp. v. Sta. Maria, GR. No. 215006, 11 Jan. 2021) Unenforceable
XPN: When principal gave NOTE: Contracts entered by guardian in behalf of
his consent. ward are rescissible if ward suffers lesion by more
Persons who are Absolutely Incapacitated to than ¼ of value of property. Sale by guardian of
Enter into a Contract of Sale (Art. 1327, NCC) property belonging to a ward without Court
approval is void regardless of the lesion, hence,
1. Unemancipated minors; and cannot be ratified.
2. Insane or demented persons, and deaf-
mutes who do not know how to write.
Guardian
Persons who are Relatively Incapacitated to
enter into a contract of sale
Can be ratified after the inhibition has ceased.
1. Spouses; (Art. 1490, NCC)
2. Agents, Guardians, Executors and Reason: the only wrong that subsists is the private
Administrators; wrong to the ward, principal or estate; and can be
3. Public Officers and Employees; condoned by the private parties themselves.
Property of the ward
4. Lawyers; during period of Voidable
5. Court Officers and Employees; and NOTE: Contracts entered by guardian in behalf of
guardianship
6. Others specially disqualified by law. (Art. ward are rescissible if ward suffers lesion by more
1491, NCC) than ¼ of value of property. Sale by guardian of
property belonging to a ward without Court
approval is void regardless of the lesion, hence,
cannot be ratified.

Executors and Administrators

Can be ratified after the inhibition has ceased.

Reason: the only wrong that subsists is the private

wrong to the ward, principal or estate; and can be
condoned by the private parties themselves.
Property of the estate
Voidable
under administration. NOTE: Contracts entered by guardian in behalf of
ward are rescissible if ward suffers lesion by more
than ¼ of value of property. Sale by guardian of
property belonging to a ward without Court
approval is void regardless of the lesion, hence,
cannot be ratified.

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Court Officers and Employees NOTE: The prohibitions are based upon public between them under Article 191 of the
policy and morality. The law believes that human Family Code.
Property and rights in Cannot be ratified. nature would not be strong enough to resist the
litigation or levied upon on temptations likely to arise of antagonism between b. Contract of sale with 3rd parties:
Void
execution before the court Reason: It is not only a private wrong, but also a the interest of the seller and the buyer. (Jurado,
under their jurisdiction public wrong. (Villanueva, 2014) 2019) GR: Under the law on sales, it would seem
that a spouse may, without the consent of
Others Specially Disqualified by Law The permanent disqualification of public and the other spouse, enter into sales
judicial officers and lawyers grounded on public transactions in the regular or normal pursuit
Cannot be ratified.
policy differs from the first three cases of guardians, of their profession, vocation or trade. (In
- Void agents and administrators (Art 1491, NCC), as to relation to Art. 73, FC)
Reason: It is not only a private wrong, but also a
whose transactions it had been opined that they
public wrong. (Ibid.)
may be “ratified” by means of and in “the form of a XPN: Even when the property regime
Public Officers and Employees new contract, in which cases its validity shall be prevailing was the conjugal partnership of
determined only by the circumstances at the time gains, the Supreme Court held the sale by the
Cannot be ratified. the execution of such new contract.” The causes of husband of a conjugal property without the
Property of the State
entrusted to them for Void nullity which have ceased to exist cannot impair the consent of the wife is void, not merely
Reason: It is not only a private wrong, but also a validity of the new contract. (Rubias v. Batiller, G.R. voidable under Art. 124 of the Family Code
administration.
public wrong. (Ibid.) No. L-35702, 29 May 1973) since the resulting contract lacks one of the
essential elements of full consent. (Sps.
NOTE: Prohibitions are applicable to sales in legal Guiang v. CA, G.R. No. 125172, 26 June 1998)
redemption, compromises and renunciations.
XPN to the XPN: The following are valid
Status of the following Contracts of Sale even though they involve conjugal property
and are made without the consent of the
1. Sale entered into by minors – other spouse:

GR: It is voidable, subject to annulment or 1. If there is a court order; and

ratification. 2. If such sale of the conjugal property is
necessary to answer for the conjugal
XPN: Where necessaries are sold and delivered liabilities mentioned in art. 161 and 162
to a minor or other person without capacity to of the FC.
act, he must pay a reasonable price. (Art. 1489
(2), NCC) c. Between common law spouses – also null
and void.
2. Sale by & between spouses (Art. 1490, NCC)
Sale between common law spouses is null
a. Status of prohibited sales between and void to prevent the exercise of undue
spouses: influence by one spouse over the other. The
prohibition also applies to a couple living as
GR: Null and void husband and wife without the benefit of
marriage.
XPN: In case of sale between spouses:
1. When a separation of property was A contract of sale made by a husband to a
agreed upon in the marriage concubine was null and void for being
settlements; or contrary to morals and public policy. The
2. When there has been a judicial sale was subversive of the stability of the
separation of property agreed upon family, a basic social institution, which
public policy cherishes and protects.

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(Calimlim-Canullas v. Fortun, G.R. No. L- judgment and not during the pendency of the case. SUBJECT MATTER The requisite that a thing be determinate is satisfied
57499, 22 June 1984) As such it is valid stipulation between the lawyer if at the time the contract is entered into, the thing is
and client. Requisites of Proper Objects of Sale capable of being made determinate without the
Reason: The condition of those who incurred necessity of a new or further agreement between
guilt would turn out to be better than those in Persons Specially Disqualified by Law to Enter 1. THINGS the parties. (Art. 1460, NCC)
legal union. To render it applicable would put into Contracts of Sale (ALIEN-Un-O-S) a. Determinate or determinable;
common-law relationships in a better position b. Lawful or licit; and B. When a thing is determinable –
than those legally married. (Villanueva, 2018) 1. ALIENs who are disqualified to purchase c. Should not be impossible (within the
private agricultural lands; (Art. XII, Secs. 3 & 7, commerce of men). Requisites:
Persons who have the Right to Assail the Validity 1987 Constitution) 1. Capacity to segregate test – If at
of the Transaction between Spouses 2. RIGHTS perfection of the sale, the subject matter is
2. Unpaid seller having a right of lien or having capable of being made determinate (the
The following are the only persons who can stopped the goods in transitu is prohibited GR: Must be transmissible. “capacity to segregate” test); and
question the sale between spouses: from buying the goods either directly or
indirectly in the resale of the same at public or e.g., right of redemption, right of usufruct, 2. No further agreement test – Without the
1. The heirs of either of the spouses who have private sale which he may make or initiate; assignment or sale of credit, right to necessity of a new or further agreement
been prejudiced; (Arts. 1533(5) & 1476(4), NCC) inheritance already acquired, etc. between the parties (the “no further
2. Prior creditors; and agreement” test).
3. The State when it comes to the payment of the 3. The Officer holding the execution or deputy XPNs:
proper taxes due on the transaction. cannot become a purchaser or be interested a. FUTURE INHERITANCE – cannot be Even if the subject matter of the sale was generic,
directly or indirectly on any purchase at an the subject of sale; the performance of the seller’s obligation would
Status of the Contract Entered into by a Person execution; (Sec. 21, Rule 39, ROC) require necessarily its physical segregation or
who has No Capacity to Act Reason: The interest of the heir over particular designation, making the subject matter
4. In Sale by auction, seller cannot bid unless the inheritance prior to the death of determinate at the point of performance.
1. If only one of the parties has no capacity: notice has been given that such sale is subject the decent is merely inchoate or a
VOIDABLE to a right to bid in behalf of the seller. (Art. mere expectancy. This rule is in accord The buyer does not assume the risk of loss of a
2. If both parties have no capacity: 1476, NCC) with a well-known principle of law generic subject matter under a valid sale until the
UNENFORCEABLE that one cannot transmit or dispose of object is made determinate, either by physical
3. If the incapacity is Senility: VOID (Villanueva, Effect of a Sale made by the Seller with Voidable that which he does not have — nemo segregation or particular designation. (Villanueva,
2018) Title over the Object dat quod non-habet. 2009)

NOTE: An incapacitated person is NOT obligated to 1. Perfection stage: Valid – buyer acquires title b. SERVICE NOTE: The thing may be existing or not at the time
make restitution, except insofar as he has been of goods. of the perfection of the contract. So long as it has the
benefited by the thing/price. Reason: They are not determinate possibility of existence at some future time. The law
2. Consummation stage: Valid – if the title has things and no transfer of ownership is says things that having a potential existence may be
Q: The stipulation between the lawyer and not yet been avoided at the time of sale and the available but it can be the object of the object of the contract of sale. (Art. 1461(1), NCC;
counsel is as follows, “the attorney’s fees of the buyer must buy the goods under the following certain contracts such as contract for a Rabuya, 2017)
Atty. X will be ½ of whatever the client might conditions: piece of work. (Pineda, 2010)
recover from his share in the property subject of a. In good faith; Sale for a Lump Sum (Art. 1542, NCC)
the litigation.” Is the stipulation valid? b. For value; and The Subject Matter of Sale must be Determinate
c. Without notice of seller’s defect of title. or at least Determinable. In the sale of real estate, made for a lump sum and
A: YES. The stipulation made is one of a contingent (Art. 1506, NCC) not at the rate of a certain sum for a unit of measure
fee which is allowed by the CPE and the CPR. It does A. When a thing is determinate – or number, there shall be no increase or decrease of
not violate the prohibition of acquisition of property NOTE: Art. 1506 is predicated on the principle that the price, although there be a greater or less area or
subject of the litigation by the lawyer provided for where loss has happened which must fall on one of A thing is determinate when it is particularly number than that stated in the contract.
in the Civil Code since the prohibition applies only two innocent persons, it should be borne by him, designated or physically segregated from all others
to a sale or assignment to the lawyer by his client who is the occasion of the loss. (De Leon, 2005) of the same class. The same rule shall be applied when two or more
during the pendency of the litigation. The transfer immovables as s sold for a single price; but if,
actually takes effect after the finality of the besides mentioning the boundaries, which is

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indispensable in every conveyance of real estate, its Kinds of Object of Sale did not act in bad faith. Emptio Rei Speratae v. Emptio Spei
area or number should be designated in the
contract, the vendor shall be bound to deliver all 1. Existing Goods – Owned or possessed by seller 5. Things subject to Resolutory Condition EMPTIO REI
EMPTIO SPEI
that is included within said boundaries, even when at the time of perfection. SPERATAE
it exceeds the area or number specified in the e.g., Things acquired under legal or Definition
contract; and, should he not be able to do so, he shall 2. Future Goods – Goods to be manufactured, conventional right of redemption, or subject to
Sale of thing having Sale of mere hope or
suffer a reduction in the price, in proportion to what raised, acquired by seller after perfection of the reserva troncal. (Art. 1465, NCC)
potential existence expectancy
is lacking in the area or number, unless the contract contract or whose acquisition by seller depends
is rescinded because the vendee does not accede to upon a contingency. (Art. 1462, NCC) 6. Indeterminate Quantity of Subject Matter Uncertainty
the failure to deliver what has been stipulated. (Art. Uncertainty is with Uncertainty is with
1542, NCC) 3. Sale of Undivided Interest or Share NOTE: The fact that the quantity is not regard to quantity & regard to the existence
determinate shall not be an obstacle to the quality of the thing
The vendors are obligated to deliver all the land a. Sole owner may sell an undivided interest existence of the contract, provided it is possible Object of the Sale
included within the boundaries, regardless of (Art. 1463, NCC). e.g., A fraction or to determine the same without need of a new
Contract deals with a
whether the real area should be greater or smaller percentage of such property. contract. (Art. 1349, NCC) Contract deals with a
present thing – the
than that recited in the deed. This is particularly future thing
hope or expectancy
true where the area is described as “humigit b. Sale of an undivided share in a specific Sale of Things with Potential Existence
kumulang,” that is, more or less. (Semira v. CA, G.R. mass of fungible goods makes the buyer a Effectivity
No. 76031, 02 Mar. 1994) co-owner of the entire mass in proportion The validity of sale of things with potential existence
to the amount he bought. (Art. 1464, NCC) depends upon the intention of the parties: Sale is valid only if the
Q: Lino entered into a contract to sell with expected thing will
Ramon, undertaking to convey to the latter one NOTE: Each co-owner only possesses a 1. Emptio rei speratae / sale of the thing exist. So that if the
of the five lots he owns, without specifying which right to sell or alienate his ideal share after expected – If the contract of sale is made condition is not
lot it was, for the price of P1 million. Later, the partition. However, in case he disposes his dependent upon the existence of the things such fulfilled, if the thing Sale is valid even
parties could not agree which of five lots he share before partition, such disposition that if it did not come into existence, the does not come into though expected thing
owned Lino undertook to sell to Ramon. What is does not make the sale or alienation null contract is not effective, and the buyer will have existence, the contract does not come into
the standing of the contract? (2011 BAR) and void. What will be affected on the sale no obligation to pay the price. cannot have the effect existence as long as the
is only his proportionate share, subject to for lack of an essential hope itself validly
A: It is a void contract since the particular lot sold the results of the partition. The co-owners 2. Emptio spei / sale of hope – If the contracting requisite. Although the existed e.g., lotto.
cannot be determined. who did not give their consent to the sale parties intended the contract of sale to exist at vendee may have
stand to be unaffected by the alienation. all events. reserved his right to NOTE: Sale of a vain
OBJECT OF SALE (Torres, Jr. v. Lapinid, G.R. No. 187987, 26 claim indemnity from hope or expectancy
Nov. 2014) Sale of a Mere Hope or Expectancy the vendor in the event however, is void. (Art.
GR: A person cannot sell or convey what he does not that the latter knew 1461, NCC)
have or own. 4. Sale of Things in Litigation GR: The sale is valid even if the expected thing did that the thing could not
not materialize. come into existence.
XPNs: a. Sale of things under litigation is rescissible (Rabuya, 2017; Jurado,
1. Sale of a thing having potential existence; (Art. if entered into by the defendant, without XPNs: 2019)
1461, NCC) the approval of the litigants or the court. 1. The hope or expectancy is vain; or
2. Sale of future goods; (Art. 1462, NCC) and (Art. 1381, NCC) 2. The parties intended that if the hope or
3. Contract for the delivery at a certain price of an expectancy will not materialize, the sale is NOTE: If there is doubt, the presumption is in favor
article, which the seller in the ordinary course NOTE: If the property involved belongs to a void. of emptio rei speratae.
of business manufactures/procures for the ward and the guardian enters into a
general market, whether the same is on hand contract involving such property without The efficacy of the sale of a mere hope or expectancy PRICE
at the time or not. (Art. 1467, NCC) court approval, the contract is void, not is deemed subject to the condition that the thing will
merely rescissible. come into existence. (Art. 1461, NCC) The sum stipulated as the equivalent of the thing
sold and also every incident taken into
b. No rescission is allowed where the thing is consideration for the fixing of the price put to the
legally in the possession of a 3rd person who debit of the buyer and agreed to by him. (Villanueva,
2009)

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NOTE: A definite agreement on the manner of NOTE: If the price is based on estimates, it is 3. When the third person is prevented from Agreement further provided that breach of its
payment of the price is an essential element in the uncertain. fixing the price or terms by fault of either the terms shall render the Deed of Sale non-effective
formation of a binding and enforceable contract of seller or the buyer, the party not in fault may and nugatory.
sale. (Hyatt Elevators and Escalators Corp. v. When Price of Securities, Grains, Liquids and have such remedies such as rescission or
Cathedral Heights Building Complex Assoc., Inc., G.R. Things is Considered Certain fulfillment, with damages in either case, Aproniana assailed the validity of both
No. 173881, 01 Dec. 2010) against the party in fault as are allowed the documents for being fictitious and without
1. When the price fixed is that which the thing seller or the buyer, as the case may be; (Arts. consideration. She claimed that it was
Requisites for Valid Price would have on a definite day, or in a particular 1469, 1191, & 1594) incongruous for Anecito to sell the subject
exchange or market; 4. When the third person disregards the specific property for P15,000.00 when it had a market
It must be: 2. When the amount is fixed above or below the instructions or the procedure marked out by value of at least P150,000.00 at the time of sale.
1. Real, not fictitious (Art. 1471, NCC); price of such day, or in such exchange or market, the parties. Moreover, Juan allegedly could not afford to pay
2. Paid in money or its equivalent (i.e., valuable provided said amount be certain; the real value of the subject property as he had
consideration) (Arts. 1458 & 1468, NCC); 3. When it is by reference to another certain thing. Test of Gross Inadequacy of Price no known means of livelihood. She claimed that
3. Certain or ascertainable at the time of the (Art. 1471, NCC) the transaction was in reality a donation mortis
perfection of the contract (Art. 1458, NCC); and The price is grossly inadequate if a reasonable man causa, and since it was not executed in
4. In some cases, must not be grossly inferior to NOTE: Art. 1469 is not allowed for the will not agree to dispose of his property at that accordance with the formalities of the law, it was
the value of the thing sold. determination of the subject matter of the sale. amount. (Vda. De Delfin v. Dellota, G.R. No. 143697, null and void.
28 Jan. 2008)
NOTE: There is NO effect on the contract of sale in Fixing of the Price CANNOT be Left to the Aproniana also claimed that while Juan knew
case of breach in the agreed manner of payment. Discretion of One of the Contracting Parties Effect of Gross Inadequacy of Price that Aquilino and Ducepino were mentally
Payment of the price has nothing to do with the incapacitated, the sale transpired without the
perfection of the contract. Payment of the price goes GR: The price cannot be fixed unilaterally by one of GR: It does not affect the validity of the sale. two brothers being represented therein.
into the performance of the contract. (Pilipinas Shell the contracting parties. Aproniana further averred that Juan and
Petroleum Corp. v. Gobonseng, Jr., G.R. No. 163562, 21 XPNs: (Co-R-D-S) Corazon took possession of the property and
Jul. 2006) XPN: If the price fixed by one of the parties is 1. If Consent is vitiated (may be annulled or arrogated unto themselves the full enjoyment
accepted by the other, the sale is perfected. (Art. presumed to be equitable mortgage); thereof and its fruits to the detriment of
Simulated Price 1473, NCC) 2. If the parties intended a Donation or some Aquilino and Ducepino who had not been
other act/contract; properly taken care of until she took them under
The price is simulated when neither party had the Effect when the Price is Unilaterally Fixed by 3. If the price is so low as to be “Shocking to the her custody in 1996. Will gross inadequacy of
intention that the amount will be paid. (Yu Bun Guan One of the Contracting Parties without Consent conscience;” and the price nullify the contract between Anecito
v. Ong, G.R. No. 144735, 18 Oct. 2001) of the Other Party 4. If in the event of Resale, a better price can be and Juan?
obtained. (Art. 1470, NCC)
Effect if Price is Simulated There is no meeting of the minds. The sale is A: NO. Gross inadequacy of the price did not
inefficacious. (Pineda, 2010) NOTE: When the law gives the owner the right of invalidate the subject contract. First, a contract
GR: The sale is void. redemption like in a sale made at public auction, the enjoys the presumption that it is supported by an
Effect when the Price is Fixed by the Third sale is not necessarily affected even if the price is existing and lawful cause or consideration. Second,
XPN: If it can be shown to be a donation or another Person Designated low. The reason is that the lesser the price, the notarized documents, being public in nature,
contract. (Art. 1471, NCC) easier it is for the owner to redeem the property. require no further proof of their authenticity and
GR: Price fixed by a third person designated by the due execution. The Deed of Sale states in plain terms
When Price is Certain parties is binding upon them. Q: A Deed of Sale and an Agreement, was that the subject property is being sold for
executed by and between Anecito and Juan. In P15,000.00. Anecito had expressly acknowledged in
1. If there is a stipulation; XPNs: the Deed of Sale, Anecito allegedly ceded unto the Deed of Sale his receipt of the said amount as
2. If it be with reference to another thing certain; 1. When the third person is unable or unwilling Juan the subject property for a consideration of consideration of the contract. No further issue on
3. If the determination of the price is left to the to fix it, the contract shall be inefficacious, P15,000.00, while the Agreement stipulated that the regularity of the notarization was raised on
judgment of specified person(s) (Art. 1469, unless the parties subsequently agree upon during Anecito's lifetime, Juan shall allow appeal. To debunk the existence of consideration in
NCC); or the price; (Art. 1469, NCC) Anecito to enjoy the usufruct of the subject the Deed of Sale, there must be more than mere
4. By reference to certain facts as referred to in 2. When the third person acts in bad faith or by property, and that upon Anecito's death, Juan preponderant evidence showing that Anecito did
Art. 1472 of the Civil Code mistake. The courts may fix the price; (Art. shall continue to support and provide financial not truly execute the disputed document or that the
1469, NCC) assistance to Aquilino and Ducepino. The parties had not truly intended a contract of sale.

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However, whether preponderant, clear, or property. Nante alleged that the agreement was NOTE: Option money may become earnest money if Effect of Non-payment
convincing, petitioner never submitted any one to sell, which was not consummated as the the parties agree. (De Leon, 2011)
controverting evidence. Aproniana only stated that full contract price was not paid. Is the Action for specific Action for specific
Anecito had told her that the sale was simulated and contention of Nante tenable? (2014 BAR) Significance of Giving Earnest Money performance can be performance or
that no consideration was paid. Aside from what filed. rescission can be filed.
Aproniana stated, nothing else was presented in A: NO. The deed itself states that for consideration It is considered as:
support of the claim that the amount of P15,000.00 received, he sells, transfers, and conveys the land to 1. Part of the purchase price – earnest money is Remedy when Seller Refuses to Complete the
was fabricated or actually unpaid. (Bacala v. Heirs of Monica and there was delivery of the property to the deducted from the total price; and Sale Transaction despite Down Payment of the
Poliño, G.R. No. 200608, 10 Feb. 2021) latter. The contract is clearly one of sale as there was 2. Proof of perfection of the contract. (Art. 1482, Buyer
no reservation of ownership on the part of the seller NCC)
Annulment of Sale NOT the Remedy in a Nante. The non-payment of the price in a contract of The action for specific performance will lie. There is
Simulated Sale sale would only entitle the seller to rescind the Effect of Rescission on Earnest Money Received a perfected contract of sale because there was a
contract but it does not thereby prevent the transfer binding agreement of sale, not just an option
Where the deed of sale states that the purchase of ownership particularly so as in this case, where When the seller seeks to rescind the sale, he is contract. The sale was perfected upon acceptance
price has been paid but in fact has never been paid, there was already delivery to the buyer. obliged to return the thing which was the object of by the seller of the down payment from the buyer.
the deed of sale is null and void ab initio for lack of the contract along with fruits and interest. (Art.
consideration. (Sps. Viovicente v. Sps. Viovicente, G.R. OPTION MONEY vis-à-vis EARNEST MONEY 1385, NCC) Seller’s Refusal to Proceed with the Sale despite
No. 219074, 28 July 2020) Moreover, Art. 1471 of the Down Payment of Buyer on the ground that the
Civil Code, provides that “if the price is simulated, Option Money Option Money v. Earnest Money Transaction is Disadvantageous to Him (seller)
the sale is void.” (Catindig v. Vda. de Meneses, Roxas
v. CA, G.R. No. 165851 & 168875, 02 Feb. 2, 2011) It is the distinct consideration in case of an option OPTION MONEY EARNEST MONEY The seller cannot justify his refusal to proceed with
contract. It does not form part of the purchase price the sale by the fact that the deal is financially
As to Money Given
Effect of Failure to Determine the Price hence; it cannot be recovered if the buyer did not disadvantageous to him. Having made a bad bargain
continue with the sale. (Art. 1479, NCC) Money given as distinct is not a legal ground for pulling out of a binding
1. Where contract is executory – ineffective. Forms part of the
consideration for an contract of sale, in the absence of some actionable
2. Where the thing has been delivered to and NOTE: Option contract’s distinguishing purchase price.
option contract. wrong by the other party. (Legaspi y Navera v.
appropriated by the buyer – the buyer must pay characteristic is that it imposes no binding People, G.R. No. 225753, 15 Oct. 2018)
a reasonable price therefor. obligation on the person holding the option, aside As to Perfection
from the consideration for the offer. (Capalla v. Sale of a Thing by a Person NOT its Owner
Q: Nante, a registered owner of a parcel of land COMELEC, G.R. Nos. 201112, 201121, 201127, Applies to a sale not yet Given only when there
in Quezon City, sold the property to Monica 201413, 13 June 2012) perfected. is already a sale.
Ownership by the seller on the thing sold at the time
under a deed of sale which reads as follows: of the perfection of the contract of sale is not an
Consideration of Payment as Option Money Obligation of the Buyer Upon
element for its perfection. What the law requires is
“That for and in consideration of the sum of Payment of Consideration
that the seller has the right to transfer ownership at
P500,000, value to be paid and delivered to me, Payment is considered option money when it is the time the thing sold is delivered. A perfected
When given, the buyer
and receipt of which shall be acknowledged by given as a separate and distinct consideration from Prospective buyer is
contract of sale cannot be challenged on the ground
is bound to pay the
me to the full satisfaction of Monica, referred to the purchase price. not required to buy.
of non-ownership on the part of the seller at the
balance.
as a vendee, I hereby sell, transfer, cede, convey, time of its perfection. Hence, the sale is still valid.
and assign, as by these presents, I do have sold, Earnest Money or “arras” (2002 BAR) As to Recovery
(Quijada v. CA, G.R. No. 126444, 04 Dec. 1998)
transferred, ceded, conveyed and assigned a
If sale did not
parcel of land covered by TCT No. 2468 in favor This is the money given to the seller by the If buyer does not Right to Transfer Ownership
materialize, it must be
of the Vendee.” prospective buyer to show that the latter is truly decide to buy, it cannot
returned. (Villanueva,
interested in buying the property, and its aim is to be recovered. It is during the delivery that the law requires the
2014; Pineda, 2010)
After delivery of the initial payment of bind the bargain (Pineda, 2010). It is actually a seller to have the right to transfer ownership of the
P100,000.00, Monica immediately took partial payment of the purchase price and is As to Transfer of Ownership thing sold. In general, a perfected contract of sale
possession of the property. Five (5) months considered as proof of the perfection of the contract. Ownership is reserved cannot be challenged on the ground of the seller’s
after, Monica failed to pay the remaining (De Leon, 2011) Title passes to the
to the seller and is not non-ownership of the thing sold at the time of the
balance of the purchase price. Nante filed an buyer upon delivery of
to pass until full perfection of the contract. (Alcantara-Daus v. Sps. De
action for the recovery of the possession of the the thing sold.
payment. Leon, G.R. No. 149750, 16 June 2003)

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This rule is in accord with a well-known principle of agreed but demanded for an initial payment of However, the rules also allow a co-owner to alienate
law that one cannot transmit or dispose of that ₱1,500.00, which Juan Cabrera paid. On June 15, his or her part in the co-ownership. These two rules C. EFFECTS OF THE CONTRACT WHEN
which he does not have — nemo dat quod non-habet. 1992, Juan Cabrera tried to pay the balance of are reconciled through jurisprudence. If the THE THING SOLD HAS BEEN LOST
the purchase price to Henry Ysaac. However, at alienation precedes the partition, the co-owner
NOTE: Future inheritance cannot be the subject of that time, Henry Ysaac was in the United States. cannot sell a definite portion of the land without
sale. The only person in Henry Ysaac’s residence was consent from his or her co-owners. He or she could
A thing is considered as lost
his wife who refused to accept Juan Cabrera’s only sell the undivided interest of the co-owned
Legal Effect of Sale by a Non-owner payment. property. As summarized in Lopez v. Ilustre, “if he is
GR: It is understood that the thing is lost when it:
the owner of an undivided half of a tract of land, he
1. Perishes;
GR: The buyer acquires no better title to the goods On Sept. 21, 1994, Henry Ysaac’s counsel wrote has a right to sell and convey an undivided half, but
2. Goes out of commerce; or
than the seller had; caveat emptor (buyer beware). a letter addressed to Juan Cabrera’s counsel, he has no right to divide the lot into two parts, and
3. Disappears in such a way that its existence is
(Art. 1505, NCC) informing the latter that his client is formally convey the whole of one part by metes and bounds.”
unknown or cannot be recovered. (Art.
rescinding the contract of sale because Juan (Cabrera v. Ysaac, G.R. No. 166790, 19 Nov. 2014)
1189(2), NCC)
XPNs: Cabrera failed to pay the balance of the purchase
1. Estoppel or when the owner of the goods is by price of the land between May 1990 and May
XPN: In an obligation to deliver a generic thing, the
his conduct precluded from denying the 1992. The letter also stated that Juan Cabrera’s
loss or destruction of anything of the same kind
seller’s authority to sell (Art. 1505, NCC); initial payment of ₱1,500.00 and the subsequent
does not extinguish the obligation. (Art. 1263, NCC)
2. When the contrary is provided for in recording payment of ₱6,100.00 were going to be applied
laws (Art. 1505, NCC); as payment for overdue rent of the parcel of land
Effect when the Loss occurred Before Perfection
3. When the sale is made under statutory power Juan Cabrera was leasing from Henry Ysaac. Due
of sale or under the order of a court of to Juan Cabrera’s inability to enforce the
GR: The thing perishes with the owner – Res perit
competent jurisdiction (Art. 1505, NCC); contract of sale between him and Henry Ysaac,
domino (Art. 1504, NCC; 1999 BAR)
4. When the sale is made in a merchant’s store in he decided to file a civil case for specific
accordance with the Code of Commerce and performance. Was there a valid contract of sale
XPNs:
special laws (Art. 1505, NCC); between Ysaac and Cabrera?
1. Where the delivery has been made either to
5. When a person who is not the owner sells and
the buyer or to the bailee for the buyer, but
delivers a thing, and subsequently acquired A: NO. There was no valid contract of sale between
ownership in the goods has been retained by
title thereto (Art. 1434, NCC); petitioner and respondent as the contract was null
the seller merely to secure performance by the
6. When the seller has a voidable title which has ab initio. The object of the sales contract between
buyer of his obligations under the contract
not been avoided at the time of the sale (Art. petitioner and respondent was a definite portion of
(Art. 1504(1), NCC);
1505, NCC); a co-owned parcel of land. At the time of the alleged
7. Sale by co-owner of the whole property or a sale between petitioner and respondent, the entire
2. Where actual delivery has been delayed
definite portion thereof (Art. 493, NCC); or property was still held in common. The rules allow
through the fault of either the buyer or seller,
8. Special rights of unpaid seller. (Arts. 1526- respondent to sell his undivided interest in the
the goods are at the risk of the party at fault
1533, NCC) coownership. However, this was not the object of
(Art. 1504(2), NCC); and
the sale between him and petitioner. The object of
Q: Henry Ysaac leased out portions of the the sale was a definite portion. Even if it was
3. Where goods are sent by the seller to the buyer
property to several lessees. Juan Cabrera, one of respondent who was benefiting from the fruits of
under circumstances in which the seller knows
the lessees, leased a 95 sq. m. portion of the land the lease contract to petitioner, respondent has "no
or ought to know that it is usual to insure, the
beginning in 1986. On May 6, 1990, Henry Ysaac right to sell or alienate a concrete, specific or
seller must give such notice to the buyer as
needed money and offered to sell the 95 sq. m. determinate part of the thing owned in common,
may enable him to insure them during their
piece of land to Juan Cabrera. He told Henry because his right over the thing is represented by
transit, and, if the seller fails to do so, the goods
Ysaac that the land was too small for his needs quota or ideal portion without any physical
shall be deemed to be at his risk during such
because there was no parking space for his adjudication. Sale of a portion of the property is
transit. (Art. 1523(3), NCC)
vehicle. Juan Cabrera accepted the new offer. considered an alteration of the thing owned in
Henry Ysaac and Juan Cabrera settled on the common.
NOTE: The seller still owns the thing because there
price of ₱250.00 per sq. m., but Juan Cabrera
is no delivery or transfer of ownership yet. Hence,
stated that he could only pay in full after his Under the Civil Code, such disposition requires the
the seller bears the risk of loss. (Villanueva, 2004)
retirement on June 15, 1992. Henry Ysaac unanimous consent of the other co-owners.

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Effect when the Loss occurred at the time of the part of the buyer is not extinguished. 2. Where actual delivery has been delayed
Perfection of the Contract of Sale (Villanueva, 2009) through the fault of either the buyer or seller, D. OBLIGATIONS OF VENDOR
the goods are at the risk of the party at fault.
GR: Contract is considered void or inexistent NOTE: Pursuant to Art. 1537 of the Civil Code, the (Art. 1504(1)(2), NCC)
because the object did not exist at the time of the vendee must also bear the resulting disadvantages
Obligations of the Seller (D-D-T-W-T-P-I)
transaction (Pineda, 2010). Res perit domino applies. before the delivery but after the contract has been SUMMARY: Person who Bears the Risk of Loss or
(Art. 1504, NCC) perfected. This theory is an exception to the rule of Deterioration
1. Deliver the thing sold (Arts. 1458 & 1495, NCC);
res perit domino. On the other hand, pursuant to Art.
2. Deliver fruits & accessions/accessories
XPN: In case of partial loss, the buyer may choose 1262 of the Civil Code, if the thing is lost or PERSON WHO BEARS accruing from perfection of sale (Arts. 1164,
between withdrawing from the contract and destroyed without the fault of the seller, the THE RISK OF LOSS OR DETERIORATION 1166, & 1537, NCC);
demanding the remaining part. If he chooses the obligation to deliver is extinguished but the Before Perfection 3. Transfer the ownership (Arts. 1458 & 1495,
latter, he shall pay the remaining part’s obligation to pay subsist. (Pineda, 2010)
SELLER is the owner so seller bears risk of loss. NCC);
corresponding price in proportion to the total sum
4. Warranties (Arts. 1495 & 1545-1581, NCC);
agreed upon. (Art. 1493, NCC) Second view: Res perit domino or seller bears the At the Time of Perfection
5. Take care of the thing, pending delivery, with
risk of loss. (Tolentino, Jurado, Baviera, and Contract shall be without any effect – the SELLER proper diligence (Arts. 1163, NCC);
Options of the Buyer with regard to the Sale in Villanueva) bears the loss since the buyer is relieved of his 6. Pay for the expenses of the deed of sale unless
the Total or Partial Loss or Deterioration of a obligation under the contract. there is a stipulation to the contrary (Arts.
Mass of Specific Goods without the Knowledge of In reciprocal obligations, the extinguishment of the After Perfection but Before Delivery 1487, NCC); and
the Seller obligation due to loss of the thing affects both
Two (2) conflicting views 7. Obligation of taking-out the Insurance
debtor and creditor; the entire juridical relation is
Deterioration & fruits – Buyer bears loss. coverage. (Art. 1523, NCC)
1. He may treat the sale as avoided or cancelled; or extinguished. Under this view, the rule on loss under
(Tolentino, 2002)
2. He may continue with the sale with respect to Art. 1189 of the Civil Code would be different from
Obligation of the Seller in terms of the Nature of
the available or remaining goods. (Art. 1494, the rule on deterioration – the loss would be for the
First view: Res perit creditori or buyer bears the Subject Matter of the Sale
NCC) account of the seller, while deterioration would be
the risk of loss. (Paras, Vitug, Padilla,
for the account of the buyer. (Tolentino, 2002)
and De Leon) When the subject matter of the sale is a determinate
Effect if the Buyer chooses to Continue with the
or specific thing, the seller must deliver the thing to
Sale of the Remaining Goods This view would make Arts. 1480 and 1538 of the
Second view: Res perit domino or seller bears the buyer when compelled by the latter.
Civil Code consistent with the provisions of Arts.
the risk of loss. (Tolentino, Jurado, Baviera, and
The remaining goods shall pass in ownership to the 1504 of the Civil Code. (Villanueva, 2009)
Villanueva) When the subject matter is an indeterminate or
buyer but subject to proportionate reduction of the
After Delivery generic thing, the seller may be asked that the
price. But this is applicable only if the goods are Ownership is transferred only after delivery,
Buyer becomes the owner so BUYER bears risk of obligation be complied with at his expense. (Art.
divisible or capable of being divided (Pineda, 2010). further, the contract is reciprocal. If the vendee
loss. 1165, NCC)
If indivisible, the only option available is the cannot have the thing, it is illogical and unjust to
avoidance of the sale. make him pay the price. (Pineda, 2010)
Delivery extinguish ownership vis-à-vis the seller Seller’s Obligation in case of Delay or Promise to
& creates a new one in favor of the buyer; where Deliver the Thing to Two or More Persons who
Effect when the Loss occurred After Perfection Effect when Loss occurred After Delivery
the application of res perit domino lies. do NOT have the Same Interest
but Before Delivery
GR: Res perit domino applies – the buyer is now the
The seller shall be responsible for any fortuitous
GR: Who bears the risk of loss is governed by the owner; hence, the buyer bears the risk of loss. (Art.
event that may occur until he has delivered the
stipulations in the contract. 1504, NCC)
thing. (Art. 1165 in relation to Art. 1174, NCC)

XPN: In the absence of stipulation, there are two XPNs:

WARRANTIES
conflicting views: 1. Where the delivery has been made either to the
First view: Res perit creditori or buyer bears the buyer or to the bailee for the buyer, but
Warranty
risk of loss. (Paras, Vitug, Padilla, and De Leon) ownership in the goods has been retained by
the seller merely to secure performance by the
A statement or representation made by the seller of
Art. 1504 of the Civil Code which embodies res perit buyer of his obligations under the contract; and
goods, as part of the contract of sale, having
domino, only covers goods. The obligation to pay on
reference to the character, quality, or title, of the
goods, and by which he promises or undertakes to

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insure that certain facts are or shall be as he then Liability of the Seller for Breach of Express 3. GR: Warranty against non-apparent burden or NOTE: Hidden faults or defects pertain only to those
represents. (De Leon, 2011) Warranties servitude. (Art. 1560, NCC) that make the object of sale unfit for the use for
which it was intended at the time of the sale, or
Effect of a Breach of Warranty The seller is liable for damages. (Villanueva, 2009) Requisites: those which considerably decrease such fitness.
a. Immovable sold is encumbered with non-
Buyer may: Effect of Expression of Opinion apparent burden or servitude not Non-applicability of Implied Warranty (A-S-A-P)
1. Refuse to proceed with the contract; or mentioned in the agreement; and
2. Proceed with the contract and waive the GR: A mere expression of opinion, no matter how b. Nature of non-apparent servitude or 1. “As is and where is” sale;
condition. positively asserted, does not import a warranty. (De burden is such that it must be presumed 2. Sale of Second-hand articles;
Leon, 2011) that the buyer would not have acquired, it 3. Sale by virtue of Authority in fact or law; and
NOTE: If the condition is in the nature of a promise had he been aware thereof. 4. Sale at Public auction for tax delinquency.
that it should happen or be performed, the non- XPN: If the seller is an expert and his opinion was
performance may be treated as a breach of relied upon by the buyer. XPN: Warranty is not applicable when the Where the Cause of Action is to Hold the Seller of
warranty. (Art. 1545(1), NCC) servitude is mentioned in the agreement, or a Vehicle for Breach of Implied Warranty
Implied Warranties when the non-apparent burden or servitude is
Kinds of Warranties recorded in the Registry of Property. Under Art. 1599 of the Civil Code, once an express
Warranties deemed included in all contracts of sale warranty is breached, the buyer can accept or keep
1. Express; or by operation of law. (Art. 1547, NCC) XPN to the XPN: Unless there is an express the goods, and maintain an action against the seller
2. Implied warranty that the thing is free from all burdens for damages. In the absence of an existing express
1. Warranty that seller has right to sell – refers and encumbrances. warranty, a complaint for damages may be
NOTE: Prescriptive period of actions based on to consummation stage, at which time the anchored on the enforcement of an implied
express warranty: ownership is to pass. Not applicable to a sheriff, 4. Warranty against Hidden Defects (Art. 1561, warranty against hidden defects. However, this
auctioneer, mortgagee, pledgee or any other NCC); right must be exercised within six (6) months from
a. That specified in the contract and in the person professing to sell by virtue of authority the delivery of the thing sold, or else his cause of
absence thereof; or in fact or in law, for the sale of a thing in which Requisites: (S-H-A-W-N-E) action had become time-barred. (De Guzman v.
b. Four (4) years. (Rabuya, 2017) a third person has legal or equitable interest Toyota Cubao, G.R. No. 141480, 29 Nov. 2006)
(Art. 1547, NCC); a. Defect is important or Serious;
Express Warranties i. The thing sold is rendered unfit for the Effects of Waiver of an Implied Warranty
2. Warranty against eviction (Art. 1548, NCC); use which it is intended; and
Any affirmation of fact or any promise by the seller ii. Diminishes its fitness for such use to 1. Seller is in bad faith and there is waiver against
relating to the thing if the natural tendency of such Requisites: (J-J-P-E-N-S) such an extent that the buyer would eviction – the waiver is void.
affirmation or promise is to induce the buyer to a. Buyer is Evicted in whole or in part from not have acquired it, had he been
purchase the same, and if the buyer purchases the the subject matter of sale; aware thereof, or would have at least 2. When the buyer who is without knowledge of a
thing relying thereon. (Art. 1546, NCC) b. Final Judgment; given a lower price for it. particular risk, made a general renunciation of
c. Eviction is by Final Judgment; warranty – is not a waiver but merely limits
Requisites: (A-I-R) d. Basis of eviction is a right Prior to sale or b. Defect is Hidden; liability of seller in case of eviction.
1. It must be an Affirmation of fact or any act imputable to seller; c. Defect Exists at the time of the sale;
promise by the seller relating to the subject e. Seller has been Summoned in the suit for d. Buyer gives Notice of the defect to the seller 3. When the buyer with knowledge of risk of
matter of sale; eviction at the instance of buyer, or made within a reasonable time; eviction assumed its consequences and made a
by a third-party defendant through a e. Action for rescission or reduction of the price waiver – seller is not liable (applicable only to
2. The natural tendency of such affirmation or third-party complaint brought by the is brought within the proper period; waiver of warranty against eviction).
promise is to Induce buyer to purchase the buyer; and i. Within six (6) months from delivery of
subject matter; and f. There is No waiver of warranty on the part the thing sold; (Art. 1571, NCC) and WARRANTY AGAINST EVICTION
of the buyer. ii. Within 40 days from delivery, in the
3. The buyer purchases the subject matter case of a redhibitory action on the sale In a contract of sale, unless a contrary intention
Relying on such affirmation or promise NOTE: For eviction – disturbance in law is of defective animals. (Art. 1577, NCC) appears, there is an implied warranty on the part of
thereon. (Philippine Steel Coating Corp. v. required and not just trespass in fact. the seller that he has the right to sell the thing at the
Quinones, G.R. No. 194533, 19 Apr. 2017) f. There must be no Waiver of warranty on time when the ownership is to pass, and that the
the part of the buyer. buyer shall from that time have and enjoy the legal

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and peaceful possession of the thing. (Art. 1547(1), 4. The Expenses of contract if buyer has paid NOTE: Seller does not warrant patent defects, or Responsibility of a Vendor for Hidden Defects
NCC) them; and those which are visible, or even for those which are
not visible if the buyer is an expert or should have If the hidden defects which the thing sold may have:
Kinds of Waiver of Eviction by the Buyer 5. The damages, interests and ornamental known them.
expenses if sale was made in bad faith. (Art. 1. Render it unfit for the use for which it is
1. Consciente – waiver voluntarily made by the 1555, NCC) Reason: Caveat emptor (buyer beware). intended; or
buyer without the knowledge and assumption 2. Diminish its fitness for such use to such an
of the risks of eviction; and NOTE: Vendor is liable for any hidden defect even if Application extent that had the vendee been aware thereof,
he is not aware thereof (Caveat Venditor). he would not have acquired it or would have
2. Intencionada – waiver made by the buyer with The seller shall be responsible for warranty against given a lower price for it. (Art. 1561, NCC)
knowledge of the risks of eviction and Purchaser must be aware of the title of the vendor “hidden defect” only when:
assumption of its consequences. (Art. 1554, (Caveat Emptor). Extent of Warranty by the Seller against Hidden
NCC) 1. The nature of the hidden defect is such that it Defects
Rights of Buyer in case of Partial Eviction should render the subject matter unfit for the
NOTE: Every waiver is presumed to be use for which it is intended; or The seller is responsible to the vendee for any
consciente unless the contrary is proven. 1. Restitution (with obligation to return the thing hidden faults or defects in the thing sold, even
without other encumbrances than those which 2. Should diminish its fitness for such use to such though he was not aware thereof.
Coverage of a Warranty against Eviction it had when he acquired it); an extent that, had the buyer been aware
thereof, he would not have acquired it or would When the Seller is NOT Answerable for the
It covers eviction by a final judgment based on a 2. Rescission of the contract if the part lost by have given a lower price for it. Defects of the Thing Sold
right prior to the sale, or an act imputable to the eviction is of such importance, in relation to the
vendor, whereby the vendee is deprived of the whole, that the buyer would not have bought it Redhibitory Defect 1. For patent defects or those which are visible;
whole or of a part of the thing purchased. without said part, provided that he returns the 2. Even for those which are not visible if the buyer
thing without other encumbrances than those It is an imperfection or defect in the article sold is an expert who, by reason of his trade or
The vendor shall answer for the eviction even which it had when he acquired it; or against which defect the seller is bound to warrant. profession, should have known them; (Art.
though nothing has been said in the contract on the The vice must constitute an imperfection, a defect in 1561, NCC) or
subject. 3. Enforcement of the vendor’s warranty against its nature, which is of certain importance; and thus, 3. If the contrary has been stipulated, and the
eviction. (Art. 1556, NCC; Paras, 2013) a minor defect does not give rise to redhibition. (De vendor was not aware of the hidden faults or
NOTE: The contracting parties, however, may Leon, 2011) defects in the thing sold. (Art. 1566, NCC)
increase, diminish, or suppress this legal obligation Inapplicability of Rescission
of the vendor. (Art. 1548, NCC) Redhibitory Defect on Animals (Art. 1576, NCC) Effect of a Breach of Warranty against Hidden
GR: Rescission is not a remedy in case of total Defects
Effect of a Breach of Warranty against Eviction eviction because rescission contemplates that the If the hidden defect of animals, even in case a
one demanding it is able to return whatever he has professional inspection has been made, should be of It would depend on whether the seller had
The buyer shall have the right to demand the R-I-C- received under the contract. Since the vendee can such a nature that expert knowledge is not sufficient knowledge of such defect, and whether there has
E with damages from seller: no longer restore the subject matter of the sale to to discover it, the defect shall be considered as been a waiver of the warranty.
the vendor, rescission cannot be carried out. (Art. redhibitory.
1. The Return of the value which the thing sold 1385, NCC) 1. If the thing should be lost in consequence of
had at the time of the eviction, be it greater or NOTE: The warranty against hidden defects shall the hidden faults, and seller was aware of
lesser than the price of the sale; XPN: The buyer may demand rescission in case of not apply to animals sold at fairs or at public them – he shall:
partial eviction, because there still remains a auctions, or of livestock sold as condemned. (Art. a. bear the loss;
2. The Income or fruits, if he has been ordered to portion of the thing sold. (De Leon, 2009) 1574, NCC) b. return the price; and
deliver them to the party who won the suit c. refund the expenses of the contract, with
against him; WARRANTY AGAINST HIDDEN DEFECT Void Sale of Animal (Art. 1575, NCC) damages.

3. The Costs of suit which caused the eviction, and, Hidden Defect (Art. 1561, NCC) The sale is void if the animal is: 2. If the thing is lost and the seller was not
in a proper case, those of suit brought against 1. Suffering from contagious diseases; or aware of the hidden faults – he shall:
the vendor for the warranty; One which is unknown or could not have been 2. Unfit for the use or service for which they were a. return the price and interest thereon;
known to the buyer. (Diaz, 2006) purchased, as indicated in the contract. and

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b. reimburse the expenses of the contract Specific Implied Warranties in Sale of Goods Remedies of the Buyer in case of Breach of Goodyear for breach of warranty. It is Sy’s
which the buyer might have paid, but not (Art. 1562, NCC) Warranty NOT Absolute argument that it is Goodyear’s duty to convey
for damages. (Villanueva, 2009) the vehicle to Sy, free from all liens,
1. Warranty of fitness for the purpose: The vendee's remedies against a vendor with encumbrances and legal impediments. Was
3. If the thing sold had any hidden fault at the respect to the warranties against hidden defects or there a breach of warranty by Goodyear?
time of sale, and should thereafter be lost That goods are suitable for the special purpose encumbrances upon the thing sold, in the case of
through a fortuitous event or through the of the buyer which will not be satisfied by mere Arts. 1561, 1562, 1564, 1565 and 1566 of the Civil A: NO. Upon the execution of the Deed of Sale,
fault of the buyer: fitness for general purposes. Code, may either be to withdraw from the contract Goodyear did transfer ownership of, and deliver the
or demand a proportionate reduction of the price, vehicle to Sy. The impoundment of the vehicle and
a. If the seller was not aware of the hidden GR: No implied warranty with damages in either case. the failure to register it were clearly acts that were
of the hidden defects, he shall be liable to not deliberately caused by Goodyear, but that
return the price paid less the value of the XPNs: The vendee may also ask for the annulment of the resulted solely from the failure of the PNP to lift the
thing at the time of the loss; a. Buyer expressly or impliedly manifests to contract upon proof of error or fraud, in which case latter’s own alarm over the vehicle. Assuming there
b. If there was bad faith, the seller shall also the seller the particular purpose for which the ordinary rule on obligations shall be applicable. was a breach of the implied warranty against hidden
pay damages to the buyer. the goods are acquired; and Responsibility arising from fraud is demandable in encumbrances, notice of breach was not given to the
b. Buyer relies upon the seller’s skill or all obligations and any waiver of an action for future Goodyear within a reasonable time. Art. 1586 of the
Prescriptive Period judgment. (De Leon, 2011) fraud is void. Responsibility arising from negligence Civil Code requires that notice be given after the
is also demandable in any obligation, but such breach, of which Sy ought to have known. (Goodyear
Six (6) months from date of the delivery of the thing 2. Warranty of merchantability: liability may be regulated by the courts, according Philippines, Inc. v. Sy and Lee, G.R. No. 154554, 09
sold. (Art. 1571, NCC) to the circumstances. Nov. 2005)
That goods are reasonably fit for the general
Remedies of the Buyer in case of Sale of Things purpose for which they are sold. The vendor could likewise be liable for quasi-delict Condition
with Hidden Defects under Art. 2176 of the Civil Code, and an action
There is an implied warranty that the goods based thereon may be brought by the vendee. (Coca- An uncertain event or contingency upon the
The vendee may elect between: shall be of merchantable quality when they are Cola Bottlers Ph., Inc. v. CA, G.R. No. 110295, 18 Oct. happening of which the obligation or right of the
1. Withdrawing from the contract, with a claim bought by description from a seller who sells 1993) contract depends. In such case, the obligation of the
for damages; or goods of such description. contract does not attach until the condition is
2. Demanding a proportionate reduction of the Instances when the Buyer Cannot Rescind the performed. (De Leon, 2011)
price, with a claim for damages. (Art. 1567, REMEDIES IN CASE OF Sale in case there is a Breach of Warranty
NCC) BREACH OF WARRANTY NOTE: There may be a contract of sale of goods,
1. If he knew of the breach of warranty at the time whose acquisition by the seller depends upon a
Waiver of Warranty against Eviction Hidden 1. Accept goods and set up against the seller, the that he accepted the goods without protest; contingency, which may or may not happen. (Art.
Defects breach of warranty by way of recoupment in 2. If he fails to return or offer to return goods to 1462(2), NCC)
diminution or extinction of the price; seller in substantially as good condition as they
There is waiver of warranty against eviction hidden were at the time the ownership was transferred Effect of Non-fulfillment of a Condition
defects when the lessee has inspected the premises 2. Accept goods and maintain action against seller to the buyer; or
and decides to consummate the contract based on for damages; 3. If he fails to notify the seller within a reasonable 1. If imposed on the perfection of contract – it
such inspection. Under Arts. 1561 and 1653 of the time of his election to rescind. prevents the juridical relation itself from
Civil Code, the lessor is responsible for warranty 3. Refuse to accept goods and maintain action coming into existence.
against hidden defects, but he is not answerable for against seller for damages; Q: Goodyear Philippines sold a car to Anthony
patent defects or those which are visible. (De Ysasi Sy. Later on, Sy sold the car to Jose Lee. When Lee 2. If imposed on the performance of an obligation,
v. Arceo, G.R. No. 136586, 22 Nov. 2001) 4. Rescind contract of sale, refuse to receive tried to register the car in his name, he failed to the other injured party may:
goods/return them when already received, and have it registered because it turned out that the a. Refuse to proceed with the contract; or
recover the price paid. car was stolen before, and was only b. Proceed with the contract, waiving the
subsequently recovered by Goodyear. However, performance of the condition.
PNP did not lift the alert alarm over the said car.
Due to this, the car was impounded and Lee was
sued by the PNP. This problem was relayed by
Lee to Sy. It led to Sy filing a case against

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Condition v. Warranty (Villanueva, 2009) 3. Sale on return; or v. Traditio Constitutum Possessorium Sale made through a Public Instrument
4. There is implied reservation of ownership. – the seller remains in possession of
CONDITION WARRANTY (Art. 1503, NCC) the property in a different capacity., Art. 1498 of the Civil Code provides that when the
e.g., from owner to lessee sale is made through a public instrument, the
As to Nature
NOTE: Seller bears expenses of delivery. execution thereof shall be equivalent to the delivery
Goes into the 3. Quasi-Traditio – delivery of rights, credits or of the thing which is the object of the contract, if
Goes into the root of the performance of the Kinds of Delivery incorporeal property, made by: from the deed the contrary does not appear or
existence or perfection obligation and in fact a. Placing titles of ownership in the hands of cannot clearly be inferred. In the absence of
of the obligation. may constitute an 1. Actual or real – Thing sold is placed under the the buyer; or stipulation to the contrary, the ownership of the
obligation itself. control and possession of buyer/agent. (Art. b. Allowing buyer to make use of the rights. property sold passes to the vendee upon the actual
As to the Need for Stipulation 1497, NCC) (Art. 1501, NCC; Paras, 2016) or constructive delivery thereof. (Boy v. CA, G.R. No.
125088, 14 Apr. 2004)
Need not be stipulated;
Must be stipulated to 2. Constructive or legal – Does not confer 4. Tradition by operation of law – Execution of
may form part of the
form part of the physical possession of the thing, but by a public instrument is equivalent to delivery. Q: On March 3, 2004, Sps. Maranao filed the suit
obligation by provision
obligation. construction of law, is equivalent to acts of real But to be effective, it is necessary that the seller for recovery of possession against Juan Dela
of law.
delivery. (Arts. 1498 to 1500, NCC) have such control over the thing sold that, at the Cruz. They alleged that, sometime after causing
As to Subject Matter moment of sale, its material delivery could have the Certificate of Sale in their favor to be
Whether express or Requisites: been made. (Art. 1434, NCC) annotated in the TCT, they conducted an
May attach itself to the
implied, relates to the a. The seller must have control over the inspection of the subject property. They
obligation of seller to
subject matter itself or thing; GR: There is presumption of delivery. discovered that the same was in the possession
deliver possession and
to obligation of the b. The buyer must be put under control; and of Dela Cruz who claimed to be the owner
transfer.
seller as to the subject c. There must be intention to deliver the XPNs: thereof, having bought the property from the
matter of the sale. thing for purposes of ownership. a. Contrary stipulation; Sps. Rivera in 1996. Claiming to be entitled to
b. When at the time of execution, subject the ownership and possession of the property,
TRANSFER OF OWNERSHIP i. Traditio Symbolica – delivery of matter was not subject to the control of they prayed that Dela Cruz be ordered to vacate
certain symbols representing the seller; and to surrender the possession thereof to
Q: When is ownership deemed transferred? thing; c. Seller has no capacity to deliver at time of them.
execution; and
A: The thing shall be understood as delivered when ii. Traditio Instrumental – delivery of d. Such capacity should subsist for a Dela Cruz averred that he is already, and
it is placed in the control and possession of the the instrument of conveyance; reasonable time after execution of continues to be, the owner of the subject
vendee. instrument. property as he bought the same from Sps. Rivera
iii. Traditio Longa Manu – Delivery of way back March 20, 1996 despite failing to cause
NOTE: The most that a sale does is to create the thing by mere agreement; when Delivery deemed Effective the registration of the sale as he lost the owner's
obligation to transfer ownership. It is only the title seller points to the property without copy of TCT. Asserting that the Sps. Rivera no
while the mode of transferring ownership is need of actually delivering; Delivery should be coupled with intention of longer have rights or interests over the subject
delivery. delivering the thing, and acceptance on the part of property at the time of the levy, he maintained
NOTE: The thing to be transferred the buyer to give legal effect of the act. Without such that the Sps. Maranao acquired no right over the
Effect of Delivery must be within sight at that time. intention, there is no such tradition. same. Claiming to be an innocent purchaser for
(Rabuya, 2017) value who cannot be deprived of possession
GR: Title/ownership is transferred. Delivery of Incorporeal Property over the subject property, he prayed that the
iv. Traditio Brevi Manu – the buyer, complaint be dismissed, that he be declared the
XPN: When the contrary is stipulated as in the case being already in possession of the 1. By execution of a public instrument; (Art. 1498, rightful owner of the subject property, and for
of: thing sold due to some other cause, NCC) an that he be awarded of damages. Should the
merely remains in possession after 2. By placing the titles of ownership in the complaint by Sps. Maranao be dismissed and the
1. Pactum reservatii in domini – Agreement the sale is effected, but now in the possession of the buyer; or right to possession be granted to Dela Cruz?
that ownership will remain with seller until concept of owner., e.g., from lessee to 3. By the vendee’s use of his rights as owner with
full payment of price (contract to sell); becoming an owner; the consent of the vendor. (Art. 1501, NCC) A: YES. The Deed of Absolute Sale between Sps.
2. Sale on acceptance, approval, satisfaction; Rivera, the then registered owners of the subject
(Art. 1402, NCC) property, and Dela Cruz was executed in March

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1996 and possession was already transferred to delivered “f.o.b.” at the point of shipment or at When the Object should be Delivered: XPNs:
Dela Cruz, through constructive delivery when the the point of destination. (Villanueva, 2009) 1. Seller gives security for the return of the price
Deed of Absolute Sale, a public instrument, was 1. Stipulated time; or in a proper case;
executed conformably to Art. 1498 of the Civil Code, 3. CIF (Cost, Insurance, and Freight) – where the 2. If there is none, at a reasonable hour. 2. A stipulation that notwithstanding any such
and through real delivery when actual possession buyer pays a fixed price for which the seller contingency, the buyer must make payment;
was turned over to Dela Cruz pursuant to Art. furnishes the goods, pays the freight and Place of Delivery 3. Disturbance or danger is caused by the seller;
1497 of the Civil Code. Pursuant to the applicable insurance to the point of delivery, and all risks 4. If the disturbance is a mere act of trespass; or
provisions of the Civil Code on the contract of sale while the goods are in transit are for the The place of delivery shall be: (A-U-B-R-I) 5. Upon full payment of the price.
and modes of acquiring ownership, Dela Cruz account of the buyer
acquired ownership of the subject property when 1. That place Agreed upon, if any stipulation has XPN to the XPN: If the trespass is in law which takes
he took actual physical, or at least constructive, 4. COD (Collect on Delivery) – the carrier acts for been made; place when a third person, by judicial or extra-
possession thereof. The non-registration of the the seller in collecting the purchase price, which 2. Place determined by Usage of trade; judicial acts, questions the right of the buyer and/or
Deed of Absolute Sale with the Registry of Deeds for the buyer must pay to obtain possession of the 3. Seller’s place of Business; seller, and claims possession or ownership,
the Province of Nueva Ecija did not affect the sale's goods. 4. Seller’s Residence; or suspension of payment is authorized.
validity and effectivity. Since ownership of the 5. In case of specific goods, where they can be
subject property had been transferred to Dela Cruz Seller’s Duties After Delivery to the Carrier found. (Art. 1521 in relation to Art. 1582, NCC) Necessity of Payment of the Purchase Price to
in 1996, it ceased to be owned by Sps. Rivera as Transfer Ownership
early as then. Not being owned by Sps. Rivera, the 1. To enter on behalf of the buyer into such NOTE: If specific goods are involved in the sale, the
subject property could not therefore be made contract reasonable under the circumstances; place where they are found shall be the place of GR: Ownership of the thing sold shall be transferred
answerable for any judgment rendered against and delivery, in the absence of any agreement or to the vendee upon the actual or constructive
them. 2. To give notice to the buyer regarding necessity applicable usage of trade. delivery.
of insuring the goods.
A judgment creditor or purchaser at an execution sale Effects of a Sale of Goods on Installment XPN: Unless the contract contains a stipulation that
acquires only whatever rights that the judgment Effect of Delivery through a Carrier ownership of the thing sold shall not pass to the
obligor may have over the property at the time of 1. Goods must be delivered in full except when purchaser until he has fully paid the price.
levy. Thus, if the judgment obligor has no right, title GR: If the seller is authorized, delivery to carrier is stipulated; and
or interest over the levied property — as in this case considered delivery to the buyer. The premise being 2. When not examined by the buyer – it is not Acceptance of Delivery by the Buyer of the Thing
— there is nothing for him to transfer. In conclusion, that the carrier acts as an agent of the buyer. accepted until examined or at least had Sold
Dela Cruz has a better right of possession over the (Villanueva, 2009) reasonable time to examine
subject property having acquired ownership 1. Express – he communicates or intimates to the
thereof prior to the levy on execution that Sps. NOTE: Here, the carrier is deemed the bailee of the When Seller NOT Bound to Deliver the Thing seller that he has accepted. (Art. 1585, NCC)
Maranao had caused to be made upon the subject buyer and the seller is deemed the agent of the Sold
property. (Miranda v. Sps. Mallari, G.R. No. 218343, buyer in employing the carrier. (Rabuya, 2017) 2. Implied (Art. 1585, NCC)
28 Nov. 2018, J. Caguioa) 1. If the buyer has not paid the price; a. Buyer does not act inconsistently with
XPNs: 2. No period for payment has been fixed in the ownership of seller after delivery; and
Kinds of Delivery through Carrier 1. When the seller reserves his right of contract; and b. Retains the thing without communicating
ownership over the goods; 3. A period for payment has been fixed in the to seller that he has rejected.
1. FAS (Free along Side) – when goods are 2. When the delivery is directed by the seller to contract but the buyer has lost the right to make
delivered alongside the ship, there is already the place of destination, to himself or his agent; use of the time. Effect if the Buyer Refuses to Accept Despite
delivery to the buyer. The seller pays all charges 3. When the bill of lading is deliverable to the Delivery of the Object of the Sale
and is subject to risk until the goods are placed buyer, but the seller retains possession of the Suspension of Payment by the Buyer
alongside the vessel. (Villanueva, 2009) bill of lading; (Art. 1503, NCC) and Delivery is completed. Since delivery of the subject
4. When the parties have a different intention as GR: matter of the sale is an obligation on the part of the
2. FOB (Free on Board) – when goods are when the parties did not intend to have the 1. If he is disturbed in the possession or seller, the acceptance thereof by the buyer is not a
delivered at the point of shipment, delivery to goods delivered to the buyer through the ownership of the thing bought; or condition for the completeness of the delivery. Thus,
carrier by placing the goods on vessel is carrier. (Smith Bell & Co., Inc. v. Jimenez, G.R. No. 2. If he has well-grounded fear that his even with such refusal of acceptance, delivery
delivery to buyer. The seller shall bear all L-17617, 29 June 1963) possession or ownership would be disturbed (actual/constructive), will produce its legal effects
expenses until the goods are delivered, by a vindicatory action or foreclosure of (e.g., transferring the risk of loss of the subject
depending on whether the goods are to be mortgage. (Art. 1590, NCC) matter to the buyer who has become the owner

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thereof). Under Art. 1588 of the Civil Code, when the Other Obligations of the Buyer exchange by returning the bill of lading to
buyer’s refusal to accept the goods is without just E. OBLIGATIONS OF VENDEE the sell. (Art. 1503, NCC)
cause, the title thereto passes to him from the 1. To take care of the goods without the obligation
moment they are placed at his disposal. (Villanueva, to return, where the goods are delivered to the 4. When sale is not valid;
2009) buyer and he rightfully refuses to accept; (Art.
Obligations of the Buyer (P-A-E)
1587, NCC) 5. When the seller is not the owner of the goods
subject to the exceptions in Art. 1505 of NCC;
1. Payment of the price (Art. 1582, NCC)
NOTE: The goods in the buyer’s possession are
at the seller’s risk. 6. GR: When goods are HELD BY A THIRD PARTY.
GR: Seller is not bound to deliver unless the
purchase price is paid.
2. To be liable as a depositary if he voluntarily XPN: Third person acknowledges to the buyer
constituted himself as such; (Art. 1587, NCC) and that he holds the goods in behalf of the buyer.
XPN: A period of payment has been fixed.
(Art. 1521, NCC)
3. To pay interest for the period between delivery
2. Accept delivery of thing sold (Arts. 1582-1585,
of the thing and the payment of the price in the 7. On sale or return – The ownership passes to
NCC)
following cases: buyer upon delivery, but he may revest
ownership in the seller by returning or
Modes of Acceptance
a. should it have been stipulated; tendering the goods within the time fixed in the
b. should the thing sold and delivered contract or within reasonable time. (Art. 1502,
1. Express acceptance – Buyer is deemed to have
produces fruits or income; or NCC)
accepted the goods when he intimates to the
c. should he be in default, from the time of
seller that he has accepted them.
judicial or extra-judicial demand for the Sale on Trial, Approval or Satisfaction
payment of the price. (Art. 1589, NCC)
2. Implied acceptance
Requisites:
a. When the goods have been delivered to
When Delivery does NOT Transfer Title 1. When buyer signifies approval or acceptance
him, and he does any act in relation to
to the seller or does any act adopting the
which is inconsistent with the ownership
1. Sale on trial, approval, or satisfaction (Art. transaction;
of the seller, or
1502, NCC); 2. If buyer did not signify approval or acceptance,
b. When after a lapse of a reasonable time, he
but retains the goods without giving notice of
retains the goods without intimating to
2. When there is an express reservation; rejection after the expiration of the period
the seller that he has rejected them. (Art.
fixed or of reasonable time. (Art. 1502, NCC)
1585, NCC)
a. If it was stipulated that ownership shall not
pass to the purchaser until he has fully paid Rules in Case of Sale on Trial, Approval or
Right to refuse – When goods are delivered to the
the price. (Art. 1478, NCC) Satisfaction
buyer and he refuses to accept them, having the
right to do so, he is not bound to return to the goods
3. When there is an implied reservation; TITLE WHO BEARS THE LOSS
to the seller, and it is sufficient that he notifies the
seller of his refusal, unless otherwise stipulated. GR: Borne by seller
a. When goods are shipped, but the bill of XPNs:
lading states that goods are deliverable to 1. Buyer is at fault
No right to refuse – When the buyer’s refusal to Risk of Loss
the seller or his agent, or to the order of the 2. Buyer expressly
accept the goods is without just cause, the title
seller or his agent (Art. 1503, NCC); agreed to bear the
passes to him from the moment they are placed at his
disposal, unless otherwise stipulated. loss
b. When the bill of lading is retained by the
GR: Buyer must give goods
seller or his agent (Art. 1503, NCC);
3. Bear expenses for the execution and a trial
registration of the sale and putting the goods in
c. When the seller of the goods draws on the As to trial
a deliverable state, if such is the stipulation. XPN: Buyer need not do so
buyer for the price and transmits the bill of
if it is evident that it cannot
exchange and the bill of lading to the buyer,
perform the work.
and the latter does not honor the bill of

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c. No registration & no possession in good Principle of prius tempore, potior jure – first in him to place the buyer in possession of such
When period within It runs only when all the faith – person who presents oldest title in time, stronger in right property. (Pineda, 2010)
which buyer must parts essential for the good faith. (Martinez v. CA, G.R. No. 123547,
signify his operation of the object has 21 May 2001) Knowledge gained by the first buyer of the second Caveat Emptor NOT Applicable in Sales of
acceptance runs been delivered. sale cannot defeat the first buyer’s rights except Registered Land
NOTE: Art. 1544 of the Civil Code has no application only as provided by the NCC and that is where the
to lands not registered with the Torrens system. If second buyer first registers in good faith the second The purchaser of a registered land under the
Validity of
the sale is not registered, it is binding only as sale ahead of the first. (Jurado, 2019) Torrens system is merely charged with notice of the
stipulation that a 3rd
Valid, provided the 3rd between the seller and the buyer; it does not affect burdens and claims on the property which are
person must satisfy
person is in good faith. innocent third persons. (De Leon, 2011) Conversely, knowledge gained by the second buyer inscribed on the face of certificate of title. (Pineda,
approval or
of the first sale defeats his rights even if he is first to 2010)
satisfaction
Villanueva (2009) proffers that the rules on double register, since such knowledge taints his
sales for immovables under Article Art, 1544 are registration with bad faith to merit the protection of Application of Caveat Emptor in Judicial Sales
If the sale is made to Generally, it cannot be applicable to unregistered land, but only insofar as Art. 1544 (2nd par.) of NCC, the second realty buyer
a buyer who is an considered a sale on they do not undermine specific rules and must act in good faith in registering his deed of sale. Caveat emptor is applicable in judicial sales. The
expert on the object approval, trial, or legislations that have a higher hierarchical purchaser in a judicial sale acquires no higher or
purchased satisfaction. enforcement value, such as the “without prejudice NOTE: Where one sale is absolute and the other is a better title or right than that of the judgment debtor.
to a better right” provision under Act No. 3344, now pacto de retro transaction where the period to If it happens that the judgment debtor has no right,
Sec. 113 of the Property Registration Decree. redeem has not yet expired, Art. 1544 of NCC will interest, or lien on and to the property sold, the
DOUBLE SALE (2001, 2004, 2008 BAR)
(Villanueva, 2009) not apply. (Pineda, 2010) purchaser acquires none. (Pineda, 2010)
There is double sale when the same object of the
Purchaser in Good Faith Q: Does prior registration by the second buyer of Effect of Subsequent Foreclosure to a Prior
sale is sold to different vendees. (Art. 1544, NCC)
a property subject of a double sale confer Purchaser in Good Faith (2008 BAR)
1. Buys the property without notice that some ownership or preferred right in his favor over
Requisites of Double Sales (Art. 1544, NCC)
other person has a right to, or interest in such that of the first buyer? The purchaser in good faith has better title to the
property; and property sold even if subsequently foreclosed by a
1. Two (2) or more sales transactions must
A: Principle of caveat emptor – buyer beware. It mortgagor.
constitute valid sales transactions;
2. Pays a full and fair price for the same at the time literally means, ‘Let the buyer beware’. The rule
2. Two (2) or more sales transactions must
of such purchase, or before he has notice of the requires the purchaser to be aware of the supposed
pertain to exactly the same subject matter;
claim or interest of some other person in the title of the vendor and one who buys without
3. Two (2) or more buyers at odds over the
property. (Uy v. Fule, G.R. No. 164961, 30 June checking the vendor’s title takes all the risks and
rightful ownership of the subject matter must
2014) losses consequent to such failure. (Agcaoili, 2015)
each represent conflicting interests; and
4. Two (2) or more buyers at odds over the
NOTE: Partial payment is not enough. Full Application of Caveat Emptor in particular Sale
rightful ownership of the subject matter must
payment is a requirement for purposes of Transactions
each have bought from the very same seller.
acquiring right over the rules of double sale.
(Sps. Manlan v. Sps. Beltran, G.R. No. 222530, 16
1. Sales of animals (Art. 1574, NCC);
Oct. 2019)
NOTE: This principle applies in a situation where 2. Double sales (Art. 1574, NCC);
not all the requisites are present which would 3. In sheriff’s sales; and
Rules on Preference (Art. 1544, NCC)
warrant the application of Art. 1544 of NCC. The 4. Tax sales.
only requisite of this rule is priority in time. In other
1. Movable / personal property – Owner who is
words, the only one who can invoke this is the first NOTE: In the above sales, there is no warranty of
first to possess in good faith;
vendee. Undisputedly, he is a purchaser in good title or quality on the part of the seller. The
2. Immovable / real property –
faith because at the time he brought the real purchaser who buys without checking the title of
a. First to register in good faith. (Fudot v.
property, there was still no sale to a second vendee. the vendor is assuming all risks of eviction.
Cattleya Land Inc., G.R. No. 171008, 13 Sept.
(Rabuya, 2017)
2007)
In sheriff’s sales, the sheriff does not guarantee the
b. No registration – first to possess in good
title to real property and it is not incumbent upon
faith.

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Remedies of an Unpaid Seller repudiation or countermand and Instances when Possessory Lien is Lost
F. BREACH OF CONTRACT unrealized profit.
I. Ordinary / General Remedies The unpaid seller loses his lien on the goods
II. Special Remedies (Art. 1526, NCC*) whenever:
1. Action for Price (Art. 1595, NCC)
1. REMEDIES
1. Possessory Lien (Art. 1527, NCC) – seller is a. Seller delivers the goods to a carrier or other
Exercised when: not bound to deliver the object of the bailee for the purpose of transmission to buyer
REMEDIES OF AN UNPAID SELLER
a. Ownership has passed to buyer and he contract of sale if buyer has not paid him without reserving the ownership in the goods
wrongfully neglects or refuses to pay the price. This remedy presupposes that or the right to possession thereof;
Unpaid Seller
for the price; the sale is on credit. It is exercisable only in b. The buyer or his agent lawfully obtains
b. Price is payable on a day certain and following circumstances: possession of the goods; or
One is considered as unpaid seller when:
the buyer wrongfully neglects to pay c. By waiver thereof. (Art. 1529, NCC)
such price, whether or not ownership a. Where the goods have been sold
1. The whole of the price has not been paid or
has passed; or without any stipulation as to credit; 2. Loss of Lien (NCC, Art. 1529)
tendered; or
c. Goods cannot readily be resold for b. Where the goods have been sold on a. When he delivers the goods to the
reasonable price and the buyer credit, but term of credit has expired; carrier or other bailee for purpose of
2. A bill of exchange or other negotiable
wrongfully refuses to accept the goods, or transmission to the buyer without
instrument has been received as conditional
whether or not ownership has passed c. Where the buyer becomes insolvent. reserving the ownership in the goods
payment, and the condition on which it was
and Art. 1596 of NCC is inapplicable. or the right to the possession thereof;
received has been broken by reason of the
NOTE: When part of goods delivered, may b. When the buyer or his agent lawfully
dishonor of the instrument, the insolvency of
2. Action for Damages (Art. 1596, NCC) – In still exercise right on goods undelivered. obtains possession of the goods; or
the buyer, or otherwise. (Art. 1525, NCC)
case of wrongful neglect or refusal by the c. By waiver thereof.
buyer to accept or pay for the thing sold. NOTE: GR: Where an unpaid seller has
NOTE: The mere delivery of a negotiable
made part delivery of the goods, he may 3. Right of Stoppage in Transitu (Art. 1530,
instrument does not ipso facto extinguish the
NOTE: The measure of damages is the exercise his right of lien on the remainder. NCC)
obligation of the buyer to pay because the
estimated loss directly and naturally
instrument which has been delivered may be
resulting in the ordinary course of events XPN: Unless such part delivery has been Requisites: (I-S-E-N-T-U)
dishonored. In which case, the seller is still an
from the buyer’s breach of contract. made under such circumstances as to show a. Insolvent buyer; (Art. 1530, NCC)
unpaid seller. (US v. Bedoya, G.R. No. 5100, 03
an intent to waive the lien or right of b. Seller must Surrender the negotiable
Nov. 1909)
a. Where there is an available market for retention. (Art. 1528, NCC) document of title, if any; (Art. 1532,
the goods in question, the measure of NCC)
Moreover, bills of exchange or mercantile
damages is, in the absence of special Moreover, when title to the property has c. Seller must bear the Expenses of
documents shall produce the effect of payment
circumstances showing proximate passed to the buyer, but possession delivery of the goods after the exercise
only when they have been cashed or when
damage of a different amount, the remains in the hands of the seller, the latter of the right; (Art. 1532, NCC)
through the fault of the creditor, they have been
difference between the contract price is necessarily holding the goods for the d. Seller must either actually take
impaired.
and the market or current price at the buyer. For his protection, the seller is possession of the goods sold or give
time or times when the goods ought to entitled to possess the same until he has Notice of his claim to the carrier or
The term “seller” includes any person who is in the
have been accepted, or, if no time was been fully paid, or a tender of the price has other person in possession; (Art. 1532,
position of the seller, such as (a) an agent of the
fixed for acceptance, then at the time of been made. NCC)
seller to whom the bill of lading has been indorsed;
the refusal to accept. e. Goods must be in Transit; (Art. 1531,
or (b) a consignor or agent who has himself paid, or
A lien based on a writ of attachment is NCC) and
is directly responsible for the price. (Jurado, 2019)
b. Where the labor or expense of material inferior to that of the unpaid seller’s right of f. Unpaid seller. (Art. 1525, NCC)
amount is necessary on the part of the preference under Art. 2241 of the Civil
Q: When is a seller considered unpaid despite
seller to fulfill his obligations under the Code. NOTE: Buyer’s insolvency need not be
the title of the goods passing to the buyer?
contract of sale and the buyer judicially declared. A person is insolvent
repudiates the contract or notifies the who either has ceased to pay his debts in
A: Whenever the seller was only paid partially, he
seller to proceed no further therewith – the ordinary course of business or cannot
remains an unpaid seller. (Pineda, 2010)
labor performed or expenses made pay his debts as they become due,
before receiving notice of the buyer's whether insolvency proceedings have

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been commenced or not. (Art. 1636(2) The unpaid seller may resume possession of the right of lien or should have stopped the goods NOTE: In case of subdivision or condominium
NCC) goods at any time while they are in transit, and he in transitu. (Jurado, 2019) projects, if real estate developer fails to comply
will then become entitled to the same rights in with obligation according to approved plan, the
Basis of Right of Stoppage in Transitu regard to the goods as he would have had if he had Art. 1533 of the Civil Code provides that the buyer may rescind or suspend payment until
never parted with the possession. (Art. 1530, NCC) seller having the right “may resell the goods.” the seller complies. (Secs. 23& 24, P.D. No. 957)
The injustice of allowing the buyer to acquire The language is permissive in nature rather
ownership and possession of the goods when he has Thereafter, the seller may exercise the following than mandatory. (De Leon, 2014) 2. In the sale of immovable property, even
not paid and, owing to his insolvency, cannot pay rights: though it may have been stipulated that
the price which was to be given in return for the 1. Right of lien (Art. 1527, NCC); 5. Special Right to Rescind (Art. 1597, NCC) upon failure to pay the price at the time
goods. (De Leon, 2014) 2. Right to resell (Art. 1533, NCC); and agreed upon the rescission of the contract
3. Right to rescind the transfer of title. (Art. Requisites: shall of right take place, the vendee may
If the buyer, beforehand, knew of the insolvency of 1534, NCC) a. Goods have not been delivered to the pay, even after the expiration of the
the buyer, he cannot exercise the right of stoppage buyer; and period, as long as no demand for
in transitu because he is under estoppel. Effect of Exercising the Special Right of Resale b. Buyer has repudiated the contract of rescission of the contract has been made
sale; or upon him either judicially or by a notarial
However, the right is not impaired even if the The unpaid seller shall not be liable to the original c. Has manifested his inability to act. (Art. 1592, NCC)
insolvency of the buyer has been existing at the time buyer upon the sale or for any profit made by such perform his obligations thereunder;
of the perfection of the sale as long as the seller was resale, but may recover from the buyer damages for or NOTE: Art. 1592 of the Civil Code is not
not aware of it. any loss occasioned by the breach of the sale. (Art. d. Has committed a breach thereof, applicable to:
1533, NCC) which must be substantial.
When Goods are in Transit a. Sale on installment of real estate
NOTE: The seller cannot, however, directly or NOTE: Here, the seller may thereafter in which the parties have laid down
1. From the time when they are delivered to a indirectly buy the goods. totally rescind the contract of sale by giving the procedure to be followed in the
carrier or other bailee until the buyer, or his notice of his election to do so to the buyer. event the vendee failed to fulfill his
agent in that behalf, takes delivery of them from Notice to the Defaulting Buyer obligation. (Albea v. Inquimboy, G.R.
such carrier or other bailee; and When Available No. L-1601, 20 May 1950)
GR: Notice to the defaulting buyer NOT required in
2. If the goods are rejected by the buyer, and the the resale of goods When the unpaid seller has: b. Contract to sell/conditional sale of
carrier or other bailee continues in possession 1. The right of lien; or real estate where the title remains
of them, even if the seller has refused to receive XPN: Where the right to resell is not based on the 2. Stopped the goods in transit with the vendor until fulfillment of a
them back. (Art. 1531(1), NCC) perishable nature of the goods or upon an express a. Where he expressly reserved the right positive condition, such as full
provision of the sale. to rescind in case the buyer should make payment of the price. (Roque v.
When Goods are No Longer in Transit (Art. default, or Lapuz, G.R. No. L-32811, 31 Mar.
1531(2), NCC) NOTE: Notice of time and place of resale is not b. Where the buyer has been in default in 1980)
essential to the validity of such resale. (Art. 1533, the payment of the price for an
1. If the buyer, or his agent, obtains delivery of the NCC) unreasonable time. (Art. 1534, NCC) II. Movables
goods before their arrival at the appointed 1. Failure of seller to deliver – Action for
destination; 4. Special Right to Resell the Goods (Art. 1533, REMEDIES OF THE BUYER specific performance without giving the
NCC) seller the option of retaining the goods on
2. If, after the arrival of the goods at the appointed I. Immovables payments of damages. (Art. 1598, NCC)
destination, the carrier or other bailee Exercised when: 1. Suspension of payment – applicable in
acknowledges to the buyer or his agent that he a. Goods are perishable in nature, case of: 2. Breach of seller’s warranty – The buyer
holds the goods on his behalf and continues in b. The seller has expressly reserved the a. if he is disturbed in the possession or may, at his election, avail of the following
possession of them as bailee for the buyer or his right of resale in case of default; or ownership of the thing acquired; or remedies:
agent; c. The buyer has been in default in b. if he has reasonable grounds to fear
payment for an unreasonable time. such disturbance, by a vindicatory a. Recoupment – Accept goods & set
3. If the carrier or other bailee wrongfully refuses action or a foreclosure of mortgage. up breach of warranty by way of
to deliver the goods. NOTE: It is essential before the resale can be (Art. 1590, NCC) recoupment in diminution or
made that the unpaid seller should have a extinction of the price;

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NOTE: The Theory of Recoupment is 3. If, however, the buyer has used or disposed of In accordance with Art. 1480 of the Civil Code, if the
that the seller’s damages are cut down to the goods delivered before he knows that the thing is lost after perfection but before its delivery REMEDIES OF THE SELLER
an amount which will compensate him seller is not going to perform his contract in full, (i.e., before the ownership of the thing is transferred
for the value of what he has given. (De the buyer shall not be liable for more than the to the vendee), the risk of loss is shifted to the
Leon, 2013) fair value to him of the goods so received. (Art. vendee as an exception to the general rule of res 2. RECTO LAW AND MACEDA LAW
1522, NCC) perit domino.
b. Accept goods & maintain action INSTALLMENT SALES LAW OR “RECTO LAW”
against seller for damages; (Art. Rule when the Seller Delivers Goods GREATER Rule when the Sale of Immovable is by Unit of (1999, 2000 BAR)
1599(3), NCC) than what he has Contracted to Sell Measure or Number
Installment Sales Law
c. Action or counterclaim for 1. The buyer may accept only the goods which GR: The seller must deliver all that may have been
damages – refuse to accept goods & were included in the contract and reject the stated in the contract. Act No. 4122 was passed by the Philippine
maintain action against seller for excess; or Legislature on Dec. 9, 1939, otherwise known as the
damages (Art. 1599(3), NCC); or 2. The buyer may accept the entire goods XPN: If impossible to deliver all, the buyer may “Installment Sales Law” or the “Recto Law.” It is
delivered and he shall pay for them at the choose between: embodied in Art. 1484 of the NCC, which provides
d. Rescission – rescind contract of sale contract rate. (Art. 1522, NCC) a. Proportional reduction of the price; or for the remedies of a seller in the contracts of sale of
& refuse to receive goods/return b. Rescission of the contract, provided that the personal property by installments.
them when already received and Rule when the seller delivers goods which are deficiency is not less than 1/10 of the area
recover the price or any part which mixed with other goods of different description stated in the contract. (Art. 1539, NCC) Application of Recto Law
has been paid. (Art. 1599(4), NCC) not included in the contract
NOTE: The buyer is entitled to rescind the contract This law covers contracts of sale of personal
3. Disturbed in possession or with 1. The buyer may accept the goods which are in in the following cases: property by installment (Act No. 4122). It is also
reasonable grounds to fear disturbance accordance with the contract and reject the rest applied to contracts purporting to be leases of
(anticipatory breach) – Suspend (Art. 1522, NCC); or 1. The lack in area is at least 1/10th than that personal property with option to buy, when the
payment until the seller has caused the stated or stipulated in the contract; lessor has deprived the lessee of the possession or
disturbance or danger to cease. (Art. 1590, 2. The buyer may also accept them all if he so enjoyment of the thing. (PCI Leasing and Finance,
NCC) desires, but he must pay for them all. 2. The deficiency in the quality specified in the Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No.
contract exceeds 1/10th of the price agreed 142618, 12 July 2007)
NOTE: When the buyer has claimed and been Rule if the Subject Matter is Indivisible upon; and
granted a remedy in any of these ways, no other NOTE: Recto Law applies only to sale payable in
remedy can thereafter be granted, without The buyer may reject the whole of the goods. (Art. 3. The buyer would not have bought the installments and not to a sale where there is an
prejudice to the buyer’s right to rescind, even if 1522, NCC) immovable had he known of its smaller area or initial payment and the balance is payable in the
previously he has chosen specific performance inferior quality irrespective of the extent of the future, because such is a straight sale, not a sale by
when fulfillment has become impossible. Duty of the Seller with regard to Accessions and lack in area or quality. (Art. 1539, NCC; De Leon, installments.
(Villanueva, 2011; in relation to Art. 1191(2), Accessories 2011)
NCC) Rationale of Recto Law
The seller has the duty to preserve the thing and its Prescriptive Period for the Action of Rescission
Rule when the Seller Delivers Goods LESSER accessions and accessories from the time of the of Contract To remedy the abuses committed in connection
than what he has Contracted to Sell perfection of the contract of sale. (Art. 1537, NCC) with the foreclosure of chattel mortgages and to
Six (6) months from the day of delivery. (Art. 1543, prevent mortgagees from seizing the mortgaged
1. The buyer may reject the goods delivered and But all the fruits shall pertain to the vendee from the NCC) property, buying it at foreclosure sale for a low price
he shall have no liability; or day on which the contract was perfected. and then bringing suit against the mortgagor for a
How Payment is Made by the Buyer deficiency judgment. (Magna Financial Services
2. The buyer may accept the goods delivered, but NOTE: In case of loss or deterioration, the seller is Group, Inc. v. Colarina, G.R. No. 158635, 09 Dec. 2005)
he will pay the contract rate, if he has knowledge liable for damages or the buyer may seek rescission Price is paid at the time and place stipulated in the
that the seller is not going to deliver all the with damages. However, if loss or deterioration is contract. It is made to the person in whose favor the Requisites of Recto Law:
goods contracted for; or due to a fortuitous event, the seller is not liable. (Art. obligation has been constituted or his successor in
1538, NCC) interest, or any person authorized to receive. 1. Valid contract of sale;
(Villanueva, 2009) 2. Subject matter is personal property;

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3. Payable in installments; and preparatory to extrajudicial foreclosure is other two. (Delta Motor Sales Corp. v. Niu Kim Duna, property through installment. In the given case, the
4. In the case of the second and third remedies, not an action for collection much less for G.R. No. 61043, 02 Sept. 1992) amount being claimed by A was to be paid 2 years
that there has been a failure to pay two or more foreclosure. thereafter as a lump sum, not through installments.
installments. (Art. 1484, NCC) XPN: If the remedy first chosen was not completed Moreover, the transaction is a loan, not a sale.
But if the action for replevin culminated in or not fully exercised as when there was voluntary
Alternative Remedies in case of Sale of Personal the foreclosure of the chattel mortgage desistance, the vendor may still avail himself of Recto Law does NOT cover a Contract to Sell of
Property in Installments and the sale of the personal property at another remedy. Movables
the public auction, then Art. 1484 now
1. Specific Performance: Exact fulfillment should applies. (Rabuya, 2017) NOTE: In ordinary alternative obligations, a mere There will be nothing to rescind if the suspensive
the buyer fail to pay choice categorically and unequivocally made and condition (payment of full purchase price) upon
2. Rescission: Cancel the sale if buyer fails to pay then communicated by the person entitled to which the contract is based fails to materialize.
GR: If availed of, the unpaid seller cannot 2 or more installments. Deemed chosen when: exercise his option concludes the parties. The (Villanueva, 2009)
anymore choose other remedies. creditor may not thereafter exercise any other
a. Notice of rescission is sent; option unless the chosen alternative proves to be Q: Palces purchased a Hyundai Starex through a
XPN: If after choosing specific performance, it b. Takes possession of subject matter of sale; ineffectual or unavailing due to no fault on his part. loan granted by Equitable Savings Bank (ESB). In
has become impossible to perform it, rescission and (Borbon II v. Servicewide Specialists, Inc., G.R. No. connection therewith, Palces executed a
may be pursued. (Villanueva, 2016) c. Files action for rescission. 106418, 11 July 1996) Promissory Note with Chattel Mortgage in favor
of the ESB. Eventually, Palces failed to pay the
NOTE: If vendor elected fulfillment or specific NOTE: The stipulation that the installments or Effect of Filing an Action for Specific monthly installments prompting ESB to demand
performance: rents already paid shall not be returned to the Performance in case of Default in the Payment of for the payment of the entire balance which
vendee shall be valid insofar as the same may an Installment Sale Secured by a Chattel remained unheeded. Thus, ESB filed a case for
a. The filing of collection suit barred the not be unconscionable under the Mortgage on the Subject of the Sale Recovery of Possession with Replevin with
foreclosure of the mortgage. A mortgagee circumstances. Alternative Prayer for Sum of Money.
who files a suit for collection abandons the The seller can collect from the buyer for the sum of
remedy of foreclosure of the chattel 3. Foreclosure: Foreclose on chattel mortgage if money the buyer failed to pay. In case the sum In order to update her installment payments,
mortgage constituted over the personal buyer fails to pay two (2) or more installments. collected is insufficient, the court can still order for Palces paid ESB P70,000 on March 8, 2007 and
properties or security for the debt or value He shall have no further action against the the levy of the property subject of the sale P33,000 on March 20, 2007 (March 2007
of the promissory note which he seeks to purchaser to recover any unpaid balance of the transaction to cover the balance. Moreover, if the payments). Despite the aforesaid payments, ESB
recover in the said suit. price. Any agreement to the contrary shall be action instituted is for specific performance and the filed the instant complaint, resulting in the
void. mortgaged property is subsequently attached and sheriff taking possession of the subject vehicle.
b. Filing of B.P. Blg. 22 does not bar sold, the sale thereof does not amount to a The RTC ruled in favor of ESB. The CA affirmed
foreclosure of mortgage. (Sps. Torres v. NOTE: Of the three remedies, only this third foreclosure of the mortgage. Hence, the seller- the RTC ruling; however, it ordered ESB to
Medina, G.R. No. 166730, 10 Mar. 2010) remedy bars the recovery of unpaid balance. creditor is entitled to a deficiency judgment. return the amounts paid on March 2007 by
However, in Chieng v. Sps. Santos (G.R. No. Moreover, payment of damages and attorney’s (Industrial Finance Corp. v. Ramirez, G.R. No. L- Palces. It ruled that, under Art. 1484 of the Civil
169647, 31 Aug. 2007), it was held that the fees are also barred. 43821, 26 May 1977) Code, ESB had already waived its right to
filing of the B.P. Blg. 22 case is equivalent recover any unpaid installments when it sought
to the filing of a collection suit for the GR: Actual foreclosure is necessary to bar Q: A mortgaged a diamond ring to M as a security a writ of replevin in order to regain possession
recovery of the mortgage-loan. The Court recovery of balance. for a loan which was to be paid 2 years of the subject vehicle. As such, petitioner is no
explained that the civil action for the thereafter. Since A failed to pay M, she then longer entitled to receive respondent’s late
recovery of the amount of the dishonored XPN: Mortgagor refuses to deliver property to foreclosed the mortgaged property. However, it partial payments. Is the CA’s ruling correct?
checks is impliedly instituted in the effect foreclosure; expenses incurred in turned out that the proceeds of the sale were
criminal action. Hence, the impliedly attorney’s fees in obtaining the property may be insufficient; thus, M filed an action for specific A: NO. In this case, there was no vendor-vendee
instituted civil action in the criminal case recovered by the vendor. performance. A contends that this is a violation relationship between respondent and petitioner. A
for violation of B.P. Blg. 22 is, in effect, a of the Recto law since the foreclosure of the judicious perusal of the records would reveal that
collection suit or suit for recovery of The Remedies are Alternative, NOT Cumulative chattel bars subsequent recovery. Is this respondent never bought the subject vehicle from
mortgage debt. correct? petitioner but from a third party, and merely sought
GR: The election of one remedy is a waiver of the financing from petitioner for its full purchase price.
c. Action for recovery of possession with right to resort to the other remedies. If the creditor A: NO. A is not correct in invoking the Recto law Indubitably, a loan contract with the accessory
replevin as provisional remedy chooses one remedy, he cannot avail himself of the since it is only applicable in case of sale of personal chattel mortgage contract - and not a contract of sale

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of personal property in installments - was entered 4. Sale of lands payable in straight terms. (Sec. 3, 3. NOTE: Essentially, the said provision provides One day after the cancellation of the
into by the parties with respondent standing as the R.A. No. 6552) for three (3) requisites before the seller may Compromise Agreement, Foothills Realty, as
debtor-mortgagor and petitioner as the creditor- actually cancel the subject contract: first, the successor-in-interest of Goldland, caused the
mortgagee. NOTE: The enumeration of the transactions not seller shall give the buyer a 60-day grace period annotation of its adverse claim on the subject
covered by the Maceda Law is NOT exclusive, since to be reckoned from the date the installment TCTs. In its application to cancel the adverse
Thus, ESB is justified in filing his Complaint before other transactions over immovables, although not became due; second, the seller must give the claim, Star Asset argued that the cancellation is
the RTC seeking for either the recovery of within the enumerated exclusions are to be buyer a notice of cancellation/demand for in order because the compromise agreement,
possession of the subject vehicle so that it can considered as excluded because they are not within rescission by notarial act if the buyer fails to pay upon which Foothills Realty's right was
exercise its rights as a mortgagee, i.e., to conduct the clearly expressed coverage. An example would the installments due at the expiration of the said anchored was already terminated. Moreover,
foreclosure proceedings over said vehicle; or in the be the sale on installment of commercial or office grace period; and third, the seller may actually Star Asset asserted that the adverse claim was
event that the subject vehicle cannot be recovered, condominium units. (Villanueva, 2009) cancel the contract only after thirty (30) days only valid for 30 days, such that after the lapse
to compel respondent to pay the outstanding from the buyer’s receipt of the said notice of of said period, the adverse claim must be
balance of her loan. Since it is undisputed that ESB Q: What are the so-called “Maceda” and “Recto” cancellation/demand for rescission by notarial cancelled without any positive action on the part
had regained possession of the subject vehicle, it is laws in connection with sales on installments? act. (Optimum Dev. Bank v. Sps. Jovellanos, G.R. of Star Asset. Thus, Star Asset prayed for the
only appropriate that foreclosure proceedings be Give the most important features on each law. No. 189145, 04 Dec. 2013) cancellation and removal of Foothills Realty's
commenced in accordance with the provisions of (1999 BAR) adverse claim annotated on the TCTs of the
“The Chattel Mortgage Law,” as intended. NOTE: According to the Supreme Court, the vendor subject properties. Star Asset moved that it be
Otherwise, Palces will be placed in an unjust A: The Maceda Law is applicable to sales of could go to the court and demand judicial rescission substituted by Dallas Energy because its
position where she is deprived of possession of the immovable property on installments. The most in lieu of a notarial act of rescission. An action for interests over the properties were already sold
subject vehicle while her outstanding debt remains important features are: annulment of contract which is a kindred concept of to the latter. TCTs were issued in Dallas
unpaid, either in full or in part, all to the undue rescission by notarial act will also suffice. (Rabuya, Energy’s name whereby the same adverse claim
advantage of petitioner – a situation which law and 1. After having paid installments for at least two 2017) was carried over and annotated therein.
equity will never permit. (Equitable Savings Bank v. years, the buyer is entitled to a mandatory grace
Palces, G.R. No. 214752, 09 Mar. 2016) period of one month for every year of Q: The case involves three parcels of land Foothills Realty also argued that there should
installment payments made, to pay the unpaid located in Barangay Baliok, Talomo, Davao City have been a notarial act of rescission as
REALTY INSTALLMENT BUYER ACT OR installments without interest. previously registered in the name of Star Asset required by the Maceda Law and failure to serve
“MACEDA LAW” (2000, 2002 BAR) If the contract is cancelled, the seller shall under three TCTs with a combined area of the same will not be tantamount to cancellation
refund to the buyer the cash surrender value 300,000 sqm. On Dec. 12, 2012, Star Asset filed a of the compromise agreement. Is the annotation
Realty Installment Buyer Act equivalent to fifty percent (50%) of the total Petition for Cancellation of Adverse Claim in of the adverse claim anchored on the
payments made, and after five years of said TCTs before the trial court. Star Asset compromise agreement proper?
Commonly known as the “Maceda Law,” embodied installments, an additional five percent (5%) asserted that the subject properties were
in R.A. No. 6552. Sec. 2 of thereof declares as “public every year but not to exceed ninety percent previously owned by Goldland which were A: NO. The cancellation of the compromise
policy to protect buyers of real estate on installment (90%) of the total payments made. however mortgaged to PBCO. The properties agreement despite lack of notarial act of rescission
payments against onerous and oppressive were foreclosed by PBCOM and later, the is valid because the subject controversy is not
conditions.” NOTE: This requires a notarial act of rescission and ownership of the same was transferred to covered by the Maceda Law hence there is no need
the refund to the buyer of the full payment of the Unimark. Star Asset claimed that it eventually for a notarial act of recission. In this case, the buyer
Transactions/Sale covered by the Maceda Law cash surrender value of the payments on the acquired the properties from Unimark. under the compromise agreement, Foothills Realty,
property. Failure to comply with the mandatory is a company based in Davao City that is engaged in
The law involves the sale or financing of twin requirement shall result into the contract In the meantime, after the foreclosure of the the business of real estate development,
immovables (real estate) on installment remaining to be valid and subsisting. (Rabuya, 2017) properties, Goldland impugned the validity of undertaking, establishing, or managing subdivision
payments. (Sec. 3, R.A. No. 6552) the foreclosure proceedings which prompted housing problems, industrial or commercial estates,
2. In case the installments paid were less than two Star Asset to enter into a Compromise golf course projects, resort projects and other real
Coverage: Residential Condominium Apartments (2) years, the seller shall give the buyer a grace Agreement with the former with an undertaking estate developments. The properties subject of this
period of not less than 60 days. If the buyer fails to sell back the properties to Goldland under the case have an aggregate land area of 300,000 sqm. By
Excluded: to pay the installments due at the expiration of following schedule. Star Asset claimed that its sheer size, the subject properties can hardly be
1. Industrial lots; the grace period, the seller may cancel the Goldland failed to comply with its obligation classified as residential properties as to be covered
2. Commercial buildings (and commercial lots by contract after 30 days from receipt by the buyer under the compromise agreement, hence, Star by the Maceda law. As aforesaid, the Maceda
implication); of the notice of cancellation or demand for Asset was constrained to cancel said law was enacted to curb out the bad practices of real
3. Sale to tenants under agrarian laws; and rescission by notarial act. compromise agreement. estate developers like Foothills Realty. For that

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reason, the Court find that Foothills Realty is taking cancellation or the demand for rescission of the performance against Honorio invoking the 1. Is Art. 1592 applicable?
an incongruous position by invoking the Maceda contract by a notarial act. (Sec. 4, R.A. No. 6552) application of the Maceda Law. If you are the 2. Can the vendor rescind the contract?
law in as much as the said law was enacted precisely judge, how will you decide the case? (2014 BAR)
to guard against its practice. Q: Orbe purchased land from Filinvest. She paid A:
a total of P608,648.20 for the past two years and A: I will rule in favor of Honorio. The invocation of 1. NO. Art. 1592 of the NCC does not apply to a
Since the compromise agreement is validly later on failed to pay the balance. She claims that the Maceda Law is misplaced. The law applies only conditional sale. Art.1592 applies only to a
cancelled, the cancellation of the compromise she is entitled to get 50% of her payments to sale or financing of realty on installment contract of sale and not to a Deed of
agreement no longer supports the continued because she paid for at least 2 years. However, payments including residential units or residential Conditional Sale where the seller has reserved
annotation of the adverse claim on the TCTs of the Filinvest denied her claim, alleging that what condominium apartments and does not apply to title to the property until full payment of the
subject properties. (Star Asset Mgmt. Ropoas, Inc. v. she paid did not really amount to two years’ sales of industrial units or industrial lands like in the purchase price. The law applicable is the
RD of Davao City, G.R. No. 233737. 03 Feb. 2021) worth of payments. Is Orbe allowed to get the case presented. Maceda Law. (Jurado, 2019)
50%?
Rights of the Buyer The sale to the Spouses Dakila is not a sale on 2. NO, the vendor cannot rescind the contract
A: NO. When Act R.A. No. 6552 or the Maceda Law installment but more of a straight sale where a under the circumstances. Under the Maceda
a. If buyer has paid at least 2 years of speaks of paying “at least two years of installments” down payment is to be made and the balance to be Law, which is the law applicable, the seller on
installments: in order for the benefits under its Sec. 3 to become paid in a relatively short period of three months. installment may not rescind the contract till
available, it refers to the buyer's payment of two (2) after the lapse of the mandatory grace period of
The buyer is entitled to the following rights in years’ worth of the stipulated fractional, periodic Q: Priscilla purchased a condominium unit in 30 days for every one year of installment
case he defaults in the payment of succeeding payments due to the seller. (Orbe v. Filinvest Land, Makati City from the Citiland Corporation for a payments, and only after 30 days from notice of
installments: Inc., G.R. No. 208185, 06 Sept. 2017) price of P10 million, payable P3 million down cancellation or demand for rescission by a
and the balance with interest thereon at 14% notarial act.
i. To pay, without additional interest, the Other Rights Granted to a Buyer under the per annum payable in 60 equal monthly
unpaid installments due within the total Maceda Law installments of P198,333.33. In this case, the refusal of the seller to accept
grace period earned by him which is hereby payment from the buyer on the 49th month was
fixed at the rate of one (1) month grace 1. Sell or assign rights to another; They executed a Deed of Conditional Sale in not justified because the buyer was entitled to
period for every one (1) year of installment 2. Reinstate contract by updating within 30 days which it is stipulated that should the vendee 60 days grace period, and the payment was
payments made; before and cancellation; fail to pay three successive installments, the sale tendered within that period. Moreover, the
3. Deed of Sale to be done by notarial act; shall be deemed automatically rescinded notice of rescission served by the seller on the
ii. If the contract is cancelled, the seller shall 4. Pay full installment in advance the balance of without the necessity of judicial action and all buyer was not effective because the notice was
refund to the buyer the cash surrender price anytime without interest; and payments made by the vendee shall be not by a notarial act. Besides, the seller may still
value of the payments on the property 5. Have full payment annotated in certificate of forfeited in favor of the vendor by way of rental pay within 30 days from such notarial notice
equivalent to fifty percent (50%) of the title. for the use and occupancy of the unit and as before rescission may be effected. All these
total payments made, and, after five (5) liquidated damages. requirements for a valid rescission were not
years of installments, an additional five NOTE: Applies to contracts even before the law was complied with by the seller. Hence, the
percent (5%) every year but not to exceed enacted. Stipulation to the contrary is void. For 46 months, Priscilla paid the monthly rescission is invalid.
ninety percent (90%) of the total payments installments religiously, but on the 47th and
made. (Sec. 3, R.A. No. 6552) Q: Spouses Dakila entered into a contract to sell 48th months, she failed to pay. On the 49th Q: Spouses Jovellanos entered into a Contract
with Honorio Cruz over a parcel of industrial month, she tried to pay the installments due but to Sell with Palmera Homes for the purchase of
b. If the buyer has paid less than two (2) years land in Valenzuela, Bulacan for a price of the vendor refused to receive the payments a residential house and lot payable for a
of installments: P3,500,000.00. The spouses would give a down tendered by her. period of 10 years. Later, Palmera Homes
payment of P500,000.00 upon the signing of the assigned all its rights, title, and interest in
The seller shall give the buyer a grace period of contract, while the balance would be paid for the The following month, the vendor sent her a favor of Optimum Bank.
not less than sixty (60) days from the date the next 3 consecutive months in the amount of notice that it was rescinding the Deed of
installment became due. P1,000,000.00 per month. The spouses paid the Conditional Sale pursuant to the stipulation for After some time, Optimum issued a Notice of
first 2 installments but not the last installment. automatic rescission, and demanded that she Delinquency and Cancellation of the Contract
If the buyer fails to pay the installments due at vacate the premises. She replied that the to Sell on April 10, 2006 for the spouses’
the expiration of the grace period, the seller After one year, the spouses offered to pay the contract cannot be rescinded without judicial failure to pay their monthly payments.
may cancel the contract after thirty (3) days unpaid balance which Honorio refused to demand or notarial act pursuant to Art. 1592 of Thereafter, a final Demand Letter dated May
from receipt by the buyer of the notice of accept. The spouses filed a complaint for specific the Civil Code. (2000, 2014 BAR) 25, 2006, was issued by Optimum requesting

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the Sps. Jovellanos to vacate and deliver the CONVENTIONAL REDEMPTION Parole Evidence in Proving Right of Repurchase
properties which, however, remained G. EXTINGUISHMENT
unheeded. This prompted Optimum to file an Seller reserves the right to repurchase thing sold The right of repurchase may be proved by parol
unlawful detainer case against the spouses. coupled with the obligation to return the purchase evidence when the contract of sale has been
Was the cancellation of the contract to sell price of the sale, expenses incurred under the reduced in writing, or when no objection to such
1. IN GENERAL
valid? contract, other legitimate payments made by reason parol evidence was made during trial. (MCIAA v. CA,
of the sale as well as the necessary & useful G.R. No. 121506, 30 Oct. 1996)
Causes for Extinguishment of Sale
A: YES. The Maceda Law, R.A. No. 6552, expenses made on the thing sold. (Art. 1601 in
recognizes in conditional sales of all kinds of real relation to Art. 1616, NCC) Effect on the Reserved Right to Repurchase if the
A contract of sale is extinguished by:
estate (industrial, commercial, residential) the Principal Contract of Sale is Void
right of the seller to cancel the contract upon non- How Conventional Redemption takes Place
1. Same causes as how an obligation is
payment of an installment by the buyer, which is Since the underlying contract of sale was
extinguished, namely: (Arts. 1231 & 1600, NCC)
simply an event that prevents the obligation of the It shall take place when the vendor reserves the inoperative and consequently void, then the
a. Payment or performance;
vendor to convey title from acquiring binding right to repurchase the thing sold, with the reserved right of repurchase would also be void.
b. Loss of the thing due;
force. It also provides the right of the buyer on obligation to: (Villanueva, 2009)
c. Condonation or remission of the debt;
installments in case he defaults in the payment of
d. Confusion or merger of the rights of
succeeding installments. a. Return the price of the sale; Pre-emption v. Redemption
creditor and debtor;
b. Shoulder the expenses of the contract and any
e. Compensation;
Three (3) requisites before the seller may actually other legitimate payments made by the buyer PRE-EMPTION REDEMPTION
f. Novation;
cancel the contract must exist: first, the seller shall by reason of the sale;
g. Annulment; As to when it arises
give the buyer a 60-day grace period to be c. Pay the value of the necessary and useful
h. Rescission; Arises before sale Arises after sale
reckoned from the date the installment became expenses made on the thing; and
i. Fulfillment of resolutory condition; or
due; second, the seller must give the buyer a d. Comply with other stipulations agreed upon. As to availability of rescission
j. Prescription
notice of cancellation/demand for rescission by (Art. 1601, NCC) There can be rescission
Rescission is
notarial act if the buyer fails to pay the of
2. Conventional Redemption (Arts. 1601-1618, inapplicable.
installments due at the expiration of the said grace Other Person can Exercise the Right to original sale.
NCC); or
period; and third, the seller may actually cancel Repurchase As to whom the action is directed
3. Legal redemption. (Arts. 1619-1623, NCC)
the contract only after thirty (30) days from the Action is directed
buyer’s receipt of the said notice of The right to repurchase may be exercised by any Action is directed
Redemption against prospective
cancellation/demand for rescission by notarial person to whom the right of repurchase may be against buyer.
seller.
act. transferred, or in case of legal redemption, by the
It is a mode of extinguishment wherein the seller
person so entitled by law. (Villanueva, 2009) 2. PACTO DE RETRO SALE
has the right to redeem or repurchase the thing sold
It was only after the expiration of the thirty-day
upon return of the price paid.
(30) period did Optimum treat the contract to sell NOTE: Right to repurchase must be reserved at the
A sale with pacto de retro transfers the legal title to
as effectively cancelled – making as it did a final time of perfection of sale. (Pineda, 2010) the vendee a retro. The essence of a pacto de retro
Kinds of Redemption
demand upon Sps. Jovellanos to vacate the subject
sale is that the title and ownership of the property
property only on May 25, 2006. Thus, based on the Reservation of Right to Repurchase sold are immediately vested in the vendee a retro,
1. Legal; and
foregoing, there was a valid and effective
2. Conventional subject to the resolutory condition of repurchase by
cancellation of the Contract to Sell and since Sps. The right to repurchase is reserved by a stipulation
a vendor a retro within the stipulated period.
Jovellanos had already lost their right to retain to that effect in the contract of sale. Because it is not
Incorporation of Right to Redeem in Every (Cadungog v. Yap, G.R. No. 161223, 12 Sept. 2005)
possession of the subject property as a a right granted to the vendor by the vendee, but is a
Contract of Sale
consequence of such cancellation, their refusal to right reserved by the vendor.
vacate and turn over possession to Optimum Reservation CANNOT be made in an instrument
The right of the vendor to redeem/repurchase must
makes out a valid case for unlawful detainer. different from that of the contract of sale. Once the
appear in the same instrument. However, parties
(Optimum Development Bank v. Sps. Jovellanos, G.R. instrument of absolute sale is executed, any right
may stipulate on the right of repurchase in a
No. 189145, 04 Dec. 2013) thereafter granted the vendor in a separate
separate document but in this case, it is valid only
instrument cannot be a right of repurchase but
between the parties and not against third persons.
some other right like the option to buy. (Villanueva,
(Pineda, 2010)
2009)

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Pacto de retro v. Mortgage mortgage, but shows the intention of the parties to mortgage. Mere inadequacy of the price is not asked John to execute an undated Deed of
make the property subject of the contract as sufficient. The price must be grossly inadequate, or Absolute Sale with a stated consideration in the
PACTO DE RETRO MORTGAGE security for a debt and contains nothing impossible purely shocking to the conscience. (Diaz, 2010) amount of P5 Million, supposedly for the
or contrary to law. (Aludos v. Suerte, G.R. No. 165285, purpose of providing additional security for the
As to ownership nature
18 June 2012) The Decisive Factor in Evaluating whether or loan. John claimed that they verbally agreed that
not a Deed of Sale Absolute in Form is a the mode of payment for the said loan would be
Ownership is Ownership is not
Essential Requisites of Equitable Mortgage Mortgage Lourdes’ collection of rental payments from the
transferred but the transferred but the
tenants of the subject property in the total
ownership is subject to property is merely
1. Parties entered into a contract denominated as In determining whether a deed absolute in form is a amount of P70,000 per month for five (5) years.
the condition that the subject to a charge or
one of sale; and mortgage, the court is not limited to the written John remained in possession of the property. To
seller might recover the lien as security for the
2. Their intention was to secure an existing debt memorials of the transaction. The decisive factor in the surprise of John, he was informed that the
ownership within a compliance of a
by way of a mortgage. (Molina v. CA, G.R. No. evaluating such agreement is the intention of the ownership of the property had been transferred
certain period of time. principal obligation.
125755, 24 Feb. 2003) parties, as shown not necessarily by the to Lourdes. John argued that the undated Deed
As to interest terminology used in the contract but by all the of Absolute Sale is void for being an equitable
Presumption of an Equitable Mortgage surrounding circumstances, such as the relative mortgage. Is John correct?
If the seller does not situation of the parties at that time, the attitude acts,
Mortgagor does not lose
repurchase the property A sale with conventional redemption is deemed to conduct, declarations of the parties, the A: YES. An equitable mortgage is defined as one
his interest in the
upon the very day be an equitable mortgage in any of the following negotiations between them leading to the deed, and which although lacking in some formality, or form
property if he fails to
named in the contract, cases. (Art. 1602, NCC) (A-I-R-S-T-A-R) generally, all pertinent facts having a tendency to fix or words, or other requisites demanded by a statute,
pay the debt at its
he loses all interest and determine the real nature of their design and nevertheless reveals the intention of the parties to
maturity.
thereon. 1. Price of the sale with right to repurchase is understanding. (Sps. Raymundo. v. Sps. Bandong, G.R. charge real property as security for a debt, and
As to foreclosure and redemption unusually Inadequate; No. 171250, 04 July 2007) contains nothing impossible or contrary to law. Its
2. Seller Remains in possession as lessee or essential requisites are: (1) that the parties entered
It is the duty of the otherwise; Effects when Sale is adjudged as an Equitable into a contract denominated as a contract of sale;
mortgagee to foreclose 3. Upon or after the expiration of the right to Mortgage and (2) that their intention was to secure an existing
There is no obligation the mortgage if he repurchase, Another instrument extending the debt by way of a mortgage.
resting upon the wishes to secure a period of redemption or granting a new period 1. The apparent seller may ask for the reformation
purchaser to foreclose. perfect title thereto. is executed; of the instrument (Art. 1605, NCC; 2005 BAR); The purported contract of sale between John and
Neither does the vendor 4. Purchaser Retains for himself a part of the Lourdes is an equitable mortgage and not a
have any right to After the maturity of the purchase price; 2. Money, fruit or other benefit to be received by legitimate contract of sale. First, it is not disputed by
redeem the property debt secured by the 5. Seller binds himself to pay the Taxes on the the buyer as rent or otherwise shall be any party that the supposed vendor of the property,
after the maturity of the mortgage and before thing sold; considered as interest (Art. 1602, NCC); John, remains to be in possession of the subject
debt. foreclosure, the 6. In any other case where the real intention of the property despite purportedly selling the latter to
mortgagor has a right to parties is that the transaction shall Secure the 3. The court may decree that “vendor” pay his Lourdes. Second, the purchase price of the
redeem. (De Leon, 2013) payment of a debt or the performance of any outstanding loan to the “vendee” (Banga v. purported sale indicated in the undated Deed of
other obligation; or Bello, G.R. No. 156705, 30 Sept. 2005); and Absolute Sale is inadequate. Third, the evidence on
7. Art. 1602 shall also apply to a contract record shows that respondent Lourdes retained for
Subsequent Sale of Property by Vendor a retro purporting to be an Absolute sale. (Art. 1604, 4. A remand of the case to the trial court where the herself the supposed purchase price. Fourth, John
NCC; 2005 BAR) latter did not pass upon the mortgagor’s claim established that the real intention of the parties is
A sale subsequently made by the vendor to an that he had paid his mortgage obligation, only for the purported contract of sale to merely secure
innocent purchaser for value could defeat the NOTE: In case of doubt in determining whether it is for the purpose of the determining whether the payment of their debt owing to respondent De
vendee’s title and right to possession if the latter’s equitable mortgage or sale a retro (with right of said obligation has been paid, and if not, how Vera Navarro. (Sps. Sy v. De Vera-Navarro, G.R. No.
right is not properly registered or annotated. (De repurchase); it shall be construed as equitable much should still be paid. (Ibid.) 239088, 03 Apr. 2019, J. Caguioa)
Leon, 2013) mortgage. The remedy is reformation.
Q: John borrowed P3 Million from Lourdes, Q: On Dec. 27, 1987, petitioners obtained
3. EQUITABLE MORTGAGE Inadequacy of Price and Equitable Mortgage secured by a Real Estate Mortgage Contract over a loan of P3,500.00 from Felipe Marquito, the
a parcel of land and a building thereon with a father of respondents. Petitioners used their
It is one which lacks the proper formalities, form or Inadequacy of price does NOT constitute proof market value of P40 Million. Immediately after land as collateral for the loan obligation. On
words or other requisites prescribed by law for a sufficient to declare a contract as one of equitable the execution of the REM Contract, Lourdes said date, respondents' father began occupying

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the land. In March 2003, petitioner Ogatia 10-year prescriptive period. (Saclolo v. Marquito, As to notice requirement Running of Period of Legal Redemption
borrowed an additional P6,000.00, and again G.R. No. 229243, 26 June 2019, J. Caguioa) Notice is required for
used her aliquot share of the land as collateral its exercise, 1. Right of legal pre-emption or redemption shall
for the loan. In June 2004, petitioner Saclolo Pactum Commissorium Only notice for the be exercised within 30 days from written notice
accompanied with by a
also borrowed an additional amount of exercise is required. by the vendor or the prospective vendor – deed
tender of payment/
P10,000.00 from respondents, using her aliquot A stipulation for automatic vesting of title over the consignment. of sale not to be recorded in Registry of
share of the land as collateral. security in the creditor in case of debtor’s default. As to effect Property unless accompanied by affidavit of the
(Villanueva, 2009) vendor that he has given notice to all possible
In Oct. 2004, petitioners verbally informed Its exercise Its exercise results into redemptioners; or
respondents of their intention to "redeem" the Under Art. 2088 of the Civil Code, the creditor extinguishes an the perfection of a
property. Respondents, however, cannot appropriate the things given by way of existing contract of contract of sale. 2. When there is actual knowledge, no need to give
refused. Thus, petitioners were constrained to pledge or mortgage or dispose of them; any sale. (Villanueva, 2009) written notice; and the doctrine of laches may
file a Complaint for redemption of mortgaged stipulation to the contrary is null and void because apply, or when the redemptioner acted as a
properties, specific performance with damages that would result in pactum commissorium. NOTE: Once the instrument of absolute sale is middleman or intermediary to effect the sale to
before the RTC. Both the RTC and the CA held executed, the seller can no longer reserve the right a third party, the period of redemption begins
that while the transaction was one of equitable NOTE: Arts. 2088 and 2141 of the Civil Code were of repurchase, and any right thereafter granted the to run from actual knowledge.
mortgage, petitioners could no longer repealed by R.A. No. 11057, otherwise known as the seller by the buyer cannot be a right of repurchase
repurchase or redeem the subject property as “Personal Property Security Act.” Previously, the but some other rights, like that of an option to buy. Q: The subject property was mortgaged to Dura
the period for redemption under Art. 1606 of creditor has no right to appropriate to himself the Tire and Rubber Industries, Inc. as security for
the NCC has lapsed. Did petitioners’ action to things given by way of pledge or mortgage or Period of Redemption credit purchases to be made by Move Overland
redeem the subject property prescribe? dispose of them because he or she is permitted only Venture and Exploring, Inc. Under the mortgage
to recover credit from the proceeds of the sale of the 1. No period agreed upon – Four (4) years from agreement, Dura Tire was given the express
A: No. Since the true transaction between the property at a public auction through a public officer date of contract; (Art. 1606, NCC) authority to extrajudicially foreclose the
parties was an equitable mortgage and not a sale in the manner prescribed in Sec. 14 of Act No. 1508. property should Move Overland fail to pay its
with right of repurchase, there is no "redemption" 2. When there is agreement – should not exceed credit purchases.
or "repurchase" to speak of and the periods Redemption v. Option to Buy 10 years; but if it exceeded, valid only for the
provided under Art. 1606 do not apply. Instead, the first 10 years; (Art. 1606, NCC) On June 5, 1992, A&A Swiss sold the property to
prescriptive period under Art. 1144 of the Civil REDEMPTION OPTION TO BUY Mahinay. In the Deed of Absolute Sale, Mahinay
Code is applicable. In other words, the parties had 3. When period to redeem has expired & there acknowledged that the property had been
As to nature
10 years from the time the cause of action accrued has been a previous suit on the nature of the previously mortgaged by A&A Swiss to Dura
to file the appropriate action. Principal and contract – seller still has 30 days from final Tire, holding himself liable for any claims that
Forms part of the preparatory contract. judgment on the basis that contract was a sale Dura Tire may have against Move
The release of additional loans on the basis of the contract of sale. The May exist prior to or with pacto de retro; and Overland. Thereafter, Mahinay sought to pay
same security, coupled with the fact that right must be after the perfection of Move Overland's obligation to release the
respondents never filed an action to consolidate imbedded in a contract the sale, or be Rationale: No redemption due to erroneous property from the mortgage. Dura Tire,
ownership over the subject property under Art. of sale upon its imbedded in another belief that it is equitable mortgage which can be however, ignored Mahinay's request.
1607, evidently shows that for 19 years, perfection. contract upon that extinguished by paying the loan.
respondents expressly recognized: 1) that contract’s perfection. For Move Overland's failure to pay its credit
petitioners continued to own the subject property 4. When period has expired & seller allowed purchases, Dura Tire applied for extrajudicial
As to necessity of separate consideration
and 2) that the loan and equitable mortgage the period of redemption to expire – seller is foreclosure of the property. Mahinay protested
subsisted. Thus, petitioners' cause of action to Does not need a A separate the impending sale and filed a third-party claim
at fault for not having exercised his rights so he
recover the subject property can be said to have separate consideration consideration is needed before the Office of the Provincial Sheriff of
should not be granted a new period. (i.e., if the
accrued only in 2004, that is, when respondents to be valid and for it to be valid and Cebu. Despite the protest, Sheriff Romeo Laurel
issue before the court is one whether the
rejected petitioners' offers to pay and extinguish effective. effective. proceeded with the sale and issued a Certificate
contract is an absolute sale or a sale a retro)
the loan and to recover the mortgaged property as As to period NOTE: Tender of payment is sufficient, but it is not of Sale in favor of Dura Tire, the highest bidder
it was only at this time that respondents manifested in itself a payment that relieves the seller from his at the sale. The property was purchased at
Redemption period Period for an option
their intention not to comply with the true liability to pay the redemption price. ₱950,000.00, and the Certificate of Sale was
cannot exceed 10 right may exceed 10
agreement of the parties. Undoubtedly, the filing of registered on February 20, 1995.
years. years.
the complaint in 2005 was made well-within the

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Relying on the Court of Appeals’ finding that he Obligations the Vendor a retro if he Desires to Vendor a retro CANNOT be Compelled to Right of legal redemption of adjacent owners of
was a “substitute mortgagor,” Mahinay filed a Redeem (Art. 1616, NCC) Redeem rural lands
Complaint for judicial declaration of right to
redeem. The RTC dismissed Mahinay’s The vendor a retro must pay or reimburse the There is no obligation on the part of the vendor a Requisites:
Complaint for judicial declaration of right to vendee a retro the following: retro to repurchase. He may or may not exercise the
redeem. Was the one (1)-year period of right to repurchase. (Pineda, 2010) 1. Both the land of the one exercising the right of
redemption tolled when Mahinay filed his 1. Price of the sale; redemption and the land sought to be redeemed
Complaint for annulment of foreclosure sale? 2. Expenses of the contract; LEGAL REDEMPTION must be rural;
3. Other legitimate expenses made by reason of 2. The lands must be adjacent;
A: NO. The right of redemption being statutory, the the sale; and It is the right to be subrogated upon the same terms 3. There must be an alienation
mortgagor may compel the purchaser to sell back 4. Necessary and useful expenses made on the and conditions stipulated in the contract, in the 4. The piece of rural land alienated must not
the property within the one (1)-year period under thing sold. (Pineda, 2010) place of one who acquires the thing by: exceed one (1) hectare;
Act No. 3135. If the purchaser refuses to sell back 5. The grantee or vendee must already own any
the property, the mortgagor may tender payment to Written Notice Mandatory for the Right of 1. Purchase; or other rural land; and
the Sheriff who conducted the foreclosure Redemption to Commence 2. Dacion en pago; or 6. The rural land sold must not be separated by
sale. Here, Mahinay should have tendered payment 3. Other transaction whereby ownership is brooks, drains, ravines, roads, and other
to Sheriff Laurel instead of insisting on directly Written notice is mandatory for the right of apparent servitudes from the adjoining lands.
paying Move Overland's unpaid credit purchases to redemption to commence and the notice must be in Instances of legal redemption (De Leon, 2013)
Dura Tire. Since the period of redemption is fixed, it writing stating the execution of the sale and its
cannot be tolled or interrupted by the filing of cases particulars. It may be made in a private or public 1. Sale of a co-owner of his share to a stranger; NOTE: In case two or more adjacent owners desire
to annul the foreclosure sale or to enforce the right document. (Pineda, 2010) (Art. 1620, NCC; 2000, 2002 BAR) to exercise the right of redemption, the following
of redemption. 2. When a credit or other incorporeal right in rules on preference is applied:
Conversely, the filing of the suit for ejectment or litigation is sold (Art. 1634, NCC)
To rule otherwise would constitute a dangerous collection of rentals against a co-owner actually 3. Sale of an heir of his hereditary rights to a 1. When the lands have different land area
precedent. A likely offshoot of such a ruling is the dispenses with the need for a written notice, and stranger; (Art. 1088, NCC) – the owner of the adjoining land of smaller
institution of frivolous suits for annulment of must be construed as commencing the running of 4. Sale of adjacent rural lands not exceeding 1 area.
mortgage intended merely to give the mortgagor the period to exercise the right of redemption, since hectare; (Art. 1621, NCC) and 2. When the lands have similar land area –
more time to redeem the mortgaged property. the filing of the suit amounted to actual knowledge 5. Sale of adjacent small urban lands bought the owner who first requested the
of the sale from which the 30-day period of merely for speculation. (Art. 1622, NCC) redemption. (De Leon, 2011)
With Mahinay failing to redeem the property within redemption commences to run. (Villanueva, 2016)
the one (1)-year period of redemption, his right to Right of legal redemption of co-owner Right of pre-emption and legal redemption of
redeem had already lapsed. As discussed, the Tender of Payment NOT necessary for adjacent owners of urban lands
pendency of an action to annul the foreclosure sale Redemption to Take Effect Requisites:
or to enforce the right to redeem does not toll the Requisites:
running of the period of redemption. The trial court Tender of payment is not necessary and offer to 1. There must be co-ownership of a thing;
correctly dismissed the Complaint for judicial redeem is enough only when the amount of 2. There must be alienation of all or of any of 1. The one exercising the right must be an
declaration of right to redeem. (Makilito Mahinay v. repurchase is uncertain and depends upon an the shares of the other co-owners; adjacent owner;
Dura Tire & Rubber Industries, Inc., G.R. No. 194152, accounting of the vendee who has not yet made such 3. The sale must be to a third person or 2. The piece of land sold must be so small and
05 June 2017) accounting. (Tolentino, 1999) stranger; and so situtated that a major portion thereof
4. The sale must be before partition. (De Leon, cannot be used for any practical purpose
Extension of the Time to Redeem Effect of Failure to Redeem 2013) within a reasonable time; and
3. Such urban land was bought by its owner
Parties may extend the period to redeem as long as There must be judicial order before ownership of merely for speculation. (De Leon, 2013)
the total period shall not exceed ten (10) years. real property is consolidated to the buyer a retro.
However, such extension can only be granted when NOTE: In case two or more adjoining owners desire
the original period has not yet expired. Otherwise, to exercise the right of legal redemption, the law
there exists only a promise to sell on the buyer’s prefers the owner whose intended use of the land
part. (Pineda, 2010) appears best justified.

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Other instances when the right of legal heirs of the deceased sold their rights to Miguel the latter is still entitled to a written notice from the
redemption is also granted without written notice to Baltazar as the co- selling co-owner in order to remove all H. ASSIGNMENT OF CREDITS
owner. Nevertheless, Baltazar offered Miguel, by uncertainties about the sale, its terms and
1. Redemption of homesteads; way of redemption, an amount which was more conditions, as well as its efficacy and status.
2. Redemption in tax auction sales; than the purchase price of the subject property. (Barcellano v. Banas, G.R. No. 165287, 14 Sept. 2011)
Assignment is the process of transferring
3. Redemption by judgment debtors; Miguel, however, rejected the offer. Thus, on
gratuitously or onerously the right of the assignor to
4. Redemption in extrajudicial foreclosure; February 2, 2006, Baltazar filed an Action for The right of redemption of co-owners excludes that
the assignee, who would then be allowed to proceed
5. Redemption in judicial foreclosure of Legal Redemption against Miguel and the heirs. of adjoining owners. (Art. 1623, NCC) This means
against the debtor. (Paras, 2008)
mortgage; that co-owners are preferred if the property is to be
6. Foreclosures by banking institutions; In December 2016, or more than 10 years after redeemed by a co-owner and an adjoining owner.
The assignment involves no transfer of ownership
7. Foreclosures by rural banks; and the action was filed, Miguel filed a Motion to
but merely effects the transfer of rights which the
8. Redemption under the Agrarian Reform Dismiss on the ground that Baltazar's "non- Pre-emption
assignor has at the time to the assignee.
Code. compliance with a condition precedent
necessarily renders the complaint as having Redemption presupposes that the property was
An assignment of credit is an agreement by virtue of
Basis of legal redemption failed to state or show a cause of action." Miguel already sold or transferred to another. In pre-
which the owner of a credit, known as the assignor,
was referring to Baltazar's failure to tender the emption, the right is present before the sale; there is
by a legal cause, such as sale, dacion en pago,
It is created partly for reason of public policy and redemption price or consign the same in court a right to purchase ahead of or before it can be sold
exchange or donation, and without the consent of
partly for the benefit and convenience of the in a timely manner. Will the motion to dismiss or transferred to other persons.
the debtor, transfers his credit and accessory rights
redemptioner to afford him a way out of what might prosper?
to another, known as the assignee, who acquires the
be a disagreeable or inconvenient association into E.g., whenever a piece of urban land which is so
power to enforce it to the same extent as the
which he has been in trust. It is intended to A: NO. The period of legal redemption is not a small and so situated that a major portion thereof
assignor could enforce it against the debtor. (Lo v.
minimize co-ownership. (Pineda, 2010) prescriptive period but a condition precedent to the cannot be used for any practical purpose within a
KJS Eco-Formwork System Phil., Inc., G.R. No. 149420,
exercise of the right of redemption. It is a period set reasonable time, having been bought merely for
08 Oct. 2003)
Running of period of legal redemption by law to restrict the right of the person exercising speculation, is about to be re-sold, the owner of any
the right of legal redemption. It is not one of adjoining land has a right of pre-emption at a
NOTE: In assignments, a consideration is not always
The right of legal redemption shall not be exercised prescription. Baltazar filed the Action for Legal reasonable price. (Art. 1620, NCC)
a requisite, unlike in sale. Thus, an assignee may
except within 30 days from the notice in writing by Redemption on February 2, 2006, while he
maintain an action based on his title and it is
the prospective seller, or seller, as the case may be. consigned the redemption price with the trial court
immaterial whether or not he paid any
The deed of sale shall not be recorded in the only on January 20, 2017, after Miguel filed a Motion
consideration therefor. Furthermore, in an
Registry of Property unless accompanied by an to Dismiss. He failed to comply with the condition
assignment, title is transferred but possession need
affidavit of the seller that he has given written precedent of consigning the redemption price
not be delivered.
notice thereof to all possible redemptioners. (Art. within the reglementary period.
1623, NCC)
Nature of assignment of credit
Besides, as a general rule, the listed grounds must
The Court held that since legal redemption is be invoked by the party-litigant at the earliest
1. Assignment of credit and other incorporeal
intended to minimize co-ownership, once a opportunity, as in a motion to dismiss or in the
rights is a consensual, bilateral, onerous, and
property is subdivided and distributed among the answer; otherwise, such grounds are deemed
commutative or aleatory contract; (De Leon,
co-owners, the community ceases to exist and there waived. (Baltazar v. Miguel, G.R. No. 239859, 28 June
2013)
is no more reason to sustain any right of legal 2021)
2. The assignment involves no transfer of
redemption. (Avila v. Barabat, G.R. No. 141993, 17
ownership but merely effects the transfer of
Mar. 2006) Written notice indispensable
rights which the assignor has at the time to the
assignee; and (Casabuena v. CA, G.R. No.
Q: Baltazar, Florencio, and Hipolita are pro- The right of legal pre-emption or redemption shall
115410, 27 Feb. 1998)
indiviso co-owners of a parcel of land. Florencio not be exercised except within 30 days from the
3. It may be done gratuitously (i.e., by donation)
and his wife died and were survived by notice in writing by the prospective vendor, or by
or onerously. (De Leon, 2013)
Patrocinio, while Hipolita and her husband also the vendor, as the case may be. (Art. 1623, NCC;
4. As a general rule, all principles governing sales
died and were survived by Angelito, Hipolito, 2001, 2002 BAR)
also apply to this transaction. (De Leon, 2013)
Aurea, Edilberta, and Jose. The subject property NOTE: The written notice of sale is mandatory.
The act of assignment could not operate to
remained unpartitioned. Subsequently, the Notwithstanding actual knowledge of a co-owner,
erase liens or restrictions burdening the right

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assigned. (Gonzales v. Land Bank of the Accessory Rights included in the Assignment of credit assigned makes the assignor-vendor liable knowledge of any of the circumstances. (Paras,
Philippines, G.R. No. 76759, 22 Mar. 1990) a Credit for breach of such warranty. 2011)

Perfection of contract for assignment of credit 1. Guaranty; In addition, assignment does not make the assignor Legal Redemption in Sale or Credit or other
2. Mortgage; warrant the solvency of the debtor to the credit, incorporeal right in litigation (Art. 1634, NCC)
The contract for the assignment or transfer of credit 3. Pledge; and unless:
and other incorporeal rights is perfected from the 4. Preference. (Art. 1627, NCC) Requisites:
moment the parties agree upon the credit or right 1. There is a stipulation to that effect; or
assigned and upon the price even if neither has been Effect of Assignment of Credit on Debtor 2. The insolvency of the debtor was prior to 1. There must be a sale or assignment of
delivered. (Art. 1475, NCC) However, the assignee the assignment and of common knowledge. credit;
will acquire ownership only upon delivery. (De The “meeting of the minds” in assignment 2. There must be a pending litigation at the
Leon, 2011) contemplates that between the assignor of the But even when the assignor warrants the solvency time of the assignment;
credit and his assignee, there being no necessity for of the debtor, the warranty, in the absence of 3. The debtor must pay the assignee:
Effects of Assignment the consent of the debtor. It is sufficient that the contrary stipulation, should last for one year only a. price paid by him;
assignment be brought to the debtor’s knowledge in from the time of the assignment if the credit is b. judicial cost incurred by him; and
1. Transfers the right to collect the full value order to be binding upon him. (C&C Commercial already due. If the credit should be payable within a c. interest on the price from the date of
of the credit, even if the assignee paid a Corp. v. PNB, G.R. No. 42449, 05 July 1989) term or period which has not yet expired, the payment; and
price less than such value; warranty shall cease one year after the maturity of 4. The right must be exercised by the debtor
2. Transfers all accessory rights; and Effect of payment by the debtor after assignment the credit. (Art. 1629, NCC) within 30 days from the date the assignee
3. Debtor can set up against the assignee all of credit demands (judicially or extra-judicially)
the defenses he could have set up against Reasons: payment from him.
the assignor. 1. Before Notice 1. To prevent fraud which may be committed
by feigning the solvency of the debtor at the GR: Debtor has the right of legal redemption in sale
Binding Effect of Assignment Payment to the original creditor is valid and time of the assignment when in fact he is of credit or incorporeal rights in litigation.
debtor shall be released from his insolvent; and
1. As between the parties, the assignment is obligation. 2. oblige the assignee to exert efforts in the XPNs:
valid although it appears only in a private recovery of the credit and thereby avoid 1. Sale to a co-heir or co-owner;
document so long as the law does not NOTE: Assignment is effective as to the that by his oversight, the assignor may 2. Sale to a co-owner; and
require a specific form for its validity. (Art. debtor only from the time he has suffer. (De Leon, 2011) 3. Sale to the possessor of property in
1356, NCC) knowledge of it. question.
If the assignor in good faith is liable for a warranty,
2. To affect third persons: 2. After Notice he is liable only for the expenses of the contract, and
a. If personal property is involved – a any other legitimate payments made by reason of
public instrument is necessary to make Payment to the original creditor is not valid the assignment. On the other hand, an assignor in
the assignment effective against third as against the assignee. Even without bad faith who breaches such warranties, shall in
persons. notice, the debtor will not also be released addition be liable to pay for the necessary and useful
b. If real property is involved – from his obligation should he pay the expenses, plus damages. (Art. 1628, NCC)
registration in the Registry of Property creditor after having had knowledge of the
is required. assignment of the obligation. He thereby Liabilities of the assignor of credit
acts in bad faith. The debtor can be made to
NOTE: The assignee merely steps into the shoes of pay again by the assignee. (De Leon, 2013) The liability of the vendor (assignor) in good faith is
the assignor, the former acquiring the credit subject limited only to the price received and to the
to defenses (e.g., fraud, prescription, etc.) available Warranties expenses of the contract, and any other legitimate
to the debtor against the assignor. The assignee is payments by reason of the assignment. (Art. 1616
deemed subrogated to the rights as well as to the In assignment, the assignor shall be responsible for (1), NCC)
obligations of the seller. An assignee cannot acquire the existence and legality of the credit at the time of
greater rights than those pertaining to the assignor. sale, unless it has been expressly sold as a doubtful The assignor in bad faith is liable not only for the
(Koa v. CA, G.R. No. 84847, 05 Mar. 1993) account, in which case the assignee takes the credit payment of the price and all expenses, but also for
at his own risk. Consequently, the invalidity of the damages. An assignor in bad faith is one who has

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