(Let the seller beware) (Let the buyer beware) - the vendor is liable to the vendee for any

hidden faults or defects in the thing sold, even though he was not aware thereof (Art. 1566). - Based on the principle that a sound price warrants a sound article. - applies in sheriffs sale, sales of animals, and tax sales, for there is no warranty of title or quality on the part of the seller in such sales.Also applies in double sales of property where the issue is who between two vendees has a better right to the property .Requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendors title takes all the risks and losses consequent to such failure [Solvoso vs. Tanega, 87 SCRA 349]. Alternative remedies of the buyer to enforce warranty (Art. 1567): 1. Accion redhibitoria to withdraw from the contract 2. Accion quanti minoris demand a proportionate reduction of the price, with a right to damages in either case

Effect of loss of thing sold on account of hidden defects (Art. 1568) If the vendor was aware of the hidden defects in consequence of which the thing sold was lost, he shall bear the loss because he acted in bad faith. In such case, the vendee has the right to recover: (a) the expenses of the price paid b) the contract; and (c) damages. If the vendor was not aware of them, he shall be obliged only to return: (a) the price paid (b) interest thereon; and (c) expenses of the contract if paid by the vendee. He is not made liable for damages because he is not guilty of bad faith. VI. OB LI GAT IONS OF T HE VENDEE

The vendee is obliged to (1) accept delivery; and (2) pay the price of the thing sold.

The following rules must be borne in mind: 1. In contract of sale, the vendor is not required to deliver the thing sold until the price is paid nor the vendee pay the price before the thing is delivered in the absence of an agreement to the contrary [La Font vs. Pascacio, 5 Phil. 591]. 2. If stipulated, then the vendee is bound to accept delivery and to pay the price at the time and place designated. 3. If there is no stipulation as to the time and place of payment and delivery, the vendee is bound to pay at the time and place of delivery.

4. In the absence also of stipulation, as to the place of delivery, it shall be made wherever the thing might be at the moment the contract was perfected (Art. 1251). 5. If only the time for delivery of the thing sold has been fixed in the contract, the vendee is required to pay even before the thing is delivered to him; if only the time for payment of the price has been fixed, the vendee is entitled to delivery even before the price is paid by him (Art. 1524). Instances when the vendee may suspend the payment of the price: a) should he be disturbed in the possession or ownership of the thing sold; b) should he have reasonable grounds to fear such disturbance by a vindicatory action or by a foreclosure of mortgage; These rights do not exist in the following cases: (a) should there be a stipulation to that e ffect; or (b) should the vendor give security for the return of the price; or (c) should the vendor have caused the disturbance or danger to cease; or (d) should the disturbance consist only of a mere act or trespass. VII. ACT I ONS FOR T HE B REAC H OF CONT R ACT OF SALE OF GOOD S Goods include all chattels personal but not things in action or money of legal tender in the Philippines. The term includes growing fruits or crops.

Actions available for breach of the contract of sale of goods: Action by the seller for payment of the price (Art. 1595) Action by the seller for damages for non -acceptance of the goods (Art. 1596) Action by the seller for rescission of the contract for breach thereof (Art. 1597) Action by the buyer for specific performance (Art. 1 598) Action by the buyer for rescission or damages for breach of warranty (Art. 1599)

Remedies allowed to the buyer when the seller has been guilty of a breach of promise or warranty (Art. 1599): 1 Recoupment accept the goods and set up the sellers breach to reduce or extinguish the price.The theory of recoupment is that the sellers damages are cut down to an amount which will compensate him for the value of what he has given. 2 Set-off or Counterclaim for damages accept the goods and maintain an action for damages for the breach of the warranty. Both sides of the contract are enforced in the same litigation. The buyer (defendant) does not seek to avoid his obligation under the contract but seeks to enforce the sellers (plaintiffs) obligation and to deduct it from his liability for the price for breach of warranty. 3 Action for damages refuse to accept the goods and maintain an action for damages for the breach of the warranty. 4 Rescission rescind the contract of sale by returning or offering the return of the goods, and recover the price or any part thereof which has been paid. This remedy is not available in the following cases:(a) if the buyer accepted the goods knowing of the breach of warranty without protest;(b) if he fails to notify the seller within a reasonable time of his election to rescind; and (c) if he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the transfer of ownership to him. But where the injury to the goods was caused by the very defect against which the seller warranted, the buyer may still rescind the sale. VIII. EXTINGUISHMENT OF SALE

Classification of modes or causes of extinguishing the contract of sale: Common those causes which are also the means of extinguishing all other contracts like payment, loss of the thing, condonation, etc. (Art. 1231).

Special those causes which are recognized by the law on sales (those covered by Arts. 1484, 1532, 1539, 1540, 1542, 1556, 1560, 1567, and 1591). Extra-special conventional redemption and legal redemption. Conventional Redemption (Arts. 1601-1618) Legal Redemption (Arts. 1619-1623) It is the right which the vendor reserves to himself, to reacquire the property sold provided her returns to the vendee the price of the sale, the expenses of the contract, any other legitimate payments made therefore and the necessary and useful expenses made on the thing sold, and fulfills other stipulations which may have been agreed upon. It is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title. Nature: (a) it is purelyc o n t r a c t u a l because it is a right created, not by mandate of the law, but by virtue of an express contract[ O r d o e z vs. Villaroman, 78 Phil. 116]; (b) it is ana c c i d e n t a l stipulation and, therefore, its nullity cannot affect the sale of itself since the latter might be entered into without said stipulation [Alojado vs. Lim Siongco, 51 Phil. 339]; (c) it is a real right when registered, because it binds third persons [Mortera vs. Martinez, 14 Phil. 541]; (d) it is a resolutory condition because when exercised, the right of ownership acquired by the vendee is extinguished [Aquino vs. Deal, 63 Phil. 582]; (e) it isp o t e s t a t i v e because it depends upon the will of the vendor; (f) it is ap o w e r orp r i v i l e g e, not an obligation, that the vendor has reserved for himself [Ocampo vs. Potenciano, CA 48 OG 2230]; (g) it is reserved at the moment of the perfection of the contract for if the right to repurchase is agreed upon afterwards, there is only a promise to sell which produces different rights and effects and is governed by Art. 1479 [Diamante vs. CA, 206 SCRA 52]; (h) the person entitled to exercise the right

of redemption necessarily is the owner of the property sold and not any third party [Gallar vs. Husain, 20 SCRA 186] ; (i) it gives rise to reciprocal obligation that of returning the price of sale and other expenses, on the part of the vendor, and that of delivering the property and executing a deed of sale therefore, on the part of the vendee [Pandaquilla vs. Gaza, 12 Phil. 663]. Nature: (a) identical with conventional redemption, except for the source of the right conventional redemption arises from the voluntary agreement of the parties; legal redemption proceeds from law; (b) it is not predicated on proprietary right but on a bare statutory privilege to be exercised only by the person named in the statute the statute does not make actual ownership at the time of sale or redemption a condition precedent, the right following the person and not the property [Magno vs. Viola and Sotto, 61 Phil. 80]; (c) it is in the nature of a mere privilege created partly for reason of public policy and partly for the benefit and convenience of the redemptioner to afford him a way out of what might be a disagreeable or inconvenient association into which he has been thrust it is intended to minimize co ownership [Basa vs. Aguilar, 117 SCRA 128; Tan vs. CA, 172 SCRA 660]. Instances of Legal Redemption: (a) Under the Civil Code, those found in Arts. 1620-1622, 1634, and 1088; (b) Under special laws: (1) redemption by owner of real property sold for delinquent taxes period is within 1 year from date of sale; (2) repurchase by homesteader of homestead sold under the Public Land Act period is 5 years [Tupas vs. Damasco, 132 SCRA 593]; (3) redemption by judgment debtor or redemptioner or real property sold on execution period is 12 months; (4) redemption by mortgagor after mortgaged property has been judicially foreclosed and sold period is 90 days but before confirmation of sale by the court (in all cases of extra-judicial foreclosure sale, the mortgagor may redeem the property within 1 year from the date of registration of the sale);

(5) redemption by an agricultural lessee of landholding sold by the landowner period is 180 days from notice in writing which shall be served by the vendee on all lessees affected by DAR upon the registration of the sale. An equitable mortgage is one which lacks the proper formalities, form of words, or other requisi tes prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossible or contrary to law [Cachola vs. CA, 208 SCRA 496]. Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as the accepted equivalent of the performance of an obligation. Pacto de retro Mortgage Ownership is transferred but the ownership is subject to the condition that the seller might recover the ownership within a certain period of time. Ownership is not transferred but the property is merely subject to a charge or lien as security for the compliance of a principal obligation, usually a loan. If the seller does not repurchase the property upon the very day named in the contract, he loses all interest thereon. The mortgagor does not lose his interest in the property if he fails to pay the debt at its maturity. There is no obligation resting upon the purchaser to foreclose; neither does the vendor have any right to redeem the property after the maturity of the debt. It is the duty of the mortgagee to foreclose the mortgage if he wishes to secure a perfect title thereto, and after the maturity of the debt secured by the mortgage and before foreclosure, the mortgagor has a right to redeem [Basilio vs. Encarnacion, 5 Phil. 360]. Instances when conventional redemption is presumed to be an equitable mortgage: 1. when the price of a sale with right to repurchase is unusually inadequate; 2. when the vendor remains in possession as lessee or otherwise; 3. when upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; 4. when the purchaser retains for himself a part of the purchase price; 5. when the vendor binds himself to pay the taxes on the thing sold; 6. in any other case where it may be fairly inferred the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation; and 7. when there is a doubt as to whether the contract is a contract of sale with right or repurchase or an equitable mortgage. Requisites before legal redemption can be exercised :

1 There must be a sale or assignment of credit. The concept of sale must be understood in its restricted sense. The right cannot be exercised if the transaction is exchange or donation. 2 There must be a pending litigation at the time of the assignment. The complaint by the assignor must have been filed and answered by the creditor before the sale of the credit. 3 The debtor must pay the assignee (a) the price paid by him, (b) the judicial costs incurred by him, and (c) the interests on the price from the date of payment. 4 The right must be exercised by the debtor within 30 days from the date the assignee demands (judicially or extra-judicially) payment from him. Redemption Pre-emption 1 The sale to a third person has already been perfected The sale to a third person has not yet been perfected 2 Has a much broader scope Narrower in scope may be exercised only where there is a prospective resale of a small piece of urban land originally bought by the prospective vendor merely for speculation 3 Directed against the third person who bought the property Directed against the prospective vendor who is about to resell the property 4 Effect is to extinguish a contract that has already been perfected or even consummated Effect is to prevent the birth or perfection of a contract IX. AS SI GNMENT OF CREDI T S AND OT HER INCORP OREAL RIGHT S Assignment of credit a contract by which the owner of a credit transfers to another his rights and actions against a third person in consideration of a price certain in money or its equivalent (Art. 1458). Assignment of credit and other incorporeal rights are consensual, bilateral, onerous, and commutative or aleatory contracts. The assignment involves no transfer of ownership but merely effects the transfer of rights which the assignor has at the time to the assignee [Casabuena vs. CA, 286 SCRA 594] . It may be done gratuitously, but if done onerously, it is really a sale. Thus, the subject matter is the credit or right assigned; the consideration is the price paid for the credit or right; and the consent is the agreement of the parties to the assignment of the credit or right at the agreed price. Renunciation the abandonment of a right without a transfer to another. Agency involves representation, not transmission wherein the agent acts for the principal. Substitution the change of a new debtor for the previous debtor with the credit remaining in the same creditor. Subrogation the change in the person of the creditor with the credit being extinguished. Binding effects of assignment: 1 As between the parties, the assignment is valid although it appears only in a private document so long as the law does not require a specific form for its validity. 2 To affect third persons, the assignment must appear in a public instrument, and in case it involves real property, it is indispensable that it be recorded in the Registry of Deeds [Lopez vs. Alvarez, 9 Phil. 28]. 3 The assignee merely steps into the shoes of the assignor, the former acquiring the

credit subject to defenses (fraud, prescription, etc.) available to the d ebtor against the assignor. The assignee is deemed subrogated to the rights as well as to the obligations of the seller. He cannot acquire greater rights than those pertaining to the assignor. [Koa vs CA, 219 SCRA 541]. X. BARTER OR EXCHANGE Barter a contract whereby one person transfers the ownership of non -fungible things to another with the obligation on the part of the latter to give things of the same kind, quantity, and quality. The contract is perfected from the moment there is a meeting of the mi nds upon the things promised by each party in consideration of the other. It is consummated from the time of mutual delivery by the contracting parties of things they promised. Effect where the giver is not the lawful owner of the thing delivered: the aggrieved party cannot be compelled to deliver the thing he has promised. He is entitled to claim damages (Art. 1639). [Biagtan vs. Viuda de Oller, 62 Phil. 933]. Remedy in case of eviction: the injured party is given the option to recover the property he has given in exchange with damages or only claim an indemnity for damages. The right to recover is, however, subject to the rights of innocent third persons (Art. 1640). XI. T HE B ULK SALES LAW Purpose of the law (Act No. 3952) is to prevent the defrauding of creditors by the secret sale or disposal or mortgage in bulk of all or substantially all of a merchants stock of goods. The general scheme is to declare such bulk sales fraudulent and void as to creditors of the vendor, or presumptively so, unless specified formalities are observed, such as the demanding and the giving of a list of creditors, the giving of actual and constructive notice to such creditors, by record or otherwise, and the making of an inventory. A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer, mortgage, or assignment (a) of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of the business; or (b) of all or substantially all, of the business or trade; or (c) of all or substantially all, of the fixtures and equipment used in the business of the vendor, mortgagor transferor, or assignor. Acts punished by the law: 1. knowingly or willfully making or delivering a statement as requ ired by the Act which does not include the names of all the creditors of the vendor, etc. with the correct amount due and to become due or which contains any false or untrue statement; and 2. transferring title to a any stock of goods, wares, merchandise, provisions or materials sold in bulk without consideration of for a nominal consideration only.