The Law on Sales, Agency, and Credit Transactions

CHAPTER 1: NATURE AND FORM OF THE CONTRACT

Article. 1458. By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain in
money or its equivalent.
ESSENTIAL ELEMENTS:
 Consent or meeting of the minds – when there is a meeting of the mind
to transfer ownership in exchange of the price.
 Parties must have the legal capacity to give consent and to obligate
themselves.
 The acceptance of payment by the seller is an indication of his consent to a
contract of sale.
 Consent is manifested by one’s offer to buy and one’s acceptance.
 Object or subject matter – the determinate thing to be delivered.
 Cause or consideration – the price certain in money or its equivalent.

NATURAL ELEMETS – elements that are presumed to exist or

inherent in the contract of sale although the parties didn’t stipulate
therefor
 Warranty against hidden defects
 Warranty against eviction.
ACCIDENTAL ELEMENTS – these refer to the stipulations agreed
upon by the parties, such as those pertaining to the terms and
manner of payment, penalty, interest and other conditions
governing the contract of sale.

 CHARACTERISTICS OF A CONTRACT OF SALE

 Consensual – it is perfected by mere consent
 Bilateral – contracting parties are bound to fulfill obligations
reciprocally towards each other. (seller – to deliver and transfer
ownership of the thing sold; buyer – to pay the price)
 Onerous – the parties give valuable considerations in order to
acquire rights.
 Commutative – the parties exchange almost equivalent values.
 Nominate – the law designates a special name to it. (SALE)
 Principal – its existence does not depend upon another contract.

TWO KINDS OF CONTRACT OF SALE

A contract of sale may be absolute or conditional

Absolute Contract of Sale Conditional Contract of Sale

 a contract without any  Sale contemplates a contingency.

conditions except the buyer’s  Subject to certain conditions,
 payment of the purchase usually in the case of the vendee,
price. the full payment of the agreed
 Payment of the purchase purchase price and in the case of
price is not essential to the the vendor, the fulfillment of
transfer or ownership as long certain warranties
as the property sold has been  The delivery of the thing sold does
delivered. not transfer title until the condition
 Title passes to the buyer upon Is fulfilled.
delivery of the thing sold  Failure of such condition would
prevent such perfection or the
juridical relation itself from coming
into existence.

 FORMS OF CONTRACT OF SALE

GENERAL RULE: A contract of sale may be made in writing or by
word of mouth, or partly in writing and partly by word of mouth or
may be inferred from the conduct of the parties.
Exceptions:
1. If the law requires a document or other special form, the contracting parties
may compel each other to observe that form (ART. 1357, NCC)
2. Under Statute of Frauds, certain contracts must be in writing, otherwise,
they shall be unenforceable (ART. 1403(2), NCC)
3. Sale of large cattle which requires that the same me recorded with the city/
municipal treasurer and that a certificate of transfer be issued. Otherwise,
the sale is not valid (ART. 1581, NCC)
*SALE of PIECE OF LAND THROUGH AN AGENT IS VOID ALTHOUGH IT IS IN A
PUBLIC INSTRUMENT. IT SHOULD BE IN WRITING.

 PARTIES TO A CONTRACT OF SALE

 Seller or vendor – obligation is to deliver a determinate thing or to transfer
ownership of the thing sold.
- Must have a right to transfer the ownership at the time it is delivered.
 Buyer/Purchaser/Vendee – obligation is to pay a sum of money or its
equivalent.

ART. 1459. The thing must be licit and the vendor must have a right
to transfer the ownership thereof at the time it is delivered.
1. Things- determinate, licit or lawful, not contrary to law, morals,
good customs, public order or public policy, and should not be
impossible.
- Must be within the commerce of man
- If the subject matter is illicit, the contract is void and cannot therefore be
ratified
- If both parties in pari delicto, they shall have no action against each other,
and both parties shall be prosecuted(ART.411)
- When only one of the contracting parties is guilty, the innocent one may
claim what he has given and shall not be bound to comply with his promise.
2. RIGHTS – No contract may be entered upon future inheritance except in
cases expressly authorized by law.
 Services may be object of the sale, they cannot be the object of a contract
of sale.
Kinds of Illicit things:
 Illicit per se (because of its nature)
 Illicit per accidens (because of some provisions of law declaring it illegal)

RIGHT TO TRANSFER OWNERSHIP

1. Seller must be the owner or authorized by owner of thing sold.
 It is essential for a sale to valid
 This rule is in accordance with a well-known principle of law that one cannot
transmit or dispose of that which he does not have(nemo dat quod non-
habet)
 One can sell only what he owns or is authorized to sell, and the buyer can
acquire no more than what the seller can transfer legally.
 If the sale from one person to annoyer was fictitious as there was no
consideration, and therefore VOID and INEXISTENT, the latter has no title to
convey to third persons.
2. Right must exist at the time of delivery.
3. Where property sold registered in name of seller who employed
fraud in securing his title.
 A fraudulent or forged deed is a nullity and conveys no title, there are
instances when such a document may become the root of a valid title.
 The proper recourse of the true owner of the property sold who was
prejudiced and fraudulently dispossessed of the same is to bring an action
for damage against those who caused or employed the fraud, and if the
atter are insolvent, an action against the Treasurer of the Philippines ma be
filed for recovery of damages against the Assurance Fund.
4. Where property sold in violation of a right of first refusal of another person.
 The prevailing doctrine is that a contract of sale entered into in violation of a
right of first refusal of another person, WHILE VALID IS RESCISSIBLE.
 Where, however, there is no showing of bad faith on the part of the vendee,
the contract of sale may not rescinded, and the remedy of the person with
the right of first refusal is an ACTION FOR DAMAGES AGAINST THE VENDOR
5. Where real property, subject of unrecorded sale, subsequently
mortgaged by the seller by which mortgage was registered.
 The unrecorded sale between the buyer and the seller is preferred for the
reason that if the seller, the original owner, had parted with his ownership of
the thing sold, then, he no longer had ownership and free disposal of that
thing so as to able to mortgage it again.
ART. 1460. Object of sale must be determinate
 It is not necessary that the thing sold must be in sight at the time the
contract is entered into. It is sufficient that the thing is determinable or
capable of being made determinate without the necessity of a new or
further agreement between the parties.
 If the subject matter is not known – NULL and VOID.
 If thing is GENERIC, it is indicated only by its kind and cannot be pointed out
with particularity.

ART.1461. Sale of things having potential existence

 Even a future thing, not existing at the time the contract is entered into,
may be the object of sale provided it has a potential or possible existence.
 The title will vest in the buyer the moment the thing comes into existence.
 The thing sold must be specific and identified, and they must be also owned
by the seller at the time it is delivered.
 The sale of mere hope or expectancy refers to an “expected thing”
 The sale of a mere hope or expectancy is VALID even if the thing hoped or
expected does not come into existence, unless the hope or expectancy is
vain in which case, the sale is VOID.
 Sale of thing expected (Emptio rei speratae) – the sale of a thing not et
in existence subject to the condition that the thing will existence , and on
failure of the condition, the contract becomes ineffective, and hence, the
buyer has no obligation to pay the price.
 The sale of hope (Emptio spei) – the sale of hope itself that the thing will
come into existence where it is agreed that the buyer will pay the price
even if the thing does not eventually exist.

ART.1462. GOODS WHICH MAY BE THE OBJECT OF SALE

1. EXISTING GOODS – goods owned or possessed by the seller.
2. FUTURE GOODS – goods to be manufactured (like the sale of milk
bottles to be manufactured with the name of the buyer pressed in the
glass), raised (like the sale of future harvest of palay from a rice field), or
acquired(like the sale pf definite parcel of land the seller expects to buy).
 The sale of future goods, even though the contract is in the form of
a present sale, is VALID ONLY AS EXECUTORY CONTRACT to be
fulfilled by the acquisition and delivery of the goods specified.
 Futures contract where the parties merely speculate on the rise
and fall on the price of the goods subject matter of the transaction
is a form of gambling was declared NULL and VOID.

Art. 1463. The sole owner of a thing may sell an undivided interest
therein.
 The sole owner of a thing may sell the entire thing; or only a specific portion
thereof; or an undivided interest therein and such interest may be
designated as an aliquot part of the whole.
 The legal effect of the sale of an undivided interest in a thing is to make the
buyer a co-owner of the thing sold.

ART. 1464. Talk about the sale of fungible goods (Sale of share in a
specific mass)
 Fungible goods- goods that cannot be used without consuming it.
 Each co-owner shall have full ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign, or
mortgage it, and even substitute another person in its enjoyment, except
when personal rights are involved. But the effect of the alienation or the
mortgage, with respect to the co-owners, shall be limited to the portion
which may be allocated to him in the division upon the termination of the
co-ownership.
 Subject matter – in the sale of an undivided share, either a thing or of that
mass of goods, the subject matter is an incorporeal right.
 Ownership passes to the buyer by the intention of the parties.
SALE OF SHARE IN A SPECIFIC MASS:
1. If the quantity of the mass is more than the quantity sold, the parties shall
become co-owners.
2. If quantity of the mass is less than the quantity sold, the buyer becomes the
owner of the whole mass and the seller is bound to make good the
deficiency which should be of the same kind and quantity.

ART. 1465. Things subject to a resolutory condition may be the

object of the contract of sale.
Resolutory condition – an uncertain event upon the happening of which
the obligation(or right) subject to it is extinguished. Hence, the right
acquired in virtue of the obligation Is also extinguished.

ART. 1466. Contract of Sale and Agency to Sell.

By the contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another, with the consent
or authority of the latter (ART.1868)

Contract of Sale Contract of Agency to Sell

 Buyer receives the goods as  The agent receives the good

owner. The buyer after as the goods of the principal
delivery becomes the owner. who retains his ownership
 Buyer has to pay the price over them. The agent does
 The buyer, as a general rule, not become the owner.
cannot return the object sold  The agent has to simply
 In a sale, the seller warrants account for the proceeds of
the thing sold. the sale he may make on the
 The buyer can deal with the principal’s behalf.
thing sold as he pleases,  The agent can return the
being the owner. object in case he is unable to
sell the same to a third
person.
 The agent makes no
warranty for which he
assumes personal liability as
long as he acts within his
authority and in the name of
 the seller.
 The agent in dealing with the
thing received, must act and
is bound according to the
instructions of his principal.

ART. 1467. CONTRACT OF SALE AND CONTRACT FOR A PIECE OF

WORK.
Contract of Sale – ordered in the ordinary course of business.
Contract for a piece of work – to be manufactured for the customer’s
special order.

Contract of Sale Contract for a piece of Work

 The thing transferred is one  The thing transferred is one

which would have existed not in existence and which
and been the subject of sale never would have existed
to some other person, even if but for the order of the party
the other had not been desiring to acquire it.
given.  The risk of loss before
 The risk of loss is borne by delivery is borne by the
the buyer. worker or conractor, not by
the employer(the person
who ordered)
 Are not within the statute of
frauds.

ART. 1468. CONTRACT OF SALE AND BARTER.

Contract of Sale Contract of Barter or

Exchange

 The vendor gives a thing in  one of the parties binds

consideration for a price in himself to give one thing in
money. consideration of the other’s
promise to give another
thing.

If partly in money and partly in another thing, the intention of the parties
will control the situation.

If such intention does not clearly appear:

 Barter if the value of the thing given is more than the money
consideration.
 Sale if the monetary consideration is more than the value of the thing.
 ART. 1469. Applicable lang if walang specific amount na nakastate
sa contract.
GENERAL RULE: Price fixed by the third persons is binding between the
parties.
Parties not in fault remedies are:
1. Fulfillment – court may fix the price.
2. Rescission of the contract.
 Failure to pay the agreed price does not conceal a sale because the
consideration is the price, hindi lang nasunod.
 Remedy of the unpaid seller is to rescind the contract or action to collect the
balance.

The Price is certain if:

1. When it is stipulated
2. When it has reference to another thing certain.
3. When it is fixed by a third person.
4. When it is fixed by the court.
ART. 1470. GROSS INADEQUACY OF PRICE.
 Gross inadequacy of price does not affect the contract of sale, except if
the contract is vitiated. defect in the contract such as when fraud,
mistake, or undue influence is present)/ is not sufficient ground for the
cancellation of an execution sale.
 If there is a defect in the consent, the contract can be annulled.
 If the price is so inadequate as to shock the conscience of the court, the
sale will be set aside.

ART. 1471. IF PRICE IS SIMULATED.

 When the vendor really intended to transfer the thing gratiously, the
sale is VOID and the contract shall be valid as DONATION.
 Not show to be a donation or any other contract , the contract is VOID
and INEXISTENT because ownership of the thing is not transferred.

ART. 1474. IF PRICE CANNOT BE DETERMINED.

 If the price cannot be determined in accordance with articles 1469 and
1472, or in any other manner, the contract is without effect.
-there is no obligation on the part of the vendor to deliver the thing and on
the part of the vendee to pay.
 If deliver has been made, the buyer must pay a reasonable price therefor.
-the reasonable price or value of goods is generally the market price at the
time and place fixed by the contract or by law for the delivery of the goods.

ART. 1475. NATURE OF THE CONTRACT AND ITS PERFECTION.

STAGES OF A CONTRACT OF SALE:
1. Negotiation – period from the time the prospective contracting parties
indicate interest in the contract to the time the contract is perfected.
2. Perfection – takes place upon the concurrence of the essential elements of
the sale (meeting of the minds of the parties, object of the contract, and
upon the price.)
3. Consummation – begins when the parties perform their respective
undertakings under the contract if sale.
From the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price, the
reciprocal obligations of the parties arise.
In case on the contracting parties should not comply with what is incumbent
upon him, the injured party may sure for fulfillment or rescission with the
payment of damages in either case.

ART. 1476. SALE BY AUCTION.

Auction without reserve – the auctioneer cannot withdraw the goods
from sale once a bid has been made.
Every bidding is a mere offer.

ART. 1477 THE OWNERSHIP OF THE THING SOLD SHALL BE

TRANSFERRED TO THE VENDEE UPON THE ACTUAL OR
CONSTRUCTIVE DELIVERY THEREOF.
ART. 1478. THE PARTIES MAY STIPULATE THAT OWNERSHIP IN THE
THING SHALL NOT PASS TO THE PURCHASER UNTIL HE HAS FULLY
PAID THE PRICE.

ART. 1479. MUTUAL PROMISE/BILATERAL AND UNILATERAL

PROMISE.
 If no acceptance by the offeree, unilateral promise has no legal effect.
 If there is acceptance by the offeree but without consideration that is
distinct and separate from the purchase price, the sale may be withdrawn
anytime
 If there is acceptance by the offeree and the promise is supported by a
consideration distinct and separate from the price that its acceptance will
give rise to a perfected contract.
 It has been held by the Supreme Court, however, that if acceptance is made
before a withdrawal, it constitutes a binding contract of sale although the
option is given without consideration.
Option Money – consideration distinct from the purchase price.
- The consideration paid for the purpose of holding one
to his promise to buy or sell a determinate thing for a
certain period of time, which consideration is separate
and distinct from the purchase price.
- Option money is not always monetary but could consist
of other things or undertakings.
 ART. 1480. ABOUT WHO BEARS THE RISK OF LOSS OR
DETERIORATION.

Seller bears the risk of loss Buyer bears the risk of loss

 If the thing was lost  If the object was lost

before perfection. after delivery to the
buyer.
 If object was lost after
perfection but before
delivery, even before the
ownership is transferred
to the buyer, the risk of
loss is shifted to the
buyer, it is because
during that period, the
buyer gets the benefits
from it if meron and to be
fair, the buyer will also
bears the risk of loss.

If the thing is lost at the time of the perfection, the contract is

VOID and INEXISTENT.
- The legal effect is the same as when the object is lost before the perfection
of the contract of sale.
ART. 1481. SALE BY SAMPLE AND SALE BY DESCRIPTION.
ART. 1482. ABOUT EARNEST MONEY. (constitutes an advance
payment)
 In earnest money, there is a perfected contract of sale.
 Money given as part of the purchase price and proof of the perfection of
the contract
 It is also called “arras’ or something of value to show that the buyer was
really in earnest and given to the seller to bind the bargain.
 NOTE: Since there is already a perfected contract of sale, any of the
parties cannot refuse to continue with the sale on the ground that the
transaction appears to be disadvantageous to them.

EARNEST MONEY OPTION MONEY

Part of the purchase price Consideration distinct from

Applies in perfected sale the purchase price
Buyer is required only to pay There is still no perfected
for the balance. contract of sale.
The would-be-buyer is not
required to buy. The option
money may be forfeited.
 ART. 1483. FOR ENFORCEABILITY OF A CONTRACT
GENRAL RULE: A contract may be entered into in any form provided all the
essential elements for its validity are present.
 WHEN CONTRACTS COVERED BY STATUTE OF FRAUDS: The law
requires that it be in writing subscribed by the party charged, otherwise
the contract cannot be enforced by action.
 WHEN FORM IS REQUIRED IN ORDER THAT A CONTRACT MAY BE
VALID: The required form must be observed in order that the contract
may be both valid and enforceable.
 WHEN THE FORM IS REQUIRED ONLY FOR THE CONVENIENCE OF
THE PARTIES: as between the contracting parties, the form is not
indispensable since they are allowed by law to compel each other to
execute the contract of sale observing that form.
 SALE OF A REA PROPERTY/IMMOVABLE PROPERTY OR AN
INTEREST THEREIN
 A sale of piece of land or an interest therein through an agent is VOID
unless the agent’s authority is in writing.
 For the sale of real property to be effective against third persons, the
sale must be registered in the Registry of Deeds of the province or city
where it is located.
 The sale must be in a public instrument or document.
 The sale of land in a private instrument is valid as between the parties
but it cannot be registered to bind or affect third persons.
 Verbal/oral contract is valid as long as it must be in writing.
Statute of Frauds is applicable only to executory contract(where no
performance or delivery and payment has yet been made by both
parties and not to contracts which are totally(consummated) or
partially performed.
 SALE OF PERSONAL/MOVABLE PROPERTY
 If price is 500 or more, it must be in writing.
 If the price is less than 500, verbal/oral contract is enforceable.

ARTICLE 1484. RECTO LAW

Coverage: Sale of personal property where price is payable in several
installments.
Remedies of vendor in sale of personal property payable in installments
The vendor of personal property payable in installments may
exercise any of the following remedies:
1. Specific performance/Exact fulfillment: elect fulfillment upon the
vendee’s failure to pay; (in case of 1 failure to pay the installments)
- If availed of, the unpaid cannot anymore choose other remedies;
Exception: if after choosing, it has become impossible, rescission may be
pursued.
2. Rescission: cancel the sale, if the vendee shall have failed to pay two or
more installments; deemed chosen when:
a. Notice of rescission is sent.
b. Takes possession of subject matter of sale
c. Files action for rescission
Mutual restitution – both parties must return whatever has been received
by each of them.
3. Foreclosure: foreclose the chattel mortgage, if one has been
constituted, if the vendee shall have failed to pay two or more
installments.
Chattel mortgage – security contract or agreement wherein the
buyer uses a personal property as security for his obligation and
that security agreement is registered with the chattel mortgage.
- Protects the lender by giving him/her a collateral that
he/she can foreclosed and sell to pay the loan if the
borrower defaults or failed to pay.

Note: these remedies are alternative and are not to be exercised

cumulatively or successively and the election of one is a waiver of
the right to resort to the others.
- If the buyer forecloses the chattel mortgage on the thing sold
itself, the seller cannot anymore recover the deficiency (provided
under the Recto Law)

ARTICLE 1485. LEASE OF PERSONAL PROPERTY WITH OPTION TO

BUY.
On the part of lessee who takes possession or enjoyment of the
property leased are really SALES OF PERSONALTY PAYABLE IN
INSTALLMENTS
ARTICLE 1486. STIPULATION AUTHORIZING FORFEITUR OF
INSTALLMENTS OR RENTS PAID.
 In sales of personal property by installments or leases of personal
property with option to buy, the parties may stipulate that the
installments or rents paid are not to be returned.
 No returning of the price that has been partially paid is a VALID
stipulation.
ARTICLE 487. THE EXPENSES FOR THE EXECUTION AND
REGISTRATION OF THE SALE SHALL BE BORNE BY THE VENDOR,
UNLESS THERE IS A STIPULATION TO THE CONTRARY.
 The vendor has the duty to pay not only the expenses for the
execution of the sale but also for the registration of the same in
the absence of any agreement between the parties to contrary.
  Expenses incurred subsequent to the transfer of title are to be borne
by the buyer, unless cause by the fault of the seller.
ARTICLE 1488. THE EXPROPRIATION OF A PROPERTY FOR PUBLIC
USE IS GOVERNED BY SPECIAL LAWS.
EXPROPRIATION – act of taking away money or property without
payment to the owner. Involuntary in nature.

CHAPTER 2: CAPACITY TO BUY OR SELL

 Rules on the sale of real estate

If the sale of real estate should be made with a statement of its
area at the rate of a certain price for a unit of measure or number.
1. The vendor shall be obliged to deliver to the vendee, if the latter should
demand it, all that may have been stated in the contract; or
2. Should it be not impossible, the vendee may choose between:
a. Proportional reduction of the price; and
b. Rescission of the contract, provided that the lack in the area is not less than
one-tenth of that stated (CIVIL CODE, Art. 1539)
3. The vendor shall be obliged to deliver to the vendee, if the latter should
demand it, all that may have been stated in the contract; or
4. Should it be not impossible, the vendee may choose between:
c. Proportional reduction of the price; and
d. Rescission of the contract, provided that the lack in the area is not less than
one-tenth of that stated (CIVIL CODE, Art. 1539)

 Obligations of the vendee

1. To accept the delivery;
2. To pay the price
Q: What are the instances when the buyer can suspend payment?
A: - if he is disturbed in the possession or ownership of the thing bought.
- If he has a well-grounded fear that his possession or ownership would be
disturbed by a vindicatory action or foreclosure of mortgage
3. Bear the expenses for the execution and registration of the sale and putting
the goods in a deliverable state.
4. To take good care of the goods without the obligation to return, where the
goods are delivered to the buyer, and he rightfully refuses to accept it.
5. To pay the interest thereon for the period between delivery of the thing and
the payment of the price in the following cases.

 Warranties
Kinds:
1. Express Warranty – Any affirmation of fact or any promise by the seller
relating to the thing if the natural tendency of such affirmation or promise is
to induce the buyer to purchase the same, and if the buyer purchases the
thing relying thereon (Art.1546)
2. Implied Warranty – inherent in a contract of sale. It is presumed to exist
although nothing has been mentioned about it.
- Warranty against eviction – this refers to the implied warranty on the
part of the seller that he has a right to sell the thing at the time when the
ownership is to pass, and that the buyer shall from that time have and enjoy
the legal and peaceful possession of the thing.
- Warranty against hidden defects – this refers to the implied warranty
that the thing shall be free from any hidden faults or defects, or any charge
or encumbrance not declared or known to the buyer.

 Warranty against eviction

Q: when is there eviction?
A: eviction shall take place whenever by a final judgement based on a right
prior to the sale or an act imputable to the vendor, the vendee is deprived
of the whole or part of the thing purchased.

Requisites:
a. The purchaser has been deprived of the whole or part of the thing sold.
b. The eviction is by final judgement.
the vendee need not appeal form the decision or judgement in order that
the vendor may become liable for eviction (Art.1549).
c. The deprivation is based on a right prior to the sale or an act imputable to
the vendor. (Art.1548)
d. The vendor must have been notified of the suit for eviction at the instance
of the vendee. (Art.1558)

Obligation of the vendor in case of eviction

a. The return of the value which the thing sold had at the time of the eviction ,
be it greater or less than the price of the sale.
b. The income or fruits, if he has not been ordered to deliver them to the party
who won the suit against him;
c. The costs of fruit which caused the eviction and, in proper case, those of the
suit brought against the vendor for the warranty;
d. The damages and interests and ornamental expenses if the sale was made
in bad faith.

 Warranty against hidden defects

Elements:
a. The defects must be such that it renders the thing unfit for the use which it
is intended, or it diminishes its fitness for such use to such an extent that,
 had the vendee been aware thereof, he would not have acquired it or would
have given a lower price for it (Art.1561)
b. The defect must be hidden or cannot be discovered by ordinary inspection
or examination.
c. The defect must be present at the time of the execution of the sale.
d. The vendee has not waived the warrant (Art.1566, CC)

Obligation of the vendor in case the thing is long due to hidden

defects:
a. If the vendor as aware thereof
 Return the price and refund the expenses of the contract, with damages.
b. If the vendor was not aware thereof
 Return the price and interest thereon and reimburse the expenses of the
contract which the vendee might have paid.
Prescriptive period for rescission or reduction of the price
(Warranty against hidden defects)
a. 6 months from delivery
b. 40 days (in case of animals) from delivery.

 Specific implied warranties in sale of goods

 Warranty of fitness for a particular purpose
- Is a warranty that the goods are suitable for the particular or special
purpose disclosed by the buyer which will not be satisfied by the mere
fitness of the goods for general purposes.
 Warranty of merchantability
- Is a warranty that the goods purchased are reasonably fir for the general
purposes for which they are sold.

 Breach of Contract
1. If breach is on the part of the vendee.
Remedy of the seller:
a. Action for payment of the price of the goods (Art.1595, CC)
b. Action for damages due to wrongful neglect and refusal to accept and pay
for the goods (Art. 1596, CC)
c. Action for rescission if buyer has repudiated the contract or has manifested
his inability to perform his obligation (Art. 1597, CC)
2. If breach is on the part of the vendor
Remedy of the buyer:
a. Action for specific performance when the vendor has failed to deliver the
goods (Art. 1598, CC)
b. Action for damages for breach of warranty but accepting the goods ( Art.
1599, CC)
c. Action for rescission for breach of warranty where the vendee may validly
refuse acceptance of the goods, or even if the goods had already been
received, he may return them (Art. 1599, CC)

 Maceda Law
Coverage: sale of immovables on installments including residential
condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under agrarian laws.
Note: Maceda Law only covers sale of financing of real estate.
Rights granted to buyer:
 If the installments paid is less than two (2) years.
a. Grace period is not less than 60 days from due date.
b. Cancellation if failure to pay within 60 days grace.
c. 30 days’ notice of cancellation by a notarial act before final cancellation.
Note: buyer can still pay within 30 days period with interest.
If installments paid is at least two years installment.
A. Pay without interest the balance within a grace period of 1 month for every
year of installment payment. Grace period to be exercised once every 5
years.
B. If contract is cancelled, buyer is entitled to cash surrender value equivalent
to 50% of what he has paid + 5% (available after installment payments of 5
years) for every year but not exceeding 90% of payments made
C. 30 days notice of cancellation by a notarial act and full payment of cash
surrender value, before final cancellation

Other rights granted to the buyer:

1. Sell or assign rights to another.
2. Reinstate contract by updating within 30 days before and cancellation.
3. Deed of sale to be done by a notarial act
4. Pay full payment in advance the balance of price anytime without interest.
5. Have full payment annotated in certificate of title.

 Double Sales
Q: When is there a double sale?
1. Two or more transactions constitute valid sales
2. the sales pertain to exactly the same object or subject matter
3. the object must be bought from the same immediate seller
4. two or more buyers who are at odds over the rightful ownership of the
subject matter must represent conflicting interests.
 Rule of preference in double sales:
In the case of Movable Property: Ownership shall be transferred to the first
possessor in good faith. Possession may be either actual or constructive.
In the case of immovable property:
Priority 1: ownership shall belong to the persons who in good faith first
registered the sale in the Registry of Property.
Priority 2: if there was no registration, ownership shall pertain to the first
possessor in good faith.
Priority 3: in the absence of both registration and possession, ownership
shall belong to the person who present’s the oldest title in good faith. (first
buyer)
*Execution of a public instrument is equivalent to delivery.
Nore: The governing principle in double sales is priore tempore, potior
jure(first in time, stronger in right)

In all the above cases, good faith is essential, being the basic
premise of preferential rights granted to the person claiming
ownership of the immovable.

 EXTINGUISHMENT OF A SALE
Sales are extinguished by the same causes as all other obligations, by those
stated in the preceding articles of this title, and by conventional or legal
redemption.
1. Same causes as other obligations (PALOREMECONO-PARE-FU)
A. Payment
B. Loss of the thing due
C. Remission or condonation
D. Merger of confusion of rights
E. Compensation
F. Novation
G. Prescription
H. Annulment
I. Rescission
J. Fulfillment of resolutory condition
2. Redemption
a. Conventional
- Takes place when the vendor reserves the right to repurchase the thing
sold, with the obligations to return to the vendee the price of the sale,
expenses of the contract, and any other legitimate payments made by
reason of the sale, the necessary and useful expenses made on the thing
sold and other stipulations which may have been agreed upon.
 Period to avail the right to repurchase:
A. If there is no stipulation – 4 years
B. If there is a stipulation – it should not exceed 10 years.
 However, the vendor may still exercise the right to repurchase within thirty
days from the time final judgement was rendered in a civil action on the
basis that the contract was a true sale with right to repurchase.
b. Legal
- 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 transaction whereby ownership is transmitted
by onerous title.
Instances of legal redemption:
1. Sale of a co-owner of his share to a stranger (NCC, ART.1621)
2. When a credit or other incorporated right in litigation is sold (NCC,
ART.1634)
3. Sale of an heir of his hereditary rights to a stranger (NCC, ART 1088)
4. Sale of adjacent rural lands not exceeding 1 hectare (NCC, ART. 1621)
5. Sale of adjacent small urban lands bought merely for speculation (NCC,
ART.1622)
 The right of legal redemption shall not be exercised except within 30 days
from the notice in writing by the prospective seller, or seller, as the case
may be. The deed of sale shall not be recorded in the Registry of Property
unless accompanied by an affidavit of the seller that he has given written
notice thereof to all possible redemptioners – co-owners. (NCC, ART.1623)
 Written notice indispensable
 The right of legal pre-emption or redemption shall not be exercised except
within 30 days from the notice in writing by the prospective vendor, or by
the vendor, as the case may be (NCC, ART.1623).
 Note: Mere knowledge does not satisfy the requirement, there must still be
written notice despite such knowledge.