1.

1 - Sales
Wednesday, 7 August 2024 1:13 pm

Sales, concept

CONTRACT OF SALE
• 1 of the contracting parties → obligates himself to (vendor/ seller):
1) transfer the ownership of
2) to deliver a determinate thing
• the other party (vendee/ buyer) → to pay therefor a price certain money or its equivalent.

Elements of a contract of Sale

A. Essential Elements B. Natural Elements C. Accidental Elements

→ those without which a → those inherent in a contract → particular stipulations of
contract of sale would not exist. of sale, which in the absence of the parties
stipulation excluding them, are
1. Consent of the deemed to exist. → Ex.
contracting parties • payment of interest in a
→ Ex. contract of loan
2. Subject matter which • Warranty against eviction • Terms, place, & time of
should be a determinate and against hidden payment & other
thing (object) defect in a contract of conditions agreed
sale. upon.
3. Price in certain money or
its equivalent

Characteristics of a contract of Sale

1. Nominate → law gave it a special name
2. Principal → can stand on its own without being dependent upon another contract; unlike
accessory contract
3. Bilateral → imposes obligation on both parties (reciprocal)
a. obligation of seller
○ transfer ownership & deliver
b. obligation of buyer
○ pay for price
4. Onerous → valuable consideration are given by both parties to acquire rights
5. Commutative → equal value is exchanged for equal value
6. Consensual → meeting of minds makes a perfect contract of sale but needs delivery to
consummate the perfection of the contract of sale.

→ perfected by mere consent of the parties

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Sale vs. Dacion En Pago

SALE DACION EN PAGO
→ no pre-existing credit → pre-existing credit
→ creates obligations → extinguishes obligations

Seller's POV Buyer's POV Debtor's POV Debtor's POV

cause/ Delivery of the object cause/ consideration: Delivery of the object
consideration: extinguishment of given in place of the
price the obligation credit

→ greater freedom in fixing the price → less freedom in fixing the price

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→ greater freedom in fixing the price → less freedom in fixing the price

Sale vs. Cession / Cession De Bienes

SALE CESSION/ CESSION DE BIENES
→ no pre-existing credit → pre-existing credit
→ creates obligations → extinguishes obligations

Seller's POV Buyer's POV Debtor's POV Creditor's POV

cause/ Delivery of the object cause/ consideration: The assignment of the
consideration: extinguishment of things to be sold
price the obligation

→ greater freedom in fixing the price → less freedom in fixing the price
→ transferred to the buyer: ownership of the → creditors: do not become the owners of the
thing properties assigned to them but are merely given
the right to sell such properties & apply the
proceeds to their claims

Sale vs. Contract for a piece of work

SALE CONTRACT FOR A PIECE OF WORK
→ ordinary course of business → manufactured specially for a customer + upon
special order
→ manufactures or procures for general
market → not for the general market

→ higher in amount

Sale vs. Barter

SALE BARTER
→ consideration = the giving of money → consideration = the giving of a thing;
→ governed by law on sales; same
→ both are species of the genus sales

➢ if consideration consists partly in money & partly by thing

1. look at manifest intention;
2. if intention is not clear:
value of thing is equal or less than amount of money → sale
value of thing is more than amount of money → barter

Sale vs. Contract to sell

CONTRACT OF SALE CONTRACT TO SELL
→ The title to the property passes to the → by agreement: ownership is reserved to the
vendee upon the delivery of the thing sold vendor and is not to pass to the vendee until full
payment of the purchase price.

→ partake of the nature of a contract preparatory to the

execution of a contract of sale.
→ NON-PAYMENT: negative resolutory → NON-PAYMENT: positive suspensive condition
condition • Failure to pay the price is not a breach but an
• The vendor loses ownership of the event that prevents the obligation of the vendor
property and cannot recover it until to convey title from becoming effective
and unless the contract of sales is
resolved and rescinded.
→ RISK OF LOSS: Buyer → RISK OF LOSS: Seller

Sale vs. Agency to sell

CONTRACT OF SALE AGENCY TO SELL

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→ buyer pays for the price of the object; → agent (mediator) not obliged to pay for price
(direct)
→ merely obliged to deliver price received from
buyer;
→ buyer becomes owner of a thing; object → principal remains the owner even if the object is
is delivered to him delivered to the agent;
→ seller warrants; → agent assumes no risk/liability as long as he acted
within the authority given;
→ not unilaterally revocable; → may be revoked unilaterally;
→ seller receives profit; → agent not allowed to profit;
→ sale is a real contract (to give) → Agency is a personal contract;
→ rescission is not available.

Other Notes:
Absolute Sale Conditional Sale
→ no condition attached → the sale is subject to a contingent event:
• Sale with a right to repurchase;
• sale of things having potential existence;
• sale of future harvest of a designated parcel
of land or
• sale of a residential house "except the
furniture inside”.

SALE DONATION
→ onerous → gratuitous
→ Consensual → formal contract
→ governed by law on sales → governed by law on donation

SALE LEASE
– obligation to absolutely transfer – use of thing is for specified period only with
ownership of thing; obligation to return
– consideration is price; – consideration is rent;
–seller needs to be the owner of a thing to – lessor need not be the owner
transfer ownership;

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Rules on the OBJECT of the contract of sale

1. Requisites of object of a contract of sale

a. Within the commerce of men
b. Licit (not be contrary to law, morals, good customs, public order or public policy)
c. Determinate

2. Vendor should be the owner at the time of delivery.

 Vendor need not be owner of thing at the time of the perfection of the contract of sale.

3. SALE OF THINGS HAVING POTENTIAL EXISTENCE vs. SALE OF HOPE

SALE OF THINGS HAVING POTENTIAL SALE OF HOPE (Emptio Spei)
EXISTENCE (Emptio Rei Speratae)
→ Sale of future things; → sale of a present thing, that is the hope or
expectancy;

→ A resolutory condition that thing will → It is not certain that the thing will exist much
come into existence less its quantity and quality; aleatory in character,
but still valid.
→ otherwise: sale will not be effective

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 → otherwise: sale will not be effective
→ sale of VAIN in hope/ expectancy (sale of a losing
sweepstake ticket already drawn = VOID)

4. The goods which form the subject of a contract of sale may be either:
a. Existing goods owned/ possessed by the seller

b. Goods:
▪ To be manufactured, raised, or acquired by the seller AFTER the perfection of the
contract of sale (future goods)
▪ Whose acquisition by the seller depends upon a CONTINGENCY which may or may
not happen

5. The sole owner of a thing may sell UNDIVIDED interest therein

 Sale shall produce the effect of making the seller & the buyer co-owners of the thing
sold

6. Sale of FUNGIBLE goods

 Fungible goods
▪ refer to interchangeable goods such as grain, oil, etc.,
▪ allow one to be replaced by another without loss of value.

 rules if the quantity sold is different from the quantity of the mass:
Quantity of the mass > Quantity sold → CO-OWNERS OF THE MASS
Quantity of the mass < Quantity sold → BUYER: Owner of the whole mass
→ SELLER: bound to make good the
deficiency from goods of the same kind &
quality, unless a contrary intent appears

7. Things subject to a RESOLUTORY CONDITION may be the object of a contract of sale

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Rules on PRICE
1. Certainty of Price
 Rules:
a. parties have agreed upon a definite amount for the sale
▪ Fixing of the price:
Left at the discretion of one of the contracting parties → No sale is perfected
Fixed by one of the parties; accepted by the other → Sale is perfected

b. If the price is certain with reference to another thing certain

c. determination of the price is left to the judgement of a specified person/s:

They are unable/unwilling to fix the → INEFFICACIOUS unless the parties =
price subsequently agree upon the price
3rd person/s acted in bad faith/ by → COURTS may fix the price
mistake
3rd person/s are prevented from → PARTY NOT @ FAULT: may have such
fixing the price/ terms by the FAULT remedies against the party @ fault as are
OF THE SELLER/BUYER allowed the seller or buyer

d. If the price fixed is that:

▪ which the thing sold would have on a definite day, or in a particular exchange or
market,
▪ or when an amount is fixed above or below the price on such day, or in such exchange
or market, provided said amount is certain.

▪ Effect if the price cannot be determined:

1) Inefficacious
2) If the thing or any part thereof has been delivered to and appropriated by
the buyer: pay a REASONABLE PRICE.

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 the buyer: pay a REASONABLE PRICE.

2. Gross inadequacy of Price

 Does not affect a contract of sale (except as it may indicate a defect in the consent)
▪ Insidious words, machinations
 Parties really intended a donation or some other act or contract.
 This exists if a REASONABLE MAN WILL NOT AGREE TO DISPOSE OF HIS PROPERTY.

3. Simulated Price
 If the price is SIMULATED = The sale is VOID → Valid donation or other act/ contract

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When a contract of sale is PERFECTED

 STAGES OF A CONTRACT OF SALE
1. Preparation → negotiation is in progress
2. Perfection → meeting of minds; birth of the contract (upon the thing
(object) & upon the price)
3. Consummation/termination → object is delivered and the price is paid; death of the contract.

Form of a contract of sale

1. Forms:
a. In writing
b. By word of mouth
c. Partly in writing & partly by word of mouth
d. May be inferred from the conduct of the parties

2. When form is important for enforceability (STATUTE OF FRAUDS)

a. Sale of real property/ any interest therein
b. ≥ P500: Sale of goods, chattels or things in action (credit, shares of stock, other
incorporeal properties)

3. Sale of piece of LAND through an agent

General rule: → Authority of the agent to sell: in WRITING
Authority of the agent to sell: Not in Sale
writing
Orally → Void
Private instrument → Void
Public instrument → Void

Authority of the agent to sell: Sale

Private instrument
Orally → Unenforceable
Private instrument → Valid
Public instrument → Valid

Authority of the agent to sell: Public Sale

instrument
Orally → Unenforceable
Private instrument → Valid
Public instrument → Valid

➢ The sale may be recorded in the Register of Deeds:

Authority of the agent → Public instrument
The sale → Public instrument

Importance of written instrument in a contract of sale

1. The enforceability of contract under Art. 1403 of the Civil Code
2. The convenience of the parties under Art. 1358 of the same Code.
3. The eventual registration of the sale with the Land Registration Authority under Presidential
Decree No. 1529

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 The eventual registration of the sale with the Land Registration Authority under Presidential
Decree No. 1529

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Rules in case of sale by auction

1. Sale of auction in lots

 Each lot → subject of a separate contract of sale

2. When sale by auction is perfected

 Auctioneer announces its perfection:
a. Fall of the hammer
b. Any other matter ("Sold")
RIGHTS OF PARTIES BEFORE PERFECTION RIGHTS OF PARTIES AFTER PERFECTION
1. Any bidder may retract his bid 1. The winning bidder CANNOT retract his
bid
2. The auctioneer may withdraw @ anytime
before acceptance 2. Nor can the auctioneer withdraw the
goods since there is already a perfected
Auction w/ → auctioneer: offeree & contract
reserve power of acceptance
→ assumption → Withdrawal from the contract by either
party = violation of the Principle of
Auction w/o → auctioneer: offeror Mutuality.
reserve → bidders: power of
acceptance

3. Rights of the seller to bid

a. The right to bid must have been reserved expressly by or on behalf of the seller.

b. His right to bid must not be prohibited by law or stipulation.

c. Notice must be given that the sale is subject to a right to bid by or on behalf of the
seller.

Effect of employment by the seller of "by bidders" or "by puffers" WITHOUT notice in a sale by
auction
➢ treated as fraudulent by the buyer
➢ the buyer may have the sale annulled on the ground of vitiated consent due to fraud.

➢ "By bidders" or "puffers"

 persons employed by the seller to bid in his behalf,
 the purpose of which is to raise the price, but the said persons are not in themselves
bound by their bids.

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When ownership of the thing sold is TRANSFERRED

➢ Upon the ACTUAL/ CONSTRUCTIVE DELIVERY thereof

➢ The time when the ownership is transferred = important to determine the party who shall bear
the loss

➢ The parties may stipulate that ownership in the thing sold shall NOT PASS TO THE
PURCHASER until he has FULLY PAID THE PRICE

Promise to buy and/or sell

1. Bilateral Promise
 Takes place when one party promises to BUY & the other party promises to SELL a
determinate thing at an agreed price

2. Unilateral Promise
 The promise to BUY or to SELL a determinate thing at an agreed price = made by only 1
of the parties

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  EFFECTS:
Not accepted by the → NOT produce any legal effect
promisee (Policitacion)
If accepted by the promisee → BINDING UPON THE PROMISOR;
• REQUISITE: Supported by any consideration (option
money) distinct from the price

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Earnest Money & Option Money

1. Earnest Money
 Money given; Part of the purchase price
 PROOF of the PERFECTION of the contract
 "Arras"
 is something of value given by the buyer to the seller to show that the buyer is really in
earnest, and to bind the bargain.

2. Option Money
 Separate & distinct from the purchase price
 Paid for a sale that is YET TO BE PERFECTED
 Holding one to his promise to buy/sell a determinate thing for a certain period of time
▪ Signifying your intention to buy, pero pwede ka naman talagang hindi interesado.
 Not always monetary; onerous in nature of the option contract (must be clearly specified
in option contract or clause)

➢ Right of First Refusal

 is a contractual right giving its holder the option to transact with the other
contracting party before others can.
 the ROFR assures the holder that they will not lose their rights to an asset if others
express interest.

 Ex: Lease contract

○ The apartment you are renting will soon be sold by the owner. Before the owner
offered it to others, you are the first priority to be offered by the sale. Relationship
of tenant-landlord is given priority by law.

OPTION CONTRACT RIGHT OF FIRST REFUSAL

→ Principal contract; → Accessory;
→ stands on its own → cannot stand on its own
→ Needs separate consideration → Does not need separate consideration
→ Subject matter & price must be valid → There must be subject matter
→ price not important
→ Not conditional → Conditional
→ Not subject to specific performance → Subject to specific performance

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Rules on Preservation of, injury to, or benefit from, the thing sold before or after perfection

1. Duty of seller to preserve thing after perfection but before delivery

 Take care of the thing with the DILLIGENCE OF A GOOD FATHER
 Unless: law/ other stipulations of the parties requires ANOTHER STANDARD OF CARE

2. Right of the buyer to the fruits

 Right to fruits & accessions/accessories accrue from time sale is perfected but no real
right over it until it is delivered.

3. Loss of / Injury to the thing

Loss BEFORE Complete loss → Void
PERFECTION

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 Complete loss → Void
PERFECTION
(including Partial loss → buyer may choose:
deterioration in 1. Withdrawal from the contract (recission)
quality) 2. Demanding the remaining part & paying its
proportionate price

Loss AFTER First View → BUYER bears the risk of loss (he must pay the
PERFECTION price)

→ loss of the thing = fortuitous event →

Extinguishes the seller's obligation
• EXCEPT:
1. Seller delays
2. Law provides that the seller shall be liable
even in the case of fortuitous event
3. Stipulated that the seller shall be liable even
in case of FE
4. Nature of the seller's obligation = requires
the assumption of risk

Second View → SELLER bears the risk of loss (buyer is not

obliged to pay the price)

1. If there is an agreement to that effect

2. If ownership of the goods is retained by the
seller merely to secure the performance by
the buyer of his obligation under the
contract.
3. When actual delivery has been delayed
through the fault of the buyer.

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Sale by sample; description; & sample & description

SALE BY SAMPLE → Is a small representative portion or quantity of a whole mass of

goods or products

→ parties contract solely with REFERENCE TO THE SAMPLE

→ The seller warrants that the bulk of the goods delivered

CORRESPONDS with the sample shown to the buyer
SALE BY DESCRIPTION → parties contract solely with REFERENCE TO THE DESCRIPTION

→ The seller warrants that the bulk of the goods delivered

CORRESPONDS with the description of the goods presented to the buyer
SALE BY SAMPLE & → The seller warrants that the bulk of the goods delivered corresponds
DESCRIPTION with BOTH the sample and the description, and not with only one.

→ The buyer shall have reasonable opportunity of comparing the bulk

with the description or the sample.

Buyer's Remedy in case of violation of warranty

➢ Goods delivered do not correspond with the above items → ASK FOR RECISSION OF THE SALE

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Capacity to buy or sell

1. Who may enter into a contract of sale
 GENERAL RULE: All parties with capacity to contract can enter into a valid contract of
sale
1) Natural Persons

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 1) Natural Persons
2) Juridical Persons
▪ corporation
▪ partnership
▪ associations
▪ Cooperatives

2. Kinds of incapacity in a contract of sale

A. ABSOLUTE INCAPACITY
1) Minors
2) Insane/ demented persons
3) Deaf-mutes who do not know how to write

▪ status of contract: voidable only

- sale therefore is ratifiable
- Remedy: action for annulment
 with partial restitution in so far as the minor is benefited

▪ necessaries are sold → he must pay a reasonable price therefor.

- sale therefore is valid
- Necessaries include everything indispensable for:
a) sustenance
b) Dwelling
c) Clothing
d) medical attendance
e) education
f) transportation

B. RELATIVE INCAPACITY
1) SALE BY & BETWEEN SPOUSES
- Reason:
a. prevent defraudation of creditors
b. avoid situation where dominant spouse take advantage
c. avoid circumvention on prohibition of donation between spouses

- Exception:
1) separation of property agreed (marriage settlement)
2) judicial separation of property
3) Common Law Spouses (Paramours)
 Status of contract: VOID

2) OTHERS PER SPECIFIC PROVISIONS OF LAW

(Voidable - private interest)
a. Guardian as regards to the property of ward during the period of
guardianship
b. Agent as regards to the property of principal
c. Executor/administrator as regards to the estate of the deceased

(Void - public interest)

d. Public officers as regards to the property of the estate
e. Officer of court & employee – as regards to the property in litigation

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Obligations of the Vendor

1. to deliver the thing sold
 + accessions, accessories, fruits → in the condition in which they were UPON THE
PERFECTION OF THE CONTRACT

2. to transfer the ownership

 Acquired by the vendee when DELIVERED

3. to warrant the thing sold

 Warranty against eviction and against hidden defect/encumbrances

4. to take good care of the thing pending delivery

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 4. to take good care of the thing pending delivery

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Delivery/ Tradition
• is a mode of acquiring ownership whereby the object of the contract is placed in the control and
possession of the vendee, either actually or constructively.

• "the absolute giving up of the control and custody on the part of the vendor, and the assumption of
the same by the vendee"

Kinds of Delivery/ Tradition

1) actual or real → when the goods are placed in the control and possession of the vendee.
delivery
2) constructive a. Legal formalities → execution of public instrument (prima facie
delivery presumption of the delivery)
→ movable/ immovable property

b. Symbolic delivery → delivery of the key where the things are kept or
(traditio simbolica/ stored, or symbol or token of delivery.
clavium)

c. Traditio longa → by mere pointing of the object

manu → "delivery by the LONG hand"

d. Tradition brevi → no need to deliver because the buyer is already in

manu possession.
→ "delivery by the SHORT hand"

e. Traditio → no need to deliver because the seller will continue

constitutum in possession after the sale but in another capacity
possessorium (lessee/ depositary)
→ "delivery by the AGREEMENT OF POSSESSORS"

3) Delivery of a. Constructive tradition - delivery of incorporeal property by the execution of

incorporeal a public contract
property (quasi-
traditio) b. Placing the titles of ownership in the possession of the vendee

c. Use by the vendee of his rights, with the consent of the vendor

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"Sale or return" and "Sale on Approval"

Sale or return Sale on Approval

→ ownership of the goods = transferred to the → goods remains with the seller despite
buyer on delivery delivery

→ buyer has the option = revest their → transferred to the buyer on the following
ownership on the seller by returning them within cases:
the time fixed in the contract/reasonable time a. Signifies approval/acceptance
frame b. Does an act adopting the transaction
c. Does not signify his approval/ acceptance
of the goods but RETAINS the goods w/o
giving notice of rejection within the time
fixed in the contract/reasonable time/such
time has expired
→ Risk of loss: BUYER → Risk of loss: SELLER

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→ Risk of loss: BUYER → Risk of loss: SELLER
→ Buyer may return the goods even if he is → Buyer has no rights to return the goods if he
satisfied of its quality is satisfied of its quality

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Transfer of ownership by delivery of specific goods to carrier or other bailee

➢ General rule: Purpose of transmission to the buyer → transfers ownership to the buyer

➢ Exceptions (ownership is retained by the seller):

1. stipulation

2. terms of the bill of lading → goods are to be delivered to the seller or his agent or to the
order of the seller or his agent.

3. terms of the bill of lading → goods are to be delivered to the order of the buyer or his
agent, but the bill of lading is retained by the seller or his agent.

4. seller draws on the buyer a bill of exchange for the price of the goods and transmits the
bill of exchange and the bill of lading to the buyer to secure acceptance or payment of the
bill of exchange, but the buyer dishonors such bill of exchange.

➢ if the bill of lading is negotiated to a purchaser for value in good faith → ownership of the
goods is passed on to him

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Shipment terms & risk of loss

1. FOB - Free on Board

POINT OF TRANSFER OF OWNERSHIP risk of loss?
a. FOB - Place of shipment → Shipping Point Buyer
b. FOB D -Place of destination → Buyer's Location Seller

2. FAS - Free alongside ship (named vessel)

 requires the seller to deliver the goods, at his own risk, alongside the vessel or at a dock
designated by the buyer.
 Once this is done by the seller, title and risk of loss pass to the buyer.

3. CIF - Cost, Insurance, Freight (named destination)

 the seller quotes a lump sum price to the buyer.
▪ cost of shipping them to the buyer + the cost of insurance to cover the goods
during their carriage
 title and risk of loss pass to the buyer on delivery to a carrier at shipping point.

4. C & F (named destination)

5. Ex-ship
 The seller is responsible for the goods until they are UNLOADED from whatever ship that
is used.

6. Ex (point of origin)
 The seller quotes a price covering only the point of origin (factory, warehouse) + agrees
to place the goods at the agreed place on the date or within the period fixed.
 The seller bears the risk of loss until such time that the buyer is obliged to take delivery
of the goods.

7. Ex Dock (named port of importation)

 the seller quotes a price:
▪ the cost of the goods + all additional expenses necessary to place the goods on the
dock at the place of importation.
 The seller bears the risk of loss until the expiration of the free time within which the
goods are allowed on the dock at the place of importation.

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 goods are allowed on the dock at the place of importation.

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Sale by a person who is NOT the owner of the thing sold

➢ The buyer acquires NO BETTER TITLE than the seller had; EXCEPT:

1. The sale is made under AUTHORITY or with the consent of the owner

2. The seller is in ESTOPPEL

3. The sale is made under the provisions of any factor's acts, recording laws or any other
provisions of law enabling the apparent owner to dispose of the goods as if he were the true
owner thereof

4. the sale is made under a statutory power of sale or under the order of court of competent
jurisdiction

5. the purchase is made in a merchant's store, or in fairs, or markets.

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Sale of registered land

➢ May safely rely on the CORECTNESS OF TITLE issued (law will in no way oblige him to go
beyond the certificate to determine the condition of the property)
 EXCEPT: A buyer who has knowledge of defect in the title of the registered owner → NOT
an INNOCENT PURCHASER FOR VALUE

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Seller's title to goods is VOIDABLE

➢ Seller's title: Voidable & not been avoided @ the time of the sale
➢ Buyer's title: Valid title
 Requisites:
1) Buys them in good faith
2) For value
3) Without notice of the seller's defect of title

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Document of title to goods, concept

➢ includes any document used in the ordinary course of business in the sale or transfer of
goods, as proof of the possession or control of the goods, or authorizing or purporting to
authorize the possessor of the document to transfer or receive, either by indorsement or by
delivery, goods represented by the document.

➢ not creations of law but by merchants to allow them to deal with merchandise without having
to physically carry them around;

➢ pertains to specific type of movable only, which is goods in particular.

 Example: Letter of credit

Common forms of document of title

1. Bill of Lading
 written acknowledgment of the receipt of the goods by a carrier
 an agreement to transport and to deliver the goods at a specified place to a person
named therein, or to his order or to bearer.

2. Dock Warrant
 warrant given by a dock owner to the owner of the goods imported and warehoused
on the dock upon the faith of the bill of lading, as a recognition of the title to the goods of
the owner of such goods.

3. Warehouse receipt/order
 written acknowledgement by a warehouseman of the receipt of the goods which are
placed in his possession.

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 placed in his possession.
 also a contract between the owner of the goods and the warehouseman whereby the
latter agrees to store the goods and the former to pay the compensation for such
storage.

Classes of documents of title

1) Negotiable → stated that the goods will be delivered to bearer, or to the order of any
documents of title person named in such document
a. Bearer document of title → "Deliver the goods to bearer"
b. Order document of title → "Deliver the goods to the order of
Kezaiah"
→ "Deliver the goods to the order of Kezaiah
or her order"

2) Non-negotiable → stated that the goods are to be delivered to a specified person

documents of title → "Deliver the goods to Kezaiah"

How negotiable document of title negotiated

1. By delivery
a. If by the terms of the document of title, the carrier, warehouseman or other bailee issuing
it undertakes to deliver the goods to bearer.
▪ Effect of special indorsement of a document of title which states that goods are
deliverable to the bearer
→ A document of title which is a bearer document of title on its face becomes
an order document of title if specially indorsed.
→ It may be further negotiated by the indorsee only by indorsement
completed by delivery.

b. If by the terms of the document of title, the carrier, warehouseman or other bailee issuing
it undertakes to deliver the goods to the order of a specified person and such person or
a subsequent indorsee of the document has indorsed it in blank or to bearer.

2. By indorsement + delivery
a. Blank indorsement
▪ consists of the signature of the indorser without specifying the name of the
indorsee.
▪ further negotiated by mere delivery.
b. To bearer
▪ Where the indorsement states that the goods are deliverable to bearer.
▪ further negotiated by mere delivery.
c. Special indorsement
▪ Where the name of the indorsee is specified.
▪ may be negotiated further through the indorsee's indorsement + delivery.

Effect if negotiable document of title is marked "Non-Negotiable"

➢ Remains to be NEGOTIABLE

Delivery of an order document of title WITHOUT INDORSEMENT

➢ Does not constitute NEGOTIATION
➢ But a mere assignment by the holder to the purchaser/ donee.

Transfer of a non-negotiable document of title

➢ Cannot be NEGOTIATED
➢ Can only be TRANSFERRED OR ASSIGNED
➢ Indorsement → does NOT constitute negotiation & gives the transferee NO additional rights

Who may negotiate negotiable document of title

1. By the owner thereof
2. By the person to whom the possession/ custody of the document has been ENTRUSTED by the
owner

Rights acquired by a person to whom a negotiable document of title is NEGOTIATED

1. The title of the person negotiating the document, over the goods covered by the document.

2. The title of the depositor or shipper over the goods covered by the document.

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 2. The title of the depositor or shipper over the goods covered by the document.

3. The direct obligation of the bailee issuing the document to hold possession of the goods
for him according to the terms of the document as fully as if such bailee had contracted directly
with him.

Rights of the transferee of a document of title

1. Non-negotiable document of title
a. As against the transferor, the title to the goods, subject to the terms of any agreement
with the transferor.

b. The right to notify the bailee (warehouseman or carrier) of the transfer to him of the
document of title.
Effect of Notification Effect of Lack of Notification
→ transferee acquires → good & right to acquire the obligation of the bailee = defeated
the direct obligation of by the ff.:
the bailee to hold
possession of the 1) The levy of an attachment or execution upon the goods
goods for him according by the creditor of the transferor.
to the terms of the
document. 2) A notification to such bailee by the transferor or a
subsequent purchaser from the transferor of a subsequent
sale of the goods by the transferor.

2. Negotiable document of title

 The transferee to whom a negotiable document of title has been transferred but not
negotiated acquires the following rights:

a. As against the transferor, the title to the goods, subject to the terms of any agreement
with the transferor.

b. The right to notify bailee (warehouseman or carrier) of the transfer to him of the
document of title. (same rule applies)

c. The right to compel the transferor to indorse the document unless a contrary intention
appears.
Effect of indorsement
1) The negotiation takes effect upon the indorsement.

2) Upon indorsement, the transferee acquires the direct obligation of the bailee to
hold possession of the goods.
• No further notification by the transferee to the bailee is required upon such
indorsement completed by delivery for the transferee to acquire such direct
obligation.

Warranties of a person transferring or negotiating a document of title

➢ A person who for value negotiates or transfers a document of title
 by indorsement or delivery
 including one who assigns for value a claim secured by a document of title unless a
contrary intention appears,
➢ warrants the following:

1. The document is genuine

2. Has legal right to negotiate/ transfer it
3. Has knowledge of no fact which would impair the validity/worth of the document
4. Has a right to transfer the title to the goods and that the goods are merchantable or fit for a
particular purpose, whenever such warranties would have been implied if the contract of the
parties had been to transfer without a document of title the goods represented thereby.
 warranty against eviction and warranty against hidden defects.

Effect of failure of bailee or previous indorsers to fulfill their obligations

➢ The indorser shall NOT be liable for any failure on the part of the bailee who issued the
document or previous indorsers to fulfill their respective obligations.

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Non-impairment of the validity of negotiation although it was made in the breach of duty
➢ Negotiated to a purchaser → for value in good faith & without notice; is NOT IMPAIRED BY
THE FF.:
a. That the negotiation was made in breach of duty of the person negotiating.
b. That the owner of the document was deprived of the possession of the same by loss, theft,
fraud, accident, mistake, duress or conversion.

Attachment or Surrender of Goods covered by a document of title

1. Negotiable document of title
 GENERAL RULE on ATTACHMENT: goods covered by a negotiable document of title
cannot be attached or levied upon
 EXCEPTION:
1) When the document is surrendered to the bailee
2) The negotiation of the document is enjoined

 GENERAL RULE on SURRENDER: The bailee cannot be compelled to surrender the goods
 EXCEPTION:
1) When the document is surrendered to him
2) The document is impounded by the Court

2. Non-negotiable document of title

 GENERAL RULE:
1) May be attached or levied upon in execution
2) The document is NOT SURRENDERED TO THE BAILEE.

Remedy of creditor of debtor-owner of goods covered by a negotiable document of title

➢ The creditor can ask the courts for an order attaching the document of title or enjoining the
delivery of the goods to the debtor-owner

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Time & Place of delivery of thing sold

1. Place of the delivery
a. Place stipulated

b. Place by usage or trade

c. Seller’s place of business

d. Seller's place of residence

e. IF specific goods: place of delivery/ where the thing is

2. Time for delivery of goods

a. Time stipulated

b. Reasonable time from the execution of the contract

3. Goods in the possession of a 3rd person

 The seller HAS NOT FULFILLED his obligation to deliver the goods UNLESS SUCH 3RD
PERSON ACKNOWLEDGES to the buyer that he holds the goods on the buyer's behalf.

4. Demand or tender of delivery

 To be effective → Reasonable hour

5. Expenses of delivery
 The seller bears the expenses of and incidental to putting the goods into a deliverable
state, unless otherwise stipulated.

______________________________________________________________________________________________________________________

When vendor is NOT BOUND to deliver the thing sold

1. If the vendee has not paid him the price

2. If no period for the payment has been fixed in the contract;

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 2. If no period for the payment has been fixed in the contract;

3. If a period has been fixed for the payment of the price → vendor is bound to deliver the
thing sold.
 However, he is NOT bound to deliver if the vendee loses the right to make use of the
period as follows:

a. When the vendee becomes insolvent, unless he gives a guaranty or security for the
payment of the price.

b. When the vendee fails to furnish the guaranties or securities that he has promised.

c. When the guaranties or securities have been impaired through his own acts or when
through a fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory.

d. When the vendee violates any undertaking in consideration of which the vendor
agreed to the period.

e. When the vendee attempts to abscond.

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Rights of the buyer when quantity or quality of goods delivered is different from that which the
seller contracted to sell

1. quantity delivered < agreed upon

a. Reject the goods
b. Accept the goods (equitable payment)

2. quantity delivered > agreed upon

a. Accept the goods agreed upon & reject the rest
b. Accept the whole of the goods delivered & pay for them @ the contract rate
c. Reject the whole of the goods (IF INDIVISIBLE)

3. deliver the goods agreed upon + goods of different description

a. Accept the goods agreed upon & reject the rest (IF DIVISIBLE)
b. Reject the whole of the goods (IF INDIVISIBLE)

______________________________________________________________________________________________________________________

Unpaid Seller, concept

➢ who has not been paid or tendered the whole of the price
➢ who has received a bill of exchange or other negotiable instrument as conditional payment and
the condition under which it was received has been broken by reason of the dishonor of the
instrument, the insolvency of the buyer, or otherwise.

Rights of an Unpaid Seller

1. Possessory Lien
 Lien on the goods/ right to retain them while he is in possession of them:

a. When available
1) Where the goods have been sold without any stipulation as to credit.
2) Where the goods have been sold on credit, but the credit term has expired.
3) Where the buyer is insolvent.

b. Lien where there is partial delivery

▪ He may exercise his right of lien on the REMAINDER
▪ UNLESS: such has been made in circumstances as to show an intent to waive the
lien

c. When lien is lost

1) When he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the ownership in the goods or the
right to the possession thereof.
2) When the buyer or his agent lawfully obtains possession of the goods.

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 2) When the buyer or his agent lawfully obtains possession of the goods.
3) By waiver thereof.

2. Right of stoppage in transit

 to resume possession of the goods at any time while they are in transit, and he will
then become entitled to the goods as he would have had if he had never parted with the
possession.

a. When right available

▪ after the unpaid seller has parted with the possession of the goods and the buyer is
or becomes insolvent.

b. How right is exercised

1) By obtaining actual possession of the goods.
2) By giving notice of his claim to the carrier or other bailee in whose possession
the goods are.

c. Effects of exercise of right of stoppage in transit

1) The goods are no longer in transit.
2) The contract of carriage ceases; the carrier shall be liable as depositary or other
bailee.
3) The carrier must redeliver the goods to, or according to the instructions of, the
seller.
→ Document of title must be surrendered to the carrier for cancellation first.

d. When goods are in transit

1) from the time they are delivered to the carrier or other bailee for the purpose of
transmission to the buyer, until the buyer or his agent, takes delivery of them
from such carrier or other bailee.
2) If the goods are rejected by the buyer, and the carrier or other bailee continues
in possession of them, even if the seller has refused to received them back.

e. When goods no longer in transit

1) If the buyer obtains delivery of the goods before arrival at the appointed
destination.
2) If the carrier or other bailee acknowledges to the buyer or his agent, that he is
holding the goods in his behalf, after arrival of the goods at their appointed
destination.
3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer
or his agent.

3. Right of Resale
a. When right available
1) The buyer has defaulted in the payment of the price.
2) The seller has the right of lien or has stopped the goods in transit.
3) Title to the goods has passed on to the buyer.
4) The grounds must be any of the following:
a. The goods are of a perishable nature.
b. The seller has expressly reserved the right to resell the goods in case the
buyer should make default.
c. The buyer has been in default for an unreasonable time.

b. How resale is made

▪ Seller → resell the goods in public/private sale (exercise reasonable care &
judgement)
▪ CANNOT → directly or indirectly buy the goods

c. Effect of Resale
1) The seller shall not be liable to the original buyer upon the contract of sale or for
any profit made by such resale.
2) He may recover damages from the buyer for any loss occasioned by the breach
of contract of sale.
3) The new buyer acquires a good title against the original buyer.

d. Importance of notice of resale to the original buyer

▪ GENERAL RULE: Notice NEED NOT BE GIVEN to the original buyer

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 ▪ GENERAL RULE: Notice NEED NOT BE GIVEN to the original buyer

▪ EXCEPTION: Not perishable goods or upon an express provision → notice shall

be relevant in any issue involving whether the buyer has been in default for an
unreasonable time before the resale was made.

4. Right to rescind the sale

a. When right available
▪ Requisites:
1) The buyer has defaulted in the payment of the price.
2) The seller has the right of lien or has stopped the goods in transit.
3) Title to the goods has passed on to the buyer.
4) The grounds must be any of the following:
a. The seller has expressly reserved the right to rescind the sale in case the
buyer should make default.
b. The buyer has been in default in the payment of the price for an
unreasonable time.

b. How rescission is made

1) By giving notice to the buyer of the intention to rescind.
2) By doing an overt act manifesting the intention to rescind.
□ include the use by the seller of the goods sold or offering them for resale to
others (same rule as in the right of resale)

c. Effect of rescission
1) the seller shall not be liable to the buyer upon the contract of sale.
2) He may recover from the buyer damages for any loss occasioned by the breach
of contract of sale.
3) The seller resumes ownership of the goods.

Effect on possessory lien or right of stoppage in transitu if buyer has SOLD/ DISPOSED of the
goods
➢ GENERAL RULE: Is NOT affected
➢ EXCEPTION:
1) Seller has assented to the sale by the buyer
2) A negotiable document of title representing the goods has been negotiated to a
purchaser for value in good faith

______________________________________________________________________________________________________________________

Sale of real estate with a statement of its area at the rate of a certain price per unit of measure/
number
➢ GENERAL RULE: Vendor shall deliver the are mentioned in the contract of sale
➢ Exception → Buyer's remedies:

1. Actual area < stated in the contract

a. Ask for a proportionate reduction in the price if the lack in area is less than one-tenth
of that stated in the contract
▪ unless the vendee would not have bought the thing had he known of its smaller
area, in which case, he may opt to rescind the sale.

b. Rescind the sale if the lack in area is not less than one-tenth of that stated.

2. Actual area > stated in the contract

a. Accept the area stated in the contract and reject the rest.

b. Accept the whole area and pay for them at the contract rate.

3. Actual area (part of immovable → not of the quality specified in the contract)
a. Ask for a proportionate reduction of the price if the inferior value of the thing does
not exceed one-tenth of the price agreed upon,
▪ unless the buyer would not have bought the thing had he known of its inferior
quality, in which case, he may opt to rescind the sale.

b. Rescind the sale if the inferior value of the thing exceeds one-tenth of the price agreed

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 b. Rescind the sale if the inferior value of the thing exceeds one-tenth of the price agreed
upon.

Sale of real estate for a LUMP SUM & not at the Sale of real estate
1. Area to be delivered
 Vendor: bound to deliver all that is included within the boundaries stated in the contract
(although there be > or < area/number than stated in the contract)

2. Price to be paid
 Vendee: pay the lump sum STIPULATED → no increase or decrease in price. (although
there be > or < area/number than stated in the contract)

3. delivered area ≠ stated in the contract → Buyer's Remedies

a. Buyer may ask for a proportionate reduction in price
b. Rescind the contract

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Rules of Preference - Double Sale

1. Movable Property
 OWNER: 1st POSSESSOR in GOOD FAITH (actual or constructive)

2. Immovable Property
a. 1st REGISTRANT in GOOD FAITH (Registry of Property)

b. 1st POSSESSOR in GOOD FAITH (actual or constructive)

c. Person who presents the OLDEST TITLE IN GOOD FAITH

Requisites - Double Sale

➢ The following circumstances must concur:
a. exactly same subject matter

b. sales are valid transactions

c. buyers represent conflicting interest

d. exactly same immediate seller

Knowledge gained bu the 1st buyer of the 2nd sale DOES NOT DEFEAT his rights

➢ Priore tempore, potior jure

 First in time, stronger in right
 EXCEPTION: the 2nd buyer registers in good faith the 2nd sale ahead of the first.
▪ UNLESS: the 2nd buyer registers in bad faith → gained knowledge of the 1st sale.

______________________________________________________________________________________________________________________

Conditions & Warranties

Conditions in a contract of sale

➢ If the condition of a party is subject to a condition which is not fulfilled→ the other party may
choose to any of the ff.:
a. Refuse to proceed with the contract
▪ Treat the non-performance of the condition → breach of warranty
b. Waive the performance of the condition

Kinds of Warranties
1. Express Warranties
 Any affirmation of fact/ promise by the seller relating to the thing whose natural
tendency is to INDUCE the buyer to purchase the same

 Buyer purchases the thing RELYING on such affirmation/ promise

 CONSTRUED AS WARRANTY: Expert Opinion (violation of warranty → if such are false )

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  NOT CONSTRUED AS WARRANTY: Any affirmation as to the VALUE of the thing/ seller's
OPINON (dealer's talk or puffery)

2. Implied Warranties
 INHERENT in contracts of sale & accompany them unless they are SUPRESSED by the
parties

 2 kinds:
Warranty against eviction Warranty against hidden defects
→ seller → has the right to sell the thing at the → the thing shall be FREE from any
time when the ownership is to pass hidden faults or defects, or any charge
or encumbrance not declared or
→ buyer→ shall from the time have & enjoy the known to the buyer
legal & peaceful possession of the thing

Vendors who are not liable for breach of warranty

1. Sheriff;
2. Auctioneer;
3. Mortgagee;
4. Pledgee;
5. Other person professing to sell by virtue of an authority in fact or in law.

______________________________________________________________________________________________________________________

Warranties in case of Eviction

Warranties in case of eviction

1. Requisites in order that the seller's warranty against eviction MAY BE ENFORCED
a. Purchaser → DEPRIVED of the of the whole/ part of the thing sold
b. By FINAL JUDGEMENT
c. Based on a RIGHT PRIOR TO THE SALE or an ACT IMPUTABLE TO THE VENDOR
d. Vendor → NOTIFIED of the suit for eviction at the instance of the vendee

 The defendant vendee shall ask, within the period fixed in the Rules of Court for
answering the complaint, that the vendor be made a co-defendant

2. Other instances when seller is liable for breach of warranty against eviction
a. Sale of property for non-payment of taxes
b. Judicial sales

3. Vendor's liability in case of eviction

a. If there is a stipulation EXEMPTING the vendor from the obligation to answer for
eviction
Vendor acted in BAD FAITH Vendor acted in GOOD FAITH
(Waiver is Void)
a. Value of the thing @ the time of a. WAIVER CONSCIENTE
eviction • Vendee made the waiver W/O
b. Income/ Fruits KNOWLEDGE of the risks of eviction
c. Cost of suit • Vendor = ONLY the value of the thing
d. Expenses of the contract @ the time of eviction
e. Damages & interests & ornamental
expenses b. WAIVER INTENCIONADA
• Vendee made the waiver W/
KNOWLEDGE of the risks of eviction
& assumed the consequences
• Vendor = NOT LIABLE

b. Where no warranty has been agreed upon or there was no stipulation exempting the
vendor from liability
Vendor acted in BAD FAITH Vendor acted in GOOD FAITH
a. Value of the thing @ the time of a. Value of the thing @ the time of eviction

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 a. Value of the thing @ the time of a. Value of the thing @ the time of eviction
eviction b. Income/ Fruits
b. Income/ Fruits c. Cost of suit
c. Cost of suit d. Expenses of the contract
d. Expenses of the contract
e. Damages & interests & ornamental
expenses

4. Vendee's remedies in case of partial eviction

a. Rescission of the contract
b. Enforcement of the vendor's liability for eviction

 Applies to those things → LOSES a part of the thing sold of such importance, in relation to
the whole, that he would not have bought it without said part.

______________________________________________________________________________________________________________________

Rules on Easement or servitude

1. Easement or servitude, concept
 An encumbrance imposed upon an immovable for the benefit of another immovable
belonging to a DIFFERENT owner
 Example: The right of way

2. Kinds of easement/ servitude

Apparent easement Non-apparent easement
→ made known → shows no external indication of its
→ continually kept in view by external signs existence
that reveal its use & enjoyment

3. Requisites for vendor's liability should the immovable sold be encumbered with easement
or servitude
a. Non-apparent easement
b. Not have been mentioned in the agreement
c. It must be of such nature that it must be presumed that the vendee would not have
acquired the immovable had he been aware thereof.

4. Vendee's remedies should the immovable sold be encumbered with any non-apparent
easement/ servitude
a. Within 1 year from the execution of the deed of sale:
1) Rescission
2) Damages
b. After 1 year from the execution of the deed of sale:
1) Damages (within a period of 1 year from the discovery of the easement/servitude)

5. When vendor NOT LIABLE for easement or servitude

a. Apparent easement
b. Non-apparent easement → recorded in the REGISTRY OF PROPERTY
▪ UNLESS: express warranty → free from all burdens & encumbrances
c. Vendee had knowledge @ the time of the sale of the existence of the easement or
servitude, though it was non-apparent, such as when it was mentioned in the agreement

______________________________________________________________________________________________________________________

Warranties against Hidden Defects/ Encumbrances upon the thing sold

Warranties against Hidden Defects

1. Requisites for enforcement of vendor's liability against hidden defects
a. Must exists @ the time of sale
b. Must be hidden (Not patent/ visible)
▪ VENDOR - NOT LIABLE → Vendee: An expert (by reason of trade/profession =
should have known them)
c. Must render the thing UNFIT FOR THE USE for which it is intended or 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.
d. The action to enforce it must be made WITHIN THE PERIOD PROVIDED BY LAW

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 d. The action to enforce it must be made WITHIN THE PERIOD PROVIDED BY LAW

2. Warranties included
A. Implied warranty 1. Requisites:
of fitness for a a. The buyer makes known to the seller the PARTICULAR
particular purpose PURPOSE for which the goods are acquired
b. The buyer has relied upon the seller's SKILL OR JUDGEMENT

2. Sale of goods under their patent or trade name

• No warranty, unless otherwise STIPULATED
• The warranty is only for the ORDINARY PURPOSE of the thing
(as the buyer relies upon the capability of the article & not on the
seller's skill or judgement)

3. Annexed by the usage of trade

B. Implied warranty → goods are fit for the GENERAL PURPOSE of the thing (not necessarily
of merchantable for the purpose of the buyer).
quality
→ goods are bought by DESCRIPTION from a seller who deals in goods
of such description (grower or not)

→ Merchantable - goods are of such quality so as to become saleable in

the market without objection in the normal course of business

C. Implied warranty → In sale by sample, if the seller is a dealer in goods of that kind, there
of merchantability is an implied warranty that the goods shall be free from any defect
rendering them unmerchantable which would not be apparent upon
reasonable examination of the sample

3. Responsibility for hidden defects

 GENERAL RULE: The vendor shall be liable to the vendee for ANY HIDDEN FAULTS OR
DEFECTS in the thing sold, even though he was not aware thereof

 EXCEPTION: The vendor shall NOT BE liable → STIPULATION - EXEMPTING him from
such defects & he was not aware thereof

4. Remedies of vendee in case of breach of warranties

a. ACCION REDHIBITORIA - Withdrawing from the contract or recission

b. ACCION QUANTI MINORIS - Demanding a proportionate reduction in the price, with

damages in either case

Rules in case of LOSS of the thing with hidden defects

1. Defect
Vendor: AWARE Vendor: NOT AWARE
1. To return the price 1. To return the price
2. To refund the expenses of the contract 2. To pay the interest thereon
3. To pay damages 3. To refund the expenses of the contract

2. Fortuitous Event
Vendor: AWARE Vendor: NOT AWARE
1. To return the price paid LESS the value of 1. To return the price paid LESS the value of
the thing at the time of loss the thing at the time of the loss
2. To pay damages

Period of filing action

➢ 6 MONTHS from the delivery of the thing sold:
a. ACCION REDHIBITORIA
b. ACCION QUANTI MINORIS
c. Seller's liability for hidden defects when the thing is lost

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 c. Seller's liability for hidden defects when the thing is lost
d. Judicial sales

______________________________________________________________________________________________________________________

Rules in sale of animals with defects or diseases

Sale of animals with redhibitory defects

1. Redhibitory defect, concept; liability of VETERINARIAN
 Is a defect of such nature that expert knowledge is NOT SUFFICIENT to discover it
 VETERINARIAN → BAD FAITH/ IGNORANCE = he shall be liable for damages

2. Remedies of vendee in case of sale of animals with redhibitory defect

a. ACCION REDHIBITORIA
▪ The only remedy if → vendee bought the animals as a team.
b. ACCION QUANTI MINORIS

3. When must redhibitory action be filed

 Must be FILED WITHIN 40 DAYS from the date of delivery to the vendee

4. Effect of the rescission of the sale of an animal with redhibitory defect

 The animal shall be returned in the condition in which it was sold and delivered, the
vendee being answerable for any injury due to his negligence, and not arising from
the redhibitory fault or defect

When sale of animals is void

a. animals are suffering from CONTAGIOUS DISEASES
b. Animals are found to be UNFIT for the use or service for which they were acquired as stated in
the contract

Vendor's liability in case the animal sold DIES of disease

a. The disease existed at the time of sale
b. The disease is the cause of death of the animal,
c. The animal dies within 3 days from time of purchase.

Sale without warranty against hidden defects of animals

➢ NO warranty against hidden defects of animals sold at fairs or at public auctions, or of
livestock sold as condemned.
 sales at fairs → the contracts are of a commercial nature and as such are wholly outside
the scope of civil law.
 livestock sold as condemned → the animals are bought neither for their quality nor
capacity for work.

______________________________________________________________________________________________________________________

Obligation of the Vendee

Obligations of the Vendee

1. To accept the delivery of the thing sold
2. To pay the price of the thing

To accept the delivery of the thing sold

1. When buyer DEEMED to have accepted the goods
a. He intimates to the seller that he is accepting them
b. He Does any act in relation to the goods which is inconsistent with the ownership of the
seller
c. He retains the goods after the lapse of a reasonable time without intimating to the seller
that he has rejected them

2. Delivery of goods in installments

 GENERAL RULE: The buyer is NOT BOUND to accept the delivery of the goods in
installments, unless otherwise agreed.

 The injured party may:

1) Refuse to proceed further with the contract & sue for damages for breach of the
entire contract

Regulatory Framework and Legal Issues Page 23

 entire contract
2) Claim compensation but NOT DAMAGES, if the breach is severable

3. Right of the buyer to examine goods before accepting them

 GENERAL RULE: The buyer has the right to examine goods before accepting them

 EXCEPTION: The ff. cases:

1) When there is an agreement to that effect
2) When there is a stipulation that the goods shall not be delivered to the buyer until
he has paid the price (collect on delivery) - UNLESS there is an agreement or usage
of trade permitting such examination

4. Effect of acceptance of goods on seller's liability for breach of warranty

 GENERAL RULE: The seller is NOT DISCHARGED from liability in damages/ other remedy
for warranty by acceptance of goods
 EXCEPTION: The ff. cases:
1) Agreement - express or implied
2) Buyer fails to give notice to the seller of any breach of warranty within a
reasonable time after the buyer knows or ought to know of such breach

5. Effect when BUYER refuses to accept delivery

Justified NOT justified
1. Has no duty to return the goods to the 1. Title to the goods passes to the buyer from the
seller unless otherwise agreed moment the goods are placed at his disposal
2. Title to the goods does not pass on to • EXCEPT:
him a. Stipulation to the contrary
3. shall not be obliged to pay the price b. Seller has reserved the ownership
4. If he constitutes himself as depositary of of the goods as security for the
the goods, he shall be liable as such payment of the price

OBLIGATION REMAINING: NOTIFY the 2. Shall be obliged to pay the price

seller that he refuses to accept the goods
(so that they can take action)

To pay the price of the thing

1. Time & place of payment of the price
a. Time & place STIPULATED
b. Time & place of DELIVERY OF THE THING

2. When interest will be paid on the price

 Period between the delivery of the thing & the payment of the price:
1) Stipulation (6%)
2) If the thing sold produces fruits or income
3) In default; from the time of judicial or extrajudicial demand for the payment of the
price

3. Suspension of payment of the price by the vendee

a. Grounds
1) Disturbance in the vendee's possession or ownership of the thing purchased
(eviction)
2) Reasonable grounds to fear such disturbance, by a vindicatory action or foreclosure
of mortgage

b. Duration of suspension of payment

▪ Until the vendor has caused the disturbance or danger to cease

c. When right to suspend payment not available

1) If the vendor gives security for the return of the price
2) If it has been stipulated that the vendee shall pay the price notwithstanding the
existence of the aforementioned disturbance or danger
3) If the disturbance is a mere act of trespass (squatters)

4. Recission by Vendor
IMMOVABLES a. When vendor is entitled to SUE for immediate recission
Reasonable grounds to fear:

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 Reasonable grounds to fear:
1. The loss of the immovable property sold
2. Its price

If one or both grounds do not exist:

1. Fulfillment of the contract + damages
2. Rescission of the contracts + damages

b. PACTUM COMMISSORIUM
• rescission of the contract shall of right take place if the vendee fails
to pay the price at the time agreed upon.
• NOT VALID
• the vendee may pay even after the expiration of the period as long as
no demand for rescission has been made upon him either judicially or
by notarial act. After the demand, the court may not grant him a new
term.

MOVABLES a. Grounds for immediate recission

• take place in the interest of the vendor (at his option)

if at the time fixed for the delivery of the thing, the vendee:
1. does not appear to receive the thing, or
2. having appeared, does not pay the price, unless a longer period is
stipulated for its payment.

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Actions for Breach of Contract of Sale of Goods

Actions by the seller

1. Maintain an action for the price of the goods if the buyer wrongfully neglects or refuses to pay.

2. Maintain an action for damages if the buyer wrongfully neglects or refuses to accept and pay for
the goods.

3. Rescind the contract if the buyer has repudiated the sale, or manifested his inability to perform
his obligation, or has committed a breach of contract, where the goods have not been delivered
to buyer.

Actions by the buyer

1. Bring an action for specific performance, if the seller has broken the contract to deliver specific
or ascertained goods.

2. In case of breach of warranty by the seller, the buyer may, at his election:
a. Accept or keep the goods and set up against the seller, the breach of warranty by way of
recoupment or diminution or extinction of the price.

b. Accept or keep the goods and maintain an action against the seller for damages for
breach of warranty.

c. Refuse to accept the goods, and maintain an action against the seller for damages for
breach of warranty.

d. Rescind the sale and refuse to receive the goods or if the goods have already been
received, return them or offer to return them to the seller and recover the price or any
part thereof which has been paid.

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Extinguishment of Sale

1. By the same causes as all other obligations.

2. By the various causes of extinguishment in Title VI (Sales) such as:

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 2. By the various causes of extinguishment in Title VI (Sales) such as:
a. Cancellation of sale of personal property payable in installments. (Art. 1484)
b. Resale of the goods by the unpaid seller. (Art. 1532)
c. Rescission of the sale by the unpaid seller. (Art. 1534)
d. Rescission by the buyer in case of partial eviction. (Art. 1556)
e. Rescission by the buyer in case of breach of warranty against hidden defects. (Art. 1567)
f. Rescission by the buyer of sale of animals with redihibitory defects. (Art. 1580)

3. By redemption, whether conventional or legal

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Redemption
➢ Means of extinguishing a sale
➢ "Repurchase" or "buying off"

Conventional Redemption
➢ Takes place when the vendor RESERVED the right to repurchase the thing sold
➢ With the obligation to:
a. Return to the vendee
1) The price of sale
2) The expenses of the contract & any other legitimate payments made by reason
of the sale
3) The necessary & useful expenses made on the thing sold

b. To comply with other stipulations agreed upon

Liability with respect to fruits existing at the time of redemption

Visible or growing fruits @ the time of sale NO fruits @ the time of sale
→ NO REIMBURSEMENT for or prorating of → PRORATED between the redemptioner & the
the fruits at the time of redemption IF NO vendee
INDEMNITY was paid by the purchaser at • giving the vendee the part corresponding to the
the time the sale was executed time he possessed the land in the last year,
counted from the anniversary of the date of sale.

Condition of the property at the time of redemption

1. The vendor shall receive the property free from all charges constituted by the vendee
2. He shall respect the leases which the vendee may have executed in good faith, and in
accordance with the custom of the place where the land is situated.

Right of vendee to subrogation

➢ In sale with right to repurchase, the vendee is subrogated to the vendor's rights and actions.

Period of redemption
1. When no period is fixed → 4 years from the date of contract

2. When a period is fixed by the parties → not exceed 10 yrs. = ___ yrs. from the date of contract
→ exceed 10 yrs. = 10 yrs. from the date of contract
(ignore excess)

3. Where the period agreed upon is → 10 yrs. from the date of contract
indefinite (@ any time)
4. In case there was a civil action → 30 days from the time final judgement was rendered
between parties in a civil action on the basis that the contract was a true
sale with a right to repurchase

Effect of failure to exercise right of repurchase

➢ Ownership is consolidated in the vendee.

➢ real property→ a judicial order, after the vendor has been duly heard, is required for the
purpose of recording the consolidation in the Registry of Property.

AGAINST whom right to repurchase available

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AGAINST whom right to repurchase available
1. The vendee a retro (original vendee)
 If they die, either of the ff:
a. against several heirs (each of their share)
b. One of the heirs (for the whole)

2. Every possessor whose right is derived from the vendee a retro (original vendee),
 even if no mention is made in the second contract of the right to repurchase, provided the
right has been recorded in the Register of Deeds, or even if the right is not registered, but the
possessor has knowledge of the existence of the right.

Who may AVAIL themselves of the right to repurchase

1. The vendor a retro (original vendor)
a. Co-owner of an undivided immovable - indivisible with a right to repurchase

b. If several persons, jointly and in the same contract, should sell an undivided
immovable with a right of repurchase, none of them may exercise this right for more
than his respective share.
□ If the person who sold an immovable alone has left several heirs, each heir
may redeem only the part which he may have acquired.
□ The vendee may demand that the co-owners or co- heirs come to an
agreement upon the repurchase of the whole thing, and if they fail to do so,
the vendee cannot be compelled to consent to a partial redemption.

c. Each one of the co-owners of an undivided immovable who may have sold his share
separately, may independently exercise the right of repurchase as regards his own
share and the vendee cannot compel him to redeem the whole property.

2. Creditors of the vendor

 Until AFTER they have exhausted the property of the vendor

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Legal Redemption
➢ Ownership is the right to be subrogated upon the same terms & 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 the ownership is transmitted by onerous title.

➢ Thus, this right is not available if the transfer of ownership is by gratuitous title.

Cases of Legal Redemption

1. Legal redemption by co-owner
 A co-owner of the thing may exercise the right of redemption in case the shares of all the
other co-owners or of any of them, are sold to a third person.
▪ Such is the rule in order to reduce the number of co-owners since co-ownership is not
favored upon

 If two or more co-owners desire to exercise the right of redemption, they may only do so
in proportion to the share they may respectively have in the thing owned in common.

2. Legal redemption by adjoining owner of rural land

 If a piece of rural land not exceeding one hectare is alienated, the adjoining owner shall
have the right of legal redemption unless the grantee does not own any rural land.

Rule if two or more adjoining owners of When right not available

rural land desire to exercise the right of
redemption:
1) The owner of the adjoining land of → if adjacent lands are by brooks, drains,
smaller area shall be preferred. ravines, roads and other apparent
servitudes for the benefit of other
2) If both lands have the same area, the one estates
who first requested the redemption,
shall be preferred.

3. Legal redemption by adjoining owner of urban land

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 3. Legal redemption by adjoining owner of urban land
 If a small piece of urban land which was bought for speculation has been resold, the
owner of the adjoining land has a right of redemption at a reasonable price.

 REQUISITES:
1) The piece of urban land is so small that it cannot be used for any practical purpose
within a reasonable time; and
2) Such small urban land was bought merely for speculation;

Right of pre-emption by adjoining owner

▪ If such small piece of urban land is about to be resold, the adjoining owner shall
have the right of pre-emption at a reasonable price, i.e., the adjoining owner shall be
given the right to buy the property before it is offered to others.

▪ Rule if two or more adjoining co-owners wish to exercise the right of redemption
or pre-emption
1. Preference shall be given to the owner whose intended use of the land in
question appears best justified.
□ (The right of redemption of co-owners excludes that of adjoining owners)

Period of pre-emption or redemption

Pre-emption → Within 30 days from written notice by prospective vendor.
Redemption → Within 30 days from written notice by vendor.

Recording of sale in the Registry of Property

➢ The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice of the sale to all possible redemptioners.

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Equitable Mortgage

Equitable mortgage, concept

➢ is one which, although lacking in some formality, or form or words, or other requisites
demanded by statute, nevertheless reveals the intention of the parties to charge real
property as security for a debt, and contains nothing impossible or contrary to law.

Essential elements of equitable mortgage

1. The parties enter into what appears to be a contract of sale.
2. Their intention is to secure an existing debt by way of mortgage.

Contracts presumed to be an equitable mortgage

➢ A contract of sale with a right to repurchase and other contracts purporting to be an
absolute sale, shall be presumed to be an equitable mortgage, in any of the following cases:

1. When the price of a sale with a right to repurchase is unusually inadequate.

2. When the vendor remains in possession as lessee or otherwise.
3. When the period for the exercise of the right to repurchase is extended.
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. When the real intention of the parties is that the transaction shall secure the payment of a
debt or the performance of any other obligation.

➢ In any of the above cases, any money, fruits, or other benefit to be received by the vendee as
rent or otherwise shall be considered as interest which shall be subject to the usury laws.

Rule in case of doubt

➢ A contract purporting to be a sale with right to repurchase shall be construed as an equitable
mortgage.

Right to reformation
➢ The apparent vendor may ask for the reformation of the instrument in the contracts
presumed to be an equitable mortgage.

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Assignment of Credit and Other Incorporeal Rights

Assignment of credits, concept

➢ Is a CONTRACT whereby a person (ASSIGNOR) transfer his credit, right or action against a 3rd
person to another person (ASSIGNEE) for a consideration which is certain in MONEY or its
EQUIVALENT.

➢ Not only entitles the assignee to the credit itself, BUT ALSO GIVES HIM THE POWER TO
ENFORCE it against the debtor of the assignor

Nature of Assignment of credits & other incorporeal rights

➢ PERFECTED @ meeting of minds upon the credit or right which is the object of the contract &
upon the price

➢ May also constitute exchange, donation, or dation in payment.

Form of assignment of credits

1. Between the parties
 Any form (oral, written, partly oral & partly written)

2. For binding effect against a 3rd persons

Personal property Real property
→ Public instrument → Public instrument + recorded in the Registry of Property

Effect of payment by debtor to creditor

BEFORE knowledge of the assignment AFTER knowledge of the assignment
→ Debtor is released from his OBLIGATION if he pays → Debtor is NOT RELEASED from his
his creditor without his knowledge that his debt has obligation to pay the assignee.
been assigned.

Debtor's consent NOT required

➢ Actual notice must be GIVEN TO HIM of the assignment so that he could make his payment to
the assignee.
 A form of protection in favor of the assignee

Accessory rights included in the assignment

1. Guaranty
2. Mortgage
3. Pledge
4. Preference

Warranties of assignor
1. The legality & existence of the credit @ the time of sale
 There is no such warranty if the credit was sold as doubtful

2. As regards the debtor's solvency, he does not warrant the same, except:
a. When there is a stipulation between the assignor & the assignee that the former
warrants the debtor's solvency
b. When the insolvency already existed prior to the sale & of the public knowledge

Liability of the assignor when warranties are violated

ASSIGNOR - GOOD FAITH ASSIGNOR - BAD FAITH
1. Price received 1. Price received
2. Expenses of the contract 2. Expenses of the contract
3. Other legitimate payments by reason of the 3. Other legitimate payments by reason of
assignment the assignment
4. Damages

Duration of assignor's warranty of the debtor's solvency if assignor was in good faith
1. The period stipulated
2. No stipulations

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 2. No stipulations
a. If the assignment was made before maturity - 1 year from maturity
b. If the assignment was made after maturity - 1 year from the time of the assignment

Sale of present inheritance

1. Warranty of person selling an existing or present inheritance
 Warranty of heirship
 Answerable for his character as heir BUT NOT OF THE THINGS COMPOSING THE
INHERITANCE, unless such things were enumerated

2. Liabilities of vendor of inheritance sold

 If the vendor of has profited from the fruits or received anything from the inheritance sold
(except to the price thereof), HE SHALL BE OBLIGED TO PAY THEM TO THE VENDEE,
unless the contrary has been stipulated

3. Liabilities of vendee of inheritance

 the vendee must REIMBURSE the vendor for the debts & charges on the estate paid by the
vendor, unless the contrary has been stipulated

Vendor's warranty for lump sum sale of the whole of certain rights, rents or products
➢ Shall not be obliged to warrant each of the various parts of which it may be composed;
1. From the whole of the thing
2. From a part of the greater value

Sale of credit or other incorporeal right in litigation

1. When right considered in litigation
 @ the time the complaint concerning the same is answered

2. Right of legal redemption of debtor when credit or other incorporeal right in litigation is
sold
a. Price paid by the assignee for the right purchased
b. The judicial cost incurred by him
c. Interest on the price from the day on which the same was paid

3. Period within which debtor may exercise the right

 Within 30 days from the date the assignee demands payment from him

4. Purpose of the legal redemption

a. To enable the debtor to pay less than the value of the credit
b. To prevent speculation on the part of the assignee
c. To put an end to the litigation

5. Exceptions to legal redemption by debtor

a. To a co-heir/ co-owner of the right assigned
b. To a creditor in payment of his credit
c. To the possessor of a tenement or piece of land which is subject to the right in litigation
assigned

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