CHAPTER 6 – ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS

ART. 1594. Actions for breach of the contract of sale of goods shall be governed
particularly by the provisions of this Chapter, and as to matters not specifically provided
for herein, by other applicable pro visions of this Title. (n)
- If someone fails to follow the contract involving the sale of goods (like not
delivering the item, not paying, or breaking the terms), this article says:
1. The rules in this chapter (about sale) will be followed first.
2. If something is not covered in this chapter, we use other relevant rules under the
Title on Sales.
ART. 1595. Where, under a contract of sale, the ownership of the goods has passed to the
buyer, and he wrongfully neglects or refuses to pay for the goods according to the terms of
the contract of sale, the seller may maintain an action against him for the price of the
goods.
Where, under a contract of sale, the price is pay able on a certain day, irrespective of
delivery or of transfer of title, and the buyer wrongfully neglects or refuses to pay such
price, the seller may maintain an action for the price, although the ownership in the goods
has not passed. But it shall be a defense to such an action that the seller at any time before
the judgment in such action has manifested an inability to perform the contract of sale on
his part or an intention not to perform it.
Although the ownership in the goods has not passed, if they cannot readily be resold for a
reason able price, and if the provisions of Article 1596, fourth paragraph, are not
applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to
receive them, may notify the buyer that the goods are thereafter held by the seller as bailee
for the buyer. Thereafter the seller may treat the goods as the buyer’s and may maintain an
action for the price. (n)
1. If the buyer already owns the goods (ownership has passed), and he wrongfully refuses to
pay,
→ the seller can sue the buyer to demand the full payment.
2. If the contract says the buyer must pay on a specific date (even if delivery or ownership
hasn’t happened yet), and the buyer still refuses to pay,
→ the seller can still sue for the price.
✅ But the buyer can defend himself if:
The seller shows he can’t or won’t deliver the goods before judgment.
3. Even if ownership hasn’t passed yet, but: The seller can’t easily resell the goods at a fair
price, and Article 1596 (on resale and damages) doesn't apply
→ The seller may offer the goods to the buyer. If the buyer refuses, the seller can: Hold the
goods for the buyer (like a safekeeper or bailee), Then treat the goods as if they already
belong to the buyer, and Sue the buyer for the price.
Seller’s right of action for the price.
The above article provides the three cases when an action for the price of the goods
under a contract of sale can be maintained by the seller:
(1) when the ownership of the goods has passed to the buyer and he wrongfully
neglects or refuses to pay for the price (par. 1.);
(2) when the price is payable on a certain day and the buyer wrongfully neglects or
refuses to pay such price, irrespective of delivery or of transfer of the title (par. 2.); and
(3) when the goods cannot readily be resold for a reasonable price and the buyer
wrongfully refuses to accept them even be fore the ownership in the goods has passed, if the
provisions of Article 1596, 4th paragraph (infra.) are not applicable. (par. 3.)
EXAMPLE: S sold to B a specific refrigerator for P8,000.00. S can main tain an
action for the price in any of the following cases:
(1) He has delivered the refrigerator to B and the latter wrongfully fails to pay;
(2) He has not yet delivered the refrigerator but the pe riod fixed for the payment
has already arrived while the pe riod fixed for delivery is yet to come; and
(3) B has refused to accept delivery without just cause and S has notified B that he is
holding the goods as bailee for B.
Under No. (1), where the unpaid goods are subsequently sold or mortgaged to
another who acted in good faith, the obli gation to pay remains with the buyer mortgagor-
seller. The failure of the buyer to pay the purchase price does not ipso facto revert
ownership of the goods to the (first) seller unless the sale is first liquidated. The (first) seller
has no cause of action against the purchaser or chattel mortgagee. (see Philippine National
Bank vs. Court of Appeals, 367 SCRA 198 [2001].)
1. Ownership already transferred + Buyer refuses to pay
If the buyer now owns the goods but refuses to pay,
→ the seller can sue to collect the price.
📌Example:
Seller gives the refrigerator to the buyer. The buyer has it now, but refuses to pay.
→ Seller can sue.
2. Price is due on a specific date + Buyer refuses to pay
Even if the goods aren’t delivered yet or ownership hasn’t transferred,
→ If the contract says the payment is due on a certain date, and the buyer doesn't pay,
→ The seller can still sue.
📌Example:The buyer agreed to pay on May 20. But delivery is scheduled on May 25.
→ If the buyer doesn’t pay on May 20, seller can sue.
3. Buyer refuses to accept + Goods can’t be resold
If: - Buyer refuses the item without a valid reason, and
- The item can’t easily be sold to someone else,
→ Then the seller can notify the buyer that he’s keeping the item for the buyer (as
a"bailee")
→ Then sue the buyer for the price.
📌 Example: The seller offers delivery, but the buyer refuses to receive the refrigerator.
Seller tells the buyer: “I’ll keep this for you,”
→ Then sues for payment.
Important Legal Note:
If the buyer already owns the goods and sells or mortgages it to someone else in good faith,
→ The first seller can’t sue the new buyer or mortgagee.
→ He can only go after the original buyer.
Ownership doesn’t automatically go back to the seller just because the buyer failed to pay.
→ The contract must be cancelled (rescinded) first.
CHAPTER 7 - EXTINGUISHMENT OF SALE
ART. 1600. 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.
(1506)
A sale can be canceled or ended in these ways:
1. Like any other obligation, it ends when:
o The buyer pays.
o The thing is lost (like destroyed or stolen).
o The seller forgives the buyer's debt.
o The agreement is changed.
2. It also ends in special ways for sales, like:
o ✅ Conventional redemption – The seller and buyer agree that the seller can
buy back the item.
o ✅ Legal redemption – The law gives someone the right to get back the thing
sold (like a neighbor or co-owner).
SECTION 1. — Conventional Redemption ART. 1601. Conventional redemption shall take
place when the vendor reserves the right to repur chase the thing sold, with the obligation
to comply with the provisions of article 1616 and other stipula tions which may have been
agreed upon. (1507)
Conventional redemption means that:
 The seller (vendor) keeps the right to buy back the item sold.
 But the seller must:
1. Return the price paid by the buyer (vendee),
2. Reimburse expenses from the contract (like notary or registration fees),
3. Pay for necessary and useful expenses the buyer spent on the item (like
repairs or improvements),
4. Follow any extra conditions that they agreed on.
👉 It only applies if both seller and buyer agreed on this buy-back option at the time of sale.
Subject matter of conventional redemption.
Both real and personal property may be the subject matter of pacto de retro sales or
sales with right to repurchase although there are certain articles (Arts. 1607, 1611, 1612,
1613, 1614, 1617, 1618.) which are applicable only to immovables.
Conventional redemption (or pacto de retro sale) can apply to both:
 Real property (like land or buildings), and
 Personal property (like jewelry, appliances, vehicles, etc.).
But: Some rules in the Civil Code (Articles 1607, 1611 to 1614, 1617, and 1618) only
apply to real property (immovable things).
ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as les see or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the trans action shall secure the payment of a debt or the performance of any other
obligation. In any of the foregoing cases, any money, fruits or other benefits to be received
by the vendee as rent or otherwise shall be considered as interest which shall be subject to
the usury laws. (n)

Pacto de Retro (Sale with Right to Repurchase)

- It is a true sale of property with an agreement that the seller can buy back the property
within a certain time. Ownership transfers to the buyer immediately. If the seller does not
repurchase on time, the buyer becomes the full owner.
Mortgage
- A mortgage is a loan where the property is used as security or collateral.
Ownership does not transfer to the lender; it stays with the borrower.
If the borrower fails to pay, the lender may foreclose and sell the property to recover the loan.