University of Negros Occidental Recoletos Bar Operations 2017

Civil Law

Chapter 1- CONTRACT OF SALE

Contract of Sale- One of the contracting parties V. DISTINGUISHED FROM OTHER

CONTRACTS
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. A contract of sale may be Donation Sale
Gratuitous or onerous Onerous
absolute or conditional.
Formal Contact Consensual contract

Governed by law on donation Governed by law on

donation
Contract of Contract to Sell
Sale
Absolute Conditional
Barter Sale
Real obligation – Personal
Consideration: giving of Consideration: giving of
obligation to obligation –
a thing money as payment
give obligation to do
Title passes to Ownership is
the buyer upon reserved in the Governed by law on Species of the genus
delivery seller and will sales; sales;
pass to the
buyer only upon If consideration consists – look at manifest
full payment of party in money and intention
the price partly by thing
Non-payment of Full payment is If intention is not clear:
the price is a a positive value of thing is more If intention is not clear:
negative suspensive than amount of money – value of thing is equal or
resolutory condition, the barter less than amount of
condition failure of which money – sale
is not a breach
Contract for piece of Sale
but prevents
work
the obligation
of the vendor to
convey title to Goods are to be Contract for delivery of an
manufactured specially for article which the vendor in
arise
a customer and upon the ordinary course of
Remedies remedies special order and not for business manufactures or
available: available: the general market procures for general market
1. specific 1. resolution (whether on hand or not)
performance 2. damages Essence is service Essence is object
2. rescission Jurisprudence:
3. damages 1. Timing test under art 1467:
whether the thing transferred
would have never existed but
for the order
I. ELEMENTS OF A CONTRACT OF SALE 2. Habituality test if
1. Consent manufacturer engages in
2. Determinate subject matter activity with need to employ
3. Price certain in money or its equivalent extraordinary skills and
II. STAGES IN LIFE OF CONTRACT OF SALE equipment (Celestino v CIR)
1. Negotiation
2. Perfection 3. Nature of the object test
3. Consummation each product’s nature of
III. OBLIGATIONS CREATED – 2 sets of real obligations to give execution differs from the
others; products are not
IV. CHARACTERISTICS OF CONTRACT OF SALE: ordinary products of
1. Nominate manufacturer (EEI v CIR
2. Principal
3. Consensual
4. Bilateral
5. Reciprocal
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6. Onerous
7. Commutative
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8. Title and not a mode

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Sale NOTE: GENERAL RULE – All persons who are authorized

Agency to Sell
in this Code to obligate themselves may enter into a
Agent not Buyer pays for price
contract of sale.
obliged to pay for of object
price, merely I. MINORS INSANE AND DEMENTED PERSONS AND
obliged to deliver DEAF MUTES
price received
from buyer. 1. Conflicts are voidable, subject to annulment or ratification
Principal remains Buyer becomes owner
owner even if object of thing; in agency
2. Also includes: (a) State of drunkenness; (b) Hypnotic
delivered to agent
spell; (c) Where necessaries are those sold and delivered to a
Agent assumes no Seller warrants
minor or other person without capacity to act, he must pay a
risk/liability as long
reasonable price therefore
as within the
authority given

May be revoked Not unilaterally revocable II. SPOUSES - A spouse may, without the consent of
unilaterally because the other spouse, enter into sales transactions in
fiduciary and even if
revoked w/o ground the regular pursuit of their profession, vocation, or
trade
Agent not allowed to Seller receives profit
profit Art. 1490. The husband and wife cannot sell property to
each other, except; (1) When a separation of property was
Personal Contract; Real Contract
agreed upon in the marriage settlements or (2) When there
Rescission is not
has been a Judicial separations or property under Article
available
191.

Dation in Payment Sale

Pre-existing credit No pre-existing credit
Obligations are Obligations are
NOTE: Prohibition likewise applies to common-law spouses
extinguished created
Debtor’s Consideration of seller:
consideration: price Consideration of III. OTHERS - TRUST RELATIONSHIPS
extinguishment of buyer: acquisition of
the debt the object 1. Art 1491 Two groups of parties prohibited from acquiring
Creditor’s By purchase a certain properties:
consideration:
acquisition of the
object offered in lieu a. Guardianship/Agent/Executors and Administrators;
of the original credit - Direct or indirect
Less freedom in
- Maybe ratified since only private wrong is involved
Greater freedom in
determining the price determining the price
b. Public Officers and employees/Officers of the Court;
Payment is received by Buyer still has to pay i. Cannot be ratified since public wrong is involved
the debtor before the the price
contract is perfected ii. Requisites for the prohibition to apply to attorneys:
1. Existence of attorney client relationship;
Lease Sale
2. Property is the subject matter in litigation;
Use of thing is for a specified period only
specified period only with an obligation to 3. while in litigation (from filing of complaint to final
with an obligation to return Judgement.
return Obligation to absolutely
transfer ownership of NOTE: Exception to the prohibition against
thing
Attorneys contingent fee arrangement where the
Consideration is rent Consideration is price Amount of legal fees is based on a value of a property
Lessor need not be Seller needs to be Involved in litigation.
owner owner of thing to
transfer ownership

NOTE: Lease with opinion to buy: really a contract of

sale but designated as lease in name only; it is
A sale by installments.

CHAPTER II-PARTIES TO CONTRACT OF SALE

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Art. 1492. The prohibitions in the two preceding articles are

applicable to sales in legal redemption, compromises and
renunciations.

III. Legal Status of Contract Object is a future thing Object is a present thing
which is the hope or
1. Void (case law) – expectancy
guardian/ executor/public
officers / officers of the court
2. Voidable (civil code) – agent; VALID if with NOTE: Quantity of subject matter is not essential for
consent perfection; must determine nature and quality of subject
matter
CHAPTER. 3 - SUBJECT MATTER OF SALE
NOTE: Seller need not be the owner of the subject matter at
1. REQUISITES: 1. Things a. “Possible” - existing, the time of perfection: sufficient that he is the owner at the
future, and contingent i. whether the subject time of delivery. exception: foreclosure sale
matter is of a type and nature that exists or could
CHAPTER. 4 - PRICE
be made to exist to allow the seller reasonable
certainty of being able to comply with his I. REQUISITES:
obligations b. Licit i. not outside the commerce of
man ii. if illicit, contract is void c. Determinate or 1. Real
determinable i. determinate: particularly designated a. when at the perfection of the contract of sale, there is
or physically segregated from all others of the same every intention on the buyer to pay the price, and every
class ii. determinable: 1. thing is capable of being expectation on the part of the seller to receive such price
made determinate 2. without the necessity of a as the value of the subject matter he obligates himself to
deliver
new further contract 2. Rights – must be
2. In money or its equivalent
transmissible, except: a. future inheritance b.
a. consideration for a valid contract of sale can be the
service price and other valuable consideration; at the very least,
a true contract of sale must have price as part of its
Emptio rei speratae Emptio spei consideration
3. Certain or ascertainable

Sale of an expected Sale of a mere hope or

a. certain: expressed and agreed in terms of specific pesos
thing expectancy that the thing and/or centavos
will come to existence; sale
b. ascertainable:

i. by third persons
sale of the hope itself ii. by the courts – in cases where the third person fixes the price
in bad faith or by mistake
iii. by reference to a definite day, particular exchange or market
iv. by reference to another thing certain
v. but never by one party to the contract
Sale is subject to the Sale is effective even if
condition; that the the thing does not 4. Jurisprudence: Manner of payment must be agreed upon
thing will exist; if it come into existence, (Marnelego v. Banco Filipino Savings and Mortgage Bank
does not, there is no unless it is a vain hope
II. EFFECT OF GROSS INADEQUACY OF PRICE
contract
NOTE: Mere inadequacy of the price does not affect the validity
of the sale, except (1) When there is fraud, mistake, or undue
influence indicative of a defect in consent is present, (2)When it
shows that the parties really intended a donation or some other
act or contract.
Uncertainty is with The uncertainty is with
regard to the quantity regard to the existence of III. EFFECT WHERE PRICE IS SIMULATED
and quality of the thing the thing
and not the existence of 1. The act may be shown to have been in reality a donation, or
the thing some other act or contract.
2. If not and neither party had any intention whatsoever that
the amount will be paid (absolutely simulated): the sale is void
3. If there is a real price but what is stated in the contract is not
the one intended to be paid (only relatively simulated): the
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contract of sale is valid but subject to reformation

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Art. 1474. Where the price cannot be determined in accordance San Miguel Philippines v Cojuangco consideration in an option contract
with the preceding articles, or in any other manner, the may be anything of value, unlike in sale where it must be price certain
contract is inefficacious. However, if the thing or any part in money

thereof has been delivered to and appropriated by the buyer he

3. How exercised: notice of acceptance should be
must pay a reasonable price therefore. What is a reasonable
communicated to offer or without actual payment as long as
price is a question of fact dependent on the circumstances of
there is delivery of payment in consummation stage
each particular case.
4. SITUATIONS IN AN OPTION CONTRACT:
CHAPTER. 5 - FORMATION OF A CONTRACT OF SALE
a. with separate consideration
I. 3 STAGES IN LIFE OF A CONTRACT OF SALE i. option contract is valid
1. Policitacion/Negotiation Stage - offer is floated, ii. offeror cannot withdraw offer until after expiry period
acceptance is floated but they do not meet; the time iii. object to rescission, damages but not to specific
when parties indicate their interest but no concurrence of performance because this is not an obligation to give
offer and acceptance.
2. Perfection - concurrence of all requisites; meeting of b. without separate consideration
i. OLD RULE - offer is still valid, but option contract is void and
the minds.
not subject to rescission, damages
3. Consummation - parties perform their respective ii. NEW RULE: Right of first refusal recognized
undertakings

II. Policitacion 1. RULES:

1. offer is floated prior to acceptance, may be Option Contract Right of First Refusal
withdrawn at will by offeror
Principal contract; stands on Accessory; cannot stand on
its own its own
2. offer floated with a period without acceptance,
extinguished when period has
Needs separate consideration Does not need separate
ended and maybe withdrawn
consideration
at will by offeror; right to
withdraw must not be There must be subject matter
Subject matter and price
arbitrary otherwise, liable to but price not important
must be valid
damage under Art 19, 20, 21
of Civil Code

3. offer floated w/ condition Extinguished by

happening/non happening of
condition
Not conditional Conditional
4. offer floated without continues to be valid
Not subject to specific Subject to specific
period/without condition depending upon
performance performance
circumstances of time, place
and person

5. offer is floated and there is original offer is destroyed,

counter-offer there is a new offer; can not
IV. RIGHT OF FIRST REFUSAL:
go back to original offer

1. creates a promise to enter into a contract of sale and it has no

6. offer is floated no authority of offeror to
separate consideration, not subject to specific performance because
modify offer
there is no contractual relationship here and it is not an obligation to
give (not a real contract)
7. offer accepted absolutely proceed to perfected stage

2. New doctrine: may be subject to specific performance

Equatorial realty Dev’t Inc. v Mayfair Theatre, the right of first refusal
is only subject to specific performance insofar as it is attached to a valid
III. OPTION CONTRACT - a contract granting an exclusive right written principal contract (e.g. lease). RFR becomes one of the
in one person, for which he has paid a separate consideration, considerations in the contract.]
to buy a certain object within an agreed period:
3. Effect of new doctrine: turned the world of policitacion upside down
1. No presumption of consideration, needs to be proven because while valid option contract is not subject to specific
2. Characteristics of Option Contract: performance, right of first refusal which does not even have a separate
a. not the contract of sale by itself, separate and distinct consideration may be subject to specific performance.
b. nominate
c. principal; but can be attached to other principal contracts 4. Recognizes recovery of damage based on abuse of rights doctrine
d. onerous
e. commutative
f. unilateral – versus contract of sale which is bilateral
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FORM OF SALE

CHAPTER. 6 - PERFECTION OF SALE I. Form not important in validity of sale

GENERAL RULE: A contract of sale is perfected at the moment a. Sale being consensual may be oral or written, perfected
by mere consent as to price and subject matter.
there is a meeting of the minds upon the thing which is the b. If particular form is required under the statute of frauds:
object of the contract and upon the price; consensual contract i. valid and binding between parties but not binding to 3rd
Exception: When the sale is subject to a suspensive condition persons.
c. Reason: purposes of convenience only and not for validity
and enforceability; cause of action is granted to sue and
compel other party to execute the document

I. REQUIREMENTS: When form is important for validity; exception by specific

provision of law; a. Power to sell a piece of land granted to
1. When parties are face to face – when there is absolute an agent – otherwise VOID b. Sale of large cattle; must
acceptance of an offer that is certain also be registered with Municipal treasurer – otherwise
2. When thru correspondence or telegram – when the offeror VOID c. Sale of land by non-Christian if not approved by
receives or had knowledge of the acceptance Governor– VOID III. When form is important for
3. When the sale is subject to a suspensive condition – from enforceability (STATUTE OF FRAUDS Article 1403 (2)) a. A
the moment the condition is fulfilled. sale agreement which by its terms is not to be performed
within a year from the making thereof; b. An agreement
NOTES: Qualified acceptance: mere counter-offer which needs for the sale of goods, chattels or things in action, at a price
to be absolutely accepted to give rise to perfected contract of not less than P500.00; and c. A sale of real property or of
sale Business ads are mere invitations to make an offer except an interest therein.
when it appears to be otherwise.
IV. EXCEPTIONS TO COVERAGE OF STATUTE IN SALES
II. RULES GOVERNING AUCTION SALES:
CONTRACTS:

1. Sales of separate lots by auction are separate contracts of

1. When there is a note or memorandum in writing and
sale subscribed to by party or his agent (contains essential terms
2. Sale is perfected by the fall of the hammer of the contract)
3. Seller has the right to bid at the auction provided such right 2. When there has been partial performance/execution
was reserved and notice was given to that effect (seller delivers with intent to transfer title/receives price)
3. When there has been failure to object to presentation of
III. EARNEST MONEY evidence (oral)
4. When sales are affected through electronic commerce

1. Money given as part of purchase price

2. Acceptance is the proof that contract of sale exists CHAPTER. 7 - CONSUMMATION
3. Nothing in law prevents parties from treating earnest STAGE/PERFORMANCE STAGE
money differently
4. Old concept: subject to forfeiture when BUYER backs
out NOTE: Stage where parties both comply with their
5. New concept: cannot be forfeited – part of purchase obligation. Nature of diligence required: diligence of a
price; must be restored good father of the family unless other requirement is
6. Qualification: if old concept is stipulated – VALID stipulated Consequence: Seller will be guilty of breach
7. Presumption of perfection of contract of sale and such if thing is lost through his fault
earnest money as part of purchase price is disputable.
I. Delivery of the Thing - Transfer ownership (tradition) c
overs a twin obligations of the seller which are: 1. to transfer
OPTION MONEY EARNEST MONEY
the ownership; and 2. to deliver a determinate thing

Money given as distinct Part of the purchased price

consideration for an option
contract PNB vs. Ling, 69 Phil. 611 Delivery of the thing
together with the payment of the price, marks the
Applies to a sale not Given only when there is consummation of the contract of sale
perfected already a sale
Norkis Distributor, Inc. vs. CA 195 SCRA 694 The act
of delivery must be coupled with the intention of
Not required to buy When given, buyer is bound
delivering the thing and putting the buyer under
to pay the balance
control

Addison vs. Felix, 38 Phil. 404 The execution of a

public Instrument is equivalent to delivery. But to
be effective, it is necessary that the vendor have such
control over the thing sold that, at the moment of
Art. 1483. Subject to the provisions of the Statute of Frauds and of any sale, its material delivery could have been made
other applicable statute, a contract of sale may be made in writing, or
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by word of mouth, or partly in writing and partly by word of mouth, or

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may be inferred from the conduct of the parties. (n)

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II. Different kinds of delivery:

1. Actual or real- when thing sold is placed in the control and
possession of the buyer
2. Legal or Constructive- can take several forms and may be any
manner signifying an agreement that the possession is
transferred from the vendor to the vendee.

III. Different forms of Constructive Delivery - Constructive

delivery has same legal effect as actual or physical delivery

Ten Forty Realty vs. Cruz, 10 Sept. 2003 Gives rise only to a
prima facie presumption of delivery which is destroyed 2. FOB - FREE ON BOARD - Shipment – when goods are
when actual delivery is not affected because of a legal delivered at ship at point of shipment; delivery to carrier by
impediment. placing goods on vessel is delivery to buyer − Destination –
when goods reach the port even if not disembarked yet from
the vessel, there is delivery to the buyer
1. Traditio Longa Manu − Delivery of thing by mere agreement;
when SELLER points to the property without need of actually
delivering 3. CIF – COST, INSURANCE, FREIGHT − When buyer pays for
services of carrier – delivery to carrier is delivery to buyer;
2. Traditio Brevi Manu − Before contract of sale, the would be
carrier is agent of the buyer − When buyer pays seller the price
buyer was already in possession of the would be subject matter
of sale (ex: as lessee)
– from moment the vessel is at port of destination, there is
already delivery to buyer.
3. Symbolic delivery − As to movables – ex: delivery of the
keys to a car.
See Arts. 1522, 1539, 1540, 1541, 1542, 1543.
4. Constitutum possessarium − When at the time of the perfection of VII. COMPLETENESS OF DELIVERY 1. MOVABLES a. delivery of
the contract of sale, seller had possession of the subject matter in thing plus accessories and accessions in the condition in which
the concept of owner and pursuant to the contract, seller continues
they were upon the perfection of the contract including the
to hold physical possession no longer in the concept of an owner but
as a lessee or any other form of possession other than in the concept
fruits b. When the seller delivers to the buyer a quantity of
of owner. goods LESS than he contracted to sell, buyer has the option to
reject or accept it. a. When accepts with knowledge that seller
5. Quasi-tradition − Delivery of rights, credits or incorporeal property, is not going to perform contract in full, he must pay at price
made by: a. Placing titles of ownership in the hands of the buyer stipulated b. When accepts and consumes before knowledge
b. Allowing buyer to make use of rights. that buyer will not perform contract in full, liable only for fair
value of goods delivered c. When seller delivers to the buyer a
6. Tradition by operation of law
quantity of goods LARGER than he contracted to sell the buyer
IV. WHEN EXECUTION OF PUBLIC INSTRUMENT DOES NOT PRODUCE
has the following options: i. accept per contract and reject the
THE EFFECTS OF DELIVERY rest ii. accept the whole – pay price stipulated iii. eject whole if
subject matter is indivisible d. When the seller delivers to the
1. When there is stipulation to contrary, buyer the goods he contracted to sell, MIXED with goods of a
execution does not produce effect of delivery different description not included in the contract, buyer has 2
options: i. accept good w/c are in accordance with contract and
2. When at the time of reject the rest ii. reject goods entirely – if indivisible
execution of instrument, subject matter was not subject to control
of the seller

3. Subject matter should be within control of seller; he 2. IMMOVABLES a. Sold per unit or number i. If the sale should
should have capacity to deliver at the time of execution of public be made with statement of its area, rate at certain price, deliver
Instrument when he wants to effect actual delivery all that may have been stated in the contract if impossible,
remedies of buyer: ii. If Less in area: - rescission - proportional
4. Such capacity should subsist for a reasonable time after execution reduction of price – LACK IN AREA SHLD NOT BE LESS THAN
of instrument (reasonable time depends on circumstances of persons, 1/10 OF AREA AGREED UPON iii. If Greater in area: - accept per
places and things
stipulation and reject the rest - accept whole area – pay at
contract rate - Not applicable to judicial sales iv. Sold for lump
sum - When price per unit not indicated - If area delivered is
V. Delivery of Fruits and Accessions/ Accessories - Right to
either greater or lesser – price will not be adjusted accordingly
fruits and accessions/accessories accrue from time sale is
perfected but no real right over it until it is delivered VIII. TIME AND PLACE OF DELIVERY 1. Follow stipulation in
contact, or 2. Follow usage in trade, or 3. Seller’s place of
VI. Delivery Through Carrier - General Rule: Where the seller is business or his residence 4. Specific goods – place where the
authorized or required to send the goods to the buyer, delivery thing is 5. At reasonable hour
to the carrier is delivery to the buyer. Exceptions: a contrary
intention appears or implied reservation of ownership under IX. EFFECTS OF DELIVERY - General Rule: The ownership of
pars. 1,2,3 of Art. 1503 the thing sold shall be transferred to the buyer upon the actual
or constructive delivery thereof. Except when the contrary is
1. FAS – FREE ALONG SIDE - When goods delivered alongside stipulated such in the cases of: 1. contract to sell 2. sale on
the ship, there is already delivery to the buyer (twin effects acceptance/approval 3. sale or return
deemed fulfilled)
NOTE: Who Bears Expenses of Delivery? Seller
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X. SALE BY DESCRIPTION/SAMPLE 1. Sample – goods must II. RULES ACCORDING TO 1544: 1. MOVABLE a. Owner is first to
correspond with sample shown 2. Description – goods must possess in good faith
correspond with description or sample 3. Effect if there is no
2. IMMOVABLE a. First to register in good faith b. No inscription, first
compliance: RESCISSION may be availed of by the buyer
to possess in good faith c. No inscription and no possession in good
faith – Person who presents oldest title in good faith d. Good Faith -
XI. OBLIGATIONS OF BUYER 1. Pay the price a. Buyer is obligated to
one who buys property without notice that another person has a right
pay price according to terms agreed upon regarding time, place and
or interest in such property; one who has paid price before notice that
amount b. If payment of interest is stipulated – must pay; if amount of
another has claim or interest
interest not mentioned – apply legal rate c. When buyer defaults –
constitutes breach: subject to specific performance/rescission and III. LIS PENDENS – notice that subject matter is in litigation
damages; interest to be paid also from default
IV. ADVERSE CLAIM – notice that somebody is claiming better right
2. Accept delivery of thing sold a. Where to accept: at time and
place stipulated in the contract; if none specified – at the time and V. POSSESSION both actual or constructive
place of delivery goods; there is acceptance when: i. He intimates to
seller that he has accepted ii. When delivered and does any act VI. REGISTRATION: any entry made in the books of the registry,
inconsistent with ownership of seller iii. Retains without intimating to including both registration in its ordinary and strict sense, and
seller that he has rejected . cancellation, annotation, and even marginal notes. It is the entry made
in the registry which records solemnly and permanently the right of
3. Sale of Goods on instalment a. Goods must be delivered in full, ownership and other real rights. 1. registered under Torrens system
except when stipulated b. When not examined by buyer – not accepted 1544 applies 2. Not registered under the Torrens system 1544 still
until examined or at least had reasonable time to examine. applies.

4. Acceptance of goods in general, absent contrary express stipulation, Jurisprudence if 2nd sale is a judicial sale (by way of levy on
does not discharge seller from liability in case of breach of warranties execution), buyer merely steps into the shoes of the judgment
(unless no notice or failure to give it within reasonable time) debtor. Outside of such situation – must apply to conflicting sales
over the same unregistered parcel of land If sale 1 occurs when
5. When buyer has a right to refuse goods, no need to return; shall be land is not yet registered and sale 2 is done when land is already
considered as depositary; unless there is stipulation to the contrary registered – apply FIRST IN TIME, PRIORITY IN RIGHT

Gabriel v. Mabanta, et al. [2003] Good faith must concur

Art. 1544. If the same thing should have been sold to different vendees,
with registration. To be entitled to priority, the second purchaser
the ownership shall be transferred to the person who may have first
must not only establish prior recording of his deed, but must
taken possession thereof in good faith, if it should be movable property.
have acted in good faith

Should it be immovable property, the ownership shall belong to the

person acquiring it who in good faith first recorded it in the Registry of
Property.

Should there be no inscription, the ownership shall pertain to the CONDITION

person who in good faith was first in the possession; and, in the absence
thereof, to the person who presents the oldest title, provided there is 1. Effect of Non-Fulfillment of Condition The other party may a.
good faith. (1473) refuse to proceed with the contract b. proceed with the contract,
waiving the performance of the condition If the condition is in the
nature of a promise that it should happen, the non-performance of
such condition may be treated by the other party as breach of
warranty.

DOUBLE SALE 2. Effect if buyer has already sold the goods

General Rule: FIRST IN TIME, PRIORITY IN RIGHT when does it apply: General Rule: The unpaid seller’s right to lien or stoppage in transitu
when not all requisites embodied in 1544 concur. remains even if buyer has sold the goods Exception: When the seller
has given consent thereto, or o When the buyer is a purchaser in good
I. REQUISITES FOR DOUBLE SALES TO EXIST: (VOCS) 1. Two or more faith for value of a negotiable document of title.
sales transactions must constitute valid sales; 2. Two or more sales
transactions must pertain to the same object or subject matter; 3. Two NEGOTIABLE DOCUMENTS OF TITLE See Article 1636
or more buyers at odds over the rightful ownership of the subject
matter must each represent conflicting interests; and 4. Two or more 1. Not creation of law but by merchants to allow them to deal with
buyers must each have bought from the very same seller. merchandise without having to physically carry them around 2.
Pertains to specific type of movables only : GOODS a. Documents of
title serve two (2) functions:
Consolidated Rural Bank (Cagayan Valley_ vs. CA [Jan. 17,
2005] If not all the elements are present for Art. 1544 to aply, the i. evidence of existence and possession of goods described
priniciple of prior tempore, potior jure or simply “he who is first in therein ii. medium by which seller is able to transfer possession
time is preferred in right” should apply. Undisputably, he is a of goods 3. A document of title which states that the goods
purchaser in good faith because at the time he bought the real referred to therein will be delivered to the bearer, or to the
property, there was still no sale to as a second vendee. order of any person named in such document 4. Negotiable by
delivery or indorsement.
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TYPES 1. NEGOTIABLE a. deliver to bearer (negotiation by mere

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delivery) b. deliver to specific person or his order (negotiable

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by endorsement + delivery) i. even if face of instrument says

NONNEGOTIABLE, it is still NEGOTIABLE; limiting words does
not destroy negotiability ii. If order instrument and no
endorsement was made – equivalent to assignment as to his spiritual share if the buyer would have still bought such
spiritual share had he known that the definite portion sold
2. NON-NEGOTIABLE would not be acquired by him.

EFFECTS OF UNAUTHORIZED NEGOTIATION The validity of the II. EXCEPTIONS TO THE RULE ON THE EFFECT OF SALE OF A
negotiation of a negotiable document is not impaired by the DEFINITE PORTION OBY A COOWNER
fact that negotiation was done in breach of duty or that the bailee has direct obligation acquires right to notify bailee so
owner of the document was deprived of the same by loss, theft, 1. Subject matter is indivisible in nature or by intent; 2. Sale of
accident, fraud, mistake if the person to whom the document is a particular portion of a property is with consent of other co-
delivered is in good faith and without notice of the said owners; 3. Co-owner sells 1 of 2 commonly-owned lands and
irregularities. does not turn over ½ of the proceeds, other co-owner, by law
and equity, has exclusive claim over remaining land.
Important Considerations 1. Negotiation gives better right than
assignment 2. Assignee takes document with defects of the
assignor 3. Obligation of bailee – bailee is immediately bound to III. RULES ON LEGAL EFFECTS OF SALE BY A NON-OWNER
the document GENERAL RULE: Sale by non-owner, buyer acquires no better
title than seller had. EXCEPTIONS: 1. Owner by his conduct is
Warranties on Negotiation 1. the document is genuine 2. he precluded from denying seller’s authority (ESTOPPEL) 2.
has legal right to negotiate or transfer it 3. he has knowledge of Contrary is provided for in recording laws (PD 1529) 3. Sale is
no fact which would impair the validity or worth of the made under statutory power of sale or under order of a court
document 4. he has right to transfer title to goods and goods of competent jurisdiction 4. Sale is made in a merchant’s store
are merchantable in accordance with code of commerce and special laws

Rules of Levy/Garnishment of Goods Covered by Documents of IV. SALE BY SELLER WITH VOIDABLE TITLE 1. PERFECTION
Title 2. NON NEGOTIABLE: a. Notification is operative act to STAGE a. Valid sale – buyer acquires title of goods
transfer title/possession of goods in favor assignee b. Before
notification – can still be garnished 2. CONSUMMATION STAGE a. Valid sale – if title has not yet
been avoided, buyer buys goods under following condition: o in
3. NEGOTIABLE: a. cannot be levied or garnished when good faith o for value o without notice of seller’s defect of title
documents are already with purchaser in good faith, unless: b.
Document is first surrendered c. Document is pounded by court V. TITLE AS TO MOVABLE PROPERTIES GENERAL RULE:
d. Negotiation is enjoined Possession is equivalent to title Requisites: Possession of
movable and Good Faith

NEGOTIATION ASSIGNMENT VII. EXCEPTIONS: 1. Owner lost movable – owner can recover
w/o reimbursing price 2. Owner is unlawfully deprived – owner
acquires title to goods can recover w/o reimbursing price
transferor/holder acquires against transferor
title to goods VIII, EXCEPTIONS TO THE EXCEPTIONS: − movable is bought at
public sale – owner can only recover after reimbursing price −
acquired in good faith and for value from auction
Bailee has direct obligation to Acquires right to notify
holder as if directly dealt with bailee so that he acquires
him. LOSS, DETERIORATION, FRUITS and OTHER BENEFITS See
obligation of bailee to
Articles 1493 and 1494
hold goods for him
Legal consequences from point of perfection are the same in
both legal systems: upon perfection of an unconditional
SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE See contract of sale involving specific or determinate subject
Articles 1475, 1477, 1505, 1506 matter, the risk of loss deterioration and the benefits of fruits
and improvements, were fro the account of the buyer.
I. SALE BY NON-OWNER 1. PERFECTION STAGE a. Sale by owner
– VALID b. Sale by non-owner – VALID; c. Reason why both sales WHO BEARS RISK OF LOSS/ DETERIORATION/ FRUITS: 1.
are valid: ownership is necessary only at time when transfer BEFORE PERFECTION a. Res perit domino b. Owner is seller so
title to goods; at perfection stage, no obligation on part of seller bears risk of loss
seller to transfer ownership d. Law on estoppel further bolsters
it: title passes by operation of law to grantee when person who 2. AT PERFECTION o Res perit domino o Contract is merely
is not owner of the goods sold delivers it and later on acquires
inefficacious because loss of the subject matter does not affect
title thereto e. Since valid, action to annul is improper; there is
already a perfected contract the validity of the sale o Seller cannot anymore comply with
obligation so buyer cannot anymore be compelled .
2. CONSUMMATION STAGE a. Contract of sale is valid because
it has passed perfected stage, despite seller not being the 3. AFTER PERFECTION BUT BEFORE DELIVERY o Loss – confused
owner or seller having no authority to sell b. What is void is the state o Paras: BUYER o Tolentino: SELLER o Deterioration and
transfer of title/ ownership did not pass c. Effect: buyer fruits - Buyer bears loss;
acquired no better right than transferor d. Legal effect: CAVEAT
EMPTOR – BUYER BEWARE e. Sale of co-owner of whole 4. AFTER DELIVERY o Res perit domino o Delivery extinguishes
property or definite portion GENERAL RULE: i. co-owner sells ownership visa-vis the seller and creates a new one in favor of
8

whole property prior to partition – sale of property itself is void

the buyer
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but valid as to his spiritual share ii. co-owner sells definite

portion to partition – sale is void as to other coowner but valid
Law on Sales Reviewer

REMEDIES OF PARTIES FOR BREACH OF CONTRACT OF SALE

See Articles 1594-1596. 1484-1486, 1592 why special? – ownership of goods already with buyer but seller
may still rescind; ownership is destroyed even without court
SUBJECT MATTER: MOVABLES (IN GENERAL) intervention but in ordinary sale, need to go to court to destroy
transfer of ownership
Remedies of Unpaid Seller GENERAL RULE: Any man may not
take law in his own hands, must seek remedy through courts Remedies of Buyer When Seller fails to deliver, buyer may seek
EXCEPTION: − DOCTRINE OF SELF HELP − SPECIAL REMEDIES SPECIFIC PERFORMANCE WITHOUT GIVING SELLER OPTION TO
Requisites: 1. Subject matter – goods 2. Seller is unpaid – not RETAIN GOODS ON PAYMENT OF DAMAGES
completely paid or received negotiable instrument under a
condition and condition has been breached by reason of SALE OF MOVABLES ON INSTALLMENT
dishonor 3. Physical possession is with seller
Remedies of Unpaid Seller (1484) 1. Exact fulfillment should
The following are the special remedies of unpaid seller 1. the buyer fail to pay. 2. Cancel the sale if buyer fails to pay 2 or
Possessory lien 2. Stoppage in transitu 3. special right of re- more installments. 3. Foreclose on chattel mortgage if buyer
sale 4. special right to rescind fails to pay 2 or more installments

NOTE: Hierarchical Application - only when unpaid seller has Incidents: 1. If buyer chooses foreclosure, no further action
exercised possessory lien or stoppage in transitu can the seller against buyer to recover any unpaid balance of the price 2.
proceed with his other special rights of resale or to rescind. When is the law applicable? Sale on movables by installment o
Sale on installment: payment by several partial payments in
I. Possessory Lien 1. Seller not bound to deliver if buyer has not small amount 4. Rationale of the law: Buyer is lulled into
paid him the price 2. Right to retain; cannot be availed when thinking that he could afford because of small amounts per
seller does not have custody 3. Exercisable only in following installment and at the same time remedy abuse of commercial
circumstances: a. goods sold without stipulation as to credit b. houses 5. Nature of remedies: alternative and not cumulative 6.
goods sold on credit but term of credit has expired c. buyer Coverage: sale and financing transaction and contracts of lease
becomes insolvent d. When part of goods delivered, may still with option to purchase 7. Action : Judicial and Extrajudicial
exercise right on goods undelivered
o Specific Performance i. If already chose specific
Instances when possessory lien lost: 1. seller delivers goods to performance, can no longer choose other remedies except:
carrier for transmission to buyer without reserving ownership after choosing, it has become impossible, rescission may be
in goods or right to possess them 2. buyer or his agent lawfully pursued b. Rescission
obtains possession of goods 3. Waiver 4. Loses lien when he
parts with goods (still has stoppage in transitu) 5. notice by - When chosen, there is correlative obligation to restitute - But
seller to buyer not essential. stipulation that installments paid are forfeited are valid if not
unconscionable - Deemed chosen when: o Notice of rescission
II. Stoppage In Transitu − Goods are in transit − Requisites
is sent o Takes possession of subject matter of sale o Files
when goods are in transit 1. From the time goods are delivered
to carrier for purpose of transmission to buyer 2. Goods action for rescission Barring effect on recovery of balance
rejected by buyer and carrier continues to possess them
3. Foreclosure i. barring effect on recovery of balance ii. Extent
When goods no longer in transit 1. Reached point of destination of barring effect: purchase price iii. Exception: mortgagor
2. Before reaching destination, buyer obtains delivery of the refuses to deliver property to effect foreclosure, recover also
goods 3. Goods are supposed to have been delivered to buyer expenses incurred in attorney’s fees, etc. (Perverse Buyer
but carrier refused 4. Shown by seller that buyer is insolvent Mortgagor)
(failure to pay when debts become due )
IMMOVABLES (IN GENERAL)
How is right exercised 1. Obtain actual possession of goods 2.
Give notice of claim to carrier / bailee in possession thereof 3. Remedies of Seller Anticipatory breach 1. Seller has reasonable
Notice by seller to buyer is not required; notice to carrier is grounds to fear loss of immovable sold and its price, sue for
essential RESCISSION 2. Non–payment of price, sue for RESCISSION
III. Special Right to Resell the Goods 1. goods are perishable 2. Remedies of Buyer 1. In case of subdivision or condo projects,
stipulated the right of resale in case buyer defaults in payment suspend payment. 2. If real estate developer fails to comply
3. buyer in default for unreasonable time 4. notice by seller to with obligation according to approved plan: - RESCIND -
buyer not essential why special? There are things which seller SUSPEND PAYMENT UNTIL SELLER COMPLIES
cannot do in ordinary sale:

1. Ownership is with buyer but seller can sell goods 2. title IMMOVABLES (BY INSTALLMENT) Article 1592 – Applies only to
accorded to buyer is destroyed even without court
contract of sale .
intervention

IV. Special Right to Rescind 1. Expressly stipulated 2. Buyer is in I. Maceda Law 1. applies to COS and CTS and Financing 2.
default for unreasonable time 3. Notice needed to be given by Coverage: REAL ESTATE – defined space vs. CONDO – not
seller to buyer defined space (w/ common areas) 3. Excluded: a. Industrial b.
Commercial c. Sale to tenants under agrarian laws
9
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Law on Sales Reviewer

Rights Granted to Buyers: act imputable to vendor - seller has been summoned in the suit for
eviction at the instance of buyer; or made 3rd party defendant through
o Buyer paid at least 2 years installment 1. Pay without interest the 3rd party complaint brought by buyer.
balance within grace period of 1 month for every year of installment
payment 2. Grace to be exercised once every 5 years 3. When no Vendor’s liability shall consists of (Total Eviction)(VICED) 1. Value of the
payment - cancelled; buyer entitled to 50% of what he has paid + if thing at the time of eviction; 2. Income or fruits if he has been ordered
after 5 years of installments, 5% for every year but not to exceed 90% to deliver the to the party who won the suit 3. Cost of the suit 4.
of total payments made 4. Cancellation to be effected 30 days from Expenses of the contract; and 5. Damages and interests if the sale was
notice and upon payment of cash surrender value in bad faith

o Buyer paid less than 2 years installment 1. 1st Grace period is 60 days
from date installment became due 2. 2nd grace period of 30 days from Partial Eviction 1. to enforce vendor’s liability for eviction (VICED); or 2.
notice of cancellation/demand for rescission ƒ buyer can still pay within to demand rescission of contract.
the 30 day period ƒ with interest ƒ No payment after 30 day period, can
cancel. a. no appeal needed nor a need for buyer to resist eviction for right to
accrue; it is enough that the aforementioned requisites are complied
Purpose of law - Protect buyers in installments against oppressive with b. warranty cannot be enforced until aforementioned requisites
conditions concur c. applies to judicial sale; judgment debtor responsible for
eviction unless otherwise decreed in judgment d. vendor not liable for
Notice needed - waiver thereof if oppressive eviction if adverse possession had been commenced before sale but
prescriptive period is completed after transfer e. Rights of buyer when
Applies to contracts even before law was enacted − Stipulation to deprived of only part of the subject matter but would not have bought
contrary is void such part if not in relation for the whole: 1. Rescission 2. Mutual
restitution.
Other rights: o Sell rights to another o Reinstate contract by updating
during grace period and before actual cancellation o Deed of Sale to be 3. warranty against encumbrances (non apparent) o Requisites: a.
done by notarial act o to pay in advance any installment or the full immovable sold is encumbered with non–apparent burden or
balance of price anytime without interest o have full payment servitude not mentioned in the agreement b. nature of non–apparent
annotated in certificate of title servitude or burden is such that it must be presumed that the buyer
would not have acquired it had he been aware thereof c. when
REMEDY OF RESCISSION IN CONTRACTS COVERING IMMOVABLES See breach of warranty exist: buyer may ask for rescission of indemnity d.
Articles 1191, 1592 warranty not applicable when non– apparent burden or servitude is
recorded in the Registry of Property – unless there is express warranty
o Nature: Judicial o Extra judicial Rescission a. allowed if stipulated; that the thing is free from all burdens and encumbrances
burden to sue shifts to party who does not like rescission b. court still
4. warranty against hidden defects o SELLER does not warrant patent
has final say as to propriety of rescission c. Forfeiture of amounts valid
defect; caveat emptor o Except when hidden 1. subject matter may be
being in nature of penal clause o Contract of Sale – Rescission is movable or immovable 2. nature of hidden defect is such that it should
Applicable o Contract to Sell – Rescission not Applicable ƒ Non–payment render the subject matter unfit for the use of which it was intended or
of purchase price would automatically cancel even without further should diminish its fitness 3. had the buyer been aware, he would not
action for rescission ƒ Except: If subject matter is residential lots, law on have acquired it or would have given a lower price a. when defect is
rescission applies when there is substantial breach. Maceda law visible or even if not visible but buyer is an expert by reason of his trade
or profession, seller is not liable b. obligation of seller for breach
applies.
depends on whether he has knowledge of such defect or not
c. seller is aware – seller should return price and refund expenses of
CONDITION and WARRANTIES See Articles 1545-1547
contract with damages d. seller is not aware - seller should return price
and interest and refund expenses ( no damages ) e. buyer may elect
I. Condition 1. When a contract contains a condition, the non-
happening of which would not constitute a breach but extinguishes the between withdrawing from contract or demanding proportionate
obligation 2. However, if party to the sales contract has promised that reduction of price with damages in either case f. applicable to judicial
the condition should happen or be performed, the non-performance of sale except that judgment debtor not liable for damages g. action to
which may be treated by parties as breach prescribe 6 months from delivery of subject matter

II. Warranties A statement or representation made by the seller 5. defects on animals a. even in the case of professional inspection but
contemporaneously and as a part of the contract of sale, having hidden defect is of such nature that expert knowledge is not sufficient
reference to the character, quality, or title of the goods, and by which
to discover it - defect shall be considered as REDHIBITORY b. if vet fails
he promises or undertakes to insure that certain facts are or shall be as
he then represents to discover through ignorance or bad faith he is liable for damages c.
sale of animals on teams (2 or more) - when only one is defective, only
Express Warranties ( requisites ): 1. it must be an affirmation of fact or one is redhibited and not the others - exception: when it appears buyer
any promise by seller relating to the subject matter of sale 2. natural would not have purchased the team without the defective one - apply
tendency of affirmation or promise is to induce buyer to purchase to sale of other things d. animals at fair or public auction - no warranty
subject matter 3. buyer purchases the subject matter relying thereon 4.
against hidden defects e. sale of animals with contagious disease is void
when breached, seller is liable for damages.
f. sale of unfit animals
Implied Warranties Deemed included in all contracts of sale whether
-- void if use / service for which they are acquired has been stated in
parties are actually aware or not, whether they were intended or not;
the contract and they are found to be unfit therefor o prescription of
by operation of law ;
action:40 days from date of delivery to buyer o if sale is rescinded,
1. Warranty that seller has a right to sell o refers to consummation animals to be returned in same condition when they were acquired;
stage since in consummation stage, it is where ownership is transferred buyer shall answer for injury / loss due to his fault - buyer may elect
by tradition o not applicable to sheriff, auctioneer, mortgagee, pledge between withdrawing from sale and demanding proportionate
reduction of price with damages in either case
2. Warranty against eviction a. implied, unless contrary provision
appears in contract b. when ownership is transferred, buyer shall enjoy Specific Implied Warranties in the Sale of Goods Warranty as to
the legal and peaceful possession of the thing c. Requisites of breach of fitness and quality; requisites: 1. Buyer makes known to seller the
particular purpose for which goods are acquired and it appears that the
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warranty against eviction: -

buyer relied on the seller’s skill or judgment 2. Goods are bought by
description from seller who deals in goods of that description 3. in case
Page

- buyer is evicted in whole or in part from the subject matter of sale -

there is a final judgement - basis of eviction is a right prior to sale or an of sale of specified article under its patent or trade name, no warranty
Law on Sales Reviewer

II. Conventional redemption

1. Only extinguishes obligations pertaining to contract of sale, not redemption. b. deeds of sale are not to be recorded in Register of
extinguish contract itself; only applies to contract of sale 2. The right Deeds unless accompanied by affidavit of seller that he has given notice
which the vendor reserves to himself to reacquire the property sold to all possible redemptioners
provided he returns to the vendee: a. the price of the sale, b. expenses
of contract, c. other legitimate payments, d. he necessary and useful
expenses made on the thing sold e. and fulfills other stipulations which
may have been agreed upon 3. The right is exercised only be seller in NOTE: Written notice under Art. 1623 is mandatory for the right of
whom right is recognized in the contract or by any person to whom redemption to commence (PSC vs. Sps. Valencia, 19 Aug. 2003). Thus,
right was transferred; must be in the same contract. the General Rule is that actual knowledge notwithstanding, written
notice is still required Except when actual knowledge is acquired by co-
III. Legal redemption heirs living in same land with purchaser, or co-owner was middleman in
sale to 3rd party.
1. Only applies to contracts of sale. 2. The right to be subrogated upon
the same terms and conditions stipulated in the contract, in the place
of one who acquires the thing by (1) purchase OR (2) by dation in Etcuban vs. CA, et. al. 148 SCRA 507 – Art. 1623 does not
payment OR (3) by other transaction whereby ownership is transmitted prescribe any distinctive method for notifying the redemptioner
by onerous title. 3. Types of Legal Redemption: a. among co-heirs i. any
of the heirs sell his hereditary rights to stranger before partition ii. any
of the co-heirs may be subrogated to the rights of the purchaser by
redeeming said hereditary right: reimburse buyer of the price of the IV. Option to Purchase - Right to repurchase the thing sold granted to
sale iii. co-heirs has 1 month from receipt of notice in writing b. among the vendor in a separate instrument from the deed of sale
co-owners i. any or all of co-owners sells their shares to 3rd person ii.
any co-owner may exercise right of redemption by paying reasonable V. Equitable Mortgage
price of property to the buyer iii. if 2 or more co-owners desire to
exercise right of redemption, they may only do so in proportion to the
share they respectively have in thing owned in common c. among Cachola vs. CA, 208 SCRA 496 One which lacks the proper
formalities, form of words, or other requisites prescribed by law for
adjoining owners i. rural land a. where piece of rural land has an area
a mortgage, but shows the intention of the parties to make the
not exceeding 1 hectare, adjoining owner has right to redeem unless property subject of the contract as security for a debt and contains
grantee does not own a rural land b. if two or more adjacent lot owners nothing impossible contrary to law
desire to exercise right to redeem, owner of adjoining lot with smaller
area shall be preferred c. if two or more adjacent lit owners desire to
exercise right to redeem and both have same lot area, one who first 1. A contract with right to repurchase is deemed to be an equitable
requested shall be granted ii. urban land a. when piece of land is small mortgage if the following requisites concur (IPERTI): a. price of sale with
and cannot be used for any practical purpose and bought right to repurchase is unusually inadequate b. seller remains in
possession as lessee or otherwise c. upon or after expiration of right to
merely for speculation, owner of adjoining land can redeem b. 2 or repurchase, another instrument extending the period of redemption or
more owners of adjoining lot desire to exercise right to redeem, owner granting new period is executed d. buyer retains for himself a part of
whose intended use is best justified shall be preferred. d. sale of credit the purchase price e. seller binds himself to pay taxes on thing sold f.
in litigation i. when a credit or other incorporeal right in litigation is real intention of parties is to secure the payment of a debt or
sold, debtor shall have a right to extinguish it by reimbursing the performance of other obligation.
assignee for the price the latter paid therefor plus judicial costs, interest
ii. debtor may exercise right within 30 days from the date assignee NOTE: In case of doubt – in determining whether it is an equitable
demands payment from him mortgage or a sale a retro, the sale shall be construed as an equitable
mortgage.
4. Other Instances When Right of Legal Redemption is Granted a.
Redemption of homesteads b. Public Land Act c. Land acquired under 2. What to Look for in Determining Nature of Contract a. language of
free patent homestead subject to repurchase by wife, legal heirs within the contract b. conduct of parties – to reveal real intent
5 years from date of conveyance granted by law, need not be stipulated
3. Remedy available to vendor: ask for reformation of contract
5. Redemption in tax sales a. in case of tax delinquency/failure to pay
tax assessments, property is foreclosed b. delinquent payer has 1 year 4. Rationale behind provision on Equitable Mortgage: a. Circumvention
from date of sale to redeem by paying to the revenue District Officer of usury law b. Circumvention of prohibition against pactum
the amount of tax delinquencies, and interest or purchase price. commissorium – creditor cannot appropriate the things given by way of
pledge or mortgage; remedy here is foreclosure. The real intention of
6. Redemption by judgment debtor - 1 year from date of registration of parties is that the pretended purchase price is money loaned and to
certificate of sale to redeem by paying purchaser at public auction with secure payment of the loan, sale with pacto de retro is drawn up 5.
interest 7. Redemption in extrajudicial foreclosure - 1 year from date of Period of Redemption a. No period agreed upon – 4 years from date of
sale and registration 8. Redemption in judicial foreclosure of mortgage - contract b. Period agreed upon – should not exceed 10 years; if it
no right to redeem is granted to debtor mortgagor except when exceeded, valid only for the first 10 years. c. When period to redeem
mortgagee is bank of a banking institution 90 days after finality of has expired and there has been a previous suit on the nature of the
judgment 9. When Period of Redemption Begins to Run - Right of legal contract – seller still has 30 days from final judgment on the basis that
pre-emption of redemptionshall be exercised within 30 days from contract was a sale with pacto de retro: d. Rationale: no redemption
notice by the seller 10. How exercised - tender of payment is not due to erroneous belief that it is equitable mortgage which can be
necessary; offer to redeem is enough. a. There is no prescribed form extinguished by paying the loan. e. This refers to cases involving a
for an offer to redeem to be properly effected. Hence, it can either be transaction where one of the parties contests or denies that the true
through a formal tender with consignation of the redemption price agreement is one of sale with the right to repurchase; not to cases
within the prescribed period. What is paramount is the availment of where the transaction is conclusively a pacto de retro sale. f. Example:
11

the fixed and definite period within which to exercise the right of legal Where a buyer a retro honestly believed that he entered merely into an
equitable mortgage, not a pacto de retro transaction, and because of
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such belief he had not redeemed within the proper period

Law on Sales Reviewer
NOTE: When period has expired and seller allowed the period of - may still set up compensation of debts previous to assignment but
redemption to expire – seller is at fault for not having exercised his not the subsequent ones.
rights so should not be granted a new period.
IV. Transfer of Ownership 1. by tradition and not by perfection 2. by
execution of public instrument because intangibles cannot be
Paez vs. Magno Tender of payment is SUFFICIENT to compel
redemption, but is not in itself a payment that relieves the
vendor from his liability to pay the redemption price

physically transferred 3. Without necessity of delivering the document

VI. Effect when There is No Redemption Made 1. jurisprudence before evidencing the credit. 4. This rule does not apply to negotiable
the NCC: buyer a retro automatically acquires full ownership 2. under documents and documents of title which are governed by special laws.
present art 1607: there must be judicial order before ownership of real
property is consolidated in the buyer a retro V. Effect of payment of debtor after assignment of credit 1. Before
Notice of the Assignment
VII. How is Redemption Effected 1. Seller a retro must first pay the
following: a. the price of the thing sold b. expenses of the contract and
other legitimate payments made by reason of the sale c. necessary and a. Payment to the original creditor is valid and debtor shall be released
useful expenses made on the thing sold d. Valid tender of payment is from his obligation 2. After Notice a. Payment to the original creditor
sufficient e. Mere sending of notice without valid tender is insufficient f. is not valid as against the assignee b. He may be made to pay again by
Failure to pay useful and unnecessary expenses entitles vendee to the assignee
retain land unless actual reimbursement is made may compel the
vendor to redeem the whole thing 2. When an undivided thing is sold VI. Warranties of the assignor of credit 1. NO warranty against hidden
by coowners / co-heirs, vendors a retro may only exercise his right over defect - N/A because intangibles has no physical existence 2. He
his respective share; vendee a retro may demand that they must come
warrants the existence and legality of credit - there is warranty except
to an agreement first and may not be compelled to consent to a partial
redemption 3. When rights of co-owners over an undivided thing is sold when expressly sold as a doubtful account a. NO warranty as to the
as regards to their own share – vendee retro cannot compel one to solvency of debtor unless it is expressly stipulated OR unless the
redeem the whole property 4. Should one of the co-heirs/co-owners insolvency was already existing and of public knowledge at the time of
succeed in redeeming the property – such vendor a retro shall be the assignment b. warranty shall last for 1 year only c. one who assigns
considered as trustee with respect to the share of the other co- inheritance right w/o enumerating rights shall be answerable for his
owners/co-heirs.
character as an heir d. one who sells whole of certain rights for a lump
IX. Fruits 1. what controls is the stipulation between parties as regards sum, shall be answerable for legitimacy of the whole in general but not
the fruits; if none: a. at time of execution of the sale a retro there are for each of the various parts the assignee
visible or growing fruits – there shall be no pro-rating at time of
redemption if no indemnity was paid by the vendee a retro b. at time of VII. Breach of Warranty: Liabilities of the assignor of credit for violation
execution sale a retro there be no fruits but there are fruits at time of of his warranties 1. Assignor in good faith a. Liability is limited to price
redemption – pro-rated between vendor a retro and vendee a retro received, expenses of the contract and other legitimate payments made
giving the vendee a retro a part corresponding to the time he possessed by reason of the assessment 2. Assignor in bad faith a. Liable ALSO for
the land.
(expenses of contract and other legitimate payments plus useful and
PRE-EMPTION REDEMPTION necessary expenses) damages

1. Arises before sale Arises after sale VIII. Assignment of Credit or Incorporeal Right in Litigation -
Requisites: 1. There must be a sale or assignment of credit 2. There
must be a pending litigation 3. The debtor must pay the assignee: a.
2. No rescission because no There can be rescission of the price paid by him AND b. judicial costs incurred by him AND c. interest
sale exists yet original sale on the price from the date of payment 4. The right must be exercised
3. The action is directed Action is directed against buyer by the debtor within 30 days from the date the assignee demands
against prospective seller (judicially or extrejudicially) payment from him

NOTE: Presumption: buyer’s purpose is speculation and; law would

ASSIGNMENT See Arts . 1624 – 1634
rather benefit the debtor of such credits rather than the one who
merely speculates for profit.
I. ASSIGNMENT: The owner of a credit transfers to another his rights
and actions in consideration of a price certain in money or its
equivalent. NOTE: When credit or incorporeal right in litigation is assigned or sold,
debtor has a right to extinguish it by reimbursing the assignee for the
1. transfers the right to collect the full value of the credit, even if he price the buyer paid plus interest
paid a price less than such value 2. transfers all the accessory rights
(e.g. guaranty, mortgage, pledge, preference) 3. debtor can set up IX. Right to redeem by debtor not available in the following instances
against the assignee all the defenses he could have set up against the (not considered speculative 1. assignment of credit / incorporeal right
assignor.
to co-heir or co-owner; the law does not favor co-ownership 2.
II. What Makes Assignment Different From Species Sale? assignment to creditor in payment for his credit a. presumption is that
the assignment is above suspicion; assignment is in the form of dacion
1. Technical term but basically a sale 2. Sale of credits and other en pago, thus perfectly legal 3. assignment to possessor of tenement or
incorporeal things piece of land which is subject to the right in litigation assigned a.
purpose is to presumably preserve the tenement
III. Effects of Assignment 1. lack of knowledge or consent of debtor not
essential for validity but has legal effects 2. assignment of rights made BULK SALES LAW
w/o knowledge of debtor – debtor may set up against assignee the
compensation w/c would pertain to him against assignor of all credits I. Purpose: Protect creditor of merchant stores.
prior to assignment and of later ones until he had knowledge of the
II. When sale or transfer in bulk? - Any sale, transfer, mortgage, or
assignment 3. debtor has consented to assignment – cannot set up 4.
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assignment 1. Of goods other than in ordinary course of business 2. of

compensation unless assignor was notified by debtor that he reserved all or
his right to the compensation 5. debtor has knowledge but no consent
Page

substantially all of business 3. of all or substantially all of fixtures and equipment’s

Law on Sales Reviewer

III. Should cover only merchants because creditors cannot get

adequate security because goods are sold ordinarily in course of
business

IV. When sale or transfer NOT covered by Bulk Sales Law: 1. If the
transfer is in the ordinary course of trade and the regular prosecution
of the business of the vendor 2. If it is made by one who produces and
delivers a written waiver of the provisions of the Bulk Sales Law from
its creditors 3. If it is made by an executor, administrator, receiver,
assignee in insolvency, or public officer, acting under judicial process
(Section 8); and 4. If it refers to properties exempt from attachment or
execution (ROC, Rule 39, Sec. 12)

V. Protection accorded to creditors by Bulk Sales Law: 1. It requires

the vendor, mortgagor, transferor, or assignor to deliver to the vendee, Failure to On Transaction On Seller
mortgagee, or to his or its agent or representative a sworn written Prepare and Fraudulent and Criminal liability
statement of names and addresses of all creditors to whom said deliver sworn Void
vendor, etc. may have been indebted together with the amount due or listing of creditors
to be due (Section 3) 2. It requires the vendor, mortgagor, transferor, or Apply proceeds Fraudulent and Criminal Liability
assignor, at least 10 days before the sale, transfer, mortgage, prorata to listed void
assignment to make a full detailed inventory showing the quantity and creditors
the cost of the price, terms and conditions of the sale, etc. (Sec. 5) Make advance Not void No Criminal liability
written disclosure
VI. Duty of seller to perform the following when transaction is within of transactions to
the coverage of law 1. make sworn statement of listing of creditors 2. creditors
delivery of sworn statement to buyer 3. apply the proceeds pro-rata to
claims of creditors shown in verified statement 4. written advance Register sworn Not void No Criminal liability
disclosure to creditors statement with
DTI
VII. Effects of False Statements in the Schedule of Creditors 1. Without Include or omit Void Criminal liability
knowledge of buyer a. If the statement is fair upon its face and the names of
buyer has no knowledge of its incorrectness and nothing to put him on creditors and
inquiry about it, he will be protected in its purchase b. The remedy of correct amount
the creditor is not against the goods but to prosecute the seller due in the
criminally statement

2. With knowledge or imputed knowledge of buyer a. The vendee Sale for no Void Criminal liability
accepts it at his peril b. The sale is valid only as between the vendor and consideration
the vendee but void against the creditors 3. With names of certain
creditors without notice are omitted from the list a. The sale is VOID as
to such creditors, whether the omission was fraudulent or not. 4. With
respect to an innocent purchaser for value from the original purchaser Anti-Dummy Law
a. An IPV from the original purchaser is protected b. However if the
circumstances are such as to bind the subsequent purchaser with I. Penalizes Filipinos who permit aliens to use them as nominees or
constructive notice that the sale to the vendor (original purchaser) was dummies to enjoy privileges reserved only for Filipinos. II.
fraudulent, the property will be liable in his hands to creditors of the Management, operation as officers, employees or laborers. III.
original vendor Includes Control or non-control positions

VIII. Effects of violation of Law on Transfer 1. As between parties a.

The Bulk Sales Law does NOT in any way affect the validity of the
transfer as between the intermediate parties thereto b. A sale not in
compliance with the Bulk Sales Law is valid against all persons other
than creditors 2. As against creditors a. A purchaser in violation of the
law acquires no right in the property purchased as against the creditors
of the seller b. His status is that of a trustee or receiver for the benefit
of the creditors of the seller; as such, he is responsible for the
disposition of the property.

IX. Remedies available to creditors 1. The proper remedy is one against

the goods to subject them to the payment of the debt, such as
execution, attachment, garnishment, or by a proceeding in equity 2. An
ordinary action against the purchaser to obtain money judgment will
NOT lie, unless the purchaser has sold or otherwise disposed of, or
dealt with the property, so as to become personally liable to the
creditors for value of it.

X. Effects of Non-Compliance
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