LECTURE AID: 6.

Consensual – meeting of minds makes a perfect contract of sale but needs

delivery to consummate.
SALE, AGENCY, LOAN AND MORTGAGES
STAGES IN LIFE OF CONTRACT OF SALE:
1. negotiation
CONTRACT OF SALE
 One of the contracting parties obligates himself to transfer the ownership 2. perfection – by mere consent; performance may be demanded (specific
of and to deliver a determinate thing, and the other to pay therefor a performance )
price certain money or its equivalent. A contract of sale may be absolute 3. consummation
or conditional.
 Parties to a contract of sale are:
DISTINGUISHED FROM OTHER CONTRACTS:
a. Buyer/Vendee
1. Donation
b. Seller/Vendor
donation is gratuitous; sale is onerous
donation is formal contract; sale is consensual
SALES donation is governed by law on donation; sale is governed by law on
1. Contract of sale (absolute) sales
real obligation – obligation to give
remedies available: 2. Barter
a. specific performance in barter, the consideration is the giving of a thing; in sale, it is giving of
b. rescission money as payment
c. damages both are governed by law on sales; both are species of the genus sales
if consideration consists party in money & partly by thing – look at
2. Contract to sell (conditional) manifest intention; if intention is not clear (1468 ):
personal obligation – obligation to do a. value of thing is equal or less than amount of money – sale
remedies available: b. value of thing is more than amount of money – barter
a. resolution
b. damages
3. Contract for piece of work
ESSENTIAL REQUISITES OF A CONTRACT OF SALE test in article 1467:
1. Consent or meeting of minds – transfer of ownership of and to deliver a. contract for delivery of an article which the vendor in the ordinary
on the part of the seller, to pay on the part of the buyer. course of business manufactures or procures for general market (
whether on hand or not ) – sale
2. Object or Subject matter- Determinate subject matter
b. goods are to be manufactured specially for a customer and upon
3. Cause or consideration-Price certain in money or its equivalent special order and not for the general market – contract for piece of
work.
CHARACTERISTICS OF CONTRACT OF SALE: jurisprudence:
1. Nominate - law gave it a name a. Timing test – under art 1467; Inchausti; whether the thing transferred
2. Principal - can stand on its own; unlike accessory contract would have never existed but for the order – contract for piece of
work (abandoned)
3. Bilateral - imposes obligation on both parties
a. obligation of seller – transfer ownership & deliver b. Habituality test – enunciated in Celestino v CIR; contract of sale if
b. obligation of buyer – pay for price manufacturer engages in activity without need to employ
extraordinary skills and equipment; contract for piece of work is sale
Consequence: power to rescind is implied in bilateral contracts
of service; contract of sale is sale of things.
4. Onerous – with valuable consideration
c. Nature of the object test – enunciated in EEI v CIR; each product’s
Consequence: all doubts in construing contract to be resolved in greater nature of execution differs from the others; products are not ordinary
reciprocity of interest
products of manufacturer.
5. Commutative – equal value is exchanged for equal value
main factor in decision of the SC: essence of why parties enter into it:
Test: subjective – as long as parties in all honesty that he is receiving a. essence is object – contract of sale
equal value then it complies with test & would not be deemed a donation;
b. essence is service – contract for piece of work
but must not be absurd.
Inadequacy of price or aleatory character not sufficient ground to cancel
contract of sale; inadequacy can show vitiation of consent & sale may 4. Agency to sell
be annulled based on vice but not on inadequacy in sale, buyer pays for price of object; in agency to sell, agent not obliged
 to pay for price, merely obliged to deliver price received from buyer. Status not provided for by law but VOID according to case law
in sale, buyer becomes owner of thing; in agency; principal remains Reason:
owner even if object delivered to him i. prevent defraudation of creditors
in sale, seller warrants; in agency, agent assumes no risk/liability as long ii. avoid situation where dominant spouse take advantage of others
as within authority given iii. avoid circumvention on prohibition of donation between spouses
in sale, not unilaterally revocable; in agency, may be revoked unilaterally Exception
because fiduciary & even w/o ground i. separation of property agreed (marriage settlement)
in sale, seller receives profit; in agency, agent not allowed to profit ii. judicial separation of property
TEST: essential clauses of whole instrument ( art 1466 – motherhood c. Common Law Spouses (Paramours)
statement, not good law ) Status of contract: VOID (per case law)
Agency is a personal contract; sale is real contract ( to give ) – rescission Rationale: evil sought to be avoided is present
not available in agency
3. OTHERS PER SPECIFIC PROVISIONS OF LAW
a. Guardian with regards to property of ward during period of guardianship
5. Dacion en pago
b. Agent with regards to property of principal
dacion: contract where property is alienated to satisfy/extinguish c. Executor/administrator with regards to the estate of the deceased
obligation to pay debt
d. Public officers with regards to the property of the estate
in dacion: novates creditor-debtor relationship into seller-buyer
in dacion: delivery is required ( real contract ) e. Officer of court & employee – with regards to property in litigation

LEGAL STATUS OF CONTRACT:

6. Lease
1. VOID (PER CASE LAW) – guardian/ executor/public officers / officers of the
in sale: obligation to absolutely transfer ownership of thing; in lease: use court
of thing is for specified period only with obligation to return
2. VOIDABLE (PER CIVIL CODE) – agent; and if with consent, VALID
in sale: consideration is price; in lease: consideration is rent
in sale: seller needs to be owner of thing to transfer ownership; in lease: TWO GROUPS OF PROHIBITED PARTIES FROM ENGAGING IN
lessor need not be owner CONTRACT OF SALE:
lease with option to buy: really a contract of sale but designated as lease 1. Guardian / Agent / Executors – ratifiable in the sense that only private wrong
in name only; it is a safe by instalments.
is involved
2. Public Officials / Officers of Court – not ratifiable in the sense that public
wrong is concerned
PARTIES TO A CONTRACT OF SALE
GUARDIAN/AGENT/ADMINISTRATOR
GENERAL RULE: All parties with capacity to contract can enter into a valid 1. Legal status of contract: VOID (case law)
contract of sale 2. Direct or indirect
1. Natural 3. If mediator – no need to prove collusion; inutile
2. Juridical - corporation/partnership/associations/Cooperatives 4. Even if court approved sale
Status of contract valid 5. Reason: fiduciary relationship is based on trust
Remedies available therefore are:
a. specific performance ATTORNEYS
b. rescission REQUISITES:
c. damages 1. Lawyer-client relationship exists
2. Subject matter – property in litigation (all types)
EXCEPTION TO GENERAL RULE:
1. Minors 3. Duration – while in litigation (from filing of complaint to final judgment); may
be future litigation
status of contract: voidable only, therefor ratifiable
Reason: due to public policy; ground for mal practice
remedy is action for annulment (with partial restitution in so far as the a. Client is at the mercy of the lawyer
minor is benefited)
b. Law is a noble profession
c. 2 Masters – 2 interest; one cannot serve 2 masters at the same time
2. SALE BY & BETWEEN SPOUSES
a. Contract with 3rd parties Exception: CONTINGENT FEE ARRANGEMENT
status of contract is valid a. Amount of legal fees is based on a value of property
b. Sale between parties b. Property itself is involved
 Not a sale but service contract d. Outside commerce of men
I give that you may do (innominate contract) so has to be governed e. Impossible service
by law on sales but because of public policy, considered VALID f. Intention can not be ascertained
Reason why contingent fee is followed: g. By provision of law
i. constitutional prohibition v impairment of contract
ii. subject to control of courts (may be reduced if unconscionable or 2. SELLER MUST BE OWNER – only at a time of consummation since
nullified) tradition transfers ownership but to have a perfected contract of sale,
iii. canons of legal ethics Vendor need not be owner of thing; can be validated/ratified by subsequent
iv. higher public policy litigants acquisition of title by seller

SUBJECT MATTER OF SALE DETERMINATE & DETERMINABLE

Absence: VOID; there is subject matter but Intention regarding subject
TO BE A VALID & BINDING SUBJECT MATTER, THE FOLLOWING MUST matter can not be ascertained – VOID
CONCUR: Kinds of subject matter:
1. Existing, Future & Contingent 1. Specific - Determinate
2. Licit Particularly designated or segregated from all others of the same
3. Determinate or determinable class
2. Generic - Determinable
EXISTING, FUTURE, CONTINGENT Test: reach a point of description where both minds concur
Refers to subject matter that are existing & not existing but capable of At the time the contract is entered in to the thing is capable of being
existence made determinate without the necessity of a new or further
(pursuant to present, technology) agreement between parties
1. if this is present, status of contract: VALID Exact quantity not essential
2. if absent : NO CONTRACT SITUATION, THEREFORE NO CAUSE OF Sale of generic things – VALID; still executory
ACTION There can only be contract of sale when subject is finally chosen for
3. if mere pipe dream : VOID delivery
– already segregated or designated; but before designation, valid K
a. SALE OF THINGS HAVING POTENTIAL EXISTENCE (Emptio Rei of sale already exists
Speratae) 3. Undivided interest (BUYER becomes co-owner)
Sale of future things; no physical existence yet 4. Undivided share in mass of fungible goods (BUYER becomes co-owner)
A resolutory condition that thing will come into existence
Non happening of condition: RESULUTORY: EXTINGUISH THE
CONTRACT PRICE – signifies the sum stipulated as equivalent of the thing sold
Remedy: can recover what has
been paid CHARACTERISTICS OF VALID PRICE
1. Must be real
2. Must be in money or its equivalent
b. SALE OF HOPE (Emptio Spei) 3. Must be certain or ascertainable at the time of the perfection of the contract
Every sale of future thing is subject to condition that they will come 4. Manner of payment provided for
into existence
If hope does not come true – NO RECOVERY OF PAYMENT/NO REAL
RESCISSION 1. When price stated is one intended by parties
Aleatory character but valid If fictitious: no intention with respect to price - VOID
If False/simulated: what appears in contract is not the true price
a. VALID if there is true consideration
LICIT & VENDOR MUST HAVE A RIGHT TO TRANSFER SUBJECT b. VOID but if none (because it is fictitious)
MATTER 2. Valuable
1. LICIT – must be within the commerce of men When not valuable – VOID
VOID SUBJECT MATTER: When contract is onerous, presumed to have valuable consideration
a. Contrary to law Nominal consideration w/c is common law concept does not apply
b. Simulated/fictitious (P1.00)
c. Did not exist at a time of transaction
Gross inadequacy of price in ordinary sale does not render contract void
 unless it is shocking to conscience of man. 2. acceptance is likewise floated but conditional
Except:
a. Judicial sale RULES:
Shocking to conscience of man 1. offer is floated – prior to acceptance, may be withdrawn at will by offeror
Higher price can be obtained at re-sale 2. offer floated with a period – without acceptance, extinguished when period
b. Rescissible contracts due to lesion has ended & maybe withdrawn at will by offeror; right to withdrawn must not
c. Sales with right to repurchase (raises presumption of equitable be arbitrary otherwise, liable to damage under Art 19, 20, 21 of civil code
mortgage) – Remedy is reformation 3. offer floated with a condition – extinguished by happening/non-happening
of condition
CERTAIN OR ASCERTAINABLE 4. offer floated without period/without condition – continues to be valid
CERTAIN depending upon circumstances of time, place & person
1. Sufficient that it is fixed with reference to another thing certain 5. offer is floated & there is counter-offer – original offer is destroyed, there is
That thing will have on a definite day, or in a particular exchange or a new offer; can not go back to original offer
market, or when an amount is fixed above or below the price on such 6. offer is floated – no authority of offeror to modify offer
day, or in such exchange or market provided said amount be certain. 7. offer is accepted absolutely – proceed to perfected stage

2. Determination be left to judgment of specified person/s OPTION CONTRACT

If contract states that price is to be determined by 3rd party, contract is floats in the policitacion stage
already perfected (there is just a suspensive condition – actual fixing of offer with a period but founded upon a separate consideration distinct from
price) the price
3rd party fixes price in bad faith or mistake – court remedy can be made no presumption of consideration, needs to be proven
3rd party is unable or unwilling to fix price – parties have no cause of
action Characteristics:
Reason: a. not the contract of sale by itself, distinct
a. suspensive condition does not happen yet – courts have no b. nominate
jurisdiction c. principal; but can be attached to other principal contracts
b. enforceable contract have not yet arisen – court with no jurisdiction d. onerous
to create contract between parties e. commutative
· Result: INEFFICACIOUS
When price can not be determined in accordance with any of the f. unilateral – vs contract of sale which is bilateral
preceding rules, contract of sale in INEFFICACIOUS to be perfected & give rise to action, the following must concur
However, when SM delivered, BUYER must pay reasonable rice a. subject matter of sale must be agreed upon
therefore – court can fix price b. price of sale & manner of payment must be agreed upon
c. consideration separate & distinct from price
MANNER OF PAYMENT MUST BE AGREED UPON d. period – as per contract; if period not provided – prescribes in 10 years
Deemed to be an essential requisite because it is part of the presentation (written contract)
of the contract e. how exercised: notice of acceptance should be communicative to
Integral part of concept of price offeror without actual payment as long as there is delivery of payment
If there is failure to meet minds as regards term of payment: CASH BASIS in consummation stage
Must be certain or at least ascertainable
Effect is absent: NO CONTRACT SITUATION 2 SITUATIONS IN AN OPTION CONTRACT:
1. with separate consideration
FORMATION OF CONTRACT OF SALE Legal consequence:
a. option contract is valid
3 STAGES IN LIFE OF A CONTRACT OF SALE b. offeror cannot withdraw offer until after expiry of the period
1. Policitacion/negotiation Stage – offer is floated, acceptance is floated but c. subject to rescission, damages but not to specific performance
they do not meet; time parties indicate their interest but no concurrence of because this is not an obligation to give
offer & acceptance 2. without separate consideration
2. Perfection – concurrence of all requisites; meeting of the minds Legal
3. Consummation – parties perform their respective undertakings consequenc
e: Ø
OLD RULE:
POLITIACION a. offer is still valid, but
1. offer is floated but not absolute b. option contract is void
 c. not subject to rescission, damages a. anything that refers to price is material
Ø NEW RULE: Right of first refusal recognized b. small items are insignificant, does not make acceptable
unconditional
RIGHT OF FIRST REFUSAL: when sale is subject to suspensive condition, no perfected contract of sale
creates a promise to enter into a contract of sale and it has no separate yet; becomes perfected only upon happening of condition
consideration, not subject to specific performance because there is no In sales at auction, perfected when auctioneer announces its perfection by
contractual relationship here & it is not an obligation to give (not a real the fall of the hammer or in other customary manner may impose terms
contract) under bidder may retract his bid; owner of property sold at auction may
New doctrine: may be subject to specific performance impose terms under w/c the auction will proceed & it shall be binding w/n
Effect of new doctrine: turned the world of policitacion upside down the bidders are aware
because while valid option contract is not subject to specific performance, Place of perfection: where the meeting of minds happen; when acceptance
right of first refusal which does not even have a separate consideration sent by mail, perfection is deemed where the offer is made
may be subject to specific performance Performance has nothing to do with perfection stage

EARNEST MONEY
OPTION CONTRACT & RIGHT OF FIRST REFUSAL DISTINGUISHED 1. money given as part of purchase price
2. its acceptance is proof that contract of sale exists
OPTION CONTRACT RIGHT OF FIRST REFUSAL nothing in law prevents parties from treating earnest money differently
Principal contract; stands on Accessory; cannot stand on its old concept: subject to forfeiture when BUYER backs out
its own own new concept: cannot be forfeited – part of purchase price; must be
Does not need separate restored
Needs separate consideration consideration qualification: if old concept is stipulated – VALID
Subject matter & price must There must be subject matter presumption of perfection of contract of sale and such earnest money
be valid but price not as art of purchase price is disputable
important FORM OF SALES
1. Form not important in validity of sale
Not conditional Conditional
Sale being consensual, may be oral or written, perfected by mere
consent as to price & subject matter
If particular form is required under the statute of frauds:
Not subject to specific a. valid & binding between parties
performance Subject to specific performance b. not binding to 3rd persons only
Recognizes recovery of damage based on abuse of rights doctrine Reason: purposes of convenience only & not for validity & enforceability;
cause of action is granted to sue & compel other party to execute the
document
PERFECTION: OFFER & ACCEPTANCE
2. When form is important for validity; exception by specific provision of law;
PERFECTION a. power to sell a piece of land granted to an agent – otherwise VOID
Sale is a consensual contract, perfected by meeting of minds regarding b. sale of large cattle; must also be registered with Municipal treasurer –
subject matter & price otherwise VOID
Meeting of Minds: c. sale of land by non-Christian if not approved by Governor – VOID
1. Offer – certain
2. Acceptance – absolute
Qualified acceptance – merely a counter-offer which needs to be 3. When form is important for enforceability (STATUTE OF FRAUDS)
absolutely accepted to give rise to perfected contract of sale a. sale to be performed 1 year after
Business ads are mere invitations to make an offer except when it b. Agreement to sell things with value of 500 and up
appears to be otherwise c. Sale of real property or interest therein
Acceptance by letter/telegram – binds only at time it came to Exception:
knowledge of SELLER; prior thereto – offer may still be withdrawn i. When there is a note or memorandum in writing & subscribe by party
Must be exact terms to be considered absolute or his agent (contains essential terms of the contract)
ii. When there has been partial performance/execution (seller delivers
When deviations allowed: with intent to transfer title/receives price)
 iii. when there has been failure to object to presentation of 6. Negotiable documents of title & non negotiable instruments
evidence (oral) (constitute waiver) transferee acquires title of transferor
when delivered without negotiation, it is a mere assignment
CONSUMMATION STAGE/PERFORMANCE STAGE
Stage where parties both comply with their obligation 7. Intangibles/ incorporeal property
Nature of diligence required: diligence of good father of family unless other through public instrument
requirement is stipulated execution is equivalent to delivery if from the deed, contrary does not
Consequence: Seller will guilty of breach if thing is lost through his fault appear

DELIVERY OF THE THING DELIVERY OF FRUITS & ACCESSIONS/ ACCESSORIES

Transfer ownership (tradicion) – twin obligation: Right to fruits & accessions/accessories accrue from time sale is perfected
1. transfer title(ownership) – SELLER must be owner of thing at the time of but no real right over it until it is delivered
consummation to validly transfer title
2. delivery of the thing DELIVERY THROUGH CARRIER
Different kinds of delivery: 1. FAS – FREE ALONG SIDE
1. Actual When goods delivered alongside the ship, there is already delivery to
· when thing sold is placed in the control & possession of the buyer the buyer (twin effects deemed fulfilled)
2. Constructive
2. FOB-FREE ON BOARD
DIFFERENT FORMS OF CONSTRUCTIVE DELIVERY: a. Shipment – when goods are delivered at ship at point of shipment;
1. Traditio Longa Manu delivery to carrier by placing goods on vessel is delivery to buyer
Delivery of thing by mere agreement; when SELLER points to the b. Destination – when goods reach the port even if not disembarked yet
property without need of actually delivering from the vessel, there is delivery to the buyer

2. Traditio Brevi Manu

Before contract of sale, the would be buyer was already in possession 3. CIF – COST, INSURANCE, FREIGHT
of the would be subject matter of sale (ex: as lessee) a. when buyer pays for services of carrier – delivery to carrier is delivery to
buyer; carrier is agent of the buyer
3. Symbolic delivery b. when buyer pays seller the price – from moment the vessel is at port of
As to movables – ex: delivery of the keys to a car destination, there is already delivery to buyer.

4. Constitutum possessarium COMPLETENESS OF DELIVERY

at the time of perfection of contract, seller continues to hold possession 1. MOVABLES – delivery of thing plus accessories & accessions in the
merely as a holder condition in which they were upon the perfection of the contract including the
fruits
5. Execution:
Exception: a. LESS – buyer has 2 options:
a. when there is stipulation to contrary, execution does not produce i. reject
effect of delivery ii. accept
b. when at the time of execution of instrument, subject matter was not (1) when accepts with knowledge that seller is not going to perform
subject to control of the seller contract in full, he must pay at price stipulated
subject matter should be within control of seller; he should have (2) when accepts & consumes before knowledge that buyer will both
capacity to deliver at the time of execution of public instrument perform contract in full, liable only for fair value of goods delivered
when he wants to effect actual delivery
b. LARGER – buyer has 2 options;
such capacity should subsist for reasonable time after execution
i. accepts per contract & reject the rest
of instrument (reason time depends on circumstances of persons,
places & things) ii. accept the whole – pay price stipulated
iii. reject whole if subject matter is indivisible
Effect when 2 requisites do not concur: no constructive delivery; no
compliance on part of SELLER to deliver
c. MIXED WITH GOODS OF DIFFERENT DESCRIPTION – buyer has 2
Even when thing is mortgaged, seller can still deliver because naked title
still belongs to him & can still do acts of ownership including conveyance options:
i. accepts good w/c are in accordance with contract & reject the rest
 ii. reject goods entirely – if indivisible 2. Accept delivery of thing sold
Where to accept: at time & place stipulated in the contract; if none
2. IMMOVABLES specified – at the time & place of delivery
a. sold per unit or number
· with statement of its area, rate at certain price Goods; there is acceptance when:
· deliver all that may heave been stated in the a. He intimates to seller that he has accepted
contract · if impossible, remedies of buyer: b. When delivered & does any act inconsistent with ownership of seller
Ø LESS IN AREA
c. Retains without intimating to seller that he has rejected
i. rescission
ii. proportional reduction of price – LACK IN AREA SHLD NOT
BE LESS THAN 1/10 OF AREA AGREED UPON Sale of Goods on installment:
GREATER IN AREA a. Goods must be delivered in full, except when stipulated
i. accept per stipulation & reject the rest b. When not examined by buyer – not accepted until examined or at
ii. accept whole area – pay at contract rate least had reasonable time to examine
Not applicable to judicial sales Acceptance of goods in general, absent contrary express stipulation,
does not discharges seller from liability in case of breach of warranties
b. sold for lump sum (unless no notice or failure to give it within reasonable time)
When price per unit not indicated When buyer has a right to refuse goods, no need to return; shall be
Is area delivered is either greater or lesser – price will not be adjusted considered as depositary; unless there is stipulation to contrary
accordingly
DOUBLE SALE
TIME & PLACE OF DELIVERY General Rule: FIRST IN TIME, PRIORITY IN RIGHT
1. follow stipulation in contact, or When does it apply: when not all requisites embodied in 1544 concur
2. follow usage of trade, or
3. seller’s place of business or his residence SPECIAL RULE: 1544
4. specific goods – place where the thing is Requisites;
5. at reasonable hour 1. exactly same subject matter
2. exactly same immediate seller
EFFECTS OF DELIVERY: Title to thing is transferred/ownership 3. they buyers represent conflicting interest
is transferred Except: contrary is stipulated as in the case of: 4. both sales are valid
1. contract to sell
2. sale on acceptance/approval RULES ACCORDING TO 1544:
3. sale or return 1. MOVABLE
4. there is implied reservation of ownership owner is first to posses in good faith
2. IMMOVABLE
WHO BEARS EXPENSES OF DELIVERY – Seller First to register in good faith
Sale by description/sample No inscription, first to possess in good faith
1. Sample – goods must correspond with sample shown No inscription & no possession in good faith – Person who presents
2. Description – goods must correspond with description or sample oldest title in good faith
· Effect if there is no compliance: RESCISSION may be availed of by the
buyer GOOD FAITH
1. one who buys property without notice that another person has a right or
OBLIGATION OF BUYER interest in such property
1. Pay the price 2. one who has paid price before notice that another has claim or interest
Buyer is obligated to pay price according to terms agreed upon – lis pendens – notice that subject matter is in litigation
regarding time, place & amount adverse claim – notice that somebody is claiming better right
If payment of interest is stipulated – must pay; if amount of interest not
mentioned – apply legal rate POSSESSION
When buyer defaults – constitutes breach: subject to specific · Both actual or constructive
performance/rescission & damages ; interest to be paid also from of
default REGISTRATION
1. registered under Torrens system
 1544 applies Notification is operative act to transfer title/possession of goods in favor
2. not registered under the Torrens system assignee
1544 still applies Before notification – can be garnished but not when there is notification
decided case which excluded unregistered land dealt with judicial sale already
whereby buyer acquires right of transferor; outside of such situation – 2. Negotiable
must apply to conflicting sale over same unregistered parcel of land Can not be levied or garnished when docs already with purchaser in
3. when situation is sale 1 deals with land when not yet registered & sale 2 good faith, unless:
is done when land already registered – apply FIRST IN TIME, PRIORITY a. Document is first surrendered
IN RIGHT b. Document is pounded by court
c. Negotiation is enjoined
DOCUMENTS OF TITLE
DOCUMENTS OF TITLE SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE
not creations of law but by merchants to allow them to deal with
merchandise without having to physically carry them around 1. SALE BY NON-OWNER
pertains to specific type of movables only : GOODS Perfection Stage
a. sale by owner – valid
2 FUNCTIONS b. sale by non-owner – valid;
1. evidence of existence & possession of goods described therein because ownership is necessary only transfer title to goods; at
2. medium by which seller is able to transfer possession of goods perfection stage, no obligation on part of seller to transfer ownership
law on estoppel further bolster it: title passes by operation of law to
2 FORMS grantee when person who is not owner of goods sold delivers it and later
1. negotiable on acquires title thereto
a. deliver to bearer (negotiation by mere delivery) since valid, action to annul is improper; there is perfected contract
b. deliver to specific person or his order (negotiation by endorsement +
delivery) Consummation Stage
even if face of instrument says NON-NEGOTIABLE it is still Contract of sale is valid because it has passed perfected stage, despite:
NEGOTIABLE; limiting words not to destroy negotiability a. seller is not owner
if order instrument & no endorsement was made – equivalent to b. seller has no authority to sell
assignment What is void is the transfer of title/ ownership did not pass
Effect: buyer acquired no better right than transferor
IMPORTANT CONSIDERATIONS Legal effect: CAVEAT EMPTOR – BUYER BEWARE
1. Negotiation gives better right than assignment
a. co-owner sells whole property prior to partition – sale is void as to his
NEGOTIATION ASSIGNMENT spiritual share
transferor/holder acquires title to goods acquires title to goods against transferor
bailee has direct obligation to holder as b. co-owner sells definite portion to partition – sale is void as to other
if acquires right to notify bailee so that he co-owner but valid as to his spiritual share
acquires obligation of bailee to hold Exception:
directly dealt with him goods a. owner by his conduct is precluded from denying seller’s authority
for him (ESTOPPEL)
2. Assignee takes document with defects of the assignor b. contrary is provided for in recording laws (pd 1529)
3. Obligation of bailee – bailee is immediately bound to the document c. sale is made under statutory power of sale or under a court of
competent jurisdiction
WARRANTIES ON NEGOTIATION/ASSIGNMENT – THE SAME d. sale is made under merchant’s store in accordance with code of
1. the document is genuine commerce & special laws
2. he has legal right to negotiate or transfer it
3. he has knowledge of no fact which would impair the validity or worth of the 2. SALE BY SELLER WITH VOIDABLE TITLE
document Perfection Stage
4. he has right to transfer title to goods and goods are merchantable/fit Valid sale – buyer acquires title of goods

RULES OF LEVY/GARNISHMENT OF GOODS COVERED BY Consummation Stage

DOCUMENTS OF TITLE Valid sale – if title has not yet been avoided buyer buys goods under
1. Non negotiable following condition:
a. in good faith
 b. for value
c. without notice of seller’s defect of title
3. After Perfection but before delivery
TITLE AS TO MOVABLE PROPERTIES a. Loss – confused state
Rule: POSSESSION IS EQUIVALENT TO TITLE 2 views:
Requisites: Paras:
a. Possession of a movable BUYER
b. In good faith Tolentino:
SELLER
Exception:
b. Deterioration & fruits - Buyer bears loss
a. Owner lost movable – owner can recover w/o reimbursing price
b. Owner is unlawfully deprived – owner can recover w/o reimbursing price
4. After delivery
Exception to Exception:
· Res perit domino
a. movable is bought at public sale – owner can only recover after
· Owner is buyer so buyer bears risk of loss
reimbursing price
b. in good faith & for value · Delivery extinguish ownership vis-a-vis the seller & creates a new one
in favor of the buyer
LOSS, DETERIORATION, FRUITS & OTHER BENEFITS REMEDIES OF PARTIES FOR BREACH OF CONTRACT OF SALE
CIVIL LAW COMMON LAW SUBJECT MATTER: MOVABLES (IN
No valid contract involving generic GENERAL) REMEDIES OF UNPAID
subject matter; Perfection of sale which is not SELLER
conditional covers goods that Any man may not take law in his own hands, must seek remedy through
are determinable; courts
Exception:
To have a valid contract of sale, Perfection is the mode which
subject matter must be determinate transfers ownership to buyer 1. DOCTRINE OF SELF HELP
(law on loss, deterioration, fruits 2. SPECIAL REMEDIES
applies only to determinate subject Requisites:
matter 1. Subject matter – goods
2. Seller is unpaid – not completely paid or received negotiable
instrument under a condition & condition has been breached by
Tradition is merely a means to reason of dishonor
Not a title but a mode perform 3. Physical possession is with seller
obligation
Perfection of contract of sale which 1. possessory lien
Res perit domino; owner bears risk
is not of loss 2. stoppage in transitu
3. special right of resale Can only be exercised when 2 prior
Conditional include goods which remedies have
are not 4. special right to rescind been exercised.
deliverable; transfers risk to buyer

WHO BEARS RISK OF LOSS/DETERIORATION/FRUITS POSSESSORY LIEN

Seller not bound to deliver if buyer has not paid him the price
1. Before perfection
Res perit domino Right to retain; cannot be availed when seller does not have custody
Exercisable only in following circumstances:
Owner is seller so seller bears risk of loss
a. goods sold without stipulation as to credit
b. goods sold on credit but term of credit has expired
2. At Perfection c. buyer becomes insolvent
Res perit domino When part of goods delivered, may still exercise right on goods undelivered
Contract is merely inefficacious because loss of the subject matter Instances when possessory lien lost:
does not affect the validity of the sale a. seller delivers goods to carrier for transmission to buyer without
Seller cannot anymore comply with obligation so buyer cannot reserving ownership in goods or right to possess them
anymore be compelled b. buyer or agent lawfully obtains possession of goods
 c. waiver any unpaid balance of the price
loses lien when he parts with goods (still has stoppage in transitu) When is law is applicable: Sale on movables by installment
notice by seller to buyer not essential Sale on installment: payment by several partial payments in small
amount
STOPPAGE IN TRANSITU Rationale of the law: Buyer is lulled into thinking that he could afford
Requisites: because of small amounts per installment & at the same time remedy
1. Goods are in transit abuse of commercial houses
When goods are in transit Nature of remedies: alternative & not cumulative
From the time goods are delivered to carrier for purpose of Coverage: sale & financing transaction & contracts of lease with option
transmission to buyer to purchase
Goods rejected by buyer & carrier continues to possess them Action : Judicial & Extrajudicial
When goods no longer in transit
Reached point of destination SPECIFIC PERFORMANCE
Before reaching destination, buyer met seller along the way If already chose specific performance, cannot anymore choose other
Goods are supposed to have been delivered to buyer but carrier remedies
refused
2. Shown by seller that buyer is insolvent ( failure to pay when debts come Except: after choosing, it has become impossible, rescission may be
due ) pursued
How is right exercised:
a. Obtain actual possession of goods RESCISSION
b. Give notice of claim to carrier / bailee in possession thereof When chosen, there is correlative obligation to restitute
Notice by seller to buyer is not required; notice to carrier is essential But stipulation that installments paid are forfeited are valid if not
unconscionable
SPECIAL RIGHT TO RESELL THE GOODS Deemed chosen when:
Requisites: a. Notice of rescission is sent
1. goods are perishable b. Takes possession of subject matter of sale
2. stipulated the right of resale in case buyer defaults in payment c. Files action for rescission
3. buyer in default for unreasonable time Barring effect on recovery of balance
notice by seller to buyer not essential
why special – there are things which seller cannot do in ordinary sale: FORECLOSURE
1. ownership is with buyer but seller can sell goods Barring effect on recover of balance
2. title accorded to buyer is destroyed even without court intervention Extent of barring effect: purchase price
Exception: mortgagor refuses to deliver property to effect foreclosure;
SPECIAL RIGHT TO RESCIND expenses incurred in attorneys fees, etc.
why special – ownership of goods already with buyer but seller may still IMMOVABLES (IN GENERAL)
rescind; ownership is destroyed even without court intervention but in
ordinary sale, need to go to court to destroy transfer of ownership REMEDIES OF SELLER
Requisites: 1. Anticipatory breach
1. Expressly stipulated Seller has reasonable grounds to fear loss of immovable sold & its price
2. Buyer is in default for unreasonable time – sue for RESCISSION
Notice needed to be given by seller to buyer 2. Non – payment of price
RESCISSION
REMEDIES OF BUYER
REMEDIES OF BUYER
When Seller fails to deliver, buyer may seek SPECIFIC PERFORMANCE
1. Disturbed in possession or with reasonable grounds to fear disturbance
WITHOUT GIVING SELLER OPTION TO RETAIN GOODS ON PAYMENT
OF DAMAGES SUSPEND PAYMENT
2. In case of subdivision or condo projects
SALE OF MOVABLES ON INSTALLMENT If real estate developer fails to comply with obligation according to
REMEDIES OF UNPAID SELLER (1484) approved plan:
1. Exact fulfillment should the buyer fail to pay a) RESCIND
2. Cancel the sale if buyer fails to pay 2 or more installments b) SUSPEND PAYMENT UNTIL SELLER COMPLIES
3. Foreclose on chattel mortgage if buyer fails to pay 2 or more installments
If buyer chooses foreclosure, no further action against buyer to recover
IMMOVABLES (BY INSTALLMENT) principal remedy, retaliatory vs. unjust
1592 – Applies only to contract of sale party subsidiary remedy – cannot be i
Maceda Law – applies to COS & CTS & Financing except when other remedies exhau
mutual restitution mutual restitution
MACEDA LAW Nature: Judicial
Coverage: REAL ESTATE – defines space v CONDO – not Extra judicial Rescission
defined space (w/ common areas) allowed if stipulated; burden to sue shifts to party
1. contract of sale who do not like rescission
2. contract to sell court still has final say as to propriety of rescission
3. financing transactions Forfeiture of amounts valid being in nature of penal clause
Excluded:
1. industrial
2. commercial
3. sale to tenants under agrarian laws
RIGHTS GRANTED TO BUYERS:
1. Buyer paid at least 2 years installment
a. Pay without interest the balance within grace period of 1
month for every year of installment payment
Grace to be exercised once every 5 years
b. When no payment - cancelled; buyer entitled to 50% of
what he has paid + 5% for every year exceeding 90% of
payments made
Cancellation to be effected 30 days from notice &
upon payment of cash surrender value
2. Buyer paid less than 2 years installment
a. Grace period is 60 days
b. Cancellation if failure to pay within 60 days grace
c. 30 days notice before final cancellation
buyer can still pay within the 30 days period
with interest
Purpose of law : Protect buyers in installment against oppressive
conditions
Notice needed – waiver thereof id oppressive
Apply to contracts even before law was enacted
Stipulation to contrary is void
Other rights:
a. Sell rights to another
b. Reinstate contract by updating within 30 days before cancellation
c. Deed of Sale to be done by notarial act
d. To pay full installment in advance the balance of price anytime
without interest
e. Have full payment annotated in certificate of title

CHAPTER 11: REMEDY OF RESCISSION IN CONTRACTS

COVERING IMMOVABLES
RESCISSION (RESOLUTION) 1191 RESCISSION – 1385
legal basis is substantial breach legal basis is lesion (rescissible contract)
 stage, it is where ownership is transferred by tradition
CONTRACT OF SALE CONTRACT TO SELL not applicable to sheriff, auctioneer, mortgagee, pledgee
Governed by genus SALE Governed by genus SALE 2. warranty against eviction
Ownership passes because of tradition Ownership passes upon full payment unless contrary provision appears in contract
Non-payment is resolutory condition Non payment is suspensive non- when ownership is transferred, buyer shall enjoy the
which payment legal and peaceful possession of the thing
may be basis of breach extinguishes contract to sell REQUISITES OF BREACH OF WARRANTY AGAINST
Perfection gives rise to reciprocal Perfection gives rise to reciprocal EVICTION:
demandable conditional 1. buyer is evicted in whole or in part from the subject matter
Obligation obligation of sale
2. there is a final judgement
CONTRACT OF SALE – RESCISSION IS APPLICABLE 3. basis of eviction is a right prior to sale or an act imputable
CONTRACT TO SELL – RESCISSION NOT APPLICABLE to vendor
Non – payment of purchase price would automatically cancel 4. seller has been summoned in he suit for eviction
even without further action for rescission at the instance of buyer; or made 3rd party
Except: If subject matter is residential lots, law on rescission defendant through 3rd party complaint brought by
applies when there is substantial breach buyer
no appeal needed nor a need to resist eviction for right
CHAPTER 12: CONDITION & WARRANTIES to accrue; enough that aforementioned requisites are
A. CONDITION complied with
When a contract contains a condition, the non-happening of
which would not constitute a breach but extinguishes the
obligation
However, if party to the sales contract has promised that the
condition should happen or be performed, the non-
performance of which may be treated by parties as breach
CONDITION WARRANTY
Purports to existence of obligation Purports to performance of obligation
Obligation must be stipulated to form
part Need not be stipulated; may form part of
of the obligation obligation by provision of law
May attach itself to obligation of seller to Relates to the subject matter itself or to
deliver possession & transfer obligation of the seller as to the subject
matter of the sale

B. EXPRESS WARRANTIES ( REQUISITES )

1. it must be an affirmation of fact or any promise by seller
relating to the subject matter of sale
2. natural tendency of affirmation or promise is to induce buyer
to purchase subject matter
3. buyer purchases the subject matter relying thereon
when breached, seller is liable for damages

C. IMPLIED WARRANTIES – deemed included in all contracts of

sale whether parties are actually aware or not aware or whether
they were intended or not; by operation of law
1. warranty that seller has a right to sell
refers to consummation stage since in consummation
 c. had the buyer been aware, he would not have acquired it or would
warranty cannot be enforced until aforementioned requisites concur have given a lower price
applies to judicial sale; judgement debtor responsible for eviction when defect is visible or even if visible if the buyer is an expert by
unless otherwise decreed in judgement reason of his trade or profession, seller is not liable
vendor not liable for eviction if adverse possession had been obligation of seller for breach depends on whether he has knowledge
commenced before sale but prescriptive period is completed after of such defect or not
transfer a. seller is aware – seller should return price & refund expenses of
contract with damages
LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole b. seller is not aware - seller should return price and interest &
subject matter) refund expenses ( no damages )
1. value of thing at time of eviction ( whether or not -/+ of price of sale buyer may elect between withdrawing from contract or demanding
) proportionate reduction of price with damages in either case
2. value of income of fruits applicable to judicial sale except judgement debtor not liable for
3. cost of suit which caused the eviction damages
4. expenses of contract if buyer paid for them action to prescribe 6 months from delivery of subject matter
5. damages & interests and ornamental expenses if sale was made in
bad faith 5. DEFECTS ON ANIMALS
even in the case of professional inspection but hidden defect is of such
RIGHTS OF BUYER WHEN DEPRIVED OF ONLY PART OF THE nature
SUBJECT MATTER BUT WOULD NOT HAVE BOUGHT SUCH PART that expert knowledge is not sufficient - defect shall be considered as
IF NOT IN RELATION FOR THE WHOLE: REDHIBITORY
1. rescission 1. if vet fails to discover through ignorance or bad faith he is liable for
2. mutual restitution damages a. sale of animals on teams ( 2 or more )
when only one is defective, only one is redhibited & not the others
3. WARRANTY AGAINST ENCUMBRANCES (non- apparent) requisites: exception: when it appears that purchase of team will not be done
a. immovable sold is encumbered with non – apparent burden or without the defective one
servitude not mentioned in the agreement
b. nature of non – apparent servitude or burden is such that it must be
presumed that the buyer would not have acquired it had he been
aware thereof
when breach of warranty exist: buyer may ask for rescission or
indemnity
warranty not applicable when non – apparent burden or servitude is
recorded in the Registry of Property – unless there is expressed
warranty that the thing is free from all burdens & encumbrances

4. WARRANTY AGAINST HIDDEN DEFECTS

SELLER does not warrant patent defect; caveat emptor
Except when hidden
a. subject matter may be movable or immovable
b. nature of hidden defect is such that it should render the subject
matter unfit for the use of which it was intended or should diminish
its fitness
 only to waiver of warranty against eviction)
apply to sale of other things when goods delivered to buyer he cannot rescind sale
b. sale of animals at fair or public auction if he knew of the breach of warranty when he accepted goods without
no warranty against hidden defects protest
c. sale of animals with contagious disease is void if he fails to return or offer to return goods to seller in substantially as
d. sale of unit of animal good condition as they were at time ownership was transferred
void if use / service for which they are acquired has been when goods deteriorated, buyer can still return them in that condition
stated in the contract and they are found to be unfit thereof if such is due to breach or warranty
prescription of action: 40 days from date of delivery to buyer
if sale is rescinded, animals to be returned in same condition F. BUYER’S OPTION IN CASE OF BREACH OF WARRANTY
when they are acquired; buyer shall answer for injury / loss 1. Accept goods & set up breach of warranty by way of recoupment in
due to his fault diminution or extinction or the price.
buyer may elect between withdrawing from sale or demanding 2. Accept goods & maintain action against seller for damages
proportionate reduction of price with damages in either case 3. Refuse to Accept goods & maintain action against seller for damages
4. Rescind contract of sale & refuse to receive goods/return them when
D. SPECIFIC IMPLIED WARRANTIES IN THE SALE OF GOODS already received.
1. Warranty as to fitness & quality; requisites:
a. buyer makes known to seller the particular purpose for which
goods are acquired and it appears that the buyer relied on the
seller’s skill or judgement
b. goods are bought by description from seller who deals in goods
of that description
no warranty unless there is stipulation in case of sale of specified
article under its patent or trade name
measure of damage: difference between value of goods at time
of delivery and value they would have had if they had answered
to the warranty

2. Sale of Goods by sample

If seller is a dealer in goods of that kind, there is an implied
warranty that the goods shall be free from defect rendering them
unmerchantable which would not be apparent on reasonable
examination of the sample

E. EFFECTS OF WAIVER
· Parties may increase or diminish implied warranty against eviction; but
effect depends on good faith or bad faith on the part of the seller.
1. seller in bad faith & there is waiver against eviction – null & void
2. buyer without knowledge of a particular risk made general
renunciation of warranty – not waiver but merely limits liability of
seller in case of eviction (pay value of subject matter at time of
eviction)
3. buyer with knowledge of risk of eviction assumed its
consequences & made a waiver – vendor not liable (applicable
 WHAT TO LOOK FOR IN DETERMINING NATURE OF CONTRACT
CHAPTER 13: EXTINGUISHMENT language of the contract
GROUNDS: 1. conduct of parties – to reveal real intent
1. same grounds whereby obligations in general are extinguished:
a. payment or performance REMEDY AVAILABLE TO VENDOR: ask for reformation of contract
b. loss of the subject matter
c. condonation or remission RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE:
d. confusion or merger of rights or creditor and debtor 1. Circumvention of usury law
e. compensation 2. Circumvention of prohibition against pactum commissorium – creditor
f. novation cannot appropriate the things given by way of pledge or mortgage;
g. annulment remedy here is foreclosure
h. rescission real intention of parties is that the pretended purchase price is money
i. fulfillment of a resolutory condition loaned & to secure payment of the loan, sale with pacto de retro is drawn
j. prescription up
2. conventional redemption – only applies to contract of sale
3. legal redemption – only applies to contract of sale

CONVENTIONAL REDEMPTION
seller reserved the right to repurchase thing sold
coupled with obligation to return price of the sale, expensed of contract
& other legitimate payments and the necessary & useful expenses made
on the thing sold
right must be recognized in the deed of sale; must be the same contract

OPTION TO PURCHASE
right to repurchase the thing sold granted to the vendor in a separate
instrument from the deed of sale

EQUITABLE MORTGAGE
a contract with right to repurchase is equitable mortgage if the following
requisites concur:
1. price of sale with right to repurchase is unusually inadequate
2. seller remains in possession as a lessee or otherwise
3. upon / after expiration of right to repurchase, another instrument
extending the period of redemption is executed
4. buyer retains for himself a part of the purchase price
5. seller binds himself to pay taxes on thing sold
6. real intention of parties is to secure the payment of a debt or
performance of other obligation

IN CASE OF DOUBT – IN DETERMINING WHETHER IT IS EQUITABLE

MORTGAGE OR SALE A RETRO (WITH RIGHT OF REPURCHASE – IT
SHALL BE CONSTRUED AS EQUITABLE MORTGAGE)
 respect to the share of the other co-owners/co-heirs.
PERIOD OF REDEMPTION
1. No period agreed upon – 4 years from date of contract FRUITS
2. When there is agreement – should not exceed 10 years; if it exceeded, 1. what controls is the stipulation between parties as regards the fruits; if
valid only for the first 10 years. none –
3. When period to redeem has expired & there has been a previous suit on 2. at time of execution of the sale a retro there should be visible or growing
the nature of the contract – seller still has 30 days from final judgement fruits – there shall be no pro-rating at time of redemption of no indemnity
on the basis that contract was a sale with pacto de retro: rationale: no was paid by the vendee a retro
redemption due to erroneous belief that it is equitable mortgage which 3. at time of execution sale a retro there should be no fruits but there are
can be extinguished by paying the loan. fruits at time of redemption – pro-rated between vendor a retro & vendee
4. When period has expired & seller allowed the period of redemption to a retro giving the vendee a retro a part corresponding to the time he
expire – seller is at fault for not having exercised his rights so should not possessed the land.
be granted a new period
LEGAL REDEMPTION
EFFECT WHEN THERE IS NO REDEMPTION MADE: right to be subrogated upon the same terms and conditions stipulated in
1. jurisprudence before the NCC: buyer a retro automatically acquires full the contract, in the place of one who acquires the thing by purchase or
ownership by dation in payment or by other transaction is transmitted by onerous
title
2. under present art 1607: there must be3 judicial order before ownership
of real property is consolidate in the buyer a retro
1. among co-heirs
any of heirs sells hereditary right to stranger before partition
HOW IS REDEMPTION EFFECTED:
1. Seller a retro must return first pay the following: any of the co-heirs may be subrogated to the rights of the purchaser
a. the price of the thing sold by redeeming said hereditary right: reimburse buyer of the price of
the sale
b. expensed of the contract and other legitimate payments made by co-heirs has 1 month from receipt of notice in writing
reason of the sale
c. necessary and useful expensed made on the thing sold
2. Valid tender of payment is sufficient
3. Mere sending of notice without valid tender is insufficient
4. Failure to pay useful & unnecessary expenses entitled vendee to retain
land unless actual reimbursement is made

IN CASE OF MULTI-PARTIES
2. When an undivided thing is old because co-owners cannot agree that it
be allotted to on of them – vendee a retro my compel the vendor to
redeem the whole thing
3. When an undivided thing is sold by co-owners / co-heirs, vendors a retro
may only exercise his right over his respective share; vendee a retro
may demand that they must come to an agreement first and may not be
compelled to consent to a partial redemption
4. When rights for co-owners over an undivided thing is sold as regards to
their own share – vendee retro cannot compel one to redeem the whole
property
5. Should one of the co-heirs/co-owners succeed in redeeming the
property – such vendor a retro shall be considered as trustee with
2. among co-owners WHEN PERIOD OF REDEMPTION BEGINS TO RUN
any or all of co-owners sells their shared to 3rd person 1. right of legal pre-emption of redemption shall be exercised within 30
any co-owner may exercise right of redemption by paying days from notice by the buyer
reasonable price of property to the buyer 2. deed of sale not to be recorded in RD unless accompanied by affidavit
if 2 or more co-owners desire to exercise right of redemption, they that buyer has given notice to redemptioners
may only do so in proportion to the share they may respectively 3. when there is actual knowledge, no need to give written notice; period
have in the thing owned in common of redemption begins to run from actual knowledge

DISTINCTION BETWEEN RIGHT OF REDEMPTION OF CO-HEIRS OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION IS
FROM CO-OWNERS GRANTED
CO-HEIRS CO-OWNERS 1. Redemption of homesteads
Heir may redeem for himself alone Co-owner may redeem property but Public Land Act
the even if Land acquired under free patent homestead
uses his own funds, redemption inures Subject to repurchase by wife, legal heirs within 5 years from date
hereditary right sold by a co-heir to of conveyance
the benefit of other co-owners Granted by law, need not be stipulated
Sale of hereditary right (1088) over
no Sale of interest in particular property
2. Redemption in tax sales
particular object
in case of tax delinquency/failure to pay tax assessments, property
is foreclosed
3. among adjoining owners
a. rural land delinquent payer has 1 year to redeem by paying to the revenue
District Officer the amount of tax delinquencies, & interest or
where piece of rural land has an area not exceeding 1 hectare, purchase price.
adjoining owner has right to redeem unless grantee does not
own a rural land 3. Redemption by judgement debtor
if 2 or more adjacent lot owners desire to exercise right to 1 year to redeem by paying purchaser at public auction with interest
redeem, owner of adjoining lot with smaller area shall be
preferred
if 2 or more adjacent lot owners desire to exercise right to
redeem & both have same lot area, one who first requested
shall be granted
b. urban land
when piece of land is small & cannot be used for any practical
purpose & brought merely for speculation, owner of adjoining
land can redeem
2 or more owners of adjoining lot desire to exercise right to
redeem, owner whose intention towards use of land shall be
preferred.
c. sale of credit litigation
when a credit or other incorporeal right in litigation is sold,
debtor shall have a right to extinguish it by reimbursing the
assignee for the price the latter paid therefor plus judicial costs,
interest
debtor may exercise right within 30 days from assignee
demands payment from him
 1. against hidden defect - N/A because intangibles has no physical
existence
4. Redemption in extrajudicial foreclosure 2. existence & legality of credit - there is warranty except when what is
1 year from date of sale and registration sold is doubtful account
3. solvency of debtor - no warranty, unless
5. Redemption in judicial foreclosure of mortgage a. there is stipulation
no right to redeem is granted to debtor mortgagor b. insolvency was prior to assignment & of common knowledge
except when mortgagee is bank of a banking institution · shall only last for 1 year
90 days after finality of judgement 4. one who assigns inheritance right w/o enumerating rights shall be
answerable for his character as an heir
CHAPTER 14: ASSIGNMENT 5. one who sells certain rights for a lump sum, shall be answerable for
Sale of credits & other incorporeal things legitimacy of the whole in general but not for each of the various parts
Technical term but basically a sale
BREACH OF WARRANTY
WHAT MAKES ASSIGNMENT DIFFERENT FROM SPECIES SALE: 1. if in good faith - expenses of the contract & other legitimate payments
ASSIGNMENT SALE made by reason of the assessment
Subject matter Intangibles Tangibles 2. if in bad faith - expenses of contract & other legitimate payments plus
Form Consensual Consensual useful & necessary expenses
Binding effect to
3rd Recorded in registry of No recording needed to suchASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION
persons property effect speculative
law would rather benefit the debtor of such credits rather than the one
EFFECT OF ASSIGNMENT who merely speculates for profit
1. lack of knowledge or consent of debtor not essential for validity but has
legal effect
2. assignment of rights made w/o knowledge of debtor – debtor may set
up against assignee the compensation w/c would pertain to him
against assignor of all credits prior to assignment and later ones until
he had knowledge of the assignment
3. debtor has consented to assignment – cannot set up compensation
unless assignor was notified that he reserved his right to the
compensation
4. debtor has knowledge but no consent - compensation may still be set
up

TRANSFER OF OWNERSHIP
by tradition & not by perfection
execution of public instrument because intangibles cannot be
physically transferred

ACCESSORIES & ACCESSIONS

includes all accessory rights such as guaranty, mortgage, pledge or
preference

WARRANTIES
 ANTI-DUMMY LAW
when credit or incorporeal right in litigation is assigned or sold, debtor has Penalizes Filipinos who permit aliens to use them as nominees or
a right to extinguish it by reimbursing the assignee for the price the buyer dummies to enjoy privileges reserved only for Filipinos
paid plus interest Management, operation as officers, employees or laborers
right to redeem to be exercised within 30 days from demand by assignee Control or non-control position
for payment

RIGHT TO REDEEM BY DEBTOR NOT AVAILABLE IN THE FOLLOWING

INSTANCES (NOT CONSIDERED SPECULATIVE)
1. assignment of credit / incorporeal right to co-heir or co-worker
2. assignment to creditor in payment for his credit
3. assignment to possessor of tenement or piece of land which is subject to
the right in litigation assigned

CHAPTER 15: BULK SALES LAW

Protect creditor of merchant stored

3 types of transactions:
1. Sale of goods other than in ordinary course of business
2. Sale of business
3. Sale of fixtures & equipments
Should cover only merchants because creditors cannot get adequate
security because goods are sold ordinarily in course of business
Not covered:
1. with waiver of creditor of seller
2. receiver, assignee in insolvency proceeding
Duty of seller to perform the following when transaction is within the
coverage of the law
1. make sworn statement of listing of creditors
2. delivery of sworn statement to buyer
3. apply the proceeds pro-data to claims of creditors shown in verified
statement
4. written advance disclosure to creditors

EFFECTS OF NON-COMPLIANCE
ON
TRANSACTION ON SELLER

FAILURE TO:
Prepare & deliver sworn listing of
creditors Fraudulent & void Criminal Liability
Apply proceeds pro-rata to listed
creditors Fraudulent & void Criminal Liability
Make advance written disclosure
of Not void No Criminal Liability
transactions to creditors
Register sworn statement with DTI Not void No Criminal Liability
Include or omit names of creditors
& Void Criminal Liability
correct amount due in the statement
Sale for no consideration Void Criminal Liability