SALES

SALE 5. Commutative; In some cases,

 A nominate contract whereby one of aleatory (emptio spei);
the contracting parties obligates 6. Onerous.
himself to transfer the ownership of
and to deliver a determinate thing * Aleatory contract: one of the parties or
and the other to pay therefor a price both reciprocally bind themselves to give
certain in money or its equivalent. or to do something in consideration of
what the other shall give or do upon the
NOTES: Delivery and payment in a happening of an event which is
contract of sale are so interrelated and uncertain, or which is to occur at an
intertwined with each other that without indeterminate time. (Ex: Sale of
delivery of the goods there is no sweepstakes ticket)
corresponding obligation to pay. The
two complement each other. It is clear Contract to sell
that the two elements cannot be  exclusive right and privilege to
dissociated, for the contract of purchase purchase an object.
and sale is essentially a bilateral  a bilateral contract whereby the
contract, as it gives rise to reciprocal prospective seller, while expressly
obligations. (Pio Barretto Sons, Inc. vs. reserving the ownership of the
Compania Maritima, 62 SCRA 167). subject property despite delivery
 Neither is the delivery of the thing thereof to the prospective buyer
bought nor the payment of the price binds himself to sell the said
necessary for the perfection of the property exclusively to the
contract of sale. Being consensual, prospective buyer upon fulfilment of
it is perfected by mere consent. the condition agreed upon, that is,
full payment of the purchase price.
 Elements:
a. Essential elements – those without NOTE: Absent a proviso in the contract
which, there can be no valid sale: that the title to the property is reserved
1. Consent or meeting of minds in the vendor until full payment of the
2. A Determinable subject matter purchase price or a stipulation giving the
3. Price certain in money or its vendor the right to unilaterally rescind
equivalent the contract the moment the vendee
b. Natural elements – inherent in the fails to pay within the fixed period, the
contract, and which in the absence transaction is an absolute contract of
of any contrary provision, are sale and not a contract to sell. (Dignos
deemed to exist in the contract: vs. CA [1988])
1. Warranty against eviction * The contract of sale by itself is not a
2. Warranty against hidden defects mode of acquiring ownership. The
c. Accidental elements – may be contact transfers no real rights; it
present or absent depending on the merely causes certain obligations to
stipulation of the parties (e.g.: arise.
conditions, interest, penalty, time or
place of payment, etc.) Contract of Contract to
Sale Sell
 Characteristics: 1. Title passes to the 1. Ownership is
1. Principal buyer upon delivery reserved in the
2. Consensual; of the thing sold seller and is not to
3. Bilateral; pass until full
payment of the
4. Nominate; purchase price
2. Non-payment of 2. Full payment is a 1. Constructive 1. Third person
the price is a positive suspensive /actual knowledge on buying the
negative resolutory condition, the the part of the 2nd property despite
condition and the failure of which is buyer of the defect in fulfilment of the
remedy of the seller not a breach – the seller’s title suspensive
is to exact fulfilment casual or serious renders him not a condition cannot
or to rescind the but simply registrant in good be deemed a
contract prevents the faith. Such second buyer in bad
obligation of the buyer cannot defeat faith and
vendor to convey the first buyer’s title. prospective
title from having Ratio: Fulfilment of buyer cannot
binding force the suspensive seek the relief of
3. Vendor loses and 3. Title remains in conditions affects the reconveyance of
cannot recover the vendor if the seller’s title to the property.
ownership of the vendee does not property and previous Exception: If
thing sold and comply with the delivery of the There was no
delivered until the condition property previous sale of
contract of sale is precedent of automatically the property.
resolved and set making payment transfers
aside at the time ownership/title to the
specified in the buyer.
contract
OBJECTS OF SALE
Conditional Sale Contract to Requisites:
Sell 1. THINGS:
As to reservation of title to the subject a) determinate or determinable
property (Arts. 1458, 1460)
In both cases the seller may reserve the b) lawful (Arts 1347, 1409 [1,4]
title to the subject property until
c) should not be impossible (Art.
fulfillment of the suspensive condition i.e.
full payment of the price 1348) e.g. must be within the
commerce of man
As to effect of fulfillment of suspensive
condition 2. RIGHTS – must be transmissible
1. Upon fulfillment of 1. Upon
Exceptions:
the suspensive fulfillment of the -future inheritance
condition, the suspensive - service
contract of sale is condition, which
thereby perfected, is the full Emptio rei Emptio spei
such that if there had payment of the speratae
been previous delivery purchase price, 1. Sale of an expected 1. Sale of a mere
of the subject ownership will thing hope or
property to the buyer, not expectancy that
ownership thereto automatically the thing will come
automatically transfer to the to existence; Sale
transfers to the buyer although of the hope itself
buyer by operation the property may 2. Sale is 2. Sale produces
of law without any have been subject to the effect even if the
further act by the previously condition that the thing does not
seller. delivered to him. thing will exist; if it come into
The prospective does not, there is no existence, unless it
seller still has contract is a vain hope
to convey title 3. The uncertainty is 3. The uncertainty
to the with regard to the is with regard to
prospective quantity and quality of the existence of
buyer by the thing and not the the thing
entering into a existence of the thing
contract of 4. Object is a future 4. Object is a
absolute sale. thing present thing which
is the hope or
As to effect of sale of the subject expectancy
property to 3rd persons
NOTE: In case of doubt the presumption Sale Agency to sell
is in favor of emptio rei speratae which 1. Buyer receives 1. Agent receives
is more in keeping with the commutative the goods as owner the goods as goods
character of the contract of the principal who
retains his
Goods which may be Object of Sale ownership over
them
a. Existing goods – goods owned or
2. Buyer pays the 2. Agent delivers the
possessed by the seller. price price which in turn
b. Future goods – goods to be he got from his
manufactured, raised or acquired by buyer
the seller after the perfection of the 3. Buyer, as a 3. Agent can return
contract. general rule, cannot the goods in case he
NOTES: return the object is unable to sell the
 A sale of future goods is valid only as sold same to a third
person
an executory contract to be fulfilled
4. Seller warrants 4. Agent makes no
by the acquisition and delivery of
the thing sold warranty for which
goods specified. he assumes personal
 While there can be sale of future liability as long as
property, there can generally be no he acts within his
donation of future property (Article authority and in the
751 Civil Code) name of the seller
 Future inheritance cannot be sold. 5. Buyer can deal 5. Agent in dealing
with the thing sold with the thing
 A contract of sale or purchase of as he pleases being received, must act
goods to be delivered at a future the owner and is bound
time, if entered into without the according to the
intention of having any goods pass instructions of the
from one party to another, but with principal
an understanding that at the
appointed time, the purchaser is Contract for
merely to receive or pay the Sale
Piece of Work
difference between the contract and 1. The thing 1. The thing
the market prices, is illegal. Such transferred is one transferred is one
contract falls under the definition of not in existence and which would have
“futures” in which the parties which never would existed and would
merely gamble on the rise or fall in have existed but for have been the
the order of the subject of sale to
prices and is declared null and void
party desiring to some other person,
by law. (Art. 2018, NCC) (Onapal acquire it even if the order
Phil. Commodities, Inc. vs. CA had not been given
[1993]) 2. The services 2. The primary
dominate the objective of the
 Instances when the Civil Code contract even contract is a sale of
recognizes sale of things not though there is a the manufactured
actually or already owned by the sale of goods item; it is a sale of
seller at the time of the sale: involved goods even though
the item is
1. Sale of a thing having potential manufactured by
existence (Article 1461) labor furnished by
2. Sale of future goods (Article 1462) the seller and upon
3. Contract for the delivery at a certain previous order of
price of an article which the vendor the customer
in the ordinary course of the 3. Not within the 3. Within the
business manufactures or procures Statute of Frauds Statute of Frauds
for the general market, whether the
same is on hand at the time or not
(Article 1467)
Rules to determine if the contract is the acquisition of part of the creditor,
one of Sale or Piece of work: the object it is the acquisition
a. If ordered in the ordinary course of of the object offered
business – sale in lieu of the original
b. If manufactured specially for the credit
4. Greater freedom 4. Less Freedom in
customer and upon his special order,
in determining determining the
and not for the market – piece of price
the price
work
5. Buyer still has to 5. The payment is
SCHOOLS OF THOUGHT: pay the price received by the
a) Massachusetts rule: If debtor before
specifically done at the order of the contract is
another, this is a contract for a perfected.
piece of work. (Philippine
application) PRICE
b) New York rule: If thing already  The sum stipulated as the equivalent
exists-SALE; if not-WORK of the thing sold and also every
c) English rule: If material is more incident taken into consideration for
valuable-SALE; if skill is more the fixing of the price, put to the
valuable-WORK debit of the vendee and agreed to by
him.
BARTER
 contract whereby one of the parties  Requisites:
binds himself to give one thing in 1. Certainty or ascertainable at the
consideration of the other's promise time of perfection
to give another thing. 2. Real, not fictitious
NOTE: The only point difference 3. In some cases, must not be
between contract of sale and barter is in grossly inferior to the value of
the element which is present in sale but the thing sold.
not in barter, namely: price certain in 4. Paid in money or its equivalent
money or its equivalent
Certainty
NOTE: If the consideration is partly in  It is not necessary that the certainty
money and partly in another thing, of the price be actual or determined
determine: at the time of the execution of the
a. The manifest intention of the contract. The price is certain in the
parties following cases:
b. If the intent is not clear, apply 1. If the parties have fixed or
the following rules: agreed upon a definite amount;
1. If the thing is more valuable NOTE: The fixing of the price can
than money – barter never be left to the discretion of one
2. If the money and the thing of the contracting parties. However
are of equal value – sale if the price fixed by one of the
3. If the thing is less valuable parties is accepted by the other, the
than money – sale sale is perfected.
2. If it be certain with reference to
Sale Dation in another thing certain
Payment 3. If the determination of the price
1. No pre-existing 1. Pre-existing credit is left to the judgment of a
credit specified person or persons even
2. Obligations are 2. Obligations are before such determination
created extinguished
4. In the cases provided under Art.
3. Consideration on 3. Consideration of
1472 NCC
the part of the seller the debtor is the
is the price; on the extinguishment of
part of the buyer is the debt; on the
 EXCEPTIONS:
Effect when the price is fixed by the a. Where the price is so low as to
third person designated: be shocking to the moral
GENERAL RULE: Price fixed by a conscience, judicial sale of
third person designated by the parties is personal property will be set
binding upon them. aside
EXCEPTIONS: b. In the event of a resale, a better
1. When the third person acts in price can be obtained
bad faith or by mistake
2. When the third person disregards NOTE: The validity of the sale is not
the specific instructions or the necessarily affected where the law gives
procedure marked out by the to the owner the right to redeem, upon
parties the theory that the lesser the price, the
easier it is for the owner to effect
Effect when the price is not fixed by redemption.
the third person designated:
1. If the third person refuses or Effect where price is simulated
cannot fix the price, the 1. If it is shown to have been in reality a
contract shall become donation or some other act or
ineffective, unless the parties contract
subsequently agree upon the  The sale is void but the act or
price contract may be valid as a
2. If the third person is prevented donation
from fixing the price by the fault 2. If not
of the seller or buyer, the party  The contract is void and
not in fault may obtain redress inexistent
against the party in fault
Effect of Failure to determine price:
Effect of Gross Inadequacy of Price: 1. Where contract executory
1. Voluntary sales  The contract is inefficacious
GENERAL RULE: Mere inadequacy of 2. Where the thing has been delivered
the price does not affect validity of the to and appropriated by the buyer
sale.  The buyer must pay a reasonable
 A valuable consideration, however price therefore
small or nominal, if given or
stipulated in good faith is, in the Reasonable price – generally the
absence of fraud, sufficient. market price at the time and place fixed
(Rodriguez vs. CA, 207 SCRA 553) by the contract or by law for the
 Future inheritance cannot be sold. delivery of the goods

EXCEPTIONS: PERFECTION OF SALE

a. Where low price indicates vice of GENERAL RULE: It is perfected at the
consent, sale may be annulled; moment there is meeting of the minds
or contract is presumed to be an upon a determinate thing (object), and a
equitable mortgage certain price (consideration), even if
b. Where the price is so low as to neither is delivered. A choice between
be “shocking to conscience”, rescission and fulfilment, with damages
sale may be set aside. in either case)

2. Involuntary or Forced sales NOTE: Sale is a consensual contract;

GENERAL RULE: Mere inadequacy of Hence, delivery and payment are not
the price is not a sufficient ground for essential for its perfection
the cancellation of the sale if property is EXCEPTION: When the sale is subject
real. to a suspensive condition by virtue of
law or stipulation.
* The terms and conditions of payment EXCEPTIONS:
are merely accidental, not essential 1. Contrary stipulation or Pactum
elements of the contract of sale except reservati dominii (contractual
where the partied themselves stipulate reservation of title) – a stipulation,
that in addition to the subject-matter usually in sales by installment,
and the price, they are essential or whereby, despite delivery of the
material to the contract. property sold, ownership remains
with the seller until full payment of
Requirements for perfection the price is made.
a. When parties are face to face 2. Contract to sell
 When an offer is accepted without 3. Contract of insurance – a perfected
conditions or qualifications contract of sale, even without
NOTES: delivery, vests in the vendee an
 A conditional acceptance is a equitable title, an existing interest
counter-offer over the goods sufficient to be the
 when negotiated thru phone it is subject of insurance
as if it is negotiated face to face
b. When contract is thru RULES GOVERNING AUCTION SALES
correspondence or thru telegram 1. Sales of separate lots by auction are
 When the offeror receives or has separate contracts of sale.
knowledge of the acceptance by the 2. Sale is perfected by the fall of the
offeree hammer
NOTE: If the buyer has already 3. Seller has the right to bid in the
accepted but the seller does not auction, provided:
know yet of the acceptance, the a) such right was reserved
seller may still withdraw b) notice was given that the sale was
c. When a sale is subject to a subject to a right to bid on behalf of the
suspensive condition seller
 From the moment the condition is c) right is not prohibited by law or by
fulfilled stipulation
4. Advertisements for bidders are simply
TRANSFER OF OWNERSHIP invitations to make proposals, and the
GENERAL RULE: While a contract of advertiser is not bound to accept the
sale is consensual, ownership of the highest or lowest bidder, unless the
thing sold is acquired only upon its contrary appears.
delivery, actual or constructive, to the
buyer. (Daus vs. Sps. De Leon, 16 June EFFECT OF PROMISE TREATED
2003) UNDER ART. 1479 Civil Code:
 This is true even if the purchase 1. Accepted unilateral promise to sell
has been made on credit. or buy
Payment of the purchase price is  Only one makes the promise, this
not essential to the transfer of promise is accepted by the other.
ownership, as long as the Example: A promises to sell to B, B
property sold has been accepts the promise, but does not in
delivered. (Sampaguita Pictures, turn promise to buy.
Inc vs. Jalwindor Manufacturers,  does not bind the promissor even if
Inc. 93 SCRA 420) accepted and may be withdrawn
 Nonpayment only creates a right anytime.
to demand payment or to rescind NOTE: Pending notice of its
the contract, or to criminal withdrawal, the accepted promise
prosecution in the case of partakes the nature of an offer to sell
bouncing checks. (EDCA which if accepted, results in a perfected
Publishing and Distributing Corp. contract of sale (Sanchez vs. Rigos 45
vs. Santos, 184 SCRA 614) SCRA3 68). In other words, if the
acceptance is made before withdrawal,
it constitutes a binding contract of sale
although the option is given without and expressing his readiness to pay the
consideration. stipulated price.
 if the promise is supported by a
consideration distinct and separate Right of First Refusal
from the price (option money), its  It is a right of first priority all things
acceptance will give rise to a and conditions being equal; there
perfected contract. should be identity of the terms and
conditions to be offered to the
2. Bilateral promise to buy and sell optionee and all other prospective
 One party accepts the other’s buyers, with optionee to enjoy the
promise to buy and the latter, the right of first priority. A deed of sale
former’s promise to sell a executed in favor of a third party
determinate thing for a price certain who cannot be deemed a purchaser
 it is reciprocally demandable in good faith, and which is in
 It requires no consideration distinct violation of the of the right of first
refusal granted to the optionee is
from the selling price
NOT voidable under the Statute of
NOTE: this is as good as a perfected
Frauds, such contract is valid BUT
sale. No title of dominion is
rescissible under Article 1380 to
transferred as yet, the parties being
1381(3) of the New Civil Code (
given only the right to demand
Guzman Bocaling & Co. vs.
fulfillment or damages.
Bonnavie; Riviera Filipina, Inc vs. CA
et.al. GR No. 117355, April 5, 2002).
Policitation
 An unaccepted unilateral promise to  The basis of the right of first refusal
must be the current offer to sell of
buy or sell. Even if accepted by the
the seller or offer to purchase of any
other party, it does not bind the
prospective buyer. Only after the
promissor and maybe withdrawn
optionee fails to exercise its right of
anytime. This is a mere offer, and
first priority under the same terms
has not yet been converted into a
and within the period contemplated
contract.
could the owner validly offer to sell
the property to a third person,
Option contract
again, under the same terms as
 A contract granting a privilege in one offered to the optionee (Paranaque
person, for which he has paid a Kings Enterprises, Inc. vs. CA GR
consideration, which gives him the No. 111538, February 26, 1997)
right to buy certain merchandise, at
anytime within the agreed period, at
 The lessee’s right of first option to
buy the leased property in case of its
a fixed price.
sale is but a part of the bigger right
 An option without consideration is to lease the said property from the
void and the effect is the same as if lessor. The option was given to the
there was no option lessee because she was the lessee of
* However, in Sanchez vs. Rigos (1972), the subject property. It was a
even though the option was not component of the consideration of
supported by a consideration, the the lease. The option was by no
moment it was accepted, a perfected means an independent right which
contract of sale resulted, applying Art. can be exercised by the lessee. If
1324 of the NCC. In view of the ruling of the lessee is barred by the contract
the Supreme Court, the only importance from assigning her right to lease the
of the consideration for an option is that subject property to any other party,
the option cannot be withdrawn by the the lessee is similarly barred to
grantor after acceptance. assign her first option to buy the
* In an option to buy, the party who has leased property to another. (
an option may validly and effectively Bangayan et.al vs. CA and Lim GR
exercise his right by merely notifying the No.123581, August 29, 1997)
owner of the former’s decision to buy
 according to weight, number or
Earnest money – or “ARRAS” is measure
something of value to show that the 2. seller is guilty of fraud,
buyer was really in earnest, and given to negligence, default or violation
the seller to bind the bargain. It is of contractual terms
considered as: 3. object sold is generic
a) part of the purchase price ( Civil Code of the Philippines, Paras)
b) proof of perfection of the NOTE: This view conforms with
contract Manresa’s view. Buyer would have
*It shall be deducted from the total been the one to profit from the thing
price. had it not been lost or destroyed.

Earnest money Option money Contrary view:

1. Title passes to 1. Ownership is Where the ownership is transferred
the buyer upon reserved to the by delivery, as in our code, the
delivery of the seller and is not to application of the axiom res perit
thing sold pass until full domino, imposes the risk of loss
payment upon the vendor; hence, if the thing
2. In case of 2. In case of is lost by fortuitous event before
non-payment, an non-payment, there delivery, the vendor suffers the loss
action for specific can be action for
and cannot recover the price from
performance or specific
for rescission can performance the vendee (Commentaries and
be filed by the Jurisprudence on the Civil Code of
injured party the Philippines, Tolentino)
3. Part of the 3. Money given as a
purchase price distinct d. The thing is lost after delivery:
consideration for an Buyer bears the loss.
option contract
4. When given, 4. The would-be Question: If one does not comply, the
the buyer is bound buyer is not required other need not pay?
to pay the balance to buy
5. Given when 5. Applies to a sale Answer: True. But this only applies when
there is already a not yet perfected the seller is able to deliver but does not.
sale
EFFECT OF LOSS AT THE TIME OF
RULES ON RISK OF LOSS AND SALE:
DETERIORATION: a. Thing entirely lost at the time of
a. The thing sold is lost before perfection: Contract is void and
perfection: Seller bears the loss. inexistent
b. The thing sold is lost at the time of b. Thing only partially lost: Vendee
perfection: Contract is void or may elect between withdrawing
inexistent. from the contract or demanding the
c. The thing sold is lost after remaining part, paying its
perfection, but before delivery: proportionate price

GENERAL RULE: Who bears the Sale by description

risk of loss is governed by the  A sale where a seller sells things as
stipulations in the contract being of a certain kind, buyer merely
 In the absence of any relying on the seller’s
stipulation: representations or descriptions.
First view:  There is warranty that the thing sold
Buyer bears the loss as an exception corresponds to the representations
to the rule of res perit domino. or descriptions.
EXCEPTIONS:
1. when object sold consists of Sale by sample
fungible goods for a price fixed
 A sale where a small quantity of a
commodity is exhibited by the seller
as a fair specimen of the bulk, which
is not present and as to which there CAPACITY TO BUY OR SELL
is no opportunity to inspect or GENERAL RULE: All persons who can
examine. bind themselves also have legal capacity
NOTE: The mere exhibition of the to buy and sell.
sample does not necessarily make it EXCEPTIONS:
a sale by sample. This exhibition 1. Absolute incapacity (minors,
must have been the sole basis or demented persons, imbeciles,
inducement of the sale. deaf and dumb, prodigals, civil
 There is warranty that the bulk of interdictees) - party cannot bind
the commodity will correspond in themselves in any case.
kind, quality, and character with the 2. Relative incapacity – incapacity
sample exhibited. exists only with reference to
certain persons or a certain class
NOTE: In a sale by sample and by of property
description, there is a two-fold
warranty. Relative Incapacity
A. Husband and wife (Art. 1490):
RIGHTS OF BUYER: Generally, a sale by one spouse to
1) Return the thing and recover the another is void.
money paid, or  The husband and wife cannot sell
2) Retain the thing and sue for the property to each other except:
breach of warranty. 1. When a separation of property
was agreed upon by the spouses
PURCHASE BY MINORS: Contract is 2. When there has been a judicial
generally voidable but in case of separation of property under
necessaries, “where necessaries are sold Article 134 and 135 of the Family
and delivered to a minor or other person Code
without capacity to act, he must pay a
reasonable price therefore. Necessaries B. Incapacity by reason of relation to
are those in Art. 290.” property (Art. 1491)
 The following persons cannot acquire
FORMALITIES OF CONTRACT OF property by purchase, even at a
SALE public auction, either in person or
GENERAL RULE: Sale is a consensual through the mediation of another:
contract and is perfected by mere (GAEP-JO)
consent. 1. the guardian, with respect to
EXCEPTIONS: In order to be the property of his ward;
enforceable by action, the following 2. agents, with respect to the
must be in writing: property whose administration or
1. Sale of personal property at a sale may have been entrusted to
price not less than P500 them, unless the consent of the
2. Sale of real property or an principal has been given;
interest therein 3. executor or administrator, with
3. Sale of property not to be respect to the property of the
performed within a year from estate under administration;
the date thereof 4. public officers and employees,
4. “Applicable statute” requires with respect to the properties of
that the contract of sale be in a the government, its political
certain form subdivisions, or GOCCs, that are
NOTE: Statute of Frauds is applicable entrusted to them;
only to executory contracts and not to 5. judges, justices, prosecuting
contracts which are totally or partially attorneys, clerks of courts, etc.,
performed. with respect to the property in
 custogia legis; and ratification

6. any other person specially OBLIGATIONS OF THE VENDOR: (WPD

disqualified by law. -TT)
Examples of persons 1. Transfer ownership (cannot be
especially disqualified by law: waived)
a. Aliens who are disqualified to 2. Deliver the thing sold (cannot be
purchase agricultural lands waived)
b. An unpaid seller having a right 3. Warrant against eviction and against
of lien or having stopped the hidden defects (can be waived or
goods in transitu, who is modified since warranty is not an
prohibited from buying the goods essential element of the contract of
either directly or indirectly in sale)
the resale of the same, at public 4. Take care of the thing, pending
or private sale which he may delivery, with proper diligence (
make Article 1163)
c. The officer holding the 5. Pay for the expenses of the deed of
execution, or his deputy. sale, unless there is stipulation to
NOTE: While those disqualified the contrary
under Arts. 1490 and 1491 may
not become lessees (Art. 1646), DELIVERY
still aliens may become lessees  Is a mode of acquiring ownership, as
even if they cannot buy lands. a consequence of certain contracts
such as sale, by virtue of which,
Effect of violation: actually or constructively, the object
a) With respect to nos. 1 to 3: the is placed in the control and
sale is VOIDABLE. possession of the vendee.
Reason: only private rights,
which are subject to ratification  Delivery of the thing together
are violated with the payment of the price,
NOTE: In the case of Lao vs. marks the consummation of the
Genato, 137 SCRA 77, the contract of sale(PNB vs. Ling, 69
Supreme Court found that the Phil. 611)
sale by the administrator of  In all forms of delivery, it is
certain properties of the estate necessary that the act of
in order to settle the existing delivery be coupled with the
obligations of the estate was intention of delivering the thing.
made to the administrator’s son The act without the intention is
for a grossly low price. insufficient. (Norkis Distributor,
Furthermore, the said sale was Inc. vs. CA, 195 SCRA 694)
not submitted to the probate court
for approval as mandated by the
order authorizing the
 Kinds:
1. Actual or real – placing the thing
administrator to sell. The sale
under the control and possession of
was indubitably illegal, irregular
the buyer.
and fictitious, and the court’s
2. Legal or constructive – delivery is
approval of the assailed
represented by other signs or acts
compromise agreement violated
indicative thereof
Article 1491 and cannot work to
a. delivery by the execution of a
ratify a fictitious contract which
public instrument.
is non-existent and void from
NOTE: Gives rise only to a prima
the very beginning
facie presumption of delivery which
b) With respect to nos. 4 to 6: the
is destroyed when actual delivery is
sale is NULL AND VOID.
not effected because of a legal
Reason: violation of public
impediment (Ten Forty Realty vs.
policy cannot be subject to
 Cruz, 10 Sept. 2003) NOTES:
b. traditio symbolica - to effect  It is a kind of sale with a condition
delivery, the parties make use of subsequent.
a token or symbol to represent  The buyer must comply with the
the thing delivered express or implied conditions
c. traditio longa manu – seller attached to the return privilege;
pointing out to the buyer the otherwise, the sale becomes
things which are transferred, absolute.
which at the time must be in  Buyer, being the owner, bears the
sight. risk of loss
d. traditio brevi manu – buyer simply
continues in possession of the
Sale on trial, approval, or satisfaction
thing but under title of
ownership.
 A contract in the nature of an option
e. traditio constitutum possessorium to purchase if the goods prove to be
– seller continues in possession
satisfactory, the approval of the
but under a different title other buyer being a condition precedent.
than ownership.
3. Quasi-tradition – delivery of rights,  Rules:
credits or incorporeal property, 1. title remains in the seller
made by: 2. risk of loss remains with seller
a. placing titles of ownership in the except when the buyer is at fault or
hands of buyer has agreed to bear the loss
b. allowing buyer to make use of 3. buyer must give goods a trial, except
rights where it is evident that it cannot
4. Tradition by operation of law perform the work
4. period within which buyer must
Constructive delivery requires three signify his acceptance runs only
things before ownership may be when all the parts essential for the
transferred: operation of the object have been
1. The seller must have control over delivered.
the thing 5. if it is stipulated that a third person
2. The buyer must be put under control must satisfy approval or satisfaction,
3. There must be the intention to the provision is valid, but the third
deliver the thing for purposes of person must be in good faith. If
ownership refusal to accept is not justified,
seller may still sue.
When is the vendor not bound to 6. Generally, the sale and delivery to a
deliver the thing sold: buyer who is an expert on the object
1. If the vendee has not paid him the purchased is not a sale on approval,
price trial, or satisfaction.
2. If no period for payment has been
fixed in the contract Sale or return Sale on Trial
3. Even if a period for payment has 1. Subject to a 1. Subject to a
resolutory condition suspensive condition
been fixed in the contract, if the
2. Depends entirely 2. Depends on the
vendee has lost the right to make on the will of the character or quality of
use of the same. buyer the goods
3. Ownership 3. Ownership remains
Sale or return passes to the buyer in the seller until
 Property is sold, but the buyer, who on delivery and buyer signifies his
subsequent return approval or
becomes the owner of the property reverts ownership acceptance to the
on delivery, has the option to return in the seller seller
the same to the seller instead of
paying the price. 4. Risk of loss or 4. Risk of loss remains
injury rests upon with the seller
the buyer
Instances where Seller is still the * “Unlawful deprivation” is no longer
Owner despite Delivery: limited to a criminal act. There is
1. Sale on trial, approval or satisfaction Unlawful Deprivation where there is no
2. Contrary intention appears by the valid transmission of ownership.
term of the contract;
3. Implied reservation of ownership Place of delivery of goods
(Article 1503) 1. Where there is an agreement, place
a. If under the bill of lading, the of delivery is that agreed upon
goods are deliverable to seller or 2. Where there is no agreement, place
agent or their order; of delivery determined by usage of
b. If the bill of lading, although trade
stating that the goods are to be 3. Where there is no agreement and no
delivered to the buyer or his prevalent usage, place of delivery is
agent, is kept by the seller or his the seller’s place
agent; 4. In any other case, place of delivery
c. When the buyer, although the is the seller’s residence
goods are deliverable to order of 5. In case of specific goods, which to
buyer, and although the bill of the knowledge of the parties at the
lading is given to him, does not time the contract was made were in
honor the bill of exchange sent some other place, that place is the
along with it. place of delivery, in the absence of
agreement or usage of trade to the
Transfer of ownership where goods contrary
sold delivered to carrier
General Rule: Delivery to the carrier is Time of delivery of goods
deemed to be delivery to the buyer 1. Stipulated time
Exception: Where the right of 2. In the absence thereof, within a
possession or ownership of specific goods reasonable time
sold is reserved
NEGOTIABLE DOCUMENT OF TITLE
SALE OF GOODS BY A NON-OWNER (NDT)
GENERAL RULE: Buyer acquires no  A document of title in which it is
title even if in good faith and for value stated that the goods referred to
under the maxim Nemo dat quid non therein will be delivered to the
habet (“You cannot give what you do not bearer, or to the order of any person
have”). named in such document.
EXCEPTIONS: (SMERVS)  May be negotiated by delivery or
1. Owner is estopped or precluded indorsement.
by his conduct
2. When sale is made by the r The document is negotiable if:
egistered owner or apparent 1. The goods are deliverable to the
owner in accordance with bearer; or
recording or registration laws 2. If the goods are deliverable to the
3. Sales sanctioned by judicial or order of a certain person
statutory authority
4. Purchases in a merchant's store, Persons who may negotiate NDT:
fairs or markets 1. The owner; or
5. When a person who is not the 2. Any person to whom the possession
owner sells and delivers a thing, or custody thereof has been
subsequently acquires title entrusted by the owner, if by the
thereto (Art. 1434) terms of the document the bailee
6. When the seller has a voidable issuing the document undertakes to
title which has not been avoided deliver the goods to the order of the
at the time of the sale (Art. person to whom the possession or
1506) custody of the document has been
entrusted or if at the time of such
 entrusting the document in such NOTE: Acceptance, even if not express
form that it may be negotiated by may be implied when the buyer
delivery. exercises acts of ownership over the
excess goods.
* If the holder of a negotiable document
of title (deliverable to bearer) entrusts RULES WHEN GOODS MIXED WITH
the document to a friend for deposit, GOODS OF DIFFERENT
but the friend betrays the trust and DESCRIPTION:
negotiates the document by delivering it  Buyer may accept the goods which
to another who is in good faith, the said are in accordance with the contract
owner cannot impugn the validity of the and reject the rest
negotiation. As between two innocent
persons, he who made the loss possible NOTE: If the subject matter is
shall bear the loss, without prejudice to indivisible, in case of delivery of larger
his right to recover from the wrongdoer. quantity of goods or of mixed goods, the
buyer may reject the whole of the goods
RIGHTS OF PERSON TO WHOM
DOCUMENT HAS BEEN NEGOTIATED: DELIVERY TO THE CARRIER
1) The title of the person negotiating the GENERAL RULE: Where the seller is
document, over the goods covered by authorized or required to send the goods
the document; to the buyer, delivery to the carrier is
2) The title of the person (depositor or delivery to the buyer.
owner) to whose order by the terms of EXCEPTIONS:
the document the goods were to be 1. When a contrary intention
delivered, over such goods; appears
3) The direct obligation of the bailee to 2. Implied reservation of ownership
hold possession of the goods for him, as under pars. 1,2,3 of Art. 1503
if the bailee had contracted to him
directly  Kinds of Delivery to the Carrier
NOTE; Mere transferee does not acquire a. C.I.F. (cost, insurance, freight) –
directly the obligation of the bailee (in signify that the price fixed
Art. 1513). To acquire it, he must notify covers not only the costs of the
the bailee. goods, but the expense of the
freight and the insurance to be
WHO CAN DEFEAT RIGHTS OF paid by the seller
TRANSFEREE: b. F.O.B. (free on board) – goods
1. Creditor of transferor are to be delivered free of
2. Transferor expense to the buyer to the
3. Subsequent purchaser point where they are F.O.B. The
point of F.O.B., either at the
RULES WHEN QUANTITY IS LESS point of shipment or the point of
THAN AGREED UPON: destination, determines when
1. Buyer may reject; or the ownership passes.
2. Buyer may accept what has been NOTE: the terms C.I.F. and F.O.B.
delivered, at the contract rate merely make rules of presumption
c. C.O.D. (collect on delivery) – the
RULES WHEN QUANTITY IS MORE carrier acts for the seller in
THAN AGREED UPON: collecting the purchase price,
1. Buyer may reject all; or which the buyer must pay to
2. Buyer may accept the goods obtain possession of the goods.
agreed upon and reject the rest;
or SELLER’S DUTY AFTER DELIVERY TO
3. Buyer may accept all and must CARRIER
pay for them at the contract 1. To enter on behalf of buyer into such
rate contract reasonable under the
circumstances
2. To give notice to buyer regarding boundaries.
necessity of insuring the goods
DOUBLE SALE (Art. 1544)
PAYMENT OF THE PURCHASE PRICE  Requisites: VOCS
GENERAL RULE: The seller is not
1. two or more transactions must
bound to deliver the thing sold unless
constitute valid sales;
the purchase price has been paid.
2. they must pertain exactly to the
EXCEPTION: The seller is bound to
same object or subject matter;
deliver even if the price has not been
paid, if a period of payment has been 3. they must be bought from the same
fixed. or immediate seller; AND
4. two or more buyers who are at odds
Sale of Real Property by Unit over the rightful ownership of the
 Entire area stated in the contract subject matter must represent c
must be delivered onflicting interests.
 When entire area could not be  Rules of preference:
delivered, vendee may:
1. Personal Property
1. Enforce the contract with the
a. first possessor in good faith
corresponding decrease in price
2. Real Property
2. Rescind the sale:
a. first registrant in good faith
a. If the lack in area is at least
b. first possessor in good faith
1/10 than that stated or
c. person with oldest title in good
stipulated
faith
b. If the deficiency in quality
specified in the contract
NOTES:
exceeds 1/10 of the price
agreed upon  Purchaser in Good Faith – one who
c. If the vendee would not have buys the property of another without
bought the immovable had notice that some other person has a
he known of its smaller area right to or interest in such property
of inferior quality and pays a full and fair price for the
irrespective of the extent of same at the time of such purchase or
lack of area or quality before he has notice of the claim or
interest of some other person in the
Sale for a Lump Sum (A Cuerpo Cierto) property (Veloso vs. CA).
 Vendor is obligated to deliver all the  Registration requires actual
land included within the boundaries, recording; if the property was never
regardless of whether the real area really registered as when the
should be greater or smaller registrar forgot to do so although he
has been handed the document,
 Ordinarily, there can be no rescission there is no registration.
or reduction or increase whether the
area be greater or lesser, unless  Possession is either actual or
there is gross mistake. constructive since the law made no
NOTE: The Civil Code presumes that distinction (Sanchez vs. Ramos 40
the purchaser had in mind a particular Phil614)
piece of land and that he ascertained its  Possession in Art.1544 includes not
area and quality before the contract of only material but also symbolic
sale was perfected. If he did not do so, possession (Ten Forty Realty vs.
or if having done so he made no Cruz, 10 Sept. 2003.)
objection and consented to the  Title means title because of sale,
transaction, he can blame no one but and not any other title or mode of
himself (Teran vs. Villanueva Viuda de acquiring property (Lichauco vs.
Riosa 56 Phil 677). Berenguer 39 Phil 642)
What is important is the delivery  Hernandez vs. Katigbak Rule: When
of all the land included in the the property sold on execution is
 registered under Torrens,
registration is the operative act that
gives validity to the transfer or EFFECT IF BUYER HAS ALREADY
creates a lien on the land, and a SOLD THE GOODS:
purchaser on execution sale is not General Rule: The unpaid seller’s right
required to go behind the registry to to lien or stoppage in transitu remains
determine the conditions of the even if buyer has sold the goods.
property. Exception: Where the Except:
purchaser had knowledge, prior to or 1) When the seller has given consent
at the time of the levy, of such thereto, or
previous lien or encumbrance, his 2) When the buyer is a purchaser in good
knowledge is equivalent to faith for value of a negotiable document
registration. of title.
CONDITION WARRANTY
Effect of Non-fulfillment of Condition  a statement or representation made
1. If the obligation of either party
by the seller of goods,
is subject to any condition and
contemporaneously and as a part of
such condition is not fulfilled,
the contract of sale, having
such party may either:
reference to the character, quality,
a. refuse to proceed with the
or title of the goods, and by which
contract he promises or undertakes to insure
b. proceed with the contract ,
that certain facts are or shall be as
waiving the performance of
he then represents.
the condition.
2. If the condition is in the nature
of a promise that it should  Kinds:
happen, the non-performance of 1. EXPRESS – any affirmation of fact
such condition may be treated or any promise by the seller relating
by the other party as breach of to the thing if the natural tendency
warranty. of such affirmation or promise is to
induce the buyer to purchase the
NOTE: A distinction must be made same and if the buyer purchases the
between a condition imposed on the thing relying thereon
perfection of a contract and a condition
imposed merely on the performance of NOTE: A mere expression of opinion, no
an obligation. The failure to comply with matter how positively asserted, does not
the first condition would prevent the import a warranty unless the seller is an
juridical relation itself from coming into expert and his opinion was relied upon
existence, while failure to comply with by the buyer.
the second merely gives the option
either to refuse or proceed with the sale 2. IMPLIED - that which the law
or to waive the condition. derives by implication or inference
from the nature of the transaction or
 The mere fact that the second the relative situation or
contract of sale was perfected in circumstances of the parties,
good faith is not sufficient if, before irrespective of any intention of the
title passes, the second vendee seller to create it.
acquires knowledge of the first a. Warranty against eviction
transaction. The good faith or b. Warranty against hidden defects
innocence of the posterior vendee c. Warranty as to Fitness and
needs to continue until his contract Merchantability
ripens into ownership by tradition or NOTE: An implied warranty is a natural,
registration. (Palanca vs. Dir. Of not an essential element of a contract,
Lands, 46 PHIL 149) and is deemed incorporated in the
contract of sale. It may however, be
waived or modified by express Question: Why is rescission not a remedy
stipulation. (De Leon) in case of total eviction?
There is no implied warranty as to the Answer: Rescission contemplates that
condition, adaptation, fitness or the one demanding it is able to return
suitability or the quality of an article whatever he has received under the
sold as a second-hand article. But such contract. Since the vendee can no longer
articles might be sold under such restore the subject-matter of the sale to
circumstances as to raise an implied the vendor, rescission cannot be carried
warranty. out.
* A certification issued by a vendor that
a second-hand machine was in A-1 * The suit for the breach can be directed
condition is an express warranty binding only against the immediate seller, not
on the vendor. (Moles vs. IAC [1989]) sellers of the seller unless such sellers
had promised to warrant in favor of later
A. Warranty against eviction buyers or unless the immediate seller
 Warranty in which the seller has expressly assigned to the buyer his
guarantees that he has the right to own right to sue his own seller.
sell the thing sold and to transfer NOTE: The disturbance referred to in
ownership to the buyer who shall not the case of eviction is a disturbance in
be disturbed in his legal and law which requires that a person go to
peaceful possession thereof. the courts of justice claiming the thing
sold, or part thereof and invoking
 Elements: reasons. Mere trespass in fact does not
1. vendee is deprived, in whole or give rise to the application of the
in part, of the thing purchased; doctrine of eviction.
2. the deprivation is by virtue of a
final judgment;  Vendor’s liability is waivable but any
3. the judgment is based on a prior stipulation exempting the vendor
right to the sale or an act from the obligation to answer for
imputable to the vendor; eviction shall be void if he acted in
4. the vendor was summoned in the bad faith.
suit for eviction at the instance  Kinds of Waiver:
of the vendee; AND a. Consciente – voluntarily
5. no waiver of warranty by the made by the vendee without
vendee. the knowledge and
assumption of the risks of
 Vendor's liability shall consist of: eviction
1. Total eviction: (VICED) NOTE: vendor shall pay only the
a. Value of the thing at the time of value which the thing sold had at
eviction; the time of eviction
b. Income or fruits if he has been b. Intencionada – made by the
ordered to deliver them to the vendee with knowledge of
party who won the suit; the risks of eviction and
c. Costs of the suit; assumption of its
d. Expenses of the contract; AND consequences
e. Damages and interests if the EFFECT: vendor not liable
sale was in bad faith. NOTE: Every waiver is presumed to be
consciente. To consider it intencionada,
2. Partial eviction: it must be accompanied by some
a. to enforce vendor’s liability circumstance which reveals the
for eviction (VICED); OR vendor’s knowledge of the risks of
b. to demand rescission of eviction and his intention to submit to
contract. such consequences.

WHERE IMMOVABLE SOLD

ENCUMBERED WITH NON-APPARENT
BURDEN 1. If vendor was aware of hidden
1. Right of vendee defects, he shall bear the loss and
a) recission, or vendee shall have the right to
b) indemnity recover: (PED)
a. the price paid
2. When right cannot be exercised: b. expenses of the contract
a) if the burden or servitude is c. damages
apparent 2. If vendor was not aware, he shall be
b) if the non-apparent burden or obliged to return: (PIE)
servitude is registered a. price paid
c) if vendee had knowledge of the b. interest thereon
encumbrance, whether it is registered c. expenses of the contract if paid
or not by the vendee
3. When action must be brought
- within ONE YEAR from the Effect if the cause of loss was not the
execution of the deed of sale hidden defect
 If the thing sold had any hidden fault
B. Warranty against hidden defects at the time of the sale, and should
 Warranty in which the seller thereafter be lost by a (1) fortuitous
guarantees that the thing sold is free event OR (2) through the fault of the
from any hidden faults or defects or vendee:
any charge or encumbrance not  the vendee may demand of the
declared or known to the buyer. vendor the price which he paid
less the value of the thing at the
 Elements: (SHENPW) time of its loss.
1. defect must be Serious or NOTE: the difference between the
important; price paid and the value of the thing
2. it must be Hidden; at the time of its loss represents the
3. it must Exist at the time of the damage suffered by the vendee and
sale; the amount which the vendor
4. vendee must give Notice of the enriched himself at the expense of
defect to the vendor within a the vendee
reasonable time;  If the vendor acted in bad faith:
5. action for rescission or reduction  vendor shall pay damages to the
of price must be brought within vendee
the proper Period (within 6 mos.
from delivery of the thing or 40 C. Implied Warranties of Quality
days from date of delivery in Warranty of Fitness
case of animals); and  Warranty in which the seller
6. no Waiver of the warranty. guarantees that the thing sold is
reasonably fit for the known
 Remedies of the Vendee: particular purpose for which it was
a. Accion redhibitoria (rescission) acquired by the buyer
b. Accion quanti minoris (reduction
of the price) GENERAL RULE: There is no implied
NOTES: warranty as to the quality or fitness for
 Hidden faults or defects pertain only any particular purpose of goods under a
to those that make the object unfit contract of sale
for the use for which it was intended EXCEPTIONS:
at the time of the sale. 1. Where the buyer, expressly or by
 This warranty in Sales is applicable implication manifests to the
in Lease (Yap vs. Tiaoqui 13Phil433) seller the particular purpose for
Effect of loss of thing on account of which the goods are required
hidden defects: 2. Where the buyer relies upon the
seller’s skill or judgment
 3. Sale of animals shall be void when:
Warranty of Merchantability a) animals sold are suffering from
 Warranty in which the seller contagious disease
guarantees, where the goods were b) if the use or service for which
bought by description, that they are they are acquired has been stated in the
reasonably fit for the general contract, and they are found to be unfit
purpose for which they are sold therefor
 It requires identity between what is 4. Limitation of the action: 40 days
described in the contract AND what is from the date of their delivery to the
tendered, in the sense that the latter vendee
is of such quality to have some value 5. Vendor shall be liable if the animal
should die within 3 days after its
Instances where implied warranties are purchase if the disease which caused the
inapplicable: death existed at the time of the contract
1. As is and where is sale - vendor
makes no warranty as to the quality OBLIGATIONS OF THE VENDEE:
or workable condition of the goods, A. Principal Obligations:
and that the vendee takes them in 1. To accept delivery
the condition in which they are 2. To pay the price of the thing sold in
found and from the place where they legal tender unless another mode
are located. has been agreed upon
2. Sale of second-hand articles NOTE: A grace period granted the
3. Sale by virtue of authority in fact or vendee in case of failure to pay the
law amount/s due is a right not an
obligation. The grace period must not
Caveat Venditor (“Let the seller be likened to an obligation, the non-
beware”): the vendor is liable to the payment of which, under Article 1169 of
vendee for any hidden faults or defects the Civil Code, would still generally
in the thing sold, even though he was require judicial or extra-judicial demand
not aware thereof. before “default” can be said to arise (
Bricktown Dev’t Corp vs. Amor Tierra
Caveat Emptor (“Let the buyer Dev’t Corp. 57SCRA437)
beware”): requires the purchaser to be
aware of the supposed title of the B. Other Obligations
vendor and one who buys without 1. To take care of the goods without
checking the vendor’s title takes all the the obligation to return, where the
risks and losses consequent to such goods are delivered to the buyer and
failure. he rightfully refuses to accept

RULES IN CASE OF SALE OF NOTES:

ANIMALS  The buyer in such a case is in the
1. When two or more animals have been position of a bailee who has had
sold at the same time and the goods thrust upon him without
redhibitory defect is in one, or some of his assent. He has the obligation
them but not in all, the general rule is to take reasonable care of the
that the redhibition will not affect the goods but nothing more can be
others without it. It is immaterial demanded of him.
whether the price has been fixed for a  The goods in the buyer’s
lump sum for all the animals or for a possession under these
separate price for each. circumstances are at the seller’s
2. No warranty against hidden defects risk
of animals sold at fairs or at public 2. To be liable as a depositary if he
auctions, or of livestock sold as voluntarily constituted himself as
condemned. This is based on the such
assumption that the defects must have 3. To pay interest for the period
been clearly known to the buyer. between delivery of the thing and
 the payment of the price in the obligations; vendee has nothing
following cases: to do with the act of delivery by
a. Should it have been stipulated the vendor
b. Should the thing sold and  Acceptance is an obligation of
delivered produce fruits or the vendee; acceptance cannot
income be regarded as a condition to
c. Should he be in default, from complete delivery;
the time of judicial or extra-  seller must comply with the
judicial demand for the payment obligation to deliver although
of the price there is no acceptance yet by
the buyer
 Pertinent Rules:  Acceptance by the buyer may
1. The vendor is not required to deliver precede actual delivery; there may
the thing sold until the price is paid be actual receipt without
nor the vendee to pay the price acceptance and there may be
before the thing is delivered in the acceptance without receipt
absence of an agreement to the  Unless otherwise agreed upon,
contrary (Article 1524). acceptance of the goods by the
2. If stipulated, the vendee is bound to buyer does not discharge the seller
accept delivery and to pay the price from liability for damages or other
at the time and place designated; legal remedy like for breach of any
3. If there is no stipulation as to the promise or warranty
time and place of payment and
delivery, the vendee is bound to pay When vendee may suspend payment
at the time and place of delivery of the price:
4. In the absence of stipulation as to 1. If he is disturbed in the possession or
the place of delivery, it shall be ownership of the thing bought
made wherever the thing might be at 2. If he has well-grounded fear that his
the moment the contract was possession or ownership would be
perfected (Article 1251) disturbed by a vindicatory action or
5. If only the time for delivery has been foreclosure of mortgage
fixed in the contract, the vendee is
required to pay even before the NOTES:
thing is delivered to him; if only the  If the thing sold is in the possession
time for payment has been fixed, of the vendee and the price is
the vendee is entitled to delivery already in the hands of the vendor,
even before the price is paid by him the sale is a consummated contract
( Article 1524) and Article 1590 is no longer
applicable. Article 1590,
Ways of accepting goods: presupposes that the price or any
1. Express acceptance part thereof has not yet been paid
2. Implied acceptance and the contract is not yet
a. When buyer does an act which consummated.
only an owner can do,
b. Failure to return goods after  Under Article 1590, the vendee has
reasonable lapse of time no cause of action for rescission
before final judgement, otherwise
NOTES: the vendor might become a victim of
machinations between the vendee
 The retention of goods is strong and the third person
evidence that the buyer has
accepted ownership of the goods.  Disturbance must be in possession
and ownership of the thing acquired
 Delivery and acceptance are two
separate and distinct acts of  If the disturbance is caused by the
different parties existence of non-apparent servitude,
 Delivery is an act of the vendor the remedy of the buyer is
and one of the vendor’s rescission, not suspension of
 payment. price has not been tendered
b. The seller of the goods, in case a
bill of exchange or other
When vendee cannot suspend negotiable instrument has been
payment of the price even if there is received as conditional payment,
disturbance in the possession or AND the condition on which it
ownership of the thing sold: was received has been broken by
1. if the vendor gives security for the reason of the dishonor of the
return of the price in a proper case instrument, insolvency of the
2. if it has been stipulated that buyer or otherwise.
notwithstanding any such  Remedies:
contingency, the vendee must make 1. Possessory lien over the goods
payment (see Article 1548 par.3) 2. Right of stoppage in transitu after
3. if the vendor has caused the he has parted with the
disturbance or danger to cease possession of the goods and the
4. if the disturbance is a mere act of buyer becomes insolvent
trespass 3. Special Right of resale
5. if the vendee has fully paid the price 4. Special Right to rescind the sale
5. Action for the price
REMEDIES FOR BREACH OF 6. Action for damages
CONTRACT
A. Remedies of the seller 3. Article 1484 or Recto Law
1. Action for payment of the price (Art.  Remedies of vendor in sale of
1595) personal property by installments
2. Action for damages for non-  Requisites:
acceptance of the goods (Art. 1596) 1. Contract of sale
3. Action for rescission (Art. 1597) 2. Personal property
B. Remedies of the buyer 3. Payable in installments
1. Action for specific performance (Art. 4. In the case of the second and
1598) third remedies, that there has
2. Action for rescission or damages for been a failure to pay two or
breach of warranty (Art 1599) more installments
NOTE: Apply likewise to contracts
A. REMEDIES OF THE SELLER FOR purporting to be leases of personal
BREACH OF CONTRACT property with option to buy
 IN CASE OF MOVABLES
1. Ordinary Remedies
 Art. 1484 does not apply to a sale:
1. Payable on straight terms (partly
a. Movables in General – Failure of
in cash and partly in one term)
the vendee to appear to receive
2. Of Real property
delivery or, having appeared,
failure to tender the price at the  Remedies:
same time, unless, a longer 1. Specific performance upon
period for its payment has been vendee’s failure to pay
stipulated NOTE: Does not bar full recovery for
judgment secured may be executed
 action to rescind the sale
on all personal and real properties of
(Art. 1593)
the buyer which are not exempt
b. Sale of Goods –
from execution (Palma v. CA.)
 action for the price (Art. 2. Rescission of the sale if vendee
1595) shall have failed to pay two or
 action for damages (Art. more installments
1596) NOTES:
2. Unpaid Seller  Nature of the remedy – which
 Types: requires mutual restitution – bars
a. The seller of the goods who has further action on the purchase
not been paid or to whom the price (Nonato vs. IAC.)
  GENERAL RULE: cancellation Filipinas Invest. & Finance Corp. vs.
of sale requires mutual Vitug, Jr. 28SCRA658)
restitution, that is all partial
payments of price or rents must NOTE: Remedies are alternative and
be returned exclusive
EXCEPTIONS: a stipulation
that the installments or rents  IN CASE OF IMMOVABLES
paid shall not be returned to the 1. Ordinary Remedies
vendee or lessee shall be valid a. In case of anticipatory breach –
insofar as the same may not be  rescission (Article 1591)
unconscionable under the b. Failure to pay the purchase price
circumstan-ces (Article 1486). –
3. Foreclosure of the chattel  rescission upon judicial or
mortgage on the thing sold if notarial demand for
vendee shall have failed to pay rescission (Article 1592)
two or more installments. In this  the vendee may pay, even
case, there shall be no further after the expiration of the
action against the purchaser to period, as long as no demand
recover unpaid balance of the for rescission has been made
price. upon him
NOTE: Article 1592 does not
NOTES: apply to:
 Further recovery barred only from 1) Sale on instalment of real
the time of actual sale at public auction estate
conducted pursuant to foreclosure 2) Contract to sell
(Macondray vs. Tan.) 3) Conditional sale
 Other chattels given as security 4) Cases covered by RA 6552:
cannot be foreclosed if they are not Realty Installment buyer
subject of the installment sale (Ridad vs. protection act
Filipinas investment and Finance Corp.
GR 39806, Jan. 28, 1983) 2. R.A. No. 6552 or Maceda Law
 If the vendor assigns his right to a  An Act to Provide Protection to
financing company, the latter may be buyers of Real Estate on Installment
regarded as a collecting agency of the Payments
vendor and cannot therefore recover any  Law governing sale or financing of
deficiency from the vendee (Zayas vs. real estate on installment payments
Luneta Motors Co.)  Requisites:
 When the vendor assigns his credit to 1. transactions or contracts
another person, the latter is likewise involving the sale OR financing of
bound by the same law. Accordingly, real estate on installment
when the assignee forecloses on the payments, including residential
mortgage, there can be no further condominium apartments; and
recovery of the deficiency and the 2. buyer defaults in payment of
vendor-mortgagee is deemed to have succeeding installments.
renounced any right thereto (Borbon II
vs. Servicewide Specialist, Inc.  Rights of the buyer:
258SCRA658) A. If Buyer has paid at least two
NOTE: However, Article 1484(3) does (2) years of installments
NOT bar one to whom the vendor has 1. The buyer must pay, without
assigned on with a recourse basis his additional interest, the unpaid
credit against the vendee from installments due within the total
recovering from the vendor the grace period earned by him.
assigned credit in full although the There shall be one (1) month
vendor may have no right of recovery grace period for every one (1)
against the vendee for the deficiency ( year of installment payments
 made 2. Same No. 3 and 4 paragraph A
NOTE: This right shall be above
exercised by the buyer ONLY
once in every 5 years of the life NOTE: Down payments, deposits or
of the contract AND its options on the contract shall be included
extensions. in the computation of the total number
2. Actual cancellation can only take of installment payments made
place after 30 days from receipt
by the buyer of the notice of Remedies of Unpaid Seller
cancellation OR demand for I. Possessory Lien
rescission by a notarial act AND  When may be exercised:
upon full payment of the cash 1. Where the goods have been sold
surrender value to the buyer without any stipulation as to
(Olympia Housing vs. Panasiatic, credit
16 January 2003.) 2. When the goods have been sold
NOTE: The seller shall refund to on credit, but the term of credit
the buyer the cash surrender has expired
value of the payments on the 3. Where the buyer becomes
property equivalent to 50% of insolvent
the total payments made. After  When lost:
five (5) years of installments, 1. Delivery of the goods to a carrier
there shall be an additional 5% or bailee for the purpose of
every year but not to exceed 90% transmission to the buyer
of the total payments made without reserving ownership or
3. The buyer shall have the right to right of possession
sell his rights or assign the same 2. When the buyer lawfully obtains
to another person OR to reinstate possession of the goods
the contract by updating the 3. By waiver of the lien
account during the grace period NOTE: Possessory lien is lost after the
and before actual cancellation of seller loses possession but his lien as an
the contract unpaid seller remains; hence he is still
4. The buyer shall have the right to an unpaid creditor with respect to the
pay in advance any installment price of specific goods sold. His
or the full unpaid balance of the preference can only be defeated by the
purchase price any time without governments claim to the specific tax on
interest and to have such full the goods themselves (Arts. 2247 and
payment of the purchase price 2241).
annotated in the certificate of NOTE: The bringing of an action to
title covering the property. recover the purchase price is not one of
the ways of losing the possessory lien.
B. If Buyer has paid less than 2 An unpaid seller does not lose his lien by
years of installments reason that he has obtained a money
1. The seller shall give the buyer a judgement or decree for the price of
grace period of NOT less than 60 goods (Art. 1529, last paragraph).
days from the date the
installment became due. If the II. Stoppage of goods in transitu
buyer fails to pay the  Requisites:
installments due at the 1. Seller must be unpaid
expiration of the grace period, 2. Buyer must be insolvent
the seller may cancel the
3. Goods must be in transit
contract after 30 days from 4. Seller must either:
receipt by the buyer of the a. actually take possession of
notice of cancellation or the the goods sold OR
demand for rescission of
b. give notice of his claim to
contract by a notarial act. the carrier or other person in
 possession transitu AND under ANY of the
5. Seller must surrender the following conditions:
negotiable document of title, if 1. Where the goods are perishable
any, issued by the carrier or in nature
bailee 2. Where the right to resell is
6. Seller must bear the expenses of expressly reserved in case the
delivery of the goods after the buyer should make a default
exercise of the right 3. Where the buyer delays in the
payment of the price for an
GOODS ARE CONSIDERED IN unreasonable time
TRANSITU:
1. after delivery to a carrier or other IV. Rescission
bailee and before the buyer or his agent  Types:
takes delivery of them; and 1. Special Right to Rescind Under
2. If the goods are rejected by the Art. 1534 – If the seller has
buyer, and the carrier or other bailee either the right of lien OR a right
continues in possession of them to stop the goods in transitu AND
under either of 2 situations:
GOODS ARE NO LONGER a. Where the right to rescind
CONSIDERED IN TRANSITU: on default has been
1. after delivery to the buyer or his expressly reserved
agent in that behalf; b. Where the buyer has been in
2. if the buyer or his agent obtains default for an unreasonable
possession of the goods at a point before time
the destination originally fixed; 2. Under Art. 1597 (“technical
3. if the carrier or the bailee rescission”)
acknowledges to hold the goods on
behalf of the buyer; and V. Action for the price
4. if the carrier or bailee wrongfully  When may be exercised:
refuses to deliver the goods to the buyer 1. Where the ownership has passed
to the buyer AND he wrongfully
 Effects of the exercise of the right neglects OR refuses to pay for
1. The goods are no longer in transit. the price
2. The contract of carriage ends; 2. Where the price is payable on a
instead the carrier now becomes a day certain AND he wrongfully
mere bailee, and will be liable as neglects OR refuses to pay for
such. the price, irrespective of the
3. The carrier should not deliver delivery or transfer of title
anymore to the buyer or the latter’s 3. Where the goods cannot readily
agent; otherwise he will clearly be be resold for a reasonable price
liable for damages. AND the buyer wrongfully refuses
4. The carrier must redeliver to, or to accept them even before the
according to the directions of the ownership of the goods has
seller. passed, if Article 1596 is
inapplicable.
WAYS OF EXERCISING THE RIGHT TO
STOP: VI. Action for damages
1. By taking actual possession of the  When may be exercised:
goods 1. In case of wrongful neglect or
2. By giving notice of his claim to the refusal by the buyer to accept or
carrier or bailee pay for the thing sold (Art. 1596
par.1)
III. Special Right of Resale 2. In an executory contract, where
 May be exercised only when the the ownership in the goods has
unpaid seller has either a right of not passed, and the seller cannot
lien OR has stopped the goods in
 maintain an action to recover sold provided he returns to the
the price (Art 1595) vendee:
3. If the goods are not yet a. the price of the sale;
identified at the time of the b. expenses of the contract;
contract or subsequently c. any other legitimate payments
B. REMEDIES OF THE BUYER FOR made therefore and;
BREACH OF CONTRACT d. the necessary and useful
expenses made on the thing
1. Action for specific performance sold; and
(Art. 1598) e. fulfills other stipulations which
 Where the seller has broken the may have been agreed upon.
contract to deliver specific or
ascertained goods
A sale with conventional redemption is
 The judgment or decree may be
deemed to be an equitable mortgage in
unconditional, or upon such terms
any of the following cases: (IPERTOD)
and conditions as to damages,
payment of the price and otherwise 1. Unusually Inadequate purchase
as the court may deem just price;
2. Possession by the vendor remains, as
2. Remedies of buyer for breach of lessee or otherwise;
warranty by seller (Art. 1599): 3. Extension of redemption period
1. Recoupment – accept the goods and after expiration;
set up the seller’s breach to reduce 4. Retention by the vendee of part of
or extinguish the price the purchase price;
2. Accept the goods and maintain an 5. Vendor binds himself to pay the T
action for damages for breach of axes of the thing sold;
warranty 6. Any Other case where the parties
3. Refuse to accept the goods and really intended that the transaction
maintain an action for damages for should secure the payment of a debt
breach of warranty or the performance of any
4. Rescind the contract by returning or obligation; or
offering the return of the goods, and 7. When there is Doubt as to whether
recover the price of any part thereof contract is contract of sale with
NOTE: These are alternative remedies. right of repurchase or an equitable
mortgage.
When rescission by buyer not allowed:
1. if the buyer accepted the goods Equitable Mortgage
knowing of the breach of warranty  One which lacks the proper
without protest formalities, form of words, or other
2. if he fails to notify the seller within a requisites prescribed by law for a
reasonable time of his election to mortgage, but shows the intention of
rescind the parties to make the property
3. if he fails to return or offer to return subject of the contract as security
the goods in substantially as good for a debt and contains nothing
condition as they were in at the time of impossible or contrary to law (
the transfer of ownership to him Cachola vs. CA 208SCRA496)

EXTINGUISHMENT OF SALE * When can there be presumption as to

1. Same causes as in all other Equitable Mortgage?
obligations 1) Parties must have entered into a
2. Conventional Redemption contract denominated as a contract of
3. Legal Redemption sale
2) The intention of the parties was to
CONVENTIONAL REDEMPTION secure an existing debt by way of
 The right which the vendor reserves mortgage
to himself, to reacquire the property
NOTE: In the cases referred to in Arts. by the vendor.\
1602 and 1604, the apparent vendor may
ask for the reformation of the
instrument. NOTE: Written notice under Article 1623
Remedy of Reformation: To correct the is mandatory for the right of redemption
instrument so as to make it express the to commence (PSC vs. Sps. Valencia 19
true intent of the parties. August 2003.)

Redemption Period BASIS OF LEGAL REDEMPTION: Not

a. if there is an agreement: period on any proprietary right, which after the
agreed upon cannot exceed 10 years sale of the property on execution, leaves
b. if no agreement as to the period: 4 the judgment debtor and vests in the
years from the date of the contract purchaser, but on a bare statutory
c. the vendor who fails to repurchase privilege to be exercised only by the
the property within the period persons named in the statute.
agreed upon may, however, exercise
the right to repurchase within 30  Tender of payment is not necessary;
days FROM the time final judgment offer to redeem is enough.
was rendered in a civil action on the
basis that the contract was a true PRE-EMPTION REDEMPTION
sale with right of repurchase 1. arises before 1. arises after sale
 This refers to cases involving a sale
transaction where one of the 2. no rescission 2. there can be
parties contests or denies that because no sale as rescission of the
the true agreement is one of sale yet exists original sale
with right to repurchase; not to 3. the action is 3. action is directed
cases where the transaction is directed against against the buyer
conclusively a pacto de retro the prospective
sale. Example: Where a buyer a seller
retro honestly believed that he
entered merely into an Equitable Instances of legal redemption:
Mortgage, not a pacto de retro A. Under the Civil Code (legal
transaction, and because of such redemption):
belief he had not redeemed 1. Sale of a co-owner of his share
within the proper period. to a stranger (Article 1620)
NOTE: Tender of payment is 2. When a credit or other
sufficient to compel redemption, but incorporeal right in litigation is
is not in itself a payment that sold (Article 1634)
relieves the vendor from his liability 3. Sale of an heir of his hereditary
to pay the redemption price (Paez rights to a stranger (Article 1088)
vs. Magno.) 4. Sale of adjacent rural lands not
exceeding one hectare (Article
1621)
LEGAL REDEMPTION 5. Sale of adjacent small urban
 The right to be subrogated, upon the lands bought merely for
same terms and conditions stipulated speculation (Article 1622)
in the contract, in the place of one B. Under special laws:
who acquires a thing by (1) purchase 1. An equity of redemption in cases
or (2) dation in payment, or (3) by of judicial foreclosures
any other transaction whereby 2. A right of redemption in cases of
ownership is transferred by onerous extra-judicial foreclosures
title. 3. Redemption of homesteads
 May be effected against movables or 4. Redemption in tax sales
immovables. 5. Redemption by an agricultural
 It must be exercised within thirty tenant of land sold by the
(30) days from the notice in writing landowner
 NOTE: The seller of an inheritance
warrants only the fact of his heirship but
ASSIGNMENT OF CREDIT not the objects which make up his
 a contract by which the owner of a inheritance.
credit transfers to another his rights
and actions against a third person in Liabilities of the assignor of credit for
consideration of a price certain in violation of his warranties
money or its equivalent 1. Assignor in good faith
 Liability is limited only to the
NOTE: Transfer of rights by assignment price received and to the
takes place by the perfection of the expenses of the contract, and
contract of assignment without the any other legitimate payments
necessity of delivering the document by reason of the assignment
evidencing the credit. 2. Assignor in bad faith
 this rule does not apply to  Liable not only for the payment
negotiable documents and of the price and all the expenses
documents of title which are but also for damages
governed by special laws.
Legal Redemption in Sale or Credit or
 Effects of Assignment: other incorporeal right in litigation
1. transfers the right to collect the full  Requisites:
value of the credit, even if he paid a 1. There must be a sale or assignment
price less than such value of credit
2. transfers all the accessory rights 2. There must be a pending litigation at
3. debtor can set up against the the time of the assignment
assignee all the defenses he could 3. The debtor must pay the assignee:
have set up against the assignor a. price paid by him
b. judicial cost incurred by him;
Effect of payment by the debtor after AND
assignment of credit c. interest on the price from the
1. Before Notice of the assignment date of payment
 Payment to the original creditor
is valid and debtor shall be 4. The right must be exercised by the
released from his obligation debtor within 30 days from the date
2. After Notice the assignee demands (judicially or
 Payment to the original creditor extra-judicially) payment from him
is not valid as against the
assignee SALE OF CREDIT OR OTHER
INCORPOREAL RIGHTS IN
 He can be made to pay again by
LITIGATION
the assignee
GENERAL RULE: Debtor has the right
of legal redemption in sale of credit or
Warranties of the assignor of credit:
incorporeal rights in litigation
a. He warrants the existence of the
EXCEPTIONS:
credit
a. Sale to a co-heir or co-owner
b. He warrants the legality of the
b. Sale to a co-owner
credit at the perfection of the
c. Sale to the possessor of property
contract
in question
NOTE: There is no warranty as to the
solvency of the debtor unless it is
expressly stipulated OR unless the BARTER
insolvency was already existing and of
public knowledge at the time of the BARTER
assignment  contract whereby one of the parties
binds himself to give one thing in
consideration of the other's promise
 to give another thing (Article 1638) the vendor;
2. If it is made by one who produces
NOTE: Barter is similar to a sale with and delivers a written waiver of the
the only difference that instead of provisions of the Bulk Sales Act from
paying a price in money, another thing is his creditors
given in lieu of the purchase price 3. If it is made by an executor,
administrator, receiver, assignee in
PERFECTION and CONSUMMATION insolvency, or public officer, acting
 Perfected from the moment there is under judicial process (Section 8);
a meeting of minds upon the things and
promised by each party in 4. If it refers to properties exempt
consideration of the other from attachment or execution (Rules
of Court, Rule 39, Section 12)
 Consummated from the time of
mutual delivery by the contracting Protection Accorded to Creditors by
parties of the things promised Bulk Sales Law:
1. It requires the vendor, mortgagor,
NOTES: transferor or assignor to deliver to
 Where the giver of the thing the vendee, mortgagee, or to his or
bartered is not the lawful owner its agent or representative a sworn
thereof, the aggrieved party cannot written statement of names and
be compelled to deliver the thing addresses of all creditors to whom
which he has promised and is also
said vendor, etc. may have been
entitled to damages. indebted together with the amount
due or to be due (Section 3)
 Where a party is evicted of the thing 2. It requires the vendor, mortgagor,
exchanged, the injured party is given transferor or assignor, at least 10
the option, either to recover the days before the sale, transfer,
property he has given in exchange mortgage, assignment to make a full
with damages or only claim an detailed inventory showing the
indemnity for damages. quantity and the cost of price of
 As to matters not provided for by the goods, and to notify every creditor
provisions on barter, the provisions of the price terms and conditions of
on sales will apply suppletorily the sale, etc. (Section 5)
BULK SALES LAW (Act No. 3952) Effects of False Statements in the
When Sale or Transfer in Bulk: Schedule of Creditors:
 Any sale, transfer, mortgage, or 1. Without knowledge of buyer
assignment:  If the statement is fair upon its
1. Of a stock of goods, wares, face and the buyer has no
merchandise, provisions, or knowledge of its incorrectness
materials otherwise than in the and nothing to put him on
ordinary course of trade and the inquiry about it, he will be
regular prosecution of business; or protected in its purchase
2. Of all or substantially all, of the  The remedy of the creditor is not
business or trade; or against the goods but to
3. Of all or substantially all, of the prosecute the seller criminally
fixtures and equipment used in the 2. With knowledge or imputed
business of the vendor, mortgagor, knowledge of buyer
transferor or assignor (section 2)  The vendee accepts it at his
peril
When sale or transfer in bulk not  The sale is valid only as between
covered by Bulk Sales Law: the vendor and the vendee but
1. If the sale or transfer is in the void against the creditors
ordinary course of trade and the
regular prosecution of business of
3. With names of certain creditors Acts Punished by Bulk Sales Law:
without notice are omitted from the 1. Knowingly or wilfully making or
list delivering a statement required by
 The sale is void as to such the Act which does not include the
creditors, whether the omission names of all the creditors of the
was fraudulent or not, vendor, etc. with the correct
4. With respect to an innocent amount due or to become due or
purchaser for a value from the which contains any false or untrue
original purchaser statement; and
 An innocent purchaser for value 2. Transferring title to any stock of
from the original purchaser is goods, wares, merchandise,
protected provisions or materials sold in bulk
 However if the circumstances without consideration or for nominal
are such as to bind the consideration (Section 7)
subsequent purchaser with
constructive notice that the sale RETAIL TRADE LIBERALIZATION ACT
to the vendor (original (RA 8762)
purchaser) was fraudulent, the
property will be liable in his Retail Trade
hands to creditors of the original  Any act occupation or calling of
vendor habitually selling direct to the
Effect of violation of law on Transfer: general public merchandise,
1. As between the parties commodities or goods for
 The Bulk Sales Law does not in consumption, but the restrictions of
any way affect the validity of this law shall not apply to the
the transfer as between the following:
intermediate parties thereto 1. Sales by manufacturer, processor,
 A sale not in compliance with laborer, or worker, to the general
the Bulk Sales Law is valid public the products manufactured,
against all persons other than processed produced by him if his
the creditors. capital does not exceed P100,000;
2. As against creditors 2. Sales by a farmer or agriculturalist
 A purchaser in violation of the selling the products of his farm
law acquires no right in the 3. Sales in restaurant operations by a
property purchased as against hotel owner or inn-keeper
the creditors of the seller irrespective of the amount of
 His status is that of a trustee or capital; provided that the restaurant
receiver for the benefit of the is incidental to the hotel business;
creditors of the seller; as such, and
he is responsible for the 4. Sales which are limited only to
disposition of the property products manufactured, processed or
assembled by a manufacturer
Remedies Available to creditors: through a single outlet, irrespective
 The proper remedy is one against the of capitalization
goods to subject them to the
payment of the debt, such as High-End or Luxury Goods
execution, attachment,  Goods which are not necessary for
garnishment, or by a proceeding in life maintenance and whose demand
equity is generated in large part by the
 An ordinary action against the higher income groups
purchaser to obtain money
 Shall include but not limited to:
judgement will not lie, unless the
jewelry, branded or designer
purchaser has sold or otherwise
clothing and footwear, wearing
disposed of, or dealt with the
apparel, leisure and sporting goods,
property, so as to become personally
electronics and other personal
liable to creditors for value of it.
 effects
NOTE: A natural-born citizen of the NOTES:
Philippines who has lost his citizenship  Foreign investor shall be required to
but who resides in the Philippines shall maintain in the Philippines the FULL
be granted the same rights as Filipino amount of the prescribed minimum
citizens capital, UNLESS the foreign investor
has notified the SEC and the DTI of
Foreign Equity Participation: its intention to repatriate its capital
 Foreign-owned partnerships, and cease operations in the
associations and corporations formed Philippines
and organized under the laws of the  Failure to maintain the full amount
Philippines may, upon registration of the prescribed minimum capital
with SEC and DTI, or in case of prior to notification of the SEC and
Foreign-owned single proprietorship the DTI shall subject the foreign
with the DTI, engage or invest in investors to penalties or restrictions
retail trade business, subject to the on any future trading
following categories: activities/business in the Philippines
1. Category A:
 Paid-up capital of the equivalent NOTE: Foreign Investors Acquiring
in Philippine Peso of: < Shares of Stock of existing retail stores
$2,500,000 US Dollars whether or not publicly listed whose net
 Reserved exclusively for Filipino worth is in excess of the Peso equivalent
citizens and corporations wholly of US $2,500,000 may purchase only up
owned by citizens to the maximum of 60% of the equity
2. Category B: thereof within the first 2 years, and
 Minimum paid-up capital of the thereafter, they may acquire the
equivalent in Philippine Peso of remaining percentage consistent with the
$2,500,000 US Dollars, but allowable foreign participation as herein
<$7,500,000 provided
 May be wholly owned by
foreigners except for the first NOTE: All retail Trade enterprises
under categories B and C in which
two years after the effectivity of
foreign ownership exceeds 80% of equity
this Act wherein foreign
shall offer a minimum of 30% of their
participation shall be limited to
equity to the public through any stock
not > 60% of total equity.
exchange in the Philippines within 8 years
3. Category C:
from the start of the operations
 Paid-up capital of the equivalent
in Philippine Peso of: Qualification of Foreign Retailers
$7,500,000 US Dollars or more 1. Minimum of $200,000,000 US Dollars
 May be wholly owned by net worth in its parent corporation
foreigners for Categories B and C and
NOTE: In no case shall the $50,000,000 net worth in its parent
investments for establishing a corporation for Categories D
store in Categories B and C be 2. 5 retailing branches or franchises in
less than the equivalent in operation anywhere around the
Philippine Peso of: US $830,000 world unless such retailer has at
4. Category D: least 1 store capitalized at a
 Enterprises specializing in high- minimum of $25,000,000 US Dollars
end or luxury products with paid- 3. 5-year track record in retailing; and
up capital of the equivalent in 4. Only nationals from, or juridical
Philippine Peso of: $250,000 US entities formed or incorporated in
Dollars per store Countries which allow to engage in
 May be wholly owned by retail trade in the Philippines
foreigners
 sell any subdivision lot or
PD 957 (SUBDIVISION AND condominium unit in the registered
CONDOMINIUM BUYERS’ project unless he shall have first
PROTECTIVE DECREE obtained a license to sell the project
within two weeks from the
Registration of Projects registration of such project.
 The registered owner of a parcel of
land who wishes to convert the same Exempt transactions
into a subdivision project shall  A license to sell and performance
submit his subdivision plan to the bond shall not be required in any of
HOUSING AND LAND-USE the following transactions:
REGULATORY BOARD, which shall act 1. Sale of a subdivision lot resulting
upon and approve the same, upon a from the partition of land among co-
finding that the plan complies with owners and co-heirs.
the Subdivision Standards' and 2. Sale or transfer of a subdivision lot
Regulations enforceable at the time by the original purchaser thereof and
the plan is submitted. The same any subsequent sale of the same lot.
procedure shall be followed in the 3. Sale of a subdivision lot or a
case of a plan for a condominium condominium unit by or for the
project except that, in addition, said account of a mortgagee in the
Authority shall act upon and approve ordinary course of business when
the plan with respect to the building necessary to liquidate a bona fide
or buildings included in the debt.
condominium project in accordance
with the National Building Code ( Grounds for Revocation of registration
R.A. No. 6541). certificate and license to sell of owners
 The subdivision plan, as so approved, or dealers
shall then be submitted to the 1. Is insolvent; or
Director of Lands for approval in 2. Has violated any of the provisions of
accordance with the procedure this Decree or any applicable rule or
prescribed in Section 44 of the Land regulation of the Authority, or any
Registration Act (Act No. 496, as undertaking of his/its performance
amended by R.A. No. 440): Provided, bond; or
that it case of complex subdivision 3. Has been or is engaged or is about to
plans, court approval shall no longer engage in fraudulent transactions; or
be required. The condominium plan 4. Has made any misrepresentation in
as likewise so approved, shall be any prospectus, brochure, circular or
submitted to the Register of Deeds other literature about the
of the province or city in which the subdivision project or condominium
property lies and the same shall be project that has been distributed to
acted upon subject to the conditions prospective buyers; or
and in accordance with the 5. Is of bad business repute; or
procedure prescribed in Section 4 of 6. Does not conduct his business in
the Condominium Act (R.A. No. accordance with law or sound
4726). business principles.

 National Housing authority (now

Housing and Land Use Regulatory LEASE
Board) has the exclusive jurisdiction
to regulate the real estate trade and LEASE
business.  consensual, bilateral, onerous, and
commutative contract by virtue of
License to sell which one person binds himself to
 Such owner or dealer to whom has grant temporarily the use of the
been issued a registration certificate thing or to render some service to
shall not, however, be authorized to another who undertakes to pay some
 rent. NOTES:
Kinds of Leases (From the view point  When a student boards and lodges in
of the subject matter a dormitory, there is no contract of
1. Lease of things lease. The contract is not
2. Lease of service designated specifically in the Civil
3. Lease of work Code. It is an innominate contract.
It is however, believed that the
NOTE: Since lease is consensual and is contract can be denominated as the
not imposed by law, only the lessor has contract of board and lodging.
the right to fix the rents. However, the  There is a contract of lease when the
increasing of the rent is not an absolute use and enjoyment of a safety
right on the part of the lessor. deposit box in a bank is given for a
price certain. This is certainly not a
Characteristics or Requisites for Lease contract of deposit.
of Things
 A lease of personal property with
1. Consensual
option to buy (at a nominal amount)
2. Principal
at the end of the lease can be
3. Nominate
considered a sale.
4. Purpose is to allow enjoyment or
use of a thing (the person to
LEASE SALES
enjoy is the lessee; the person
1. only use or 1. ownership is
allowing the enjoyment by enjoyment is transferred
another is the lessor transferred
5. Subject matter must be within 2. transfer is 2. transfer is
the commerce of man temporary permanent
6. Purpose to which the thing will 3. lessor need not 3. seller must be
be devoted should not be be the owner the owner at the
immoral time the property
7. Onerous (there must rent or price is delivered
certain) 4. the price of the 4. usually, the
8. Period is Temporary (not object, selling price is
distinguished from mentioned
perpetual, hence, the longest
the rent, is usually
period is 99 years) not mentioned
9. Period is either definite or
indefinite
 If no term is fixed, we should Lease of Lease of
Things Services
apply Art.1682 (for rural leases)
1. object 1. object is
and Art. 1687 (for urban leases)
of contract is a some work or
 If the term is fixed but thing service
indefinite, the court will fix the 2. lessor 2. lessor has
term under the law of has to deliver to perform some
obligations and contracts the thing leased work or service
10. Lessor need not be the owner 3. in case of 3. in case of
breach, there breach, no action
NOTE: A usufructuary may thus can be an action for specific
lease the premises in favor of a for specific performance
performance
stranger, such lease to end at the
time that the usufruct itself ends
Lease of Contract for a
Rent Services Piece of Work
(locatio (locatio operas)
 The compensation either in operatum)
money, provisions, chattels, or 1. the 1. the
labor, received by the lessor important object important object is
from the lessee. is the labor the work done
performed by the
lessor
 2. the 2. the result
result is is generally * Lease may be made orally, but if the
generally not important; lease of Real Property is for more than 1
important, generally, the price year, it must be in writing under the
hence the is not payable until
Statue of Frauds.
laborer is the work is
entitled to be completed, and
paid even if said price cannot be Persons Disqualified to be Lessees
there is lawfully demanded Because Disqualified to Buy
destruction of if the work is 1. A husband and a wife cannot lease to
the work through destroyed before it each other their separate properties
fortuitous event is finished and
except:
accepted
a. if separation of property was
agreed upon
b. if there has been judicial
Lease of Agency
separation of property
Services Persons referred to in Art. 1491 are
It is based on It is based on disqualified because of fiduciary
employment – representation – relationships
the lessor of agent represents his
services does not principal and enters SUBLEASE
represent his into juridical acts.  A separate and distinct contract of
employer nor
lease wherein the original lessee
does he execute
juridical acts.
becomes a sublessor to a sublessee.
Principal Preparatory  Allowed unless expressly prohibited.
contract contract  The sublessee is subsidiarily liable
for any rent due. The lessor has an
Rule for Lease of Consumable Goods accion directa against the sublessee
GENERAL RULE: Consumable goods for unpaid rentals and improper use
cannot be the subject matter of a of the object.
contract of lease of things.
Why? To use or enjoy hem, they will SUBLEASE ASSIGNMENT
have to be consumed. This cannot be OF LEASE
done by a lease since ownership over 1. there are two 1. there is only one
them is not transferred to him by the leases and two juridical
contract of lease. distinct juridical relationship, that of
EXCEPTIONS: relationships the lessor and the
a. If they are merely exhibited although assignee, who is
immediately converted into a
b. If they are accessory to an connected and lessee
industrial establishment related to each
other
RECORDING OF LEASE OF 2. the 2. the personality of
PERSONAL PROPERTY personality of the lessee
GENERAL RULE: Lease of real the lessee does disappears
property is personal right not disappear
EXCEPTIONS: Lease partakes of the 3.the lessee does 3. the lessee
nature of real right if: not transmit transmits absolutely
a. Lease of real property is more absolutely his his rights to the
rights and assignee
than 1 year
obligations to the
b. Lease of real property is sublessee
registered regardless of duration 4. the sublessee, 4. the assignee has
generally, does a direct action
NOTE: Lease of personal property not have any against the lessor
cannot be registered. To be binding direct action
against third persons, the parties must against the lessor
execute a public instrument.
RIGHTS OF LESSOR IF SUBLEASE 2. Partial destruction
PROHIBITED BUT ENTERED INTO BY a. Proportional reduction of the
LESSEE: rent, or
1) Rescission and damages, or b. Rescission of the lease
2) Damages only (Contract will be When lessee may suspend payment of
allowed to remain in force) rent:
3) Ejectment 1. lessor fails to undertake necessary
repairs
Instances when sublessee is liable to 2. lessor fails to maintain the lessee in
the lessor: peaceful and adequate enjoyment of
a. All acts which refer to the use the property leased
and preservation of the thing
leased in the manner stipulated NOTE: “Suspend”- for the intervening
between the lessor and the period, the lessee does not have to pay
lessee the rent.
b. The sublessee is subsidiarily
liable to the lessor for any rent EFFECTIVITY OF THE SUSPENSION:
due from the lessee. The right begins:
NOTE: The sublessee shall not be a) In the case of repairs, from the time
responsible beyond the amount of rent he made the demand for said repairs,
due from him. and the demand went unheeded.
b) In the case of eviction, from the time
Accion Directa: direct action which the the final judgment for eviction becomes
lessor may bring against a sublessee who effective.
misuses the subleased property.
Alternative remedies of Aggrieved
OBLIGATIONS OF THE LESSOR (DnM) party (Lessor/Lessee) in case of Non-
a. Delivery of the object (cannot be fulfillment of duties:
waived) 1. Rescission and damages
b. Making of necessary repairs 2. Damages only, allowing the contract
c. Maintenance in peaceful and to remain in force – Specific
adequate possession Performance
NOTE: Damages Recoverable in
OBLIGATIONS OF THE LESSEE (R2EN2 ejectment cases are the rents or the fair
U) rental value of the premises. The
a. to pay rent following cannot be successfully claimed:
b. to use thing leased as a diligent 1. Profits plaintiff could have
father of a family, devoting it to earned were it not for the
the use stipulated possible entry or unlawful
c. to pay expenses for the deed of detainer
lease 2. Material injury to the premises
d. to notify the lessor of usurpation 3. Actual, moral, or exemplary
or untoward acts damages
e. to notify the lessor of need for
repairs Immediate termination of lease under
f. to return the property leased Art. 1660 applies:
upon termination of the lease
1. only to dwelling place or any other
Effect of Destruction of the Thing building intended for human
Leased: habitation
1. Total destruction by a fortuitous event 2. even if at the time the contract was
 Lease is extinguished perfected, the lessee knew of the
dangerous condition or waived the
right to rescind on account of this
condition
Rules on Alteration of the Form of the discharged at any given moment, but
Lease must be fulfilled all throughout the term
 The Lessor can alter provided there of the contract. (Villaruel vs. Manila
is no impairment of the use to which Motor Co.)
the thing is devoted under the terms
of the lease Duration of Lease
 Alteration can also be made by the 1. Lease made for a determinate time
Lessee so long as the value of the or fixed Period
property is not substantially  Lease will be for the said period
impaired and it ends on the day fixed
without need of a demand
Rules in case of Urgent Repairs
 The lessee is obliged to tolerate the 2. If there is no fixed period
work although it may be very A. For Rural Lands (Article 1680)
annoying to him and although during  it shall be for all time necessary
the same time he may be deprived for the gathering of fruits which
of a part of the premises the whole estate may yield in 1
1. If repairs last for more than 40 days: year, or which it may yield once
Lessee cannot act for reduction of B. For Urban Lands (Article 1687)
rent or rescission a. If rent is paid daily: lease is
2. If 40 days or more: lessee can ask from day to day
for proportionate reduction b. If rent is paid weekly: lease is
NOTE: In either case, rescission may be from week to week
availed of if the main purpose is to c. If rent is paid monthly: lease is
provide a dwelling place and the from month to month
property becomes uninhabitable. d. If rent is paid yearly: lease is
from year to year
Effects if Lessor fails to make Urgent
Repairs RULES ON EXTENSION OF THE
1. Lessee may order repairs at the LEASE PERIOD:
lessor’s cost 1) If a lease contract for a definite term
2. Lessee may sue for damages allows lessee to extend the term, there
3. Lessee may suspend the payment of is no necessity for lessee to notify lessor
the rent of his desire to so extend the term,
4. Lessee may ask for rescission, in case unless the contrary is stipulated.
of substantial damage to him 2) “May be extended” as stipulation:
lessee can extend without lessor’s
TRESPASS IN LEASE: consent but lessee must notify lessor.
1. Trespass in fact (perturbacion de 3) “May be extended for 6 years agreed
mere hecho): upon by both parties” as stipulation: This
 physical enjoyment is reduced must be interpreted in favor of the
 Lessor will not be held liable. lessee. Hence, ordinarily the lessee at
the end of the original period may
2. Trespass in law (perturbacion de
derecho):
either:
a) leave the premises; or
 A third person claims legal right b) remain in possession
to enjoy the premises 4) In co-ownership, assent of all is
 Lessor will be held liable needed; otherwise, it is void or
ineffective as against non-consenting co-
NOTE: While the Japanese Occupation owners.
was a fortuitous event, the lessor is still 5) Where according to the terms of the
not excused from his obligation to contract, the lease can be extended only
warrant peaceful legal possession. Lease by the written consent of the parties
is a contract that calls for prestations thereto, no right of extension can rise
both reciprocal and repetitive; and the without such written consent.
obligations of either party are not
Rule if Lessor Objects to the Lessee’s which are by nature foreign to the right
continued Possession: of occupancy or enjoyment inherent in a
 Requisites: contract of lease – such as an option to
1. Contract has expired purchase the leased premises (Dizon vs.
2. Lessee continued enjoying the thing Magsaysay GR No. 23399, May 31,1974)
3. Lessor Objected to this enjoyment
 If the three requisites are present, Perpetual Lease
the lessee shall be considered a  A lease contract providing that the
possessor in bad faith lessee can stay in the premises for as
long as he wants and for as long as
IMPLIED NEW LEASE (Tacita he can pay the rentals and its
Reconducion) increases.
 lease which arises if at the end of  This is not permissible; it is a purely
the contract the lessee should potestative condition because it
continue enjoying the thing leased leaves the effectivity and enjoyment
for 15 days with the acquiescence of of leasehold rights to the sole and
the lessor, unless a notice to the exclusive will of the lessee
contrary had previously been given
by either party. NOTE: In Jespajo Realty vs. CA, 27
Sept. 2002, the SC upheld a lease
 Requisites: contract, which provides that “the lease
a. the term of the original contract contract shall continue for an indefinite
has expired period provided that the lessee is up-to-
b. the lessor has not given the date in the payment of his monthly
lessee a notice to vacate rentals” for the contract is one with a
c. the lessee continued enjoying period subject to a resolutory condition.
the thing leased for at least 15
days with the acquiescence of PURCHASE OF THE LEASED
the lessor PROPERTY
GENERAL RULE: Purchaser of thing
 When there is no implied new leased can terminate lease.
EXCEPTIONS:
lease:
1. When before or after the
a. lease is recorded in Registry of
expiration of the term, there is a Property
notice to vacate given by either b. there is stipulation in the
party. contract of sale that purchaser
shall respect the lease
2. When there is no definite fixed
period in the original lease contract c. purchaser knows the existence of
the lease
as in the case of successive
renewals. d. sale is fictitious
e. sale is made with right of
repurchase
 Effects:
a. The period of the new lease is GROUNDS FOR EJECTMENT UNDER
not that stated in the original ART. 1673: (ELVU)
contract but the time in Articles 1. Expiration of the period agreed upon
1682 and 1687. or the period under Arts. 1682 and
b. Other terms of the original 1687;
contract are revived. 2. Lack of payment of the price
stipulated;
NOTE: Terms that are revived are only 3. Violation of any of the conditions
those which are germane to the agreed upon in the contract; and
enjoyment of possession, but not those 4. Unauthorized use or service by the
with respect to special agreements lessee of the thing leased.
 6. Expiration of period of the lease
RENTAL REFORM ACT OF 2002 contract.
(R.A. No. 9161)
 Effectivity: January 1, 2002. NOTE:
 Coverage:  Except when the lease is for a
a. All residential units of NCR and definite period, the provisions of
other highly urbanized cities, the Art. 1673(1) of the Civil Code (CC),
total monthly rental for each of insofar as they refer to residential
which does not exceed P7,500; units, shall be suspended during the
b. All residential units in other areas effectivity of R.A. 9161, but other
the total monthly rental for each of provisions of the CC and the Rules of
which does not exceed P4,000 as of Court on lease contracts insofar as
1/1/02, without prejudice to pre- they are not in conflict with the
existing contracts. provisions of R.A. No. 9161 shall
apply.
 Grounds for judicial ejectment:  No increase in monthly rental by
SANORE more than 10% is allowed.
1. Assignment of lease or subleasing of
residential units including the TERMINATION OF THE LEASE
acceptance of boarders or  If made for a determinate time, it
bedspacers without written consent ceases upon the day fixed without
of the owner or lessor; the need of a demand.
2. Arrears in payment of rent for a 1) By the expiration of the period
total of 3 months; 2) By the total loss of the thing
3. Legitimate needs of the owner or 3) By the resolution of the right of the
lessor to repossess for his own use or lessor
for the use of any immediate 4) By the will of the purchaser or
member of his family as a residential transferee of the thing
unit, provided: 5) By rescission due to non-performance
a. owner or immediate member not of the obligation of one of the parties
being owner of any other available
residential unit within the same city Special Provisions for Rural Lands
or municipality;  Effect of loss due to fortuitous
b. lease for a definite period has event:
expired; 1. Ordinary fortuitous event – no
c. lessor has given lessee formal reduction
notice 3 months in advance; and 2. Extraordinary fortuitous event
d. owner or lessor is prohibited a. if more than ½ of the fruits were
from leasing the residential unit or lost, there shall be a reduction,
allowing its use by a third person for unless there is a stipulation to
at least 1 year. the contrary
4. Absolute ownership by the lessee of b. if ½ or less, there shall be no
another dwelling unit in the same reduction
city or municipality which may be  Lease duration: If not fixed, it shall
lawfully used as his residence be for all time necessary for the
provided lessee is with formal notice gathering of fruits which the whole
3 months in advance; estate may yield in 1 year, or which
5. Need of the lessor to make it may yield once.
necessary repairs in the leased
premises which is the subject of an Special Provisions for Urban Lands
existing order of condemnation by  Repairs for which urban lessor is
appropriate authorities concerned in liable:
order to make said premises safe and 1. special stipulation
habitable; and 2. if none, custom of the place
3. in case of doubt, the repairs are
chargeable against him

 Lease duration:
1. If there is a fixed period, lease will be
for said period.
2. If no fixed period, apply the following
rules:
a. If rent is paid daily: day to day
b. If rent is paid weekly: week to
week
c. If rent is paid monthly: month to
month
d. If rent is paid yearly: year to
year