NATURE OF OBLIGATION CREATED

RFBT : LAW ON SALES a. For the SELLER : To transfer ownership and to deliver possession
of the subject matter
A contract where one party obliges himself to transfer ownership and to b. For the BUYER : To pay the price
deliver a determinate thing and the other party to pay a price certain in
money or its equivalent. SALES AS A TITLE
Contract of sale DOES NOT transfer the ownership of the subject matter. It
ELEMENTS OF A CONTRACT OF SALE is merely a title that creates the obligation to transfer ownership and a
1. Essential Elements mode thereof.
a. Consent
b. Determinate Object The contract of sale transfers no real rights. Ownership and position is
c. Price Certain in Money transferred through delivery or tradition.
2. Natural Elements
a. Warranty Against Eviction SALE DISTINGUISH FROM OTHER CONTRACTS
b. Warranty Against Hidden Defects and Encumbrances
3. Accidental Elements A. DONATION
a. This refers to the stipulations of the contracting parties,
SALE DONATION
CHARACTERISTICS OF A CONTRACT OF SALE Onerous Gratuitous
1. Consensual - It is perfected by mere consent.
2. Principal - It is capable of standing alone without the need of Perfected by mere consent Perfected by donee’s acceptance
another contract.
3. Bilateral - There is a reciprocal obligation between the parties . Donation is an act of liberality whereby a person disposes gratuitously of a
4. Onerous - A valuable consideration is given by both parties. thing or right in favor of another, who accepts it.
5. Commutative - The consideration exchange is of equivalent values.
6. Nominate - It has a name given by law. B. BARTER
SALE BARTER
STAGES OF A CONTRACT OF SALE
1. Preparation/Conception Cause or consideration is another
Cause or consideration is in money.
The time the contracting parties shows interest in the contract. thing.
2. Perfection/Birth
The concurrence of the essential elements of the sale. By contract of barter or exchange, one of the parties binds himself to give
3. Consummation/Death one thing in consideration of the other’s promise to give another thing.
It begins when the parties perform their respective undertakings, [Art. 1638]
resulting in the extinguishment thereof.
Note : Consideration is partly in money and partly in another thing.
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The type of contract is determined under the following hierarchy :
CONTRACT OF SALE CONTRACT TO SELL
a. Manifest intention of the parties,
b. If intention is not clear, the following rules shall apply: Ownership is transferred upon Ownership is transferred upon full
● Things are more valuable than money- barter. delivery payment
● Money is equal or more than to the value of the thing - sale.
Non-payment is a resolutory Full payment is a positive
condition suspensive condition
C. CONTRACT FOR PIECE OF WORK
CONTRACT FOR PIECE OF Sale is already perfected No perfected sale yet
SALE
WORK
Subsequent buyer is presumed to be Subsequent buyer is presumed to be
in bad faith in good faith
Ordered in the ordinary course of Made specially for the customer
the business. upon his special order. Vendor loses and cannot recover
Title remains in the vendor if the
ownership of the thing sold until
Things transferred already existed vendee does not comply with the
Things transferred existed due to contract of sale is resolved and set
and can be a subject of sale to other conditions of the contract
the order of the party desiring it. aside
persons.

Within the statues of fraud. Not within the statutes of fraud. Contract to sell cannot be considered as a contract of sale because the first
element (consent) is lacking. The prospective seller does not consent until
When each product or system executed is always UNIQUE and could not the happening of an event. The seller only agrees to fulfill his promise to
mass produce the product because of its very nature, such is a contract for a sell the subject when full payment is made.
piece of work. [Commissioner vs. Engineering Equipment and Supply Co.,
1975] F. KINDS OF CONTRACT OF SALE
CONDITIONAL CONTRACT OF CONTRACT TO SELL
D. DACION EN PAGO SALE
SALE DACION EN PAGO
Sale is already perfected Sale is not perfected
No pre-existing debt Pre-existing debt Upon fulfillment of condition, Upon fulfillment of condition,
ownership automatically transfers to ownership does not automatically
Creates an obligation Extinguishes an obligation the buyer transfers to the buyer
Cause is the extinguishment of the
The cause or consideration is the 1. ABSOLUTE - Sale is not subjected to any condition and the title
obligation and the delivery of the
price and the delivery of the object immediately passes to the purchaser upon delivery.
object

E. CONTRACT TO SELL 2. CONDITIONAL - Ownership of the object remains with the vendor
until fulfillment of condition/s.
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G. AGENCY TO SELL B. For Rights :
1. Transmissible
SALE AGENCY TO SELL
2. Licit
Agent receives goods of the
Buyer receives goods as owner Goods which may be object of sale :
principal who retains ownership
a. Existing Goods - goods owned or possessed by the seller
Agent delivers the price which he b. Future Goods - goods to be manufactured, raised or acquired by
Buyer pays the price
got from his buyer
the seller after the perfection of the contract. These are things which
Buyer, as a general rule, cannot are expected.
Agent can return the goods
return the object sold.
Objects must be within the commerce of men. If the subject is illicit, the
Seller warrants the thing sold Agent makes no warranty contract is VOID and cannot be ratified.
Agent can deal with the thing
Buyer can deal with the thing sold received as long as it is within his Instances of sale of things not actually or already owned by the seller at
authority given by the principal time of sale.
1. Sale of things having potential existence
H. LEASE 2. Sale of future goods.
3. Contract for the delivery at a certain price of a thing the vendor
SALE LEASE
produces in the ordinary course of the business or for the general
Ownership transferred by delivery No transfer of ownership market.

Seller must be the owner at the time LICIT

Lessor need not be the owner
of delivery The thing is licit when :
1. It is within the commerce of man.
One person binds himself to grant temporarily the use of the thing or to 2. When right is transmissible.
render some service to another who undertakes to pay some rent. 3. It does not contemplate a future inheritance, unless expressly
authorized by law.

OBJECTIVES / SUBJECT MATTER Example of properties not within the commerce of man :
1. Public Property
REQUISITES OF A VALID SUBJECT MATTER a. Property for public use.
A. For Things : b. Intended for public service.
1. Licit/Lawful. c. Intended for development of national wealth.
2. Should not be impossible. 2. Church
3. Determinate or determinable. 3. Narcotics
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KINDS OF ILLICIT THINGS and the title will vest in the buyer the moment the thing comes into
1. Per Se - of its nature. existence.
2. Per Accidens - due to provisions of law declaring it illegal.
MERE HOPE OR EXPECTANCY (Emptio Spei)
Examples of Illicit Sale : The sale of a mere hope or expectancy is deemed subject to the condition
a. Sale of Future inheritance. that the thing contemplated or expected will come into existence.
b. Sale of animals suffering from contagious disease.
c. Sale of animals to be used for a service stated in a contract, and they The Sale itself is valid even if the thing hoped or expected does not come
have found to be unfit therefore. into existence, unless if such hope or expectancy is in vain, such sale is
d. Sale or transfer of land to aliens. VOID.

EXISTING, FUTURE, CONTINGENT

Goods which form the subject may either be :
1. Existing
2. Goods to be manufactures, raise or acquired by the seller
3. Things having potential existence
4. Sale of specific things
5. Fungible goods
6. Undivided interest

FUTURE GOODS (Emptio Rei Speratae)

It is in the form of a present sale, and is valid only as an executory contract
to be fulfilled by the acquisition and delivery of the goods specified. Upon
the acquisition of goods, either party may demand the execution of the
contract. Note : In case of doubt, presumption is in favor of emptio rei speratae
since it is more in keeping the commutative character of the contract.
Example of future things :
1. Goods to be manufactured or printed SALE OF SPECIFIC THINGS
2. To be raised or future agricultural products A. Sale of Things in Litigation
3. To be acquired by the seller after the perfection of the contract Entered into by the defendant, without knowledge and approval of the
4. Things whose acquisition depends upon a contingency litigants or the court is rescissible. [Art. 1381 (4)] Rescission will not take
place when the thing legally is in the possession of a 3rd person who acted
Potential Existence in good faith. [Art. 1385 (2)]
Goods not existing at the time can be an object as long as it has a potential
or possible existence, that is, it is reasonably certain to come into existence,
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B. Sale of Undivided Interest Requisites
Makes the buyer a co-owner of the thing. The co-owner can dispose of his 1. Certain or ascertained at the time of perfection
share even without the consent of the other co-owner/s. 2. In money or its equivalent
3. Real, not fictitious
C. Sale of Undivided Share of a Specific Mass of Fungible Goods
The sale of an undivided share in a specific mass of fungible goods makes A. CERTAINTY OF PRICE
the buyer a co-owner of the entire mass in proportion to the amount he Price must be certain, otherwise the sale is void by reason of absence of
bought. If later on it was discovered that the mass of fungible goods contain meeting of minds.
less than what was agreed upon, the buyer becomes the owner of the whole
mass and seller must make up for the difference. Price can be determined or certain when :
a. Parties have fixed or agreed upon a definite price
D. Sale of Things Subject to a Resolutory Condition Fixing of price cannot be left to the discretion of one of the parties
If the resolutory condition happens, the vendor cannot transfer ownership unless such was accepted by the other, therefore the sale is
of what he sold since there is no object. perfected.
b. If it be certain with reference to another thing certain
DETERMINATE OR DETERMINABLE c. Determination is left to the judgment of a specified person
A. Determinate Price fixed by 3rd persons designated by the parties is binding upon
A thing is determinate when it is particularly designated or physically them.
segregated from all others of the same class.
Exemptions
B. Determinable 1. If unable or unwilling : sale is inefficacious unless parties
A thing is determinable when it is capable of being determined at the time subsequently agree about the price.
the contract was entered without the necessity of a new or further 2. If in bad faith/by mistake : Courts may fix the price.
agreement between the parties. 3. If 3rd person is prevented from fixing price by fault of seller or
buyer : Innocent party may avail of remedies through recession or
Note : o Failure to state the exact location of the land does not make the fulfillment of obligation, with damages.
object indeterminate, so long as it can be located. o The fact that the exact
area of the land specified in the contract of sale is subjected to the result of B. INADEQUACY OF PRICE
the survey does not make the object indeterminate. Gross inadequacy of price does not affect the contract of sale except that it
may indicate a defect in consent.
PRICE 1. Voluntary Sales
General Rule : Mere inadequacy of the price does not affect
It is the sum stipulated as equivalent of the thing sold and also every validity of the sale.
incident taken into consideration for the fixing of the price put to the debit
of the buyer and agreed to by him. Exceptions :
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 a. When low price indicates vice of consent, sale may be Reasonable Price
annulled What is a reasonable price is a question of fact dependent on the
b. Where the price is so low as to be “shocking to conscience”, circumstances of each case.
sale may be set aside
c. Where the parties did not intend to be bound at all, sale is It may be determined on the basis of a company’s balance sheet showing
VOID the book or fair value of its shares.

2. Involuntary Sales Generally, a reasonable price is the market price at the time and place fixed
General Rule : Mere inadequacy of the price is not a sufficient by the contract or by law for delivery of goods.
ground for the cancellation of the sale if property is real.
E. EARNEST MONEY
Exceptions : Partial payment of the purchase price & considered proof of the perfection
1. Where the price is so low as to be shocking to the moral of the contract.
conscience, judicial sale will be set aside.
2. In the event of resale, a better price can be obtained.

C. SIMULATION OF PRICE
If the price is simulated, the contract is void for the lack of cause or
consideration, but can be shown as a donation or some other contract.
Disagreement on the matter of payment is tantamount to a failure on
the price.
1. False Price (Relative Simulation)
Price stated in the contract is not the true price parties intended to
be bound

2. Simulated Price (Absolute Simulation)

Price stated in the contract is not intended to be paid. Parties never NOTE : Expenses for the execution and registration of the sale shall be
intended to be bound. Contract is void and inexistent. borne by the vendor, unless there is a stipulation to the contrary.

D. FAILURE TO DETERMINE PRICE Remedies of vendor to unpaid price :

1. Where contract executory - contract is without effect. There is 1. Exact fulfillment
no obligation created. 2. Cancel the sale, should vendee fail to pay two or more installments.
2. Where delivery has been made - buyer must pay a reasonable 3. Foreclose the chattel mortgage.
price.

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Requisites
a. Must be a contract of sale ACCEPTANCE
b. Object is personal property
c. Sale must be in installments The acceptance referred to which determines consent is the acceptance of
the offer, and not of the goods delivered.
Does not apply for sale for cash or straight terms.
Requisites
OFFER 1. It must be absolute
2. Must be plain and unconditional
General Rule : Offer may be withdrawn at any time without even 3. To bind the offeror, the offeree must comply with the conditions of
communicating such withdrawal to the interested buyer the offer.

Exception : When the offeror has allowed the offeree a certain period to PERFECTION
accept, may be withdrawn at any time before acceptance by communicating
such withdrawal. Contract of sale is perfected at the moment of the meeting of the minds of
the parties.
Exception to the Exception : Cannot be withdrawn within a certain
period if found under a consideration. From the moment of perfection, parties may reciprocally demand
performance.
OPTION CONTRACT
An accepted unilateral promise to buy or sell supported by a consideration Requirements for Perfection
distinct from the price. It secures the privilege to buy. 1. When parties are face to face, when an offer is accepted without
conditions and without qualifications. If negotiation is made
through a phone, it is as if the parties are face to face.
2. When contract is through a correspondence or thru telegram, there
is perfection when the offeror receives or has knowledge of the
acceptance by the offeree.
An option without consideration is VOID and the effect is the same as if 3. When sale is made subject to a suspensive condition, perfection is
there was no option. when from the moment the condition is fulfilled.

Kinds of Promises Statute of Fraud

1. Unilateral promise to sell - promise elects to buy The following transaction must be in writing, otherwise the contract is
2. Unilateral promise to buy - promise elects to sell unenforceable. Unless ratified by failure to object to oral acceptance of
3. Bilateral promise to buy and sell - either parties choose to benefits under the contract.
exact fulfillment 1. Sale of property at price not less than P500.00
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 2. Sale not to be performed within one year
3. Sale of real property or interest therein CAPACITY TO BUY AND SELL

NOTE : Applicable only to executory contracts and not to contracts which All persons who can bind themselves by contract also have legal capacity to
are totally or partially performed. buy and sell.

Sale by Auction Kinds of Incapacity

Perfected when the auctioneer accepts the bid by the falloff the hammer, 1. Absolute Incapacity - persons cannot bind themselves at all.
gavel, or in any other customary manner. a. Minors
b. Insane or Demented
If the auction is announced “without reserved”, goods cannot be withdrawn c. Deaf-mutes who do not know how to write
from sale after the bid is made. d. Civil Interdiction

By taking part in the auction, the buyer voluntarily submitted to the terms 2. Relative Incapacity - only with regards to certain persons and
and conditions of the auction. certain class of property

Sale Of Goods By Description Husband and Wife

Seller sells things as being a particular kind, and buyer has not seen the General Rule : Husband and wife cannot sell to each other
article sold and relies on the description given by the vendor. Exception :
1. When separation of property was agreed
Sale by Sample 2. There was a judicial separation of property
Parties contracted solely with reference to the sample, with the
understanding that the bulk was like it. The vendor warrants the thing sold Relative Incapacity
will conform with the sample in kind, character, and quantity. It is the sole The following persons cannot acquire property by purchase, even at a
basis or inducement of the sale. public auction, either in person or through the mediation of another :
1. Guardian, with respect to the property of his ward
NOTE : goods must satisfy all the warranties. Otherwise, the contract may 2. Agents, the property whose administration or sale may have been in
be rescinded. trusted to them, unless consent of principal is given
3. Executors and administrators, property of estate under his
Effect of Perfection administration.
After perfection, parties must now comply with their mutual obligations. In 4. Public officers and employees, with respect to the properties of the
the meantime, buyers have personal rather than real rights. Hence if the government, political subdivisions, or GOCCs, entrusted to them.
seller again sells a parcel of land to a stranger in good faith, the proper 5. Judges, justice, prosecuting attorney, clerks of court, etc., with
remedy of the buyer would be to sue for damages for he cannot recover respect to the property in custodia legis.
ownership over something he had never owned before. 6. Other persons disqualified by law
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Effect of Violation
a. With respect to 1-3 : VOIDABLE DELIVERY
Reason : only private rights, which are subject to ratification are violated.
Ownership, as a consequence of certain contracts such as sale, shall be
b. With respect to 4-6 : NULL & VOID transferred to the vendee upon actual or constructive delivery.
Reason : violation of public policy cannot be subjected to ratification
Intention to Transfer Ownership
LOSS AND DETERIORATION In all forms of delivery, the act of delivery shall be coupled with the
intention of delivering the thing. The act without the intention is
Res Perit Domino insufficient.
The concept that the owner bears risk of loss and deterioration because
ownership is not transferred until delivery. Requisites of Delivery
1. Identity
Rule on Risk of Loss and Deterioration : 2. Integrity
● Before Perfection : Seller bears the risk 3. Intentional
● At the time of perfection : Contract is VOID or inexistence
● At the time of sale : if entirely lost, the contract is VOID or When the vendor is not bound to deliver
non-existent. If partially lost, vendee may elect between 1. Vendee has not paid the price
withdrawing or demanding the remaining part. 2. No period for payment has been fixed
● After perfection but before delivery : risk of loss is shifted to 3. Even if a period for payment has been fixed, if the vendee has lost
the buyer but stipulations in the contract will govern. the right to make use of the same
● After delivery : buyer bears the risk. Unless delivery was delayed
through the fault of either parties, the risk is with the party in fault; Kinds
and when the ownership of the goods has been retained by the 1. Actual or real - placing the thing under the control and
seller. possession of the buyer
2. Legal or constructive - delivery is represented by other signs or
OBLIGATIONS OF THE VENDOR acts indicative thereof
3. Quasi-tradition - delivery of rights, credits or incorporeal
1. Transfer ownership property, made by (i) placing titles of ownership in the hands of the
2. Deliver the thing, with its accessions and accessories, if any buyer or (ii) allowing the buyer to make use of rights
3. Warrant against eviction and against hidden defects 4. Tradition by operations of law
4. To take care of the thing, pending delivery, with proper diligence
5. To pay the expenses of the deed of sale, unless there is stipulation to Kinds of Constructive or Legal Delivery
the contrary a. By Legal Formalities - sale is made through a public instrument.
Gives rise only to a prima facie presumption of delivery.
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 b. Symbolic Delivery (tradition simbolica) - delivery of keys or
depository where the movable is kept or stored.
c. Traditio Longa Manu - delivery of a movable by mere consent or
agreement. Pointing at the thing
d. Traditio Brevi Manu - buyer simply continues in possession of
the thing but under ownership. Applies to movables only. Happens
when the buyer already has possession of the thing sold before the
sale.
e. Traditio Constitutum Possessorium - seller continues to be in
possession of the property sold but not as an owner but in some
other capacity.

Sale or Return
Property is sold, but the buyer has the option to return it to the seller
instead of paying the price. It depends on the discretion of the buyer; it is a
sale with a resolutory condition.

It is a kind of sale. Buyer, being the owner, bears the risk of loss. The buyer Goods Delivered Through Carrier
must comply with express or implied conditions otherwise, the sale General Rule :
becomes absolute. Delivery to the carrier is deemed to be delivered to the buyer.

Sale on Approval or Trial Exception :

Title remains with the seller notwithstanding delivery of the goods. It is in Where the right of possession or ownership of specific goods sold is
the nature of an option to purchase. reserved.

Sale is dependent on the quality of the goods; it is a sale with suspensive Seller’s Duty After Delivery to Carrier
condition. Buyer become owner when : 1. To enter on behalf of buyer into such contract reasonable under the
circumstances
1. Buyer signifies his approval or acceptance to seller 2. To give notice to the buyer regarding the necessity of insuring the
2. Does any other act adopting the transaction goods.
3. Retains the goods without giving notice of rejection after the time
fixed has expired; it no time has been fixed, after the expiration of a Instances Where Seller Is Still The Owner Despite Delivery
reasonable time 1. Sale on trial, approval or satisfaction
2. Contrary intention appears by the terms of the contract
3. Implied reservation of ownership a
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 a. Goods are shipped, but by the bill of lading goods are delivered to Payment of the Purchase Price
seller or his agent or their order General Rule :
b. Bill of lading is kept by the seller or his agent Seller is not bound to deliver unless the purchase price has been paid.
c. When the buyer does not honor the bill of exchange by returning
the bill of lading to the seller. Exception : The Seller is bound to deliver even if the price has not been
paid, if a period of payments has been fixed.
Sale by One Having a Voidable Title
If the seller has only a voidable title, buyer acquires a good title to the goods Goods Delivered Less Than Quantity Agreed
provided he buys them : 1. Buyer may reject; or
a. Before the title of the seller has been avoided 2. Buyer may accept and pay at the contract rate
b. In goods faith for value
c. Without notice of the seller’s defect of title Quantity More Than Agreed Upon
1. Buyer may reject all; or
Sale of Goods by a Non-owner 2. Buyer may accept the goods agreed upon and reject the rest; or
General Rule : 3. Buyer may accept all and must pay for them at the contract rate
Buyer acquires no title even if in good faith or for value. Nemo dat quod
non habet (“You cannot give what you do not have”). Goods Mixed With Goods Of Different Description
Buyer may accept the goods which are in accordance with the contract and
Exceptions : reject the rest.
1. Owner is estopped or precluded by his conduct
2. Sale is made by the registered owner or apparent owner Indivisible Goods
3. Sales sanctioned by judicial or statutory authority If the subject is indivisible, in case of delivery of a large quantity of goods or
4. Purchase in a merchant’s store, fairs or markets (art. 559) a mixed goods, the buyer may reject the whole of the goods.
5. When a person who is not the owner sells and delivers a thing,
subsequently acquires title thereto. Right of rejecting the whole of the goods delivered is given only if the
6. When the seller has a voidable title which has not been avoided at subject matter is indivisible.
the time of sale
Rights of Vendee to the Fruits
Place of Delivery Vendee has the right to the fruits of the thing sold from the time obligation
1. Where there is an agreement : Place specified to deliver arises. Generally at time of perfection, however, parties may
2. Where there is no agreement : Place of delivery determined by modify it by agreement.
usage of trade
3. Where there is no agreement and no prevalent usage :
seller’s place of business
4. In any other case : seller’s residence
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 c. Special Indorsement - name of indorsee is specified.
DOCUMENT OF TITLE
Negotiable Document of title marked “Non-negotiable”
A document of title in which it is stated that the goods referred to therein Such a mark will have no effect on the instrument and remains to be
will be delivered to the bearer, or to the order of any person named in such negotiable.
document is a negotiable instrument of title.
Who may negotiate a negotiable document of title
Document is negotiable if : 1. By the owner
1. Goods are deliverable to bearer 2. By the person to whom the possession or custody of the document
2. Goods are deliverable to the order of a certain person has been entrusted by the owner.

Common forms of document of title Rights of the Holder

a. Bill of Landing - contract or receipt for the transport of goods and 1. Title of the person negotiating the document, over the goods
their delivery to the person named therein, to order or bearer. covered by the document;
b. Dock Warrant - given by dock owners to an importer of goods 2. Title of the person to whose order by the terms of the document the
recognizing the latter’s title of the said goods goods were to be delivered, over such goods;
c. Warehouse Receipt - contract or receipt for goods deposited with 3. The direct obligation of the bailee to hold possession of the goods
a warehouseman containing the latter’s undertaking to hold and for him, as if the bailee had contracted to him directly.
deliver the said goods to a specified person, to order or bearer.
NOTE : Mere transfer does not acquire directly the obligation of the bailee.
Classes of Documents of Title To acquire it, he must notify the bailee.
a. Negotiable Documents of Title - stated that goods can be
delivered to bearer, or to the order of a person. Rights of the Transferee
b. Non-negotiable Instrument of Title - stated that goods are to The rights of a transferee, to whom a document is transferred but not
be delivered to a specified person. negotiated, are not absolute as it is subjected to the terms of the agreement.
1. Title of the goods as against the transferor;
Negotiation of Negotiable Document of Title 2. Right to notify the bailee of the transfer thereof;
1. By Delivery 3. Right, thereafter, to acquire the obligation of the bailee to hold
2. By indorsement plus delivery goods for him.

Forms of Indorsement Transfer for Value by Delivery

a. Blank Indorsement - consist of signature of the indorser without If a negotiable document of title is transferred for value by delivery, and
specifying the name of the indorsee. indorsement is essential for negotiation. The rights of the transferee are :
b. To bearer - where the indorsement states that the goods are 1. Right to the goods as against the transferor;
deliverable to bearer. 2. Right to compel the transferor to indorse
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Negotiation shall take effect as to the time when indorsement is actually 3. Right of resale
made. 4. Right to rescind the sale

Warranties on Sale of Document RIGHT TO LIEN

1. Document is genuine Right to retain possession of goods until payment or tender of the whole
2. He has a legal right to negotiate or transfer it price, or unless he agrees to sell on credit.
3. He has knowledge of no fact which would impair the validity or A. When available :
worth of the document 1. Goods sold without stipulation as to credit
4. He has the right to transfer the title to the goods and that goods are 2. Goods are sold on credit, but credit term has expired
merchantable or fit for a particular purpose 3. Buyer becomes insolvent

Bailee B. Lien on Partial Delivery :

The bailee has the direct obligation to hold possession of the goods for the When an unpaid seller makes partial delivery of the goods, he may exercise
original owner. The goods cannot be attached or levied and bailee cannot his lien on the remainder, unless such part delivery shows an intent to
be compelled to deliver the goods unless the document be first surrendered waive the lien or right of retention.
or its negotiation prohibited by court.
C. When Lien is Lost
Failure of bailee or previous indorsers to fulfill their obligations When a lien is lost :
Indorser shall not be liable for any failure on the part of the bailee or 1. Delivers the goods to a carrier or other bailee for the purpose of
previous indorsers to fulfill their respective obligation. transmission to the buyer without reserving the ownership in the
goods or the right of possession thereof;
Effect of Typographical or Grammatical Error 2. Buyer or his agent lawfully obtains possession of the goods;
It does not destroy the negotiability of the document of title, for what 3. By waiver thereof
should be considered is the intent.
RIGHT OF STOPPAGE IN TRANSITU
UNPAID SELLER An extension of the lien for the price; entitles unpaid seller to resume
possession of the goods while they are in transit before the goods come in
Unpaid seller is one who has not been paid the whole amount of the price possession of the vendee
or one who received a negotiable instrument and it has been dishonored,
the buyer is insolvent, or otherwise. When available :
1. Buyer must be insolvent;
Rights of the Unpaid Seller 2. Seller must be unpaid
1. Right to lien of goods or the rights to retain them for the price while 3. Goods are in transit
he is in possession of them 4. Seller must actually take possession of the goods sold or give notice
2. Right of stoppage in transit of his claim to the carrier or other person in possession.
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 5. Seller must surrender the document of title, if any, issues by the RIGHT OF RESALE
carrier or bailee; A. When available :
6. Seller must bear the expenses of delivery after the exercise of the 1. Seller has the right to lien or stoppage in transitu.
right 2. Under the following cases :
a. Goods are perishable by nature
When goods are considered in transit : b. Right to resell is expressly reserved
1. After delivery to the carrier or other bailee and before the buyer or c. Buyer delays in payment for an unreasonable time
his agent takes delivery of them; B. Effects of Resale
2. Goods are rejected by the buyer, and the carrier or bailee continues 1. Seller is not liable to the buyer for any profit
to be in possession of them, even if the seller refused to receive 2. If sells for less than the price, seller has right to sue for the
them back. balance from buyer
3. New buyer acquires good title as against the original buyer
How to exercise :
1. By obtaining actual possession of the goods. RIGHT TO RESCIND THE SALE
2. By giving notice of his claim to the carrier or bailee. Such notice Return of the title over the undelivered goods to the seller, and right to
may be given to the person in actual possession or to his principal. recover damages for breach of contract/
But if given to the principal, it must be given at such time and under A. When available :
such circumstances to be effective so the principal can prevent 1. Seller has the right to lien or stoppage in transitu
delivery. 2. Under either of the 2 situations:
a. Right to rescind is expressly reserved
Effects of exercise : b. When the buyer delays in the payment of the price
1. Goods are no longer in transit for an unreasonable time.
2. Carrier shall be liable as depositary or other bailee. B. Effects of Rescission
3. Carrier must redeliver the goods to, or according to the instructions 1. Seller resumes ownership of the goods
of the seller 2. Seller shall not be liable to the buyer upon the contract
3. Buyer may be held liable to the seller for damages for any
When goods are no longer in transit : loss occasioned by the breach of contract
1. After delivery to the buyer or his agent on that behalf; C. How a seller may rescind : by notice to the buyer or by some
2. Buyer obtains delivery of the goods before arrival at the appointed overt act showing an intention to rescind.
destination
3. Carrier or bailee acknowledges to hold the goods on behalf of the Communication to the buyer of rescission is not always necessary but
buyer giving/failure to give notice is relevant in determining reasonableness of
4. Carrier or other bailee wrongfully refuses to deliver the goods to the time given to the buyer to make good his obligation under contract.
buyer or his agent.

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Effect if Buyer Sold the Goods Lump Sum Sale (A Cuerpo Cierto)
Generally, the unpaid seller's right of lien or stoppage in transitu remains States the full purchase price based on the estimate or where both area and
even if the buyer has sold or otherwise disposed of the goods. boundaries are stated.

Exceptions : Boundaries
1. Seller has given his consent Mentioning the boundaries of the land is indispensable in every conveyance
2. When purchaser or buyer is a purchaser for value in good faith of a of real estate. The vendor is bound to deliver all that is included within the
negotiable document of title. said boundaries. The area of which, even if lesser or grater than what is
stipulated, is immaterial.
SALE OF REAL ESTATE
Real property not in Vendor's Possession
Unit Price Contract The failure of a person to take the ordinary precautions, specially in buying
Payment will be made only on the basis of contractual items actually a piece of land in the actual, visible and public possession of another
performed. The amount agreed upon is merely an estimate. Price is person, other than the vendor, constitutes gross negligence amounting to
depending upon the quantities performed multiplied by the unit prices bad faith. One who purchases real property which is in the actual
previously agreed upon. possession of another should, at least make some inquiry concerning the
right of those in possession. He can scarcely, in the absence of such inquiry,
Sale of Real Estate by the Unit be regarded as a bona fide purchaser as against such possessors.
The vendor must deliver the entire property agreed upon. The immovable
property must be of the quality specified in the contract. If the entire area Prescription of Action
could not be delivered, then the object of the contract is not delivered. The action for either recission of the or reduction of the price must be
Hence the vendee is entitled to rescind it. But he may, however, enforce the brought 6 months from the day of delivery.
contract with the corresponding decrease in price.
DOUBLE SALE
When Vendee is Entitled to Rescind Sale of Real Property
1. If the lack of area is at least 1/10th than that stated or stipulated. Requisites of Double Sale
2. If the deficiency in the quality specified in the contract exceeds 1. Two or more valid contracts of sale;
1/10th of the price agreed upon 2. Two or more buyers ;
3. If the vendee would not have bought the immovable had he known 3. They must pertain exactly to the same object; and
of its smaller area or inferior quality. 4. They must be bought from the same seller.

Where immovable of a greater area or number Rules of Preference

Vendee may accept the area included in the contract and reject the rest. The 1. Double Sale of Movables - who first takes possession in good
vendor may not withdraw from the contract. faith
2. Double Sale of Real Property
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 a. First registrant in good faith Warranty vs. Condition
b. First possessor in good faith
c. Person with oldest title in good faith

The requirement of the law then is two-fold: acquisition in good faith and
registration in good faith. Good faith must concur with the registration. If it
would be shown that a buyer was in bad faith, the alleged registration they
have made amounted to no registration at all.

CONDITIONS

An uncertain event or contingency on the happening. Conditions may be :

1. Waived; or
2. Considered as warranties

Effect of Non-Fulfillment of Condition

1. If the obligation of either party is subjected to any condition and
such condition is not fulfilled, such party may; Kinds of Warranties
a. Refuse to proceed with the contract 1. Express Warranty
b. Proceed the contract, waiving the performance of the 2. Implied Warranty
condition
2. If a condition is in nature a promise that it should happen, the Express of Opinion
nonperformance of such a condition may be treated by the other A mere expression of opinion by the seller does not import a warranty
party as a breach of warranty. unless :
1. Seller is an expert; and
WARRANTIES 2. Opinion was relied upon by the buyer

It is a promise that a fact is true. In a sale, it is a statement of fact about the Not every false representation voids the contract, only those matters
quality or character of the goods sold to induce the sale relied upon by the substantially affecting the buyer’s interest.
buyer. Breach or violation of it gives rise to a suit for damages.
Express Warranty
Warranty is enforceable only against the immediate vendor of the party It is an affirmation of fact or any promise by the seller about the subject
dispossessed. matter where the natural tendency of it is to induce the buyer to purchase
the thing and the buyer purchases the thing relying on such affirmation or

16
promise. An express warranty can be made by and also be binding on the 3. Judgment is based on right prior to the sale or act imputable to the
seller even in the sale of a second hand article. vendor
4. Vendor was summoned in the suit for eviction at the instance of the
Implied Warranty vendee
It is a natural, not an essential element of a contract, and is deemed 5. There is no waiver on the part of the vendee
incorporated in the contract of sale. It is inherent. Its reason is to protect
naïve and unsuspecting buyers from scrupulous sellers from running away NOTE : Rescission is not a remedy against total eviction. Rescission
from their wrongful doings. contemplates that the one demanding it is able to return whatever he has
received under the contract. Since the buyer can no longer return the thing
It may be modified or suppressed by agreement of the parties. Unless sold to the seller, rescission cannot be carried out.
waived, the warranties stay.
Prescription
Implied Warranties in Sale Where one acquires ownership and other real rights through the lapse of
1. Warranty as to seller’s title time in the manner and conditions prescribed by law.
2. Warrant against hidden defects a. Completed before sale - vendee can enforce warranty against
3. Warranty as to fitness or merchantability eviction
b. Completed after sale - vendor is not liable for eviction. (art.
When Implied Warranty not Applicable 1550)
1. “As is and where is” sale
2. Sale of secondhand articles Effect of Waiving Warranty in Bad Faith
3. Sale by virtue of authority in fact or law a. Vendor in bad faith - cannot be exempted from warranty.
Because he has knowledge beforehand of a presence of a fact giving
SUBSECTION 1 : WARRANTY AGAINST EVICTION rise to eviction. (art. 1553)
b. Vendee in bad faith - not entitled to warranty against eviction
Eviction nor right to recover damages. He proceeded to the sale with the
Vendee is deprived of the whole or part of the thing purchased. (art. 1548) assumption of the risk of eviction. (art. 1554)

Warranty against Eviction Kinds of Waiver

Seller guarantees that he has the right to sell the thing sold and to transfer Consciente
ownership to the buyer who shall not be disturbed in his legal and peaceful a. voluntarily made by the vendee without the knowledge and
possession thereof. If evicted, the vendor is liable thereof. assumption of the risks of eviction.
b. Vendor shall only pay the value of the thing sold at the time of
Elements of Warranty Against Eviction eviction
1. Vendee has been deprived in whole or in part of the thing purchased
2. Deprived by virtue of final judgment
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Eviction in Part When defect important
Buyer may either enforce vendor’s liability for eviction or he may demand a. Renders the thing sold unfit for its intended use;
rescission of the contract provided in article 1556, if the buyer loses, by b. Diminishes its fitness for such use
eviction, a part of the thing sold of such importance that he would not have
bought it without said part. NOTE : The use contemplated must be that which is stipulated, and in
absence of stipulation, that which is adopted to the nature of the thing, and
Intencionada to the business of the buyer.
a. Made by vendee with knowledge of risk of eviction and assumption
of its consequences Implied Warranty of Fitness
b. Vendor not liable unless acted in bad faith Generally, there is no implied warranty of fitness for any particular purpose
except under the following :
Rights and Liabilities a. Buyer expressly or impliedly manifests to the seller the particular
In case eviction occurs, the vendee shall have the right to demand of the purpose of the goods acquired
vendor the following : b. Buyer relies upon the seller’s skill or judgment
1. Return of value of thing
2. Income or fruits of thing There is an implied warranty that the goods are reasonably fit for such a
3. Cost of the suit special purpose.
4. Expenses of the contract
5. Damages and interest, and ornamental expenses, if sale is made in Implied Warranty of Merchantability
bad faith. (art. 1555) It’s a warranty that goods are reasonably fit for the general purpose for
which the same are sold.
SUBSECTION 2 : WARRANTY AGAINST HIDDEN DEFECTS OF,
OR ENCUMBRANCES UPON, THE THING SOLD Ignorance of Vendor of Hidden Defects
Ignorance does not relieve the vendor from liability. Good faith cannot be
Requisites for Warranty against Hidden Defects availed of as a defense by the vendor.
1. Defect must be important or serious; a. Doctrine of Caveat Venditor
2. Must be hidden Vendor is still liable even if he is not aware due to this doctrine. It is
3. Must exist at the time of sale based on the principle that a sound price warrants a sound article.
4. Vendee must give notice of defect to vendor within reasonable time
5. Action for rescission or reduction in price must be brought within 6 Alternative Remedies of the Buyer
months from delivery or 40 days in case of animals Vendee has the option to either :
6. No waiver of warranty on the part of vendee 1. Accion redhibitoria (withdraw from the contract)
2. Accion quanti minoris (reduction in price)

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Effects of Thing loss due to hidden defects No warranty against hidden defects
a. Vendor aware of hidden defects - he shall bear the loss due to 1. Animals sold at public fairs or public auctions. 2.
bad faith. 2. Livestock sold as condemned
Vendee may recover :
1. Price paid Void Sale of Animals
2. Expenses of the contract a. animals sold are suffering from contagious disease; or
3. Damages b. found unfit for the use or service stated in the contract.
b. Vendor is not aware - since he acted in good faith, he shall be
obliged only to return : Animal died with Vices
1. Price If loss is caused for a fortuitous event or by fault of vendee and animal has
2. Interest vices, the buyer may either :
3. Expenses of the contract paid by vendee 1. withdraw from the contract; or
2. demand a reduction in price.
Lost due to fault of Vendee
If the thing sold had any hidden defects at the time of sale, and it is lost EASEMENT OR SERVITUDE
through the fault of the vendee, the vendor shall be liable for the price paid
less value of the thing that was lost when it was lost. (art. 1569 Easement or servitude is an encumbrance imposed upon an immovable
property for the benefit of another immovable property owned by a
RULES IN CASE OF SALE OF ANIMALS different person.

Redhibitory Vice or Defect Kinds of easement or servitude

A defect which the seller is bound to warrant in animals, the following a. Apparent easement - expressly made
special rules shall apply : b. Non-apparent easement - no external indication of its existence
1. Defect must be hidden
2. Must be of such nature that expert knowledge is not sufficient to Requisites for Vendor’s Liability for Immovable Sold with
discover it Easement
1. Must be non-apparent
Veterinarian is liable if he fails to discover or disclose the hidden defect 2. Not indicated in the agreement
through ignorance or bad faith. (art. 1576) 3. Must be of such nature that the vendee would not have acquired the
immovable had he been aware thereof.
Seller liable if the animal dies within 3 days after its purchase due to a
disease that existed at the time of sale. Remedies & Right of Vendee
1. Within 1 year from execution of the deed of sale :
Limitation of the Action : Redhibitory action must be brought 40 days a. Rescission; or
from the date of their delivery to the vendee. (art. 1577) b. Damages.
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 2. After one (1) year from the execution of deed of sale : Exception : If there is a stipulation
a. Damages, within a period of one (1) year from discovery of
easement or servitude Right of Buyer to Examine Goods
General Rule : Buyer has the right to a reasonable opportunity to
When Vendee’s Rights Can’t Be Exercised examine the goods before accepting them. (art. 1584)
1. When servitude is apparent
2. If non-apparent servitude is registered Exception :
3. If vendee has knowledge of the encumbrance, registered or not 1. When there is an agreement;
2. stipulation that the goods shall not be delivered to the buyer until
OBLIGATIONS OF THE VENDEE he paid the price (C.O.D.). If the seller refused to allow an
opportunity for inspection, the buyer may rescind or recover the
Principal Obligations of the Vendee price paid.
1. Accept delivery
2. Pay the price NOTE : the right to examine the goods is a condition precedent to the
3. Bear expenses for the execution and registration of the sale and transfer of ownership.
putting the goods in a deliverable state, if such is the stipulation
When there is Acceptance of Goods
Pertinent Rules : 1. Express acceptance
1. Vendor not required to deliver the thing sold until the price is paid 2. Buyer does an act which only an owner can do
nor the vendee to pay the price before the thing is delivered in the 3. Failure to return after reasonable lapse of time
absence of an agreement to the contrary; (art. 1524)
2. If stipulated, vendee is bound to accept delivery and to pay the price Effect of acceptance on vendor’s liability for breach of warranty
at the time and place designated; General Rule : Seller is not discharged from liability for breach of
3. If there is no stipulation as to the time and place of payment and warranty by the acceptance of the goods
delivery, the vendee is bound to pay at the time and place of
delivery; Exception : (1) If there is an agreement, express or implied; (2) if buyer
4. In the absence of stipulation as to the place of delivery, it shall be fails to give notice to seller of breach of warranty within a reasonable time
made wherever the thing might be at the perfection of the contract after buyer knows of such breach. (art. 1586)
(art. 1251); and
5. If only the time for delivery has been fixed the vendee is required to Effects if buyer refuses to accept delivery
pay even before the thing is delivered to him; (art. 1524) 1. Buyer justifiably refuses
a. Buyer has no duty to return the goods
Delivery in Installments (art. 1583) b. Title does not pass
General Rule : Buyer is not bound to accept delivery or pay the price c. Not be obliged to pay the price
thereof by installments.
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 d. If he constitutes himself as a depositary, he shall be liable as When Vendor may Rescind the Sale
such e) Obligation to notify the seller of such refusal (art. 1. Sale of Immovable - seller must have a reasonable ground to fear
1587) the:
a. Loss of the immovable property; AND
2. Buyer unjustifiably refuses b. Loss of the price.
a. Title passes to the buyer, unless there is stipulation and the If one or both grounds do not exist, the vendor may choose between:
seller reserved the ownership a. Fulfillment with damages;
b. Obligated to pay the price (art. 1588) b. b. Rescission with damages.

Time and place for payment of price NOTE : Rescission of real property is not automatic. Demand is needed
a. Time and place stipulated before rescission may take place. Demand is for the rescission and not for
b. Time and place of delivery of thing, in absence of stipulation the payment of the price.

When Vendee is liable for interest 2. Sale of Movables - rescission of the sale of movable shall take place at
Buyer shall pay interest for the period between delivery and payment of the option of the vendor, if at the time fixed for the delivery of the thing, the
price in the following cases : vendee:
1. If there is stipulation a. does not accept delivery
2. Thing sold produces fruits or income b. does not pay the price, unless a longer period of payment is
3. If he is in default, from the time judicial or extrajudicial demand for stipulated
payment of price. (art. 1589)
BREACH OF CONTRACT OF SALE OF GOODS
Suspension of Payment (art. 1590)
1. When buyer may suspend payment Actions by the Seller
a. If he is disturbed in the possession or ownership of thing 1. Action for payment of price
bought; or a. Ownership has passed to the buyer and he wrongfully neglects or
b. If he has a well-grounded fear that his possession or refuses to pay the price;
ownership would be disturbed by a vindicatory action or b. Price is payable on a certain day and buyer did not pay, even if there
foreclosure of mortgage. is no transfer of title; or
c. If the goods can’t be readily resold for a reasonable price and the
2. When the buyer may NOT suspend payment buyer wrongfully refuses to accept them before ownership has
a. Vendor give security for the return of the price; passed.
b. It has been stipulated; 2. Action for damages
c. Vendor has caused the disturbance or danger to cease; 3. Action for rescission
d. Disturbance is a mere act of trespass; e. Vendee has fully a. When buyer repudiated the contract of sale;
paid the price.
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