ART

1458. By the contract of sale, one of the contracting parties obligates himself to transfer
the ownership of & to deliver a determinate thing, & the other to pay therefor a price
certain in money or its equivalent.
A contract of sale may be absolute or conditional.
(This Art serves as defn for Sale)

ANNOTATION
FORM & INTERPRETATION
Characteristics of a contract of sale:
1. Consensual perfected by mere consent
2. Bilateral parties are bound to fulfill correlative oblis toward each other
3. Onerous the thing sold is conveyed in consideration of the price & vice versa
4. Commutative thing sold is considered equivalent of the price paid & vice versa
5. Nominate given a special name & designation
6. Principal its existence & validity does not depend upon another contract
Essential requisites of sale:
1. Consent or meeting of the minds (1475)
2. Object or subject matter (1460)
3. Cause or consideration (1458)
Kinds of contract of sale:
1. Absolute not subject to condition. Ownership is transferred upon constructive or
actual delivery.
2. Conditional subject to a contingency. Ownership is reserved until fulfillment of a
suspensive condition or extinguished upon the happening of a resolutory condition.
Contract of Absolute Sale
Title passes upon delivery
Non-payment of the price may be seen as
a negative resolutory condition (b/c
ownership will revert to the seller if he
chooses to rescind the contract)
Non-payment gives seller right to either
demand specific performance or rescind
the contract
Seller loses ownership of the thing sold &
delivered unless the sale is rescinded
Remedy of rescission available (b/c
rescission found in 1191 is not based
upon the non-payment of the price but
rather on the failure of the debtor to
comply w/ an ALREADY EXISTING obli)
Contract to Sell
Similar to the nature of a conditional sale,
since transfer of title is conditioned upon
the full payment of the purchase price
Full payment of the purchase price does
not automatically vest ownership or title
to the prospective buyer as the
prospective seller explicitly reserves its
transfer. Seller still has to convey title.
If seller sells the object of sale to a 3rd
person once condition is fulfilled, 3rd
persons right is better than original
buyer but seller incurs damages.

1459. The thing must be licit & the vendor must have a right to transfer the ownership

Requisites of Object:

Contract to Sell
Title shall not pass until buyer has paid
the price despite delivery
Full payment of the price is a positive
suspensive condition. (b/c ownership will
be vested upon the buyer only when he
pays the price)
Non-payment is not a breach but simply
an event that prevents the obli of the
vendor to convey title from acquiring
binding force
Seller retains ownership until buyers
fulfillment of the condition
Remedy of rescission not available

NOTES
*Correlate w/:
- 1459, 1460, re: determinate thing
- 1469, 1472, re: price
Contract to Sell a bilateral contract of conditional sale whereby the prospective
seller, while expressly reserving the ownership of the subject prop despite delivery
thereof to the prospective buyer, binds himself to sell the said prop exclusively to the
prospective buyer upon fulfillment of the condition agreed upon.
Dignos v CA: A deed of sale is absolute in nature although denominated as a Deed of
Conditional Sale where nowhere in the contract in question is a proviso or stipulation
to the effect that title to the prop sold is reserved in the vendor until full payment of
the purchase price, nor is there a stipulation giving the vendor the right to unilaterally
rescind the contract the moment the vendee fails to pay w/in a fixed period.
(Hence, designation of the parties to the contract is not, in a word, controlling as to
what the contract is)
In Peoples Homesite & Housing Corp v CA, it would appear that in a conditional sale,
there is no perfected contract of sale until the fulfillment of the suspensive condition.
It is the willingness of the seller to sell the object w/c is dependent upon the condition.
So if the condition is not fulfilled, there is NO MEETING OF THE MINDS hence there is
no perfected contract of sale.
*This gives us another difference b/w contract to sell & conditional sale. In a contract
to sell, the sale is perfected but the transfer of ownership depends upon the
fulfillment of the suspensive condition, the full payment of the purchase price.

Conditional Sale
Willingness of the vendee to sell is
dependent upon a condition not
necessarily the payment of the purchase
price
Fulfillment of the suspensive condition
makes the sale absolute. If there has
been previous delivery to the buyer,
ownership/title automatically transfers to
the buyer.
If seller sells the object of sale to a 3rd
person once condition is fulfilled, 3rd
persons right cannot defeat that of the
orig buyer. (The orig buyer may even ask
for reconveyance if the object has been
delivered to such 3rd person.)
Read the cases of Artates v Urbi, Heirs of Zambales v CA for examples of sales involving

thereof at the time it is delivered.

1.
2.
3.
4.

It must be determinate
It must be licit
It must be w/in the commerce of men
As to rights, it must be transmissible or personal

2 kinds of illicit things: (relate w/ 1409)

1. Illicit per se
2. Illicit per accidens

things illicit per accidens

*When the thing is sold in violation of a right of 1st refusal of another person, the sale
is valid but rescissible
*Relate w/ Arts. 1347-48, 1460, CC

Seller need not own the thing to be sold, all that is required of him is the right to transfer
ownership thereof at the time it is delivered.
1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class.
*Relate w/ Art. 1349, CC
1461. Things having a potential existence may be the object of the contract of sale.
Things having a potential existence something that is reasonably certain to come into existence as the natural increment or usual incident of something in existence already
The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition belonging to the seller
that the thing will come into existence.
- The moment the thing does come into existence, title is vested upon the buyer.
The sale of a vain hope or expectancy is void.
Emptio Rei Speratae
Emptio Spei
Sale of a thing not yet in existence subject to the condition that the thing will exist & on Sale of hope itself that the thing will come into existence even if the thing does not
failure of the condition, the contract becomes ineffective & hence, the buyer has no obli eventually exist
to pay the price
Future thing is certain as to itself but uncertain as to its quantity & quality
It is not certain that the thing itself will exist, much less its quantity & quality
Deals w/ a future thing
Deals w/ a present thing the hope or expectancy
Presumption is in favor of Emptio Rei Speratae
1462. The goods w/c form the subject of a contract of sale may be either existing goods, Existing goods goods owned or possessed by the seller
owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the Future goods goods to be manufactured, raised, or acquired by the seller
seller after the perfection of the contract of sale, in this Title called future goods.
In the sale of future goods, the seller assumes the risk of acquiring the title (to the future goods) & making the conveyance, or responding in damages for the buyers loss of his
bargain
1462 does not apply if the goods are to be manufactured ESPECIALLY for the buyer, b/c that case is a contract for a piece of work & not of sale.
1463. The sole owner of a thing may sell an undivided interest therein.
Legal effect of the sale of an undivided interest in a thing is to make the buyer a co-owner in the thing sold
1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell & the Fungible goods goods of w/c any unit is, from its nature or by mercantile usage, treated as the equivalent of any other unit
buyer to buy a definite number, weight or measure of the goods in the mass, & though the number, weight or measure of the goods in
the mass is undetermined. By such sale the buyer becomes owner in common of such a share of the mass as the number, weight or Owner of mass may sell only an undivided share thereof, provided the mass is specific or capable of being made determinate.
measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure
- By such sale, buyer becomes a co-owner of the seller of the whole mass in proportion in w/c the definite share bought bears to the
bought, the buyer becomes the owner of the whole mass & the seller is bound to make good the deficiency from goods of the same kind
mass
& quality, unless a contrary intent appears.
- Aliquot share of each owner can be determined only by the measurement of the entire mass. If it turns out that the whole mass is
actually LESS than the thing sold, the buyer becomes the owner of the whole mass & the seller must supply the deficiency.
1465. Things subject to a resolutory condition may be the object of the contract of sale.
*Resolutory condition an uncertain event upon the happening of w/c the obli (or right) subject to it is extinguished.
1466. In construing a contract containing characteristics of both the contract of sale & of By the contract of agency, a person binds himself to render some service or to do Read: Quiroga v Parsons
the contract of agency to sell, the essential clauses of the whole instrument shall be something in representation or on behalf of another, w/ the consent or authority of the
considered.
latter. (1868, CC)
Atty. Busmente: Is there a case wherein a contract is both a contract of sale & a
contract of agency to sell at the same time?
Transaction b/w car dealerships & manufacturers. The dealers will own the cars sold
Sale
Agency
by the manufacturers but are still able to give the warranties of the manufacturers
Buyer receives the goods as owner
Agent receives the goods as the goods of
when they sell the cars in turn.
the principal who retains ownership over
them & has the right to fix the price &
terms of the sale & receive the proceeds
less the agents commission upon the
sales made
Buyer has to pay the price
Agent simply has to account for the
proceeds of the sale he may make on the
principals behalf
Buyer, generally, cannot return the object Agent can return the object in case he is
sold
unable to sell the same to a 3rd person
Seller warrants the thing sold
Agent makes no warranty for w/c he
assumes personal liability as long as he

1467. A contract for the delivery at a certain price of an art w/c the vendor in the ordinary
course of his business manufactures or procures for the genl market, whether the same is
on hand at the time or not, is a contract of sale, but if the goods are to be manufactured
specially for the customer & upon his special order, & not for the genl market, it is a
contract for a piece of work.

1468. If the consideration of the contract consists partly in money, & partly in another
thing, the transaction shall be characterized by the manifest intention of the parties. If
such intention does not clearly appear, it shall be considered a barter if the value of the
thing given as a part of the consideration exceeds the amount of the money or its
equivalent; o/w, it is a sale.

acts w/in his authority & in the name of

the seller
Buyer can deal w/ the thing sold as he Agent in dealing w/ the thing received,
pleases
must act & is bound according to the
instructions of his principal.
By the contract of a piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation.
The distinction b/w a contract of sale & one for a piece of work is tested by the inquiry whether the thing transferred is one not in existence & w/c NEVER WOULD HAVE EXISTED IF
NOT FOR THE ORDER of the party desiring to acquire it or a thing w/c WOULD HAVE EXISTED & been the subject of sale to some other person, even if the order had not been given.
Contract of Sale
The object of the sale would have existed & been the subject of sale to some other
person, even if the order had not been given
Risk of loss before delivery is borne by the buyer (at least according to 1480)
W/in the statute of frauds
Read: Concrete Aggregates v CTA
By the contract of barter/exchange, one of the parties binds himself to give one thing in
consideration of the others promise to give another thing.
Rule in determining the character of a contract the consideration of which is partly in
money & partly in another thing:
1. Determine intention of the parties
2. If such intention does not appear:
a. Value of thing given > amount of money or its equivalent = BARTER
b. Value of thing given < amount of money or its equivalent = SALE

Contract for a Piece of Work

The object of the sale never would have existed if not for the order of the party
desiring to acquire it
Risk of loss before delivery is borne by the contractor
Not w/in the Statute of Frauds
In the lease of things, one of the parties binds himself to give to another the
enjoyment or use of a thing for a price certain & for a period w/c may be definite or
indefinite.
*Difference b/w sales & lease is in lease, only TEMPORARY possession & enjoyment is
transferred unto the lessee.
Dacion en pago Alienation of prop to the creditor in satisfaction of a debt in money.
Sale
No preexisting credit or debt
Oblis are created
Cause is, as to the seller, the price paid &
as to the buyer, the thing sold.

More freedom in fixing the price

Buyer still has to pay the price

1469. In order that price may be considered certain, it shall be sufficient that it be so w/
reference to another thing certain, or that the determination thereof be left to the
judgment of a specified person or persons.
Should such person/s be unable or unwilling to fix it, the contract shall be inefficacious,
unless the parties subsequently agree upon the price.
If the 3rd person/s acted in BF or by mistake, the courts may fix the price.
Where such 3rd person/s are prevented from fixing the price or terms by fault of the seller
or the buyer, the party in fault may have such remedies against the party in fault as are
allowed the seller or the buyer, as the case may be.

1470. Gross inadequacy of price does not affect a contract of sale, except as it may
indicate a defect in the consent, or that the parties really intended a donation, or some
other act or contract.
1471. If the price is simulated, the sale is void, but the act may be shown to have been in
reality a donation, or some other act or contract.

Dacion En Pago
Pre-existing credit or debt
Oblis are extinguished
Cause is, as to the debtor, the
extinguishment of debt & as to the
creditor, he object acquired in lieu of
the credit
Less freedom. Lols
Debtor has already received payment
before the contract (of dation) is
perfected.

The price is certain if:

a. The parties have fixed or agreed upon a definite amount
b. It be certain w/ reference to another thing certain (relate to 1472)
c. The determination of the price is left to the judgment of a specified person/s
*(b) & (c) apply only in absence of (a).
Genl rule: Price fixed by a 3rd person is binding upon the parties
Exceptions:
1. When the 3rd person acts in BF or by mistake (mistake error in judgment). In such a case, the courts may fix the price.
2. When the 3rd person disregards specific instructions or procedure or data given him (Walang sinabi si De Leon kung anong mangyayari but its analogous to the 1st exception, so I
think courts will fix the price din ang ending nito)
3. When the 3rd person refuses or cannot fix it. If this happens, the contract is void unless the parties subsequently agree upon the price.
4. When the 3rd person is prevented from fixing the price either by the seller or the buyer. In this case, innocent party may choose b/w rescission & fulfillment, w/ damages in either
case. (De Leon)
Inadequacy of price however, may indicate a defect in the consent such as when fraud, mistake or undue influence is present. Read arts. 1355 & 1381, pars 1 & 2
Where the price is so low that a man in his senses & not under a delusion would not accept it, the sale may be set aside.
Simulation occurs when an apparent contract is a declaration of a fictitious will 1345. Simulation of a contract may be absolute or relative. The former takes place
deliberately made by agreement of the parties, in order to produce, for the purpose of when the parties do not intend to be bound at all; the latter when the parties conceal
deception, the appearance of a juridical act w/c does not exist or is different from that w/c their true agreement.
was really executed.
1409. The ff contracts are inexistent & void from the beginning:

Requisites of simulation:
2. Those w/c are absolutely simulated or fictitious.
1. An outward declaration of will different from the will of the parties;
2. The false appearance must have been intended by mutual agreement; &
Hence, only those acts of absolute simulation where the parties do not intend to be
3. The purpose is to deceive 3rd persons.
bound at all are void.
1472. The price of securities, grain, liquid, & other things shall also be considered certain, when the price fixed is that w/c the thing sold would have on a definite day, or a particular exchange or market or when an amount fixed is above or below the price on such day, or in
such exchange or market, provided said amount be certain.
1473. The fixing of the price can never be left to the discretion of one of the contracting Acceptance by one of the parties of the price fixed by the other produces a meeting of the Read the case of Serra v CA & RCBC, re the part of adhesion contracts w/c is similar to
parties. However, if the price fixed by one of the parties is accepted by the other, the sale minds b/w the parties as to the price. Therefore, the fact that only one of the parties fixed a price fixed by one of the parties
is perfected.
the price does not automatically invalidate the sale.
1474. Where the price cannot be determined in accordance w/ the preceding arts, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has Applies only where the means contemplated by the parties for fixing the price have,
been delivered to & appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each for any reason, proved ineffectual.
particular case.
Reasonable price = generally (but not necessarily) market price at the time & place
fixed by the contract or by law for the delivery of goods.
1475. The contract of sale is perfected at the moment there is a meeting of minds upon Perfection Consummation
Toyota Shaw v CA: A definite agreement on the MANNER of payment of the price is
the thing w/c is the object of the contract & upon the price.
Validity of contract Enforceability of the contract
an essential element in the formation of a binding & enforceable contract of sale. This
From that moment, the parties may reciprocally demand performance, subject to the Reluctance Absence of consent
is so b/c the agreement as to the manner of payment goes into the price such that a
provisions of the law governing the form of contracts.
DISAGREEMENT ON THE MANNER OF PAYMENT IS TANTAMOUNT TO A FAILURE TO
Absence of Price v Non-Payment of Price
AGREE ON THE PRICE. Definiteness as to the price is an essential element of a binding
Absence of price will render the contract void while non-payment of price is a resolutory agreement to sell personal prop.
condition for w/c the seller may choose b/w rescission or specific performance.
Read & understand 1403, 2(d). Atty. Busmente hinted na lalabas yan sa midterms. He
At the moment of perfection, the reciprocal oblis imposed upon the parties by the asked this question in class: What are the 2 exceptions to the UNENFORCEABILITY of
contract of sale arise & are, hence, demandable reciprocally in the absence of contrary an UNWRITTEN contract of sale of goods, chattels or things in action at a price not less
stipulation. (remember 1169, par 3, delay in reciprocal oblis)
than P500?
Answer: 1. When the buyer has either: a) accepted or received part of such goods &
Genl rule: a contract of sale is binding regardless of its form.
chattels or the evidences or some of them; or b) paid at the time some part of the
Exception: when the law requires a certain form for its validity or enforceability such as purchase money.
those falling under the Statute of Frauds. (Read 1356-58 & 1403)
2. Sale is made by auction & entry is made by the auctioneer in his sales book.
De Leon: Sale, by itself, does not transfer or affect ownership, what it does is it CREATES
THE OBLI TO TRANSFER the ownership of the thing sold. Ownership is transferred not by
contract but by tradition or delivery Sampaguita v Jalwindor, Ten Forty Realty v Cruz
1476. In the case of a sale by auction:
1. Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.
2. A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; & the auctioneer may w/draw the goods from the sale unless the
auction has been announced w/o reserve.
3. A right to bid may be reserved expressly by or on behalf of the seller, unless o/w provided by law or by stipulation.
4. Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any
person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer.
1477. The ownership of the thing sold shall be transferred to the vendee upon the actual Sale is consummated by delivery of both the thing sold & the purchase money.
Addison v Felix: The thing is considered to be delivered when it is placed in the hands
or constructive delivery thereof.
& possession of the vendee. In order that symbolic delivery may produce the effect of
This article applies in the absence of stipulation to the contrary, reserving ownership in tradition, it is necessary that the vendor shall have had such control over the thing sold
the thing sold despite its delivery.
that, at the moment of the sale, its material delivery could have been made. It is not
enough to confer upon the purchaser the ownership & the right of possession. THE
If the vendee/buyer fails to pay, & the thing has already been delivered, ownership of the THING SOLD MUST BE PLACED IN HIS CONTROL. When there is no impediment
thing DOES NOT automatically revert back to the vendor. In this case, the vendor has 2 whatever to prevent the thing sold passing into the tenancy of the purchaser by the
options: 1, to demand payment of the price; & 2, rescission.
sole will of the vendor, symbolic tradition thru the execution of a public instrument is
sufficient. But if notwithstanding the execution of the instrument, the purchaser
*Correlate w/:
cannot have the enjoyment & material tenancy of the thing & make use of it himself or
- 1496
thru another in his name, b/c such tenancy & enjoyment are opposed by the
- 1497, re: actual delivery
interposition of another will, then fiction yields to reality the delivery has not been
- 1498-1501, re: constructive delivery
effected.
Sampaguita v Jalwindor: Ownership is not transferred by perfection of the contract
but by delivery, either actual or constructive. This is true even if the purchase has been
made on credit. Payment of the purchase price is not essential to the transfer of
ownership as long as the prop sold has been delivered.

1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser
until he has fully paid the price.
1479. A promise to buy & sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from
the price.

Norkis Distributors v CA: In all forms of delivery, it is necessary that the act of delivery
whether constructive or actual, be coupled w/ the intention of delivering the thing.
The act, w/o the intention, is insufficient.
*Genl rule is 1477. 1478 works only if there is a stipulation to that effect. (Read: EDCA Publishing v. Santos)
A unilateral promise of offer to sell or to buy a thing w/c is not accepted creates no
juridical effect or legal bond. AKA Policitacion.
Option a contractual privilege existing in one person for w/c he has paid a consideration
w/c gives him the right to buy/sell from/to another person, if he chooses, at any time w/in
the agreed period at a fixed price, or under, or in compliance w/ certain terms &
conditions.
Nature of Option Contract:
1. Preparatory contract separate & distinct from the main/principal contract.
2. Gives one party to the right to decide whether or not to enter into principal contract,
while it binds the other: a) not to enter into the principal contract w/ any other person
during the agreed time; & b) to enter into the principal contract w/ the party to whom
the option was granted if the latter should decide to use the option w/in the agreed
period.
3. It imposes no binding obli on the person holding the option aside from the
consideration for the offer.
4. Must be supported by a consideration distinct from the price (in order to bind the
promissor the oblis stated in No.2), else it is void. (read: Atkins v Cua Hian Tek, Sanchez
v Rigos, Sps. Trinidad v IAC)
5. Consideration need not be money or actual cash. It must be something of value though.
(read: Serra v CA & RCBC)
Option Contract
Promissor cannot sell the prop to a 3rd
person UNLESS the period agreed upon
the option contract expires

1480. Any injury to or benefit from the thing sold, after the contract has been perfected,
from the moment of the perfection of the contract to the time of delivery, shall be
governed by Arts 1163 to 1165, & 1262.
This rule shall apply to the sale of fungible things, made independently & for a single price,
or w/o consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed accdg to weight, number or measure, the

Right of 1st Refusal

Promissor cannot sell the prop to a 3rd
person UNLESS he allows the promisee to
exercise his right of 1st refusal, i.e. giving
the promisee a similar offer, allowing the
latter to choose whether or not to accept
such offer
Promisee cannot compel promissor to
enter into principal contract since right of
1st refusal arises only when promissor
decides to sell
If promisee elects to buy, the price is
subject to negotiations
Usually found in contracts of lease, the
consideration is INTEGRAL in the contract
Sale to a 3rd person in violation of Right of
1st Refusal is RESCISSIBLE

Art 1324, CC. When the offeror has allowed the offeree a certain period to accept, the
offer may be w/drawn at any time before acceptance by communicating such
w/drawal except when the option is founded upon a consideration, as something paid
or promised.
Atkins v Cua Hian Tek: If the option is given w/o consideration, it is a mere offer of a
contract of sale, w/c is not binding until accepted. If, however, acceptance is made
before a w/drawal, it constitutes a binding contract of sale, even though the option
was not supported by a sufficient consideration.
Sanchez v Rigos: 1354 (presumption of cause) applies to contracts in genl, whereas
the 2nd par of 1479 refers to sales in particular, &, more specifically, to an accepted
unilateral promise to buy or to sell.
In order that said promise may be made binding upon the promissor, 1479 requires
the concurrence of a condition, namely, that the promise be supported by a
consideration distinct from the price. Accordingly, the promisee cannot compel the
promissor to comply w/ the promise, UNLESS the former establishes the existence of
said distinct consideration. In other words, the promisee has the burden of proving
such consideration.
Equatorial v Mayfair: Where a period is given to the offeree w/in w/c to accept the
offer, the ff rules genlly govern:
1. If the period is NOT ITSELF FOUNDED UPON OR SUPPORTED BY A CONSIDERATION,
the offeror is still free & has the right to w/draw the offer before its acceptance, or
if an acceptance has been made, before the offerors coming to know of such fact,
by communicating that w/drawal to the offeree.
2. If the period HAS A SEPARATE CONSIDERATION, a contract of option is deemed
perfected, & it would be a breach of that contract to w/draw the offer during the
agreed period. The option, however, is an independent contract by itself; & is to be
distinguished from the projected main agreement w/c obviously yet to be
concluded. If, in fact, the optioner-offeror w/draws the offer before its acceptance
by the optionee-offeree, the latter may not sue for specific performance on the
proposed contract since it has failed to reach its own stage of perfection. The
optioner-offeror, however, renders himself liable for damages for breach of the
option.

Promisee may compel promissor to enter

into principal contract if he decides to
exercise the option w/in the agreed
period
If promisee elects to buy, the price of the
object of sale is FIXED
Right of 1st Refusal - 1. A potential buyer's contractual right to meet the terms of a 3rd
The consideration is DISTINCT from the
party's higher offer. -For example, A has a right of 1st refusal on the purchase of Bs
purchase price
house, C then offers to buy the house for P1M, then A can match this offer & prevent C
rd
Sale to a 3 person in violation of Option:
from buying it. (Blacks Law Dictionary 9th Ed.)
a. is Valid IF 3rd person is in GF. Buyer
may only hold seller liable for
damages;
b. is Rescissible (by original buyer) if 3rd
person is in BF
Read: Equatorial v Mayfair
Who bears the loss:
1. Before perfection seller (in accordance w/ res perit domino)
2. At the time of perfection contract is void & inexistent, therefore seller (1493)
3. After perfection, before delivery if basis is 1480, buyer, regardless w/n ownership has been transferred (note the exception in the 3rd par of this Art, there has to be delivery
before the buyer can be made liable if things sold are fungible things for a price according to weight, number or measure). But if 1504, seller, if ownership is yet to be transferred.
If ownership has been transferred, buyer.

risk shall not be imputed to the vendee until they have been weighed, counted, or
measured, & delivered, unless the latter has incurred in delay.

1481. In the contract of sale of goods by description or by sample, the contract may be
rescinded if the bulk of the goods delivered do not correspond w/ the description or the
sample, & if the contract be by sample as well as by description, it is not sufficient that the
bulk of goods correspond w/ the sample if they do not also correspond w/ the description.
The buyer shall have a reasonable opportunity of comparing the bulk w/ the description or
the sample.
1482. Whenever earnest money is given in a contract of sale it shall be considered as part
of the price & as proof of the perfection of the contract.

4. After delivery buyer

Atty. Busmente: 1480 v 1504. I dont know w/c should prevail over the other. If your client is the seller, use 1480. If its the buyer, 1504.
*Read De Leons discussion of 1480 v 1504. Lumabas siya sa 2009 Sales Midterms ni Sir.
Sale by description occurs where a seller sells things as being of a particular kind, the buyer not knowing whether the sellers representations are true or false, but relying on them
as true
Sale by sample to constitute a sale by sample, it must appear that the parties contracted solely w/ reference to the sample, w/ the understanding that the bulk was like it.
Bulk of goods in this art = goods to be actually sold
Earnest money something of value given by the buyer to the seller to show that the buyer is really in earnest, & to bind the bargain.
Earnest money forms part of the consideration ONLY IF the sale is PERFECTED & the sale is CONSUMMATED upon full payment of the purchase price.
Earnest money constitutes an advance or down payment & must therefore be deducted from the total price.
Earnest Money
Part of the purchase price
Given only where there is already a perfected sale
When given, buyer is bound to pay balance

1483. Subject to the provisions of the Statute of Frauds & of any other applicable statute,
a contract of sale may be made in writing, or by word of mouth, or partly in writing &
partly by word of mouth, or may be inferred from the conduct of the parties.

Option Money
Distinct & separate consideration
Applies to a sale not yet perfected
When given, would-be buyer not bound to pay the balance (& may even forfeit the
option money if given such right in the terms of the option contract)
*Option money may become earnest money if the parties so agree. Or it may actually be in the nature of earnest money when considered w/ the rest of the contract.
Genl rule: a contract of sale is binding regardless of its form.
Exception: when the law requires a certain form for its validity or enforceability such as those falling under the Statute of Frauds. (Read 1356-58 & 1403)
In case the contract of sale is covered by the SoF, it should be in writing o/w they shall be unenforceable. (Remember, unenforceable void)

1484. In a contract of sale of personal prop the price of w/c is payable in installments, the
vendor may exercise any of the ff remedies:
1. Exact fulfillment of the obli, should the vendee fail to pay;
2. Cancel the sale, should the vendees failure to pay cover 2 or more installments.
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should
the vendees failure to pay cover 2 or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void.
(AKA RECTO Law)

Registration of a public instrument in the registry of deeds is not indispensible as regards the contracting parties. However, doing so would bind 3rd parties to the contract & protect
the buyer against claims of 3rd persons arising from subsequent alienations by the vendor.
Remedies are alternative; election of one is a waiver of the right to resort to the others.
Southern Motors v Moscoso:
Only the exercise of one of these remedies will serve as a bar to the others.
Foreclosure incident to 1st remedy
Foreclosure of chattel mortgage (3rd
remedy)
If seller chooses option 2, the buyer may demand the return of the installments unless
Procedure is those prescribed for Procedure is outlined in 14 of
there is a stipulation effecting forfeiture (read 1486).
ordinary civil actions, under the RoC
Chattel Mortgage Law
The RULES APPLY to:
1. The SALE of PERSONAL PROP, w/c is PAYABLE IN INSTALLMENTS
2. The LEASE of PERSONAL PROP, w/ OPTION TO BUY, & the LESSOR has DEPRIVED THE
LESSEE of the POSSESSION/ENJOYMENT of the thing.

Pascual v Universal Motors Corp: Sellers cannot go after guarantors if they have
already chosen 3rd remedy. B/c if they did, guarantors would have a right to go after
the original debtors, w/c would result in the situation the law seeks to prevent (double
recovery).

RA 6552 governs sales of REAL ESTATE on installments.

Where the buyer has paid at least 2 years of installments, the buyer is entitled to the ff
rights in case he defaults in the payment of succeeding installments:
1486. In the cases referred to in the 2 preceding arts, a stipulation that the installments or 1. Grace Period to pay, w/o additional interest, the unpaid installments due w/in the
rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same
total grace period earned by him w/c is hereby fixed at the rate of one month grace
may not be unconscionable under the circumstances.
period for every year of installment payments made; Provided, that this right shall be
exercised by the buyer only once in every 5 years of the life of the contract & its
extensions, if any;
2. Refund of Cash Surrender Value if the contract is cancelled, the seller shall refund to
the buyer the cash surrender value of the payments on the prop equivalent to 50% of
the total payments made, &, after 5 years of installments, an additional 5% every year
but not to exceed 90% of the total payments made; Provided, that the actual
cancellation of the contract shall take 30 days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act & upon full
payment of the cash surrender value to the buyer.
Read: Layug v IAC
1487. The expenses for the execution & registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary.
1488. The expropriation of prop for public use is governed by special laws.
CAPACITY TO BUY OR SELL

Ridad v Filinvest: Should the vendor choose to foreclose the mortgage (3rd remedy),
he has to content himself w/ the proceeds of the sale at the public auction of the
chattels w/c were sold on installment & mortgaged to him.

1485. The preceding art shall be applied to contracts purporting to be leases of personal
prop w/ option to buy, when the lessor has deprived the lessee of the possession or
enjoyment of the thing.

Why is it that in Southern Motors v Moscoso, they were able to exact the fulfillment of
the deficiency of the purchase price even after foreclosing the chattel mortgage while
in Ridad v Filinvest, the court ruled that the vendor has to content himself w/ the
proceeds of the foreclosure?
B/c in the Moscoso case, what the vendors filed was a complaint to recover of the
unpaid balance of the promissory note covering the chattel mortgage. In effect, what
they chose was the 1st remedy. The foreclosure in this case was not an exercise of the
3rd remedy but was merely incident of their choice to exact the fulfillment of the obli.
In Ridad, they chose to foreclose the chattel mortgage extrajudicially, w/c is the 3 rd
remedy, barring them to recover the deficiency from the vendees.

1489. All persons who are authorized in this Code to obligate themselves may enter into a
contract of sale, saving the modifications contained in the ff arts.
Where necessaries are sold & delivered to a minor or other person w/o capacity to act, he
must pay a reasonable price therefor. Necessaries are those referred in Art 290.

Genl rule: All persons, whether natural/juridical, who can bind themselves have also legal
capacity to buy & sell.
Exceptions: When law determines that a party suffers from either absolute or relative
incapacity.

*Art. 290, CC = Art. 94, FC

Absolute incapacity exists in case of persons who cannot bind themselves (e.g. minors,
insane or demented persons)
Ralative incapacity exists only w/ reference to certain persons or a certain class of prop
(e.g. 1490, 1491)

1490. The husband & the wife cannot sell props to each other, except:
1. When a separation of prop was agreed upon in the marriage settlements; or
2. When there has been a judicial separation of prop under Art. 191.

1491. The ff persons cannot acquire by purchase, even at public or judicial auction, either
in person or thru the mediation of another:
1. The guardian, the prop of the person/s who may be under his guardianship;
2. Agents, the prop whose administration or sale may have been intrusted to them,
unless the consent of the principal have been given;
3. Executors & administrators, the prop of the estate under administration;
4. Public officers & employees, the prop of the State or of any subdivision thereof, or of
any gocc, or institution, the admin of w/c has been intrusted to them; this provision
shall apply to judges & govt experts who, in any manner whatsoever take part in the
sale;
5. Justices, judges, prosecuting attorneys, clerks of superior & inferior courts, & other
officers & employees connected w/ the administration of justice, the prop & rights in
litigation or levied upon an execution before the court w/in whose jurisdiction or
territory they exercise their respective fxns; this prohibition includes the act of
acquiring by assignment & shall apply to lawyers, w/ respect to the prop & rights w/c
may be the object of any litigation in w/c they may take part by virtue of their
profession;
6. Any others especially dqd by law.

Necessaries those things w/c are needed for sustenance, dwelling, clothing, medical
attendance, education & transportation according to the financial capacity of the family of
the incapacitated person (Art. 94, FC)
Prohibition also applies to common-law relationships.
Persons allowed to question such sale:
1. Those who bear such relation to the parties making the transfer or to the prop itself
that such transfer interferes w/ their rights or interests.
2. The government.
Pars. 1-3 = unenforceable, capable of ratification (b/c it involves private interests)
Pars. 4-6 = void (b/c it involves public interests)
No. 2 not absolute, agent may buy the prop intrusted unto him if:
1. The agency has been terminated
2. His principal gives consent
3. The sale was made under a special power pursuant to a special law (read: Fiestan v CA)
No.3 refers only to props under the administration of the executor or administrator at the
time of the acquisition.
Executor may purchase the hereditary rights of any heir, since they do not administer such
rights.

Contracts of sale entered into by incapacitated persons are:

1. VOIDABLE, if only ONE of the parties is incapable of giving consent to a contract
(1390[1])
2. UNENFORCEABLE, if BOTH parties are incapable of giving consent to a contract
(1403[3])
Who are incapable of giving consent to a contract?
1327. The ff cannot give consent to a contract:
1. Unemancipated minors;
2. Insane or demented persons, & deaf-mutes who do not know how to write.
1329. The incapacity declared in art 1327 is subject to the modifications determined by
law, & is understood to be w/o prejudice to special dqs established in the laws.
A sale b/w husband & wife is VOID. (1409[7])
If you want:
Read Art. 87, FC, re donations b/w husband & wife/common-law partners
134-142, FC, re judicial separation of prop
143-146, FC, re separation of prop
Fiestan v CA: The prohibition mandated by par 2 of Art 1491 does not apply where
the sale of the prop in dispute was made under a special power inserted in or attached
to the real estate mortgage pursuant to Act No. 3135, as amended. Under Act No.
3135, as amended, a mortgagee-creditor is allowed to participate in the bidding &
purchase under the same conditions as any other bidder.
Act No. 3135 An Act to Regulate the Sale of Prop under Special Powers inserted in or
Annexed to Real Estate Mortgages. (applies in cases of extrajudicial foreclosure sales)
*It seems that we can consider pars. 1-3 of this article to be covered by 1403 [1] &
pars. 4-5 to be under 1409 [1]

No.4 refers only to props:

1. Belonging to the Sate, or of any subdivision thereof, or of any gocc or institution
2. The admin of w/c has been entrusted to PO/Es.

For no. 5 to operate, sale or assignment must take place during the pendency of the
litigation involving the prop. A prop is in litigation from the moment it becomes subject
to judicial action.
1492. The prohibitions in the 2 preceding arts are applicable to sales in legal redemption, compromises & renunciations.

Compromise amicable settlement of a (legal) controversy

Renunciation condonation (remember obli, read 1270-1274 kung trip mo)

EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST
1493. If at the time the contract of sale is perfected, the thing w/c is the object of the contract has been entirely lost, the contract 1493 applies to a sale of a specific thing. 1494 applies to a sale the object of w/c consists of a mass of specific goods
shall be w/o any effect.
Loss or injury referred to in these articles is one w/c takes place BEFORE or AT THE TIME OF PERFECTION.
But if the thing should have been lost in part only, the vendee may choose b/w w/drawing from the contract & demanding the
remaining part, paying its price in proportion to the total sum agreed upon.
The thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is unknown or it cannot be
recovered. (1189, [3])
1494. Where the parties purport a sale of specific goods, & the goods w/o the knowledge of the seller have perished in part or Perish material deteriorations, complete change in the nature of the thing in such a manner that it loses the utility it had during the time of
have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option, the perfection of the contract
treat the sale:
1. As avoided; or
Rule in 1493 & 1494 similar:
2. As valid in all of the existing goods or in so much thereof as have not deteriorated, & as binding the buyer to pay the agreed If lost/deteriorated in whole = void
price for the goods in w/c the ownership will pass, if the sale was divisible.
If lost/deteriorated in part = rescind contract or pay for whats left (if divisible)
OBLIS OF THE VENDOR
Section 1. Genl Provisions
1495. The vendor is bound to transfer the ownership of & deliver, as well as warrant the Principal oblis of a vendor:
thing w/c is the object of the sale.
(1) To transfer the ownership of the determinate thing sold (1948, 1495);

1496. The ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in arts 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor to the vendee.

(2) To deliver the thing, w/ its accessions & accessories, if any, in the condition in w/c they were upon the perfection of the contract; (1537)
(3) To warrant against eviction & against hidden defects; (1495, 1547)
(4) To take care of the thing, pending delivery, w/ proper diligence; (1163)
(5) To pay for the expenses of the deed of sale, unless there is a stipulation to the contrary. (1487)
*Seller need not be the owner of the thing at the time of perfection of the contract; 1459 provides that it is sufficient that he has a right to transfer the ownership thereof at the
time it is delivered.
Ways of effecting delivery:
(1) Actual or real delivery (1497);
(2) Constructive or legal delivery (1498-1501); or
(3) Any other manner signifying an agreement that the possession is transferred to the vendee. (1496-1499)
Delivery must be made to vendor or his authorized representative, if any.
Constructive delivery a genl term comprehending all those acts w/c, although not conferring physl possession of the thing, have been held by construction of law equivalent to
acts of real delivery.
Ways of effecting constructive delivery:

Execution of a public instrument (1498, par. 1);

Symbolic tradition or tradition symbolica (1498, par. 2);

Traditio Longa Manu (1499, par. 1);

Traditio Brevi Manu (1499, par. 2);

Traditio Constitutum Possessorium (1500);

Quasi-traditio or quasi-delivery (1501).

1497. The thing sold shall be understood as delivered, when it is placed in the control &
possession of the vendee.
(Actual delivery)

In all forms of delivery, it is necessary that the act be coupled w/ the intention of delivering the thing. For the same reason, any act, although not provided for in the preceding arts,
but accompanied by the evident intention of the vendor to deliver or of the vendee to receive the thing sold, will be considered as constituting tradition. It is the intention w/c is
essential.
Section 2. Delivery of the Thing Sold
Tradition is a derivative mode of acquiring ownership by virtue of w/c one who has the right & intention to alienate a corporeal thing, transmits it by virtue of a just title to one who
accepts the same.
Ownership is not transferred by contract merely but by delivery, actual or constructive. Contracts only constitute title or rights to the transfer or acquisition of ownership, while
delivery or tradition is the method of accomplishing the same. Note however, that the parties to the contract may agree when & on what conditions the ownership in the subject of
the contract shall pass to the buyer.
Delivery of thing sold + payment of purchase price = consummation of contract of sale. Since perfection consummation, delivery is not essential to the perfection of the contract of
sale.

1498. When the sale is made thru a public instrument, the execution thereof shall be
equivalent to the delivery of the thing w/c is the object to the contract, if from the deed
the contrary does not appear or cannot clearly be inferred.
W/ regard to movable prop, its delivery may also be made by the delivery of the keys of
the place or depository where it is stored or kept.

Remedies of buyer if seller fails to deliver:

Specific performance

Rescission, w/ damages
1st par applies both to movable & immovable prop.
Delivery here is only PRESUMPTIVE & can be rebutted by evidence to the contrary.
A seller cannot deliver constructively if he cannot actually deliver even if he wants to.
In order to bind 3rd parties to the sale, the public instrument needs to be recorded in the
Register of Deeds & a certificate of title must be issued in the name of the buyer over the
prop. But, as b/w the buyer & seller, the execution of the public instrument is enough to
bind the 2 of them.
Symbolic tradition when parties, to effect delivery, make use of a token symbol to
represent the thing delivered. (e.g. Delivery of car keys)

Addison v Felix: In order that symbolic delivery may produce the effect of tradition, it
is necessary that the vendor shall have had such control over the thing sold that, at the
moment of the sale, its material delivery could have been made. It is not enough to
confer upon the purchaser the ownership & the right of possession. THE THING SOLD
MUST BE PLACED IN HIS CONTROL. When there is no impediment whatever to prevent
the thing sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic tradition thru the execution of a public instrument is sufficient. But if
notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment & material tenancy of the thing & make use of it himself or thru another in
his name, b/c such tenancy & enjoyment are opposed by the interposition of another
will, then fiction yields to reality the delivery has not been effected.
Ten Forty Realty v Cruz: Execution of a public instrument gives rise only to a prima
facie presumption of delivery. Such presumption is destroyed when the delivery is not
effected b/c of a legal impediment. A constructive or symbolic delivery, being merely
presumptive, is deemed negated by the failure of the vendee to take actual possession

of the land sold.

1499. The delivery of movable prop may likewise be made by the mere consent or
agreement of the contracting parties, if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale, or if the latter already had it in his
possession for any other reason.

1500. There may also be tradition constitutum possessorium.

1501. W/ respect to incorporeal prop, the provisions of the 1st par of art 1498 shall govern.
In any other case wherein said provisions are not applicable, the placing of the titles of
ownership in the possession of the vendee or the use by the vendee of his rights, w/ the
vendors consent, shall be understood as a delivery.
1502. When goods are delivered to the buyer on sale or return to give the buyer an
option to return the goods instead of paying the price, the ownership passes to the buyer
on delivery, but he may revest the ownership in the seller by returning or tendering the
goods w/in the time fixed in the contract, or, if no time has been fixed, w/in reasonable
time.
When goods are delivered to the buyer on approval or on trial or on satisfaction, or other
similar terms, the ownership therein passes to the buyer:
1. When he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
2. If he does not signify his approval or acceptance to the seller, but retains the goods
w/o giving notice of rejection, then if a time has been fixed for the return of the
goods, on the expiration of such time, &, if no time has been fixed, on the expiration
of a reasonable time. What is a reasonable time is a question of fact.

1503. When there is a contract of sale of specific goods, the seller may, by the terms of the
contract, reserve the right of possession or ownership in the goods until certain conditions
have been fulfilled. The right of possession or ownership may be thus reserved
notw/standing the delivery of the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.
Where goods are shipped, & by the bill of lading the goods are deliverable to the seller or
his agent, or to the order of the seller or of his agent, the seller thereby reserves the
ownership in the goods. But, if except for the form of the bill of lading, the ownership
would have passed to the buyer on shipment of goods, the sellers prop in the goods shall
be deemed only for the purpose of securing performance by the buyer of his oblis under
the contract.
Where goods are shipped, & by the bill of lading the goods are deliverable to order of the
buyer or of his agent, but possession of the bill of lading is retained by the seller or his
agent, the seller thereby reserves a right to the possession of the goods as against the
buyer.
Where the seller of goods draws on the buyer for the price & transmits the bill of
exchange & bill of lading together to the buyer to secure acceptance or payment of the bill
of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of
exchange, & if he wrongfully retains the bill of lading he acquires no added right thereby.
If, however, the bill of lading provides that the goods are deliverable to the buyer or to the
order of the buyer, or is indorsed in blank, or to the buyer by the consignee named
therein, one who purchases in GF, for value, the bill of lading or goods from the buyer will
obtain the ownership in the goods, although the bill of exchange has not been honored,
provided that such purchaser has received delivery of the bill of lading indorsed by the

Traditio Longa Manu takes place by mere consent or agreement of the contracting
parties IF the thing sold cannot be transferred to the possession of the vendee at the time
of the sale

Note the cases of Roman v Grimalt, Norkis Distributors v CA

Atty. Busmentes example of Traditio Longa Manu:
e.g. A buys Bs car, however, such car is in Baguio. Or such car is the subject of a lease
contract b/w B & C at the time B sold it to A.

Traditio Brevi Manu happens when the vendee has already the possession of the thing
sold by virtue of another title (e.g. Lessor sells thing leased to lessee)
Traditio Constitutum Possessorium takes place when the vendor continues in possession of the prop sold not as owner but in some other capacity. (e.g. A sells his land to B.
Instead of delivering the land to B, A continues to occupy the land as Bs tenant.)
Quasi-traditio delivery of incorporeal things thru:
*Incorporeal having a conceptual existence but no physl existence;
- Execution of a public instrument;
intangible (BLD 9th Ed.)
- If (1) is inapplicable, the placing of titles of ownership in the possession of the vendee; or
- Allowing vendee to use his rights as new owner w/ the consent of the vendor.
Sale or Return a contract by w/c prop is sold but the buyer, who becomes the owner of the prop on delivery, has the option to return the same to the seller instead of paying the
price. If buyer does not return w/in the time fixed in the contract, or if no time has been fixed, w/in reasonable time, sale is absolute & he is liable to pay the seller.
Sale on Trial or Approval a contract in the nature of an option to purchase if the goods prove satisfactory, the approval of the buyer being a condition precedent.
*Buyer cannot accept part & reject the rest of the goods.
In both cases, if the goods are injured or damaged substantially thru the negligence or misuse of the buyer, his right to return is lost & the sale becomes absolute.
Sale or Return
Subject to resolutory condition (ownership is extinguished if buyer decides to return)
Depends entirely on the will of the buyer
Ownership of the goods passes to the buyer on delivery & subsequent return of the
goods reverts ownership in the seller.
Risk of loss/injury rests upon buyer

Sale on Trial/Approval
Subject to suspensive condition (ownership transfers if goods are satisfactory)
Depends on the character or quality of the goods
Ownership remains in the seller until the buyer signifies his approval or acceptance
to the seller
Risk still remains w/ the seller except when buyer is at fault or there is a contrary
agreement.
GENL RULE: ownership in the goods sold passes to the buyer upon their delivery to the carrier. This is so b/c the carrier is presumed to be a bailee for the buyer.
EXCEPTIONS: 1st, 2nd, & 3rd pars of 1503
Bakit di kasama yung 4th paragraph? B/c it talks about transmission of the Bill of Lading (BoL) w/ a Bill of Exchange (BoE) & not delivery of goods to a carrier or bailee
*Bill of Lading - A docu acknowledging the receipt of goods by a carrier or by the shipper's agent & the contract for the transportation of those goods; a docu that indicates the
receipt of goods for shipment & that is issued by a person engaged in the business of transporting or forwarding goods. (BLD 9th Ed.)
Scenarios wherein SELLER reserves the right of possession or ownership despite delivery of the goods to the buyer, a carrier or other bailee:
1st Scenario (1st par): Seller reserves the right of possession or ownership in the goods BY THE TERMS OF THE CONTRACT until certain conditions have been fulfilled
*Think of a contract to sell, where the seller still owns the thing despite delivery
2nd Scenario (2nd par): By the BoL the goods are DELIVERABLE TO THE SELLER OR HIS ORDER for the purpose of retaining ownership
Effects:
1. The carrier is deemed as a bailee of the SELLER, not the buyer
2. The seller may retain the goods until the buyer performs his obli
3. The seller may dispose of the goods to a 3rd person (but he will be liable for damages; the 2nd buyer though obtains a better right against the original buyer.)
*The BoL may be deliverable to the seller or his order but his purpose is not to retain ownership but to secure the performance of the buyers obli. In such cases, the buyer will bear
the risk of loss & he will also have an action based on ownership against anyone except an innocent purchaser for value of the BoL from the consignee.
3rd Scenario (3rd par): BoL is DELIVERABLE TO THE ORDER OF THE BUYER, but the SELLER RETAINS POSSESSION OF THE BoL.
Effect: Buyer, even if the BoL is deliverable to him, cannot recover the goods until he presents the BoL (w/c he cannot do KASI NGA na kay Seller ang putang inang BoL)
De Leon: A 3rd person may be named as consignee in the BoL. In this case, the buyer can only obtain the goods when the consignee surrenders the BoL to the carrier/buyer or he
indorses the bill in blank or especially to the buyer. The consignee will only do so upon payment of the price (b/c if he would do so nonetheless, then USELESS! Seller might as well
save himself the trouble by naming the buyer the consignee in the BoL)
4th Scenario (4th par): Seller transmits the BoL, together w/ a bill of exchange. (In the BoE, drawer & payee is seller, drawee is buyer)
Effects:

consignee named therein, or of the goods, w/o notice of the facts making the transfer
wrongful.

1.
2.
3.
4.
5.

Title is retained by the seller until the BoE is paid.

Delivery of goods is conditioned upon the payment/acceptance of the BoE
If BoE is not paid, buyer is BOUND to return the BoL.
If the buyer wrongfully retains the BoL, he acquires no additional right thereby.
If the BoL names the buyer as consignee or is indorsed in blank or specially to the buyer, a purchaser in GF for value of the BoL from the buyer will obtain ownership in the
goods even if BoE is not honored.
(De Leon: safe move for the seller is to send the BoL & BoE to a 3rd person b/c if sent to the buyer, he may obtain the goods & forget about honoring the BoE w/c would compel the
seller to enter upon litigation)

It seems that in these scenarios, the risk of loss is borne by the seller, as he reserves ownership in the things sold + res perit domino. The exception is when his only purpose is to
secure the performance of the buyers obli.
1504. Unless o/w agreed, the goods remain at the sellers risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the This provision states 2 exceptions to the principle of Res Perit Domino. In the 1st par,
goods are at the buyers risk whether actual delivery has been made or not, except that:
the owner is the seller but merely to secure the performance of the buyer of his oblis.
1. Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract & the ownership in the goods has been retained by the seller In this par, the buyer is the one who bears the risk. In the 2nd par, the risk of loss is
merely to secure performance by the buyer of his oblis under the contract, the goods are at the buyers risk from the time of such delivery;
borne by the party at fault.
2. Where actual delivery has been delayed thru the fault of either the buyer or seller the goods are at the risk of the party in fault.
1505. Subject to the provisions of this Title, where goods are sold by a person who is not Genl rule: Buyer cannot acquire more rights than the seller had
559. The possession of movable prop acquired in GF is equivalent to a tile.
the owner thereof, & who does not sell them under authority or w/ the consent of the Exceptions: (in these cases, the buyers right to the prop is better than the owner, Nevertheless, one who has lost any movable or has been unlawfully deprived thereof,
owner, the buyer acquires no better title to the goods than the seller had, unless the provided he is in GF)
may recover it from the person in possession of the same
owner of the goods is by his conduct precluded from denying the sellers authority.
1. Owner is estopped from denying sellers authority to sell
If the possessor of a movable lost or of w/c the owner has been unlawfully deprived,
Nothing in this Title, however, shall effect:
2. Where the law enables the apparent owner to dispose of the goods as if he were the has acquired in GF at a public sale, the owner cannot obtain its return w/o reimbursing
1. The provisions of any factors acts, recording laws, or any other provision of law
true owner thereof
the price paid therefor.
enabling the apparent owner of goods to dispose of them as if he were the true 3. Where the sale is sanctioned by statutory or judicial authority
owner thereof;
4. Where the sale is made at merchants stores, fairs or markets
Dizon v Suntay: The right of the owner cannot be defeated even by proof that there
2. The validity of any contract of sale under statutory power of sale or under the order 5. When the seller has a voidable title w/c has not been avoided at the time of the sale
was GF in acquisition by the possessor. Suffice it to say in this regard that the right of
of a court of competent jurisdiction;
6. Where seller subsequently acquires title
the owner to recover personal prop acquired in GF by another, is based on his being
3. Purchases made in a merchants store, or in fairs, markets, in accordance w/ the Read: Dizon v Suntay, EDCA Publishing v Sps. Santos
dispossessed w/o his consent. The common law principle that where 1 of 2 innocent
Code of Commerce & special laws.
persons must suffer by a fraud perpetrated by another, the law imposes the loss upon
the party who, by his misplaced confidence, has enable the fraud to be committed,
cannot be applied in a case w/c is covered by an express provision of the new CC,
specifically 559 of the CC. B/w a common law principle & a statutory provision, the
latter must prevail in this jurisdiction.

1506. Where the seller of goods has a voidable title thereto, but his title has not been
avoided at the time of the sale, the buyer acquires a good title to the goods, provided he
buys them in good faith, for value, & w/o notice of the seller's defect of title.

Requisites for acquisition of good title by buyer:

1) The sellers voidable title is yet to be avoided;
2) Buyer buys in good faith & for value;
3) Buyer has no notice of the sellers defect of title.
If the seller has NO title, then a buyer, even if he purchases in GF & for value, cannot
acquire a good title. Read the notes for the preceding article, specifically 559 & the Dizon v
Suntay doctrine.

1507. A docu of title in w/c it is stated that the goods referred

to therein will be delivered to the bearer, or to the order of any
person named in such docu is a NDT.

Why is it that in Dizon v Suntay, the owner (Suntay) was allowed to recover his prop
but in EDCA v Sps Santos, EDCA was not?
>In the latter case, the court held that EDCA WAS NOT UNLAWFULLY DEPRIVED OF
THEIR PROP. They delivered the prop in question (books) to Cruz (who talked them
into selling said books) & as we all know, ownership is transferred upon delivery,
actual or constructive. By the time Cruz sold the books to the Santoses, he was already
the owner of such books, allowing him to make a valid transfer of them.
1385. (par 2) Neither shall rescission take place when the things w/c are the object of
the contract are legally in the possession of 3rd persons who did not act in BF.
(owner cannot rescind contract b/w seller & buyer if buyer fulfills requisites)
1388. Whoever acquires in BF the things alienated in fraud of creditors, shall indemnify
the latter for damages suffered by them on acct. of the alienation, whenever, due to
any cause, it should be impossible for him to return them.
(If the buyer does not fulfill the requisites, this is the remedy of the owner if ever the
buyer cannot return the thing)

CLASSES OF DOCUMENTS OF TITLE:

1) Negotiable Documents of Title (NDT) deliverable to bearer or to the order of a specified person.
2) Non-negotiable Documents of Title (Non-NDT) deliverable to a specified person. (straight bill)
*A document deliverable to bearer or to the order of a specified person w/c is subsequently indorsed to a specified person DOES NOT lose its negotiable character, read 1509.
DEFINITION OF TERMS:
1) Document of Title of Goods any document used in the ordinary course of business in the sale or transfer of goods, or authorizing a person to do so in his behalf.
a. Bill of Lading a receipt for the transport of goods & their delivery to the person named therein. Three Persons Involved: Shipper Carrier Consignee.
b. Dock Warrant instrument given by dock owners to an importer of goods warehoused on the dock.
c. Warehouse Receipt a receipt of goods deposited w/ a warehouseman to hold & deliver the goods to the person named therein or bearer

d. Quedan warehouse receipt usually for sugar.

2) Order Relating to documents of title means an order by indorsement on the documents.
1508. A NDT may be negod by delivery:
(Abbreviations: nego = negotiable, negon = negotiation, negod = negotiated, negoing = negotiating, negos = negotiates)
1) Where by the terms of the docu the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to When NDT is negod by delivery: (1508)
the bearer; or
1. When it is a bearer NDT
2) Where by the terms of the docu the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to
2. When it is an order NDT indorsed in blank or to bearer
the order of a specified person, & such person or a subsequent indorsee of the docu has indorsed it in blank or to the bearer.
Where by the terms of a NDT the goods are deliverable to bearer or where a NDT has been indorsed in blank or to bearer, any When indorsement is essential for the negon of NDT:
holder may indorse the same to himself or to any specified person, & in such case the docu shall thereafter be negod only by the
1. When it is an order document (1509)
indorsement of such indorsee.
2. When it is a bearer NDT indorsed to a specified person (1508, 3rd par)
1509. A NDT may be negod by the indorsement of the person to whose order the goods are by the terms of the docu deliverable. *In dealing w/ such NDTs, delivery alone is not sufficient to produce the effects of negon.
Such indorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again negod by *1511: If an NDT requires an indorsement to be negod BUT is TRANSFERRED BY DELIVERY ONLY, then the transferee acquires no additional
the indorsement of such person in blank, to bearer or to another specified person.
right than that of the transferor (transferor is a mere assignee). Meanwhile, a person transferring a non-NDT, even if he indorses it, can
Subsequent negotiations may be made in like manner.
transfer only such rights that he had to the transferor, non-negotiable nga e diba. In both cases, the transferor only acquires the rights in
1510. If a docu of title w/c contains an undertaking by a carrier, warehouseman or other bailee to deliver the goods to bearer, to a 1514.
specified person or order of a specified person or w/c contains words of like import, has placed upon it the words "not nego," *If indorsement is made merely for identification, the party indorsing the document is liable only as guarantor (subsidiarily liable), not as
"non-nego" or the like, such docu may nevertheless be negod by the holder & is a NDT w/in the meaning of this Title. But nothing an indorser (primarily liable).
in this Title contained shall be construed as limiting or defining the effect upon the obligations of the carrier, warehouseman, or *The words non-nego or other words of similar import does not affect the nego character of NDT (1510)
other bailee issuing a docu of title or placing thereon the words "not nego," "non-nego," or the like.
1511. A docu of title w/c is not in such form that it can be negod by delivery may be transferred by the holder by delivery to a How indorsement is made: (1509)
purchaser or donee. A non-nego docu cannot be negod & the indorsement of such a docu gives the transferee no additional right.
1. Blank or to bearer effect: NDT can be subsequently negod by mere delivery
1512. A NDT may be negod:
2. Special indorsement effect: NDT, to be subsequently negod, must be negod by indorsement + delivery
1) By the owner thereof; or
Blank Indorsement does not name a specific person w/c makes the goods deliverable to whoever possesses the NDT
2) By any person to whom the possession or custody of the docu has been entrusted by the owner, if, by the terms of the docu the Special Indorsement names a specific person w/c makes the goods deliverable only to such named person
bailee issuing the docu undertakes to deliver the goods to the order of the person to whom the possession or custody of the
docu has been entrusted, or if at the time of such entrusting the docu is in such form that it may be negod by delivery.
Who may indorse: (1512)
1513. A person to whom a NDT has been duly negod acquires thereby:
1. Owner of an order NDT
1) Such title to the goods as the person negotiating the docu to him had or had ability to convey to a purchaser in good faith for
2. Any holder of a bearer NDT
value & also such title to the goods as the person to whose order the goods were to be delivered by the terms of the docu had
or had ability to convey to a purchaser in good faith for value; &
Rights acquired from a NDT duly negod: (1513)
2) The direct obligation of the bailee issuing the docu to hold possession of the goods for him according to the terms of the docu as 1) Title of the person negoing the document, over the goods covered by the docu
fully as if such bailee had contracted directly w/ him.
2) Title of the person (depositor or owner) to whose order by the terms of the docu the goods were to be delivered, over such goods
1514. A person to whom a docu of title has been transferred, but not negod, acquires thereby, as against the transferor, the title 3) The direct obli of the bailee to hold possession of the goods for him, as if the bailee contracted directly w/ him
to the goods, subject to the terms of any agreement w/ the transferor.
If the docu is non-nego, such person also acquires the right to notify the bailee who issued the docu of the transfer thereof, & Rights acquired from a non-NDT or a NDT not duly negod: (1514)
thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the docu.
1) The title of the goods as against the transferor;
Prior to the notification to such bailee by the transferor or transferee of a non-NDT, the title of the transferee to the goods & the 2) The right to notify the bailee of the transfer thereof; &
right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a 3) The right, thereafter, to acquire the obli of the bailee to hold the goods for him.
creditor of the transferor, or by a notification to such bailee by the transferor or a subsequent purchaser from the transferor of a - These are not absolute. These rights are subject to the terms of the transferor.
subsequent sale of the goods by the transferor.
- If what is transferred is a NDT, the goods cannot be attached or levied unless the NDT is 1 st surrendered to the bailee or its negon is
1515. Where a NDT is transferred for value by delivery, & the indorsement of the transferor is essential for negon, the transferee enjoined. If Non-NDT, transferees right may be defeated by a levy of an attachment or execution by a creditor of the transferor
acquires a right against the transferor to compel him to indorse the docu unless a contrary intention appears. The negon shall - If the transferor of a NDT is a PURCHASER FOR VALUE, he may compel the transferee to indorse the NDT so that he may acquire the rights
take effect as of the time when the indorsement is actually made.
in 1513. The negotiation shall take effect as of the time the indorsement is actually made, not at the time the document is delivered. (1515)
1516. A person who for value negotiates or transfers a docu of title by indorsement or delivery, including one who assigns for This does not apply however, when the intention of the parties is to affect a mere transfer only.
value a claim secured by a docu of title unless a contrary intention appears, warrants:
1. That the docu is genuine;
Warranties & liabilities of a person negotiating or transferring a document: (1516)
2. That he has a legal right to negotiate or transfer it;
- Liability is limited only to a violation of these four warranties (G LR K RT)
3. That he has knowledge of no fact w/c would impair the validity or worth of the docu; &
- It is the duty of every indorsee to know that all previous indorsements are genuine, o/w, he will NOT ACQUIRE a valid title to the
4. That he has a right to transfer the title to the goods & that the goods are merchantable or fit for a particular purpose, whenever
instrument. Similarly, under the NIL, the last indorser warrants that all previous indorsements are genuine.
such warranties would have been implied if the contract of the parties had been to transfer w/o a docu of title the goods *Indorsers are subsidiarily liable if the person primarily liable fails honor the document.
represented thereby.
*Indorser however, is not liable if the goods are lost or becomes defective due to the fault of the bailee as he is a mere conveyor of the docu
1517. The indorsement of a docu of title shall not make the indorser liable for any failure on the part of the bailee who issued the & not a guarantor. (1517)
docu or previous indorsers thereof to fulfill their respective oblis.
1518. The validity of the negon of a NDT is not impaired by the fact that the negon was a breach of duty on the part of the person THIS ARTICLE PERTAINS ONLY TO THE DOCUMENT, NOT THE GOODS
making the negon, or by the fact that the owner of the docu was deprived of the possession of the same by loss, theft, fraud, - Under 1512, only the owner of the docu or the person to whom he entrusted the docu to may negotiate said document. But under 1518,
accident, mistake, duress, or conversion, if the person to whom the docu was negod or a person to whom the docu was
if a person, not having such authority, negos the docu to an INNOCENT PURCHASER FOR VALUE, such purchasers right to the docu is
subsequently negod paid value therefor in good faith w/o notice of the breach of duty, or loss, theft, fraud, accident, mistake,
indefeasible. (similar to a Holder in Due Course in nego)
duress or conversion.

1519. If goods are delivered to a bailee by the owner or by a person whose act in
conveying the title to them to a purchaser in good faith for value would bind the owner &
a NDT is issued for them they cannot thereafter, while in possession of such bailee, be
attached by garnishment or o/w or be levied under an execution unless the docu be first
surrendered to the bailee or its negon enjoined. The bailee shall in no case be compelled
to deliver up the actual possession of the goods until the docu is surrendered to him or
impounded by the court.
1520. A creditor whose debtor is the owner of a NDT shall be entitled to such aid from
courts of appropriate jurisdiction by injunction & o/w in attaching such docu or in
satisfying the claim by means thereof as is allowed at law or in equity in regard to property
w/c cannot readily be attached or levied upon by ordinary legal process.

1521. Whether it is for the buyer to take possession of the goods or of the seller to send
them to the buyer is a question depending in each case on the contract, express or
implied, b/w the parties. Apart from any such contract, express or implied,
or usage of trade to the contrary, the place of delivery is the seller's place of business if he
has one, & if not his residence; but in case of a contract of sale of specific goods, w/c to
the knowledge of the parties when the contract or the sale was made were in some other
place, then that place is the place of delivery.
Where by a contract of sale the seller is bound to send the goods to the buyer, but no time
for sending them is fixed, the seller is bound to send them w/in a reasonable time.
Where the goods at the time of sale are in the possession of a third person, the seller has
not fulfilled his obligation to deliver to the buyer unless & until such third person
acknowledges to the buyer that he holds the goods on the buyer's behalf.
Demand or tender of delivery may be treated as ineffectual unless made at a reasonable
hour. What is a reasonable hour is a question of fact.
Unless o/w agreed, the expenses of & incidental to putting the goods into a deliverable
state must be borne by the seller.

GENL RULE: The goods cannot be attached or levied under execution

EXCEPTIONS:
1) The Document of Title is surrendered to the bailee; or
2) The negotiation is prohibited or the goods are impounded by the court
*If the depositor of the goods however is neither the owner nor someone authorized to convey title to the goods, 1519 does not apply.
In case a debtor refuses to surrender a NDT to a creditor, the latter may, w/ aid from the Courts, afford of the ff remedies:
1. Injunction
2. Attaching the NDT
3. Satisfy his claim on the NDT
(Only IF the prop cannot be readily attached /levied upon ordinary legal process)
However, if the NDT is negotiated to an innocent person, the transfer is nevertheless effectual.
RULES IN DELIVERY OF GOODS (PLACE):
Usage of trade is any practice or method of dealing having such regularity of
1) According to that Agreed upon;
observance in a place, vocation or trade to justify an expectation that it will be
2) In the absence of an agreement Usage of Trade;
observed w/ respect to the transaction in question.
3) Sellers Place of business;
4) Sellers Residence;
Ex. Appliance or machinery: delivered to the residence or place of business of buyer;
5) For specific goods, where the said goods are Found (Paras Civil Code Book V, 2008)
car tires delivered at the place of business of seller (good luck ikaw magpalit ng goma
ng gulong mo); mambabalot, magtataho, street vendors kung saan mo sila
PRESUMPTION: The buyer must take the goods from the sellers place of business or
matitiempuhan.
residence rather than the seller to deliver them to the buyer.
Course of dealing is a sequence of previous conduct b/w the parties to a particular
When the delivery was made not as stipulated & the buyer accepted the goods w/o
transaction w/c is fairly to be regarded as establishing a common basis of
complaint, it is deemed that the buyer WAIVED his right against the sellers failure to
understanding for interpreting their expressions & other conduct.
deliver.
Explanation: there has been previous transactions b/w the seller & buyer. There has
RULES IN DELIVERY OF GOODS (TIME):
been an established understanding how delivery is to be conducted. That established
1) The time stipulated or agreed upon
understanding is the course of dealing.
- Time is of the essence: w/in the period stipulated
- Time is NOT of the essence: w/in a reasonable time (Deleon p.236)
Note: above examples & explanation need to be confirmed if correct
2) The time is not stipulated
- Time is of the essence: buyer cannot invoke time is of the essence unless he gives the
seller sufficient notice of his intention to cancel delivery is not made on or before a fixed
time.
- Time is NOT of the essence: w/in a reasonable time (a question of fact; case to case
basis)
HOUR OF DELIVERY: (speaks of the hour of the day)
- A question of fact; depends on kind of obli

1522. Where the seller delivers to the buyer a quantity of goods less than he contracted to
sell, the buyer may reject them, but if the buyer accepts or retains the goods so delivered,
knowing that the seller is not going to perform the contract in full, he must pay for them
at the contract rate. If, however, the buyer has used or disposed of the goods delivered
before he knows that the seller is not going to perform his contract in full, the buyer shall
not be liable for more than the fair value to him of the goods so received.
Where the seller delivers to the buyer a quantity of goods larger than he contracted to
sell, the buyer may accept the goods included in the contract & reject the rest. If the buyer
accepts the whole of the goods so delivered he must pay for them at the contract rate.
Where the seller delivers to the buyer the goods he contracted to sell mixed w/ goods of a
different description not included in the contract, the buyer may accept the goods w/c are
in accordance w/ the contract & reject the rest.
In the preceding two paragraphs, if the subject matter is indivisible, the buyer may reject
the whole of the goods.
The provisions of this art are subject to any usage of trade, special agreement, or course of

DUTY OF SELLER: To prepare the good in a deliverable state at his expense. In such state,
the buyer is bound to accept delivery. (unless o/w agreed)
DELIVERY OF GOODS LESS THAN THE QUANTITY CONTRACTED:
- The buyer may reject delivery
- The buyer may accept delivery
- Know that seller would not complete delivery: Pay contract price
- Does not know that seller will not complete delivery: Fair value of the goods
DELIVERY OF GOODS MORE THAN THE QUANTITY CONTRACTED:
- Buyer may accept quantity contracted & reject the excess
- Buyer may accept including the excess provided, he pays for their value
- If indivisible, buyer may reject the whole or accept it entirely
DELIVERY OF GOODS MIXED W/ OTHERS:
- Buyer may accept those w/c are in accordance w/ the contract & reject the rest
- Buyer may accept including that w/c are not in accordance w/ the contract provided, he
pays for their value
- If indivisible, buyer may reject the whole or accept it entirely
DELIVERY OF INDIVISIBLE GOODS WHETHER IN EXCESS OR MIXED GOODS

FAIR VALUE: not necessarily the market value; the benefit w/c the buyer may receive
from the goods.
Since the seller did not delivery the correct quantity as agreed upon, the buyer is not
required to pay the contract price if such price is more than fair value to him
1233. A debt shall not be understood to have been paid unless the thing or service in
w/c the obli consists has been completely delivered or rendered, as the case may be.
1235. When the obligee accepts the performance, knowing its incompleteness or
irregularity, & w/o expressing any protest or objection, the obli is deemed fully
complied w/.

dealing b/w the parties.

1523. Where, in pursuance of a contract of sale, the seller is authorized or required to
send the goods to the buyer, delivery of the goods to a carrier, whether named by the
buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of
the goods to the buyer, except in the cases provided for in art 1503, first, second & third
paragraphs, or unless a contrary intent appears.
Unless o/w authorized by the buyer, the seller must make such contract w/ the carrier on
behalf of the buyer as may be reasonable, having regard to the nature of the goods & the
other circumstances of the case. If the seller omits so to do, & the goods are lost or
damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a
delivery to himself, or may hold the seller responsible in damages.
Unless o/w agreed, where goods are sent by the seller to the buyer under circumstances
in w/c the seller knows or ought to know that it is usual to insure, the seller must give such
notice to the buyer as may enable him to insure them during their transit, &, if the seller
fails to do so, the goods shall be deemed to be at his risk during such transit.

1524. The vendor shall not be bound to deliver the thing sold, if the vendee has not paid
him the price, or if no period for the payment has been fixed in the contract.

1525. The seller of goods is deemed to be an unpaid seller w/in the meaning of this Title:
(1) When the whole of the price has not been paid or tendered;
(2) When a bill of exchange or other nego instrument has been received as conditional
payment, & the condition on w/c it was received has been broken by reason of the
dishonor of the instrument, the insolvency of the buyer, or o/w.
(*In arts 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of
lading has been indorsed, or a consignor or agent who has himself paid, or is directly
responsible for the price, or any other person who is in the position of a seller.)

1526. Subject to the provisions of this Title, notwithstanding that the ownership in the
goods may have passed to the buyer, the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price while he is in possession of
them;
(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after
he has parted w/ the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.
Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in
addition to his other remedies a right of withholding delivery similar to & coextensive w/
his rights of lien & stoppage in transitu where the ownership has passed to the buyer.
1527. Subject to the provisions of this Title, the unpaid seller of goods who is in possession
of them is entitled to retain possession of them until payment or tender of the price in the
ff cases, namely:
(1) Where the goods have been sold w/o any stipulation as to credit;
(2) Where the goods have been sold on credit, but the term of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding that he is in possession of the
goods as agent or bailee for the buyer.

Buyer may reject the whole or accept it entirel

NOTA BENE: THIS PROVISION APPLIES ONLY IF THERE IS AN AGREEMENT THAT THE SELLER
WILL SHIP THE GOODS
GENL RULE: Delivery to the carrier constitutes delivery to the buyer, whether the carrier
was named by the buyer or not.
EXCEPTIONS:
1) The contrary appears (parties did not intend delivery to carrier is delivery to buyer)
2) 1st, 2nd & 3rd pars of 1503

C.O.D. Collect of Delivery Carrier collects the purchase price.

F.O.B. Free on Board where ever the FOB pertains to, the buyer shall not pay for
the expenses of delivery up to that place of designation.
Ex. FOB-Manila. Buyers place of business is in Bulacan. The goods will be coming from
Cebu (sellers place of business). The expenses for shipping the goods from Cebu to
Manila will be borne by the seller. The expenses for shipping the goods from Manila to
Bulacan shall be borne by the buyer. Free yung expenses from Cebu to Manila.

DUTIES OF SELLER AFTER DELIVERY TO CARRIER:

C.I.F. Cost, Insurance & Freight Signifies that the price fixed covers also expenses
1) Enter into contract w/ the carrier on behalf of the buyer.
of freight & insurance. IOW, the seller pays for the insurance & shipping expenses.
- Failure to do so:
A) Buyer may DECLINE to treat delivery to carrier as delivery to him; OR
F.A.S. Free Along Side The seller pays all charges & is subject to risk until the goods
B) the buyer may hold seller responsible for DAMAGES
are placed alongside the vessel. (Mem-Aid 2012)
2) To give notice to the buyer regarding necessity to insure the goods
- Failure to do so: RISK borne by the seller PROVIDED the buyer is unaware of the need
to insure such goods. If the buyer is aware of the need to insure, seller may not be held
responsible.
GENL RULE: The obligation to deliver arises from the moment the contract is perfected. The buyer may, from that moment, demand delivery. The seller, reciprocally, may demand
payment. Hence, the thing shall not be delivered unless the price be paid.
EXCEPTION: The thing shall be delivered but the price shall not be paid first, if the time of payment has been fixed to be paid at a latter date. (in such cases, the seller is considered
to have sold on credit)
EXCEPTION TO THE EXCEPTION: Vendee has lost the right to make use of the period of payment. Art. 1536 (Period of payment is at a latter date but the seller is not bound to make
delivery)
An UNPAID SELLER is one who:
Art. 1249. Par. 2. The delivery of promissory notes payable to order, or bills of
1) has not been paid or to whom the price has not been tendered
exchange, or other mercantile documents shall produce the effect of payment only
2) has received a bill of exchange or other negotiable instrument as conditional payment, when they have been cashed x x x
& the condition to w/c it was received has been broken by reason of the dishonor of the
instrument, insolvency of the buyer or o/w.
Note consignation. 1256. If the creditor to whom tender of payment has been made
UNPAID SELLER includes:
refuses w/o just cause to accept it, the debtor shall be released from responsibility by
1) Agent of the seller;
the consignation of the thing or sum due.
2) Consignor or agent who has himself paid or is directly responsible for the price; or
3) Any Other person in the position of the seller.
WHERE WHOLE OF PRICE HAS NOT BEEN PAID:
1) Tender of payment by buyer such as checks (juan tamad). Sellers lien is destroyed.
2) Payment of part of price payment of price does NOT destroy a sellers lien. The seller
remains an unpaid seller even if title has passed to the buyer.
3) Payment by negotiable instrument OBLICON (Art. 1249)
REMEDIES OF UNPAID SELLER (SAR-SPASMS)
1) Possessory lien (Art 1527-1529)
2) Stoppage of goods in transitu (Art 1530)
3) Special right of resale (Art 1533)
4) Special right of rescission (Art 1534)
5) Action for the price (Art 1595)
6) Action for damages (Art 1596)
7) Recto Law (Art 1484)
8) Maceda Law (Governs financing of real estate on installment payment) (ung special law na cinite sa Layug v IAC)
9) Specific performance (Art 1595)
POSSESSORY LIEN a right to retain possession of goods
WHEN IT MAY BE EXERCISED
a) The goods has been sold w/o any stipulation as to credit
b) The goods has been sold on credit, but the term of credit has expired
c) The buyer becomes insolvent

CREDIT SALE whereby the seller binds himself to give the goods to the buyer w/o
receiving at that time payment for them.
Stipulation as to credit means that a period of payment price has been fixed in the
contract. In the absence of this stipulation, the seller is entitled to the payment of the
price at the same time that he transfers the possession of the goods. Accordingly, the
seller always has a lien upon the goods until payment or tender of the entire price.
INSOLVENT is a person who either ceased to pay his debts in the ordinary course of

business or cannot pay his debts as they become due. (w or w/o insolvency
proceedings)
Insolvency does not dissolve the bargain, it merely revives the sellers lien.
Note: Notwithstanding transfer of ownership, possessory lien may still be exercised as
long as the goods are in the possession of the seller.
1528. Where an unpaid seller has made part delivery of the goods, he may exercise his
right of lien on the remainder, unless such part delivery has been made under such
circumstances as to show an intent to waive the lien or right of retention.
1529. The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer w/o reserving the ownership in the goods or the right to
the possession thereof;
(2) When the buyer or his agent lawfully obtains possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that
he has obtained judgment or decree for the price of the goods.

1530. Subject to the provisions of this Title, when the buyer of goods is or becomes
insolvent, the unpaid seller who has parted w/ the possession of the goods has the right of
stopping them in transitu, that is to say, he may resume possession of the goods at any
time while they are in transit, & he will then become entitled to the same rights in regard
to the goods as he would have had if he had never parted w/ the possession.

1531. Goods are in transit w/in the meaning of the preceding art:
(1) From the time when they are delivered to a carrier by land, water, or air, or other
bailee for the purpose of transmission to the buyer, until the buyer, or his agent in
that behalf, takes delivery of them from such carrier or other bailee;
(2) If the goods are rejected by the buyer, & the carrier or other bailee continues in
possession of them, even if the seller has refused to receive them back.
Goods are no longer in transit w/in the meaning of the preceding art:
(1) If the buyer, or his agent in that behalf, obtains delivery of the goods before their
arrival at the appointed destination;
(2) If, after the arrival of the goods at the appointed destination, the carrier or other
bailee acknowledges to the buyer or his agent that he holds the goods on his behalf
& continues in possession of them as bailee for the buyer or his agent; & it is
immaterial that further destination for the goods may have been indicated by the
buyer;
(3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or
his agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or airplane chartered by the buyer,
it is a question depending on the circumstances of the particular case, whether they are in
the possession of the carrier as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or his agent in that behalf, the

GEN RULE: Lien NOT lost by partial delivery.

When part of the goods are delivered, the unpaid seller has a lien upon the remainder for the proportion of the price w/c is due on account of the goods so retained.
EXCEPT: Art 1529 (3)
Delivery of the part intended as symbolical delivery of the whole, w/c is considered a waiver of any right of retention as to the remainder & therefore the lien is lost.
WHEN UNPAID SELLER LOSES POSSESSORY LIEN
When seller has no possession of goods anymore, he therefore has no more lien
1) Delivery to agent/a carrier or bailee of buyer
Buyers wrongful taking of the goods w/o the sellers consent does NOT destroy the
a. For the purpose of transmission to the buyer
lien
b. W/o reserving ownership or right of possession
If goods are put in the possession of the buyer merely for purpose of allowing the
2) Possession by buyer or his agent when buyer lawfully obtains possession
buyer to examine the goods, the lien in intact.
3) Waiver of the lien
Seller may lose his lien by express agreement to surrender such lien - thus, where
the buyer was allowed to alter the character of the goods & make them much more
LOSS OF LIEN (Tolentino)
valuable, the seller could no longer assert a lien.
The lien of the seller depends upon either possession OR control of the property on w/c Mere judgment by a court obtained by the unpaid seller for the price of the goods is
the lien is claimed, & if the seller permits the property to go into actual possession of the
NOT a ground for the loss of his lien (Art 1529, par.2)
buyer, such LIEN IS LOST, although he delivers on the faith of a chattel mortgage w/c turn Possessory lien IS LOST after the seller loses possession BUT his LIEN on the price as
out to be invalid, or draft given in payment was dishonored. If however, the seller has
an unpaid seller remains. The bringing of an action to recover the purchase price is
been induced to part w/ possession by fraud, the lien of the seller is NOT LOST.
NOT one of the ways of losing possessory lien.
(from PINEDA)
REVIVAL OF LIEN AFTER DELIVERY
POSSESSORY LIEN
LIEN ON THE PRICE
1) If the buyer refuses to receive the goods after they have been delivered to a carrier on
The seller is entitled to retain After delivery, the seller loses his
his behalf, though the seller has parted w/ both ownership & possession may reclaim
possession of the goods as security possessory lien but retains his lien on
the goods & revest himself w/ his lien (see Art 1531 par.2)
for the purchase price
the price of the goods
2) If the buyer returns the goods in wrongful repudiation of the sale, the lien is revived
Requisites for the exercise of RIGHT OF STOPPAGE OF GOODS IN TRANSITU:
Notice must be given either to the person in actual possession of the goods or to his
1. Seller must be unpaid (Art 1525)
principal
2. Buyer must be insolvent (need not be judicially declared)
When notice is given to the carrier or other bailee in possession of the goods, he
3. Goods must be in transit
must deliver the goods according to the directions of the seller
4. Seller must either
(NOTE: expenses must be borne by the seller)
a. take possession of the goods sold
EXCEPTION: a negotiable document of title representing the goods has been issued
b. give notice of his claim to the carrier or other person in possession of the goods
(in w/c case the carrier or bailee is not obliged to redeliver the goods unless the seller
5. Seller must surrender the negotiable document of title, if any, issued by the carrier
surrendered the document for cancellation)
6. Seller must bear the expenses of delivery of the goods after the exercise of the right
WHEN GOODS ARE CONSIDERED IN TRANSIT
Taking of goods in transit by an unauthorized agent of the buyer DOES NOT
1. After delivery to a carrier or other bailee & before the buyer or his agent takes delivery
extinguish the right of stoppage n transitu (Paras)
of them
In case of misdelivery, the goods are still considered in transit, hence, the seller may
2. If the goods are rejected by the buyer, & the carrier or other bailee continues in
still exercise said right pursuant to Art 1523, w/c provides that an unpaid seller may
possession of them (even if the seller refuse to receive them back)
exercise his right of stoppage in transitu by giving notice of his claim to the carrier or
other bailee in whose possession the goods are.
WHEN GOODS ARE NO LONGER IN TRANSIT
1. After delivery to the buyer or his agent in that behalf
ATTORN to agree to be tenant to a new owner of the same prop
2. If the buyer or his agent obtains possession of the goods at a point before the
destination originally fixed
3. If the carrier or the bailee acknowledges to hold the goods in behalf of the buyer
4. If the carrier or bailee wrongfully refuses to deliver the goods to the buyer
*If the carrier is owned by the buyer, carrier is considered an agent for the buyer.
Therefore, delivery to carrier = delivery to buyer

remainder of the goods may be stopped in transitu, unless such part delivery has been
under such circumstances as to show an agreement w/ the buyer to give up possession of
the whole of the goods.
1532. The unpaid seller may exercise his right of stoppage in transitu either by obtaining actual possession of the goods or by giving notice of his claim to the carrier or other bailee in
whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the latter case the notice, to be effectual, must be
given at such time & under such circumstances that the principal, by the exercise of reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the goods, he must redeliver the goods to, or according to the directions of, the
seller. The expenses of such delivery must be borne by the seller. If, however, a NDT representing the goods has been issued by the carrier or other bailee, he shall not be obliged to
deliver or justified in delivering the goods to the seller unless such docu is first surrendered for cancellation.
1533. Where the goods are of perishable nature, or where the seller expressly reserves
the right of resale in case the buyer should make default, or where the buyer has been in
default in the payment of the price for an unreasonable time, an unpaid seller having a
right of lien or having stopped the goods in transitu may resell the goods. He shall not
thereafter be liable to the original buyer upon the contract of sale or for any profit made
by such resale, but may recover from the buyer damages for any loss occasioned by the
breach of the contract of sale.
Where a resale is made, as authorized in this art, the buyer acquires a good title as against
the original buyer.
It is not essential to the validity of resale that notice of an intention to resell the goods be
given by the seller to the original buyer.

SPECIAL RIGHT OF RESALE

May be exercised only when the unpaid seller has either a right of lien or has stopped the
goods in transitu & under any of the ff conditions:
1. Goods are perishable in nature
2. The right to resell is expressly reserved in case the buyer should make a default
3. The buyer delays in the payment of the price for an unreasonable time
EFFECT OF RESALE
The buyer acquires a good title as against the original buyer. The seller is not liable to the
original buyer for any profit earned in the resale & may recover damages occasioned by
the buyers breach of the contract of sale. Action for the rescission of the sale is not
necessary. (Pineda, Civil Code Annotated 2010)

But where the right to resell is not based on the perishable nature of the goods or upon an
express provision of the contract of sale, the giving or failure to give such notice shall be
relevant in any issue involving the question whether the buyer had been in default for an
unreasonable time before the resale was made.

It is not essential to the validity of a resale that notice of the time & place of such resale
should be given by the seller to the original buyer.

Atty. Busmente: When is notice essential?

- When the right of resale is exercised under the condition of the buyer delaying
payment for an unreasonable time
- De Leon: safe move is to always send notice.

The seller is bound to exercise reasonable care & judgment in making a resale, & subject
to this requirement may make a resale either by public or private sale. He cannot,
however, directly or indirectly buy the goods.
1534. An unpaid seller having the right of lien or having stopped the goods in transitu, may
rescind the transfer of title & resume the ownership in the goods, where he expressly
reserved the right to do so in case the buyer should make default, or where the buyer has
been in default in the payment of the price for an unreasonable time. The seller shall not
thereafter be liable to the buyer upon the contract of sale, but may recover from the
buyer damages for any loss occasioned by the breach of the contract.
The transfer of title shall not be held to have been rescinded by an unpaid seller until he
has manifested by notice to the buyer or by some other overt act an intention to rescind.
It is not necessary that such overt act should be communicated to the buyer, but the
giving or failure to give notice to the buyer of the intention to rescind shall be relevant in
any issue involving the question whether the buyer had been in default for an
unreasonable time before the right of rescission was asserted.
1535. Subject to the provisions of this Title, the unpaid seller's right of lien or stoppage in
transitu is not affected by any sale, or other disposition of the goods w/c the buyer may
have made, unless the seller has assented thereto.
If, however, a NDT has been issued for goods, no seller's lien or right of stoppage in
transitu shall defeat the right of any purchaser for value in good faith to whom such docu
has been negod, whether such negon be prior or subsequent to the notification to the
carrier, or other bailee who issued such docu, of the seller's claim to a lien or right of
stoppage in transitu.
1536. The vendor is not bound to deliver the thing sold in case the vendee should lose the
right to make use of the terms as provided in art 1198.

Resale may be public or private sale

To avoid injustice & unfairness, the seller is prohibited from becoming the buyer of
the goods whether directly or indirectly
Notice of sale need not be sent to the original buyer

SPECIAL RIGHT TO RESCIND available ONLY if the seller has either the right of lien or a
right to stop the goods in transitu PLUS either of two situations:
1. Where the right to rescind on default has been expressly reserved
2. Where the buyer has been in default for an unreasonable time
EFFECT OF EXERCISE OF RIGHT
The seller shall not thereafter be liable to the buyer upon the contract of sale, but may
recover from the buyer damages for any loss occasioned by the breach.
There must be NOTICE or some other OVERT ACT of intention to rescind.
Overt act need not be communicated BUT the giving of notice is relevant in case of
default for an unreasonable time.
EFFECT OF SALE OF GOODS SUBJECT TO LIEN OR STOPPAGE IN TRANSITU
1) Where goods are NOT covered by negotiable doc of title - seller can give NO larger than
what he has. When goods are subject to a legal lien a purchaser from the original buyer
can acquire ONLY such rights as the buyer then had.
2) Where goods are covered by negotiable doc of title the sellers lien cannot prevail
against rights of a PURCHASER FOR VALUE IN GOOD FAITH to whom the document has
been indorsed.
RIGHT OF THE VENDOR TO HOLD DELIVERY IN SALE ON CREDIT
GEN RULE: The vendor is NOT bound to make delivery if the vendee has not paid the price.

WAYS OF EXERCISING THE RIGHT OF STOPPAGE

1. By taking actual possession of the goods
2. By giving notice of his claim to the carrier or bailee
The sellers power to stop in transitu includes:
1. Power to counter delivery
2. Power to order redelivery to himself
Art 1533 only applies id the title to goods has already passed to the buyer. Otherwise,
the goods cannot be resold.
ILLUSTRATIVE CASE:
Facts: S sold to B a tractor for P12, 000 - - P5, 000 upon delivery & 7,000 w/in 60 days.
B failed to take delivery of the tractor & pay the purchase price. S was forced to sell
the tractor at a lower price of P10, 000.
Issue: Is B liable for the difference of P2, 000?
Held: YES. In a contract of sale w/c is executory as to both parties, the vendor is
entitled to resell the goods if the purchaser fails to take delivery & pay the purchase
price. If he is obliged to resell for lesser value, he holds the buyer for the difference
BUT if he sells for the same or more than the contract price, the breach of contract of
the original buyer is DAMNUM ABSQUE INJURIA. (A loss or damage w/o injury)

Rescission a partys unilateral unmaking of a contract for a legally sufficient reason,

or a judgment rescinding the contract. (BLD 9th Ed.)
Effect of rescission:
1385. Rescission creates the obli to return the things w/c were the object of the
contract, together w/ their fruits, & the price w/ its interests; consequently, it can be
carried out only when he who demands rescission can return whatever he may be
obliged to restore.
(If the thing cannot be returned anymore, then damages, 1388)

The rule protects a purchaser w/o notice after the seller had stopped the goods either
by virtue of right of lien or stoppage in transitu.

EXCEPTION: If a period has been fixed for payment, the vendor must deliver the thing sold THOUGH the price is not yet paid.
EXCEPTION TO THE EXCEPTION: Vendor may not be compelled to make delivery, even if vendee was given the benefit of period, in case the vendee should lose the right to make
use of the term (Art 1198) & such vendee has NOT yet paid the price.

1537. The vendor is bound to deliver the thing sold & its accessions & accessories in the
condition in w/c they were upon the perfection of the contract.
All the fruits shall pertain to the vendee from the day on w/c the contract was perfected.

WHEN DOES A VENDEE LOSE EVERY RIGHT TO MAKE USE OF PERIOD: (1198)
1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the price
2) When he does not furnish to the creditor/vendor the guaranties or securities w/c he has promised
3) When by his own acts he has impaired said guaranties or securities after their establishment, & when thru a fortuitous event they disappear, unless he immediately gives new
ones equally satisfactory
4) When the debtor/vendee violates any undertaking, in consideration of w/c the creditor agreed to the period.
5) When the debtor/vendee attempts to abscond
CONDITION OF THING TO BE DELIVERED
thus, in Consing vs CA (1989) the Court ruled that a subdivision lot seller should not
The THING sold & its ACCESSIONS & ACCESSORIES must be in the condition in w/c they shift to the buyer the burden of providing access to & from the subdivision. It is the
were upon the perfection of the contract.
sellers duty to construct the necessary roads in the subdivision that could serve as
SELLERS DUTYoutlets. Proper access to the residence is essential to its enjoyment
1) To preserve the thing pending delivery (relate to Arts. 1163 & 1164)
2) To deliver the thing sold in a condition suitable for its enjoyment by the buyer for the 1166. The obli to give a determinate thing includes that of delivering all its accessions
purposes contemplated
& accessories, even though they may not have been mentioned.
Accessions are the fruits of a thing; additions to, or improvements upon, a thing such as
the young of animals, house or trees on a land, etc.
Accessories are anything attached to a principal thing for its completion, ornament, or
better use such as picture frame, key of a house, etc.
VENDEE IS ENTITLED TO THE FRUITS
Art. 1164 - the vendee has a right to the fruits of the thing sold from the time the
obligation to deliver it arises.
Art. 1475 - the obligation to deliver arises upon the perfection of the contract of sale

1538. In case of loss, deterioration or improvement of the thing before its delivery, the
rules in art 1189 shall be observed, the vendor being considered the debtor.

1539. The obligation to deliver the thing sold includes that of placing in the control of the
vendee all that is mentioned in the contract, in conformity w/ the ff rules:
If the sale of real estate should be made w/ a statement of its area, at the rate of a certain
price for a unit of measure or number, the vendor shall be obliged to deliver to the
vendee, if the latter should demand it, all that may have been stated in the contract; but,
should this be not possible, the vendee may choose b/w a proportional reduction of the
price & the rescission of the contract, provided that, in the latter case, the lack in the area
be not less than one-tenth of that stated.

VENDEE IS NOT ENTITLED TO THE FRUITS

1. When the rule provided in Art 1537(2) is modified by agreement of the parties, their
agreement shall govern.
2. If the vendee rescinds the contract of sale instead of exacting the fulfillment thereof, he
is entitled only to damages like interest, attorneys fees & costs but he may not also
claim the fruits of the thing sold
3. In a contract of promise to sell, the vendee is not entitled to the fruits.
RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT OF THING BEFORE
DELIVERY (based on Art 1189)
1) If the thing is lost w/o the fault of the debtor, the obligation shall be extinguished
2) If the thing is lost thru the fault of the debtor, he shall be obliged to pay damages; it is
understood that the thing lost when it perishes, or goes out of commerce, or disappears
in such a way that its existence is unknown or it cannot be recovered;
3) When the thing deteriorates w/o the fault of the debtor, the impairment is to be borne
by the creditor
4) If it deteriorates thru the fault of the debtor, the creditor may choose for:
a. Rescission of obligation w/indemnity for damages, OR
b. Fulfillment w/ indemnity for damages
5) If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor
6) If it is improved at the expense of the debtor, he shall have no other right than that
granted to the usufructuary
SALE OF REAL PROP BY UNIT OF MEASURE OR NUMBER
W/ Statement of area at the rate of a certain price for a unit or measure or number.
If the vendee should demand, the vendor shall deliver ALL that may have been stated in
the contract.
If what is delivered is:
- LESS IN AREA OR INFERIOR or DIFFIRENT QUALITY
Buyer may seek:

*Sale of the principal entitles the buyer to the accessions & accessories, but sale of the
accessories & accessions does not entitle buyer to the principal.

Usufructuary a person who has the right to the benefits of anothers property (BLD
9th Ed)
Usufruct - A right for a certain period to use and enjoy the fruits of another's property
without damaging or diminishing it (BLD 9th Ed)
- the right to enjoy benefits or profits from something, as real prop, while not
being the owner of it.

The rule is different where there is violation of the warranty against hidden defect (Art
1571). The vendor is also liable for damages --- Art 1567; 1191(2)
Judicial sales of immovable lacking in area or of inferior quality OR of greater quantity --- relate to Art 1552 & 1570)

The same shall be done, even when the area is the same, if any part of the immovable is
not of the quality specified in the contract.
The rescission, in this case, shall only take place at the will of the vendee, when the
inferior value of the thing sold exceeds 1/10th of the price agreed upon.
Nevertheless, if the vendee would not have bought the immovable had he known of its
smaller area of inferior quality, he may rescind the sale.
1540. If, in the case of the preceding art, there is a greater area or number in the
immovable than that stated in the contract, the vendee may accept the area included in
the contract & reject the rest. If he accepts the whole area, he must pay for the same at
the contract rate.
1541. The provisions of the two preceding arts shall apply to judicial sales.
1542. In the sale of real estate, made for a lump sum & not at the rate of a certain sum for
a unit of measure or number, there shall be no increase or decrease of the price, although
there be a greater or less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables as sold for a single price;
but if, besides mentioning the boundaries, w/c is indispensable in every conveyance of
real estate, its area or number should be designated in the contract, the vendor shall
be bound to deliver all that is included w/in said boundaries, even when it exceeds the
area or number specified in the contract; &, should he not be able to do so, he shall suffer
a reduction in the price, in proportion to what is lacking in the area or number, unless the
contract is rescinded b/c the vendee does not accede to the failure to deliver what has
been stipulated.

1. Rescission if lack in area is at least 1/10 of area agreed upon

2. Rescission if the deficiency in quality specified in the contract exceeds 1/10 of the price
agreed upon.
3. Rescission if the vendee would not have bought the immovable had he known of its
smaller area or inferior quality
4. Proportional reduction of price.
- GREATER IN AREA
1. Accept per stipulation & reject the rest
2. Accept the whole & pay the contract price

SALE OF REAL ESTATE MADE FOR A LUMP SUM - a cuerpo cierto/por precio alzado
If the sale is made for lump sum, & not so much per unit of measure or number, the cause of the contract is the thing sold independent & irrespective of its number or measure.
2 types of pricing agreement
1. Unit price contract purchase price is determined by way of reference to a stated rate per unit
2. Lump sum contract states a full purchase price for an immovable the area of w/c may be declared based on estimate or where both the area & boundaries are stated.
Example: P1M for 1,000 square meters.
Sale of real estate made for a lump sum
1) Mistake of area stated in contract immaterial
the vendor is obligated to deliver all the land included w/in the boundaries, regardless whether the real estate should be greater or smaller than they recited in the deed
(Balantakbo vs CA)
The boundaries of the land stated in the contract determine the effects & scope of the sale, NOT the area thereof (Semira vs CA)
2) Where area or number stated together w/ boundaries (De Leon p.274-276)
If vendor cannot deliver to vendee all that is stated in the contract, the vendee has the option:
a. To reduce the price in proportion to the deficiency OR
b. To set aside the contract
Phrase should not be able to do so refers to a situation when the vendor cannot deliver all that is included w/in the boundaries b/c a part or parcel of the real estate does
not belong to him.
3) Where there is conflict b/w area stipulated & title to property (p.276)
Area included w/in the stipulated boundaries prevails over that w/c the title shows when the boundaries are certain & no alterations thereof has been proven.
4) Where identity of erroneously designated property clearly established (p.277)
-the mistake in designating the property in the deed of sale does NOT vitiate consent of the parties or affect the validity & binding effect of the contract
Remedy: have the document reformed
5) Where words about , more or less , etc. Are used (p. 277-278)
Words when used in connection w/ quantity or distance are intended to cover some slight or unimportant inaccuracy. They do NOT weaken or destroy the statements of distance
& quantity when no other guides are furnished.
CONFLICT B/W AREA STATED & BOUNDARIES
RULE: Natural boundaries will prevail over area.
Boundaries prevail b/c what really defines a piece of ground is NOT the area BUT the boundaries. Erroneous statement regarding area can be disregarded-1) Where boundaries given are sufficiently certain, or
2) Where discrepancy in measurement is so great, provided, the natural boundaries are very clear & convincing
EXCEPTION: Area stated in the contract should be followed.
1) Where boundaries do not identify land or
2) overlapping of boundaries exists
When 2 or more real estates are sold for a single price, the rule is the same as when the real estate is sold for a lump sum. There shall be no increase or decrease in the area actually
delivered & the area stated in the contract (Beda MemAid)

Where price per unit is not indicated--GREATER/LESSER - No rescission or adjustment of price, UNLESS there is gross mistake.
1543. The actions arising from arts 1539 & 1542 shall prescribe in six months, counted from the day of delivery.