ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 41  May 2021 CPA Licensure Examination  Weeks 5-6

REGULATORY FRAMEWORK for BUSINESS TRANSACTIONS Atty. J. Domingo  Atty. N. Soriano

RFBT-03: LAW ON SALES

 Definition; Concept – A contract whereby one of the contracting parties known as the seller or vendor,
obligates himself to transfer the ownership of and to deliver a determinate thing and the other party
known as the buyer or vendee, obligates himself to pay therefor the price certain in money or its
equivalent.
 What are the kinds of delivery?
o Actual delivery – means actual physical transfer of control and possession to the buyer

o Constructive – delivery other than physical delivery

 Traditio Symbolica – the seller delivers the symbol of possession of a property e.g.
keys; applicable to movables only.
 Traditio Longa Manu – delivery of a movable by mere consent or agreement of the
parties usually made by pointing at the thing; applicable to movables only.
 Traditio Brevi Manu – delivery that takes place when the buyer is already in
possession of the thing sold even before the sale; applicable to movables only.
 Traditio constitutum possessorium – delivery that takes place when the seller
continues in possession of the thing sold after the sale but in another capacity such as a
lessee or depositary. Literally means “ delivery by agreement of possessors.” Oppossite
of tradition brevi manu; applicable to both movables and immovables
 Delivery by legal formalities – when the sale is made through a public instrument,
the execution thereof shall be equivalent to the delivery of the thing sold, if from the
deed the contrary does not appear or cannot be clearly inferred; applies to both
personal and real property; applicable to both movables and immovable.
 Quasi Traditio – delivery of incorporeal property. What are incorporeal property? –
shares, receivables, patents, trademarks, bank deposits, etc.

 Elements of a contract of sale

o Essential elements
 Consent of the contracting parties
 Subject matter which should be a determinate thing
 Price certain in money or its equivalent
o Natural elements – those inherent in every contract of sale:
 Warranty against eviction – eviction means deprivation of the buyer of the whole or part
of the thing sold by virtue of a final judgment in court.
 Warranty against hidden defects and encumbrances – hidden defect is a defect does is
not patent or visible; an encumbrance means a burden or impediment imposed upon a
thing.
o Accidental Elements – refer to particular stipulations of the parties such as terms, place and
time of payment and other conditions agreed upon.

 Characteristics of a contract of sale

a. Consensual
b. Principal
c. Bilateral
d. Onerous
e. Commutative
f. Nominate

 Rules on the object of a contract of sale

o Requisites:
 The thing must be within the commerce of men
 The thing must not be contrary to laws, morals, good customs, public order and public
policy
 The thing must be determinate – a thing is determinate if it is particularly designated or
physically segregated from all others of the same class.

 Other rules on object:

o The seller must have the right to transfer the ownership of the thing at the time that it is
delivered; it is not necessary that the seller be the owner of the thing at the time of sale.
o Things having potential existence may be the object of a contract of sale; However, the thing
must come into existence, otherwise the sale will not be effective for not having a subject
matter.
 Emptio rei speratae - sale of future thing; must come into existence otherwise the sale
will not be effective
 Emptio spei – sale of hope itself; produces effects even if the thing hoped does not
come into existence.
 Exception: Sale of vain hope is void.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY RFBT-03
Weeks 5-6: LAW ON SALES

o The goods which form the subject of a contract of sale may be either:
 Existing goods owned or possessed by the seller.
 Goods to be manufactured, raised or acquired by the seller after the perfection of the
contract of sale, called: “Future goods” or goods whose acquisition by the seller depends
upon a contingency which may or may not happen.
 Rules on Price
o Concept – The price is the sum that will be paid for the property that is sold.
o Price must be certain otherwise the sale is void because of lack of meeting of the minds of the
contracting parties.
o The price is considered certain if:
 It is a fixed amount
 It is certain with reference to another thing certain
 If the determination is left to the judgment of a specified person or persons, subject to
the following rules:
 Should such person or persons be unable or unwilling to fix it, the contract shall
be inefficacious, unless the parties subsequently agree upon the price.
 If the third person or persons acted in bad faith or by mistake, the courts may
fix the price.
 Where such third person or persons are prevented from fixing the price or terms
by fault of the seller or the buyer, the party not in fault may have such
remedies against the party in fault as are allowed the seller or the buyer, as the
case may be.
o Fixing of the price cannot be at the sole discretion of one party. However, if the price fixed by
one of the parties is accepted by the other, the sale is perfected.
o Effect if Price cannot be fixed: Where the price cannot be determined in accordance with the
above stated rules, the contract is inefficacious or without effect.
o Gross inadequacy of price: Does not affect the validity of a contract of sale. However such gross
inadequacy may indicate either:
 A defect in the consent; or
 The parties really intended a donation or some other act or contract.

 Who may be parties to a contract of sale? – all parties who are capacitated may enter into a
contract of sale.
o Minors – where necessaries are sold and delivered to a minor or other person without capacity to
act, he must pay a reasonable price therefor. Necessaries are those indispensable for
sustenance, dwelling, clothing and medical attendance.
o Sale between spouses is void; applies also to common law spouses. Exceptions:
 When a separation of property was agreed in the marriage settlement; or
 When there has been a judicial separation of property.

 Relative incapacity to buy – the following persons cannot acquire by purchase, even at a public or
judicial auction sales or in legal redemption, compromises and renunciations, either in person or
through mediation of another:
o The guardian, the property of the person or person who may be under his guardianship;
o Agents, the property whose administration or sale may have been entrusted to them unless
consent of the principal has been given;
o Executors and administrators, the property of the estate under their administration;
o Public officers and employees the property of the State or any subdivision thereof or of any GOCC
or institution, the administration of which has been entrusted to them.
o Justices, judges and prosecuting attorneys, clerks of superior or inferior courts and other officers
and employees connected with the administration of justice, the property and rights in litigation
or levied upon an execution before the court within whose jurisdiction or territory they exercise
their respective functions.

 A contract of sale is perfected at the moment there is a meeting of the minds upon:
o The thing which is the subject of the sale; and
o The price.
 Form of a contract of sale
o Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract
of sale may be in any of the following terms:
 In writing, or by word of mouth or partly in writing and partly by word of mouth or may
be inferred from the conduct of the parties.
 Rules in case of sale by auction
o When sale by auction is perfected? – when the auctioneer announces its perfection by the fall of
the hammer, or in any other manner.
o Rights of parties before perfection:
 Any bidder may retract his bid – because the bid is merely an offer and an offer may be
withdrawn at anytime before acceptance.
 The auctioneer may withdraw the goods from sale unless the auction has been
announced to be without reserve.

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o Rights of Parties after perfection

 The winning bidder cannot retroact his bid nor can the auctioneer withdraw the goods
since there is already a perfected contract.
o Right of the seller to bid – The seller may bid at the auction provided the following requisites
are present:
 The right to bid must have been reserved expressly by or on behalf of the seller;
 His right to bid must not be prohibited by law or stipulation;
 Notice must be given that the sale is subject to a right to bid by or on behalf of the
seller.

 Rules on promise to buy/sell

o Bilateral promise – one party promises to buy and the other party promises to sell a
determinate thing at an agreed price.
 This is as good as a perfected sale; For enforceability, the rules in Statute of Frauds
must be observed.
o Unilateral Promise – here the promise to buy or to sell a determinate thing at a certain price is
made by only one of the parties. The promise may be accepted or not and shall have the
following effects:
 If not accepted by the promise – no legal effect
 If accepted by the promise:
 If supported by a consideration distinct from the price, the promise is binding
upon the promisor.
 If it is not supported by any consideration distinct from the price, the promise is
not binding upon the promisor. Accordingly, the promisor can withdraw his
promise by informing the promise of such withdrawal even before the lapse of
any option period given to the promise.

 Earnest money and Option Money

o Earnest Money – the money given as part of the purchase price and as proof of the perfection
of the contract; paid by the buyer to show his legitimate interest and earnest desire to purchase
the thing.
o Option Money – is the consideration paid for the purpose of holding one to his promise to buy
or sell a determinate thing for a certain period of time, which consideration is separate and
distinct from the purchase price.

 Sale by sample, description, sale or return, sale on approval

o Sale by sample – the parties contract solely with reference to the sample. The seller warrants
that the bulk of the goods delivered correspond with the sample shown to the buyer.
o Sale by description – The parties contract solely with reference to the description. The seller
warrants that the bulk of the goods delivered correspond with the description of the goods
presented to the buyer.
o Sale by sample and description – The seller warrants that the bulk of the goods delivered
correspond with both the sample and description, and not with only one. The buyer shall have
reasonable opportunity of comparing the bulk with the description of the sample.
o Sale or return – The ownership of the goods is transferred to the buyer on delivery, but the
buyer has the option to revest their ownership on the seller by returning them within the time
fixed in the contract, or if not time has been fixed, within a reasonable time.
o Sale on approval or on trial or on satisfaction – ownership of the goods remains with the seller
despite delivery but shall be transferred to the buyer in the following cases:
 When he signifies his approval or acceptance of the goods;
 When he does an act adopting the transaction e.g. makes use or consumes the thing;
 If he does not signify his approval or acceptance of the goods but retains the goods
without giving notice of rejection within the time fixed in the contract, or within a
reasonable time, and such time has expired.

 Rules on double sale

o The determination of who has preferred right (who becomes the owner) in case the same thing
had been sold to different buyers is governed by the following:
 Movables –ownership shall be transferred to the person who may have first taken
possession thereof in good faith;
 Immovable Property:
 The buyer who first registered in good faith; good faith means the registrant is
not aware that there was a prior buyer or that somebody else is in possession of
the property sold with prior claim of ownership.
 Should there be no inscription or registration, ownership shall pertain to the
person who in good faith was first in the possession; and
 Oldest title – in the absence of inscription and possessor, the property shall be
considered owned by the person who in good faith presents the oldest title—first
in time, stronger in right.

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 Sale of Real Property in Installments

o Recto Law (Art. 1484) – In a contract of sale of PERSONAL PROPERTY on installment basis, the
vendor may exercise any of the following alternative remedies:
 Exact fulfillment of the obligation should the vendee fail to pay;
 Cancel the sale, should the vendee’s failure to pay cover two or more installments; or
 Foreclose the chattel mortgage.
 It contemplates a situation wherein personal property is sold on installment and
the said property is used as security for the loan under a chattel mortgage;
 Applies only if the seller is also the creditor-mortgagee;
 The remedies are alternative, not cumulative;
 Foreclosure of chattel mortgage on the thing sold shall bar recovery of any
deficiency.
 A stipulation that the installments or rents paid shall not be returned to the
buyer shall be valid insofar as the same may not be unconscionable under the
circumstances.

 Maceda Law (RA No. 6552) – The Maceda Law applies to contracts of sale of real estate on
installment payments including residential condominium apartments. It likewise covers contracts to sell.
o Maceda Law does not apply to:
 Sale of industrial lots;
 Sale of commercial buildings;
 Sales to agricultural tenants;
 Straight sale or sale not on installment basis.
o Maceda Law cannot be invoked by the following persons:
 The highest bidder in the foreclosure sale, if the seller opted to foreclose the mortgage;
 The developer-seller or his successor.
o Rules in Maceda Law:
 If the buyer has paid at least two years installment:
 In case the buyer defaults in paying the installment payments, The buyer has a
grace period of of one month for every year of installment payment. The buyer
can pay the unpaid installment interest free during this grace period.
 The foregoing right shall be exercised by the buyer only once in every five years
of the life of the contract.
 The seller can cancel the sale if the buyer still failed to pay within the grace
period. The following must be complied with if the seller wishes to cancel:
o Give a notarized notice of cancellation or demand for rescission of the
contract by a notarial act;
o There must be full payment of the cash surrender value, if any.
o The actual cancellation shall take place after 30 days from receipt by the
buyer of the notice of cancellation or the notarial demand for rescission
and upon full payment of the cash surrender value.
o Amount of cash surrender value – 50% of the total payments made plus
after five years of installments, an additional 5% every year.
o The amount of CSV should not exceed 90% of the total payments made;
and downpayments, deposits and options on the contract shall be
included in the computation of the total number of installment payments
made.

 If the buyer has paid less than two years installment:

 Grace period – the buyer may pay within 60 days from the date the installment
became due.
 Cancellation – in case of non payment within the 60-day grace period, the seller
may cancel the sale after 30 days from receipt of the buyer of the notice of
cancellation or demand fro rescission.

 Obligations of the Seller

o The following are the obligations of a seller:
 To transfer ownership of the thing sold;
 To deliver the thing sold – including its accessions and accessories in the condition in
which they were upon perfection of the contract. All of the fruits shall pertain to the
vendee from the day on which the contract is perfected;
 To warrant the thing sold – the vendor is liable for breach of warranty against eviction
and warranty against hidden defects and encumbrances;
 To take care of the thing sold with the diligence of a good father of a family unless the
law or the stipulation of the parties requires another standard of care.
 Sale by a person who is not the owner of the thing sold –The buyer acquires no better title than
the seller had, except in the following cases:
o When the sale is made under authority or with the consent of the owner;
o When the owner is precluded by his conduct from the denying the seller’s authority;

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o When the sale is made under the provisions of any factor’s acts, recording laws or any other
provisions of law enabling the apparent owner to dispose of the goods as if he were the true
owner thereof;
o When the sale is made under a statutory power of sale or under the order of court of competent
jurisdiction;
o When the purchase is made in merchant’s store or in fairs or markets.

 Time and place of delivery of the thing sold

o Place of delivery
 Place stipulated
 If no stipulation, place fixed by usage or trade;
 In the absence of both, the seller’s place of business if he has one; if none, the seller’s
place of residence. However, in the case of sale of specific goods, which to the
knowledge of the parties when the contract was made were in some other place, that
place shall be the place of delivery.
o Time for delivery of goods
 Time stipulated
 If there is no stipulation, delivery must be made within a reasonable time from the
execution of the contract.
 Demand or tender of delivery must be made at a reasonable hour to be effectual.

 Expenses of delivery – the seller bears the expenses of an incidental to putting the goods into a
deliverable state, unless otherwise stipulated.

 When is a seller not bound to deliver the thing sold?

o If the vendee has not paid him the price;
o If no period for the payment of the price has been fixed in the contract;
o If a period has been fixed for the payment of the price, the seller is bound to deliver the thing
sold. However, the seller is not bound to deliver if the buyer loses the right to make use of the
period.

 What are the rights of the buyer when quantity or quality of goods delivered is different from
that which the seller contracted to sell?
o Reject the goods – because the creditor cannot be compelled to accept partial payment;
o Accept the goods – the buyer must pay for the goods at the contract rate. If the buyer has used
or disposed of the goods before he knows that the seller is not going to perform his contract in
full, the buyer shall not be liable for more than fair value to him of the goods so received.

 What if the quantity delivered is MORE than that which the parties agreed upon? The buyer
may:
o Accept the goods agreed upon and reject the rest;
o Accept the whole of the goods delivered and pay them at the contract rate;
o Reject the whole of the goods if they are indivisible.
 What if the goods delivered are mixed goods of different description? The buyer may:
o Accept the goods agreed upon and reject the rest, if the sale is divisible;
o Reject the whole of the goods, if the sale is indivisible.

 Unpaid Seller – one who has not been paid or tendered the whole of the price or who has received a
bill of exchange or other negotiable instrument as conditional payment and the condition under which it
was received has been broken by reason ofthe dishonor of the instrument, the insolvency of the buyer,
or otherwise.
 Rights of an unpaid seller
o Possessory lien – or a right on the goods or right to retain them while he is in possession of
them.
 When available - This right is available to the seller and notwithstanding that he may be
in possession of the goods as agent or bailee for the buyer in the following instances:
 Where the goods have been sold without any stipulation or credit;
 Where the goods have been sold on credit, but the credit term has expired;
 Where the buyer is insolvent.
 Lien where there is partial delivery:
 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.
 When lien is lost – the unpaid seller loses his lien on the goods in the following
cases:
o When he delivers the goods to a carrier or other bailee for the purpose
of transmission to the buyer without reserving the ownership in the
goods or the right to the possession thereof.
o When the buyer or his agent lawfully obtains possession of the goods.
o By waiver thereof.

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o Right of Stoppage in Transitu – this right involves the right of the unpaid seller to resume
possession of the goods at any time while they are in transit and he will then become entitled to
the goods as he would have had if he never parted with the possession.
 When right available –This right is available after the unpaid seller has parted with the
possession of the goods and the buyer is or becomes insolvent.
 How exercised:
 By obtaining actual possession of the goods;
 By giving notice of his claim to the carrier or other bailee in whose possession
the goods are.
 Effects of execise of right of stoppage in transit:
 The goods are no longer in transit
 The contract of carriage ceases; the carrier shall be liable as depositary or other
bailee
 The carrier must redeliver the goods to, or according to the instructions of, the
seller; However, if a negotiable document of title has been issued for the goods,
the carrier will not be bound to deliver the goods unless the document of title is
first surrendered to him for cancellation.
 When goods are in transit
 From the time are delivered to the carrier or other bailee for the purpose of
transmission to the buyer, until the buyer or his agent, takes delivery of them
from such carrier or other bailee;
 If the goods are rejected by the buyer, and the carrier or other bailee continues
in possession of them, even if the seller has refused to received them back.
 When the goods are NO LONGER in transit
 If the buyer obtains delivery of the goods before arrival at the appointed
destination;
 If the carrier or other bailee acknowledges to the buyer or his agent, that he is
holding the goods in his behalf, after arrival of the goods at their appointed
destination.
 If the carrier or other bailee wrongfully refuses to deliver the goods to buyer or
his agent.
o Right of Resale
 When right is available – This right is available to an unpaid seller when the following
requisites are present:
 The buyer has defaulted in the payment of the price;
 The seller has the right of lien or has stopped the goods in transit;
 Title to the goods has passed on to the buyer;
 The grounds must be any of the following:
 The goods are of a perishable nature;
 The seller has expressly reserved the right to resell the goods in case the buyer
should make default;
 The buyer has been in default for an unreasonable time.
 How resale is made – the seller may resell the goods in a public or private sale. He is
bound to exercise reasonable care and judgment in making the resale. He cannot
directly and indirectly, buy the goods.
 Effects of Resale:
 The seller shall not be liable to the original buyer upon the contract of sale or for
any profit made by such resale;
 He may recover damages from the buyer for any loss occasioned by the breach
of contract of sale
 The new buyer acquires a good title against the original buyer.
o Right to rescind the sale
 When available – this right is available to an unpaid seller when the following requisites
are present:
 The buyer has defaulted in the payment of the price;
 The seller has the right of lien or has stopped the goods in transit;
 Title to the goods has passed on the buyer;
 The grounds must be any of the following:
 The seller has expressly reserved the right to rescind the sale in case the buyer
should make default;
 The buyer has been in default in the payment of the price for an un reasonable
time.
 How rescission is made:
 By giving notice to the buyer of the intention to rescind;
 By doing an overt act manifesting the intention to rescind.

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 Effects of rescission:
 The seller shall not be liable to the buyer upon the contract of sale;
 He may recover from the buyer damages for any loss occasioned by the breach
of the contract of sale;
 The seller resumes ownership of the goods.

 What happens to a contract of sale subject to a condition that is not fulfilled? – The other party
may choose to do any of the following:
o Refuse to proceed with the contract – he may also treat the non-performance of the condition
as a breach of warranty;
o Waive the performance of the condition and proceed with the contract.

 Warranties

 Warranties may be express or implied. Implied warranties are the natural elements of a contract of
sale.
o Express Warranties of the seller – an express warranty is an affirmation of fact or any
promise by the seller relating to the thing if the natural tendency of such affirmation or
promise is to induce the buyer to purchase the same, and if the buyer purchase relying
thereon.
o Implied Warranties of the seller – Unless a contrary intention appears, the following are
deemed included in a contract of sale even without an express stipulation:
 Warranty against eviction/Warranty in case of eviction – this is an implied
warranty that the seller has a right to sell the thing at the time when the
ownership is to pass and the buyer shall from that time have and enjoy the legal
and peaceful possession of the thing;
 The warranty may be eliminated by stipulation, so long as the stipulation was
agreed upon in good faith;
 Any stipulation exempting the vendor from the obligation to answer for eviction
shall be void, if he acted in bad faith.
 Requisites for the enforcement of warranty in case of eviction:
o The vendee has been evicted;
o The eviction was by virtue of final judgment;
o The eviction was based on the ground on a right prior to the sale
or an act imputable to the vendor and;
o The seller must be summoned in the suit for eviction at the
instance of the buyer.
 Waiver of Warranty in case of eviction – may be conciente or
intentionada:
o The waiver is conciente when buyer made the waiver without
the knowledge of the risks of eviction – the seller shall only pay
the value which the thing sold had at the time of the eviction;
o The waiver is intentionada when the buyer made the waiver with
knowledge of the risks of eviction and assumed its
consequences – seller is NOT liable.

 Liabilities of the seller in case of breach of the said Warranty – the buyer shall demand from the
seller:
o The return of the value which the thing sold had at the time of the eviction, be it greater or
less, than the price of the sale;
o The income or fruits if he has been ordered to deliver them to the party who won the suit
against him;
o The cost of the suit which caused the eviction and in a proper case, those of suit brought
against the vendor for the warranty;
o The expense of the contract, if the vendee has paid them
o The damages and interests and ornamental expenses if the sale was made in bad faith.

 Warranty against hidden defects – this is an implied warranty that the thing shall be free from any
hidden faults or defects or any change or encumbrance not declared or known to the buyer;
o These refer to defects which would render the thing unfit for the use for which it is intended or
should they diminish its fitness for such use to such an extent that, had the vendee been aware
thereof he would not have acquired it or would have given a price for it.
o Remedies – In case of breach of warranty against hidden defects within the prescriptive period
of six months from the delivery of the thing. The buyer may elect between:
 Withdrawing from the contract also known as accion redhibitoria with damages
 Demanding a proportionate reduction of the price also known as recoupment with
damages.

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 Warranties under the Consumer Act (RA No. 7394)

o Consumer products are goods which are primarily for personal, family, household or agricultural
purposes which shall include but not limited to goods, drugs, cosmetics and devices;
o Any seller or manufacturer who gives an express warranty for consumer products is required to
do the following:
 Set the terms of warranty in clear and readily understandable language and clearly
identify himself as the warrantor;
 Identify the party to whom the warranty is extended;
 State the products or parts covered;
 State what the warrantor will do in the event of a defect, malfunction or failure to
conform to the written warranty and at whose expense;
 State what the consumer must do to avail of the warranty rights;
 Stipulate the warranty period.

 Period of Warranty – It is also mandated that all written warranties or guarantees issued by a
manufacturer, producer, or importer shall be operative from the moment of sale. The period of warranty
shall be:
o The parties may stipulate the period within which the express warranty shall be enforceable. If
the implied warranty on merchantability accompanies an express warranty, both will be of equal
durations;
o Any other implied warranty shall endure not less than 60 days nor more than one year following
the sale of new consumer products.

 Redhibitory defect of animals – if the hidden defect of animals, even in case a professional
inspection has been made, should be of such a nature that expert knowledge is not sufficient to
discover it, the defect shall be considered as redhibitory;
o The sale of animals suffering from contagious diseases shall be void;
o A contract of sale of animals shall also be void if the ise or service for which the are acquired
has been stated in the contract and they are found to be unfit therefor;
o If a veterinarian, through ignorance or bad faith should fail to discover or disclose it, the
veterinarian shall be liable for damages;
o Prescriptive period – the redhibitory action based on the faults or defects of animals, must be
brought within 40 days from the date of their delivery to the vendee.
 Obligations of the Buyer
o The obligations of the buyer/vendee are as follows:
 To accept delivery; When are the goods deemed accepted?
 He intimates to the seller that he is accepting them;
 When he does any act in relation to the goods which is inconsistent with the
ownership of the seller;
 When he retains the goods after the lapse of a reasonable time without
intimating to the seller that he has rejected them.
 To pay the price of the thing sold at the time and place stipulated in the contract.
 When can the vendee suspend payment of the price?
o Should the vendee be disturbed in the possession or ownership of the
thing acquired or;
o Should he have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage.
o The suspension is effective until the vendor has caused the disturbance
or danger to cease, unless the latter gives security for the return of the
price in a proper case, or it has been stipulated that, notwithstanding
any such contingency, the vendee shall be bound to make the payment.
A mere act of trespass shall not authorize the suspension of the
payment of the price.

 What are the basic remedies of each party in case the other breaches his or her obligation?
o Specific Performance – action to recover price by seller of goods is available to the seller. It
can be maintained by the seller in three instances:
 The ownership of the goods has passed to the buyer and he wrongfully neglects or
refuses to pay for the goods according to the terms of the contract of sale;
 The price is payable on a certain day, irrespective of delivery or of transfer of title and
the buyer wrongfully neglects or refuses to pay such price;
 When the buyer refused to receive the goods upon the seller’s offer to deliver.
o Action for damages – Available when the buyer wrongfully neglects or refuses to accept and
pay for the goods.
o Recission by the seller – The seller can give notice of rescission where the goods have not
been delivered to the buyer and the buyer has:
 Repudiated the contract of sale;
 Has manifested his ability to perform his obligations, or;
 Has committed a breach thereof, the seller may totally rescind the contract of sale of his
election so to do to the buyer.

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 Extinguishment of Sale
o A contract of sale is extinguished by:
 The same causes as all other obligations;
 Conventional redemption;
 Legal redemption
o Conventional Redemption – also known as Sale con pacto de retro. By express agreement, the
seller is given the right to repurchase the thing sold.
 Period – The right of redemption should be exercised within the following period:
 Within the period agreed upon which should not exceed ten years from the date
of the contract;
 In the absence of an express agreement, the seller should redeem within four
years from the date of the contract.
 How exercised – the seller must:
 Give his express intention to repurchase;
 Payment or valid tender of the redemption price. The redemption price consists
of the following:
o The price of the sale;
o The expenses of the contract
o Necessary and useful expenses made on the thing sold
 Effects of redemptioning – redemption has the following effects:
 Any money, fruits or other benefits to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to usury laws;
 The apparent seller may ask for the reformation of the instrument;
 The buyer is subrogated to the seller’s rights and actions.
o Failure to redeem shall have the effect of consolidation of ownership in
the person of the vendee.

 Equitable Mortgage – a sale with a right to repurchase or even a deed of absolute sale shall be
presumed to be an equitable mortgage in any of the following cases:
o When the price of a sale with right to repurchase is unusually inadequate;
o When the seller remains in possession as lessee or otherwise;
o When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;
o When the purchaser retains for himself a part of the purchase price;
o When the seller binds himself to pay taxes on the thing sold;
o In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure payment of a debt or the performance of any other obligation.
 In case of doubt, a contract purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage.

 Legal Redemption – Legal redemption is the right to be subrogated, upon the same terms and
conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in
payment or by any other transaction whereby ownership is transmitted by onerous title.

 Condominium: an interest in real property consisting of a separate interest in a unit in a residential,

industrial or commercial building and an undivided interest in common, directly or indirectly, in the land
on which it is located and in other common areas of the building

o Condominium Corporation: a corporation which holds title to the common areas, including
the land, or the appurtenant interests in such areas for the purpose in which the holders of
separate interest shall automatically be members or shareholders, to the exclusion of others, in
proportion to the appurtenant interest of their respective units in the common areas
o Interest in real property: Any transfer or conveyance of a unit or an apartment, office or
store or other space therein, shall include transfer or conveyance of the undivided interest in
the common areas, or in a proper case the membership or shareholdings in the condominium
corporation, provided, however, that where the common areas in the condominium project are
held by the owners of separate units as co-owners thereof, no condominium unit therein shall
be conveyed or transferred to persons other than Filipino citizens or corporations at least 60%
of the capital of which belong to Filipino citizens, except in case of hereditary succession.
o Documents to consider:
 Master deed
 Declaration of restrictions
 Articles and by-laws of the condominium corporation or association
o Rights of condominium owner:
 Exclusive right to paint, repaint, tile, wax, paper or otherwise refinish and decorate the
inner surfaces of the walls, ceilings, floor, windows and doors bounding his own unit
 Exclusive right to mortgage, pledge or encumber his condominium and to have the
same appraised independently of other condominiums but any obligation incurred by
such condominium owner is personal to him

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Weeks 5-6: LAW ON SALES

 Absolute right to sell or dispose his condominium unless the master deed contains a
requirement that the property be first offered to the condominium owners within a
reasonable period of time before the same is offered to outside parties
o Obligations of a condominium owner:
 Pay realty tax of his unit
 Share realty tax on land and common areas
 Pay condominium dues and other assessments
 Share in the insurance of common areas
 Comply with restrictions of the condominium project
 Give right of first refusal to the condominium corporation or unit owners in case of sale
(if required in the master deed)
o Grounds for partition of common areas (or dissolution of condominium corporation):
 That 3 years after damage or destruction to the project which renders material part
thereof unit for its use prior thereto, the project has not been rebuilt or repaired
substantially to its state prior to its damage or destruction
 That damage or destruction to the project has rendered ½ or more of the units therein
untenantable and that condominium owners holding in aggregate more than 30%
interest in the common areas (or of the members of the corporation, if non-stock, or the
shareholders representing more than 30% of the capital stock entitled to vote, in case
of dissolution of condominium corporation) are opposed to repair or restoration of the
project
 That the project has been existence in excess of 50 years, that is obsolete and
uneconomic, and that condominium owners holding in aggregate more than 50%
interest in the common areas(or of the members of the corporation, if non-stock, or the
stockholders representing more than 50% of the capital stock entitled to vote, if a stock
corporation, in case of dissolution of condominium corporation) are opposed to repair or
restoration or remodeling or modernizing of the project
 That the project or a material part thereof has been condemned or expropriated and
that the project is no longer viable, or that the condominium owners holding in
aggregate more than 70% in the common areas (or of the members of the corporation,
if non-stock, or the stockholders representing more than 70% of the capital stock
entitled to vote, if a stock corporation, in case of dissolution of condominium
corporation) are opposed to continuation of the condominium regime after expropriation
or condemnation of a material portion thereof
 That the conditions for such partition by sale (or dissolution)set forth in the declaration
of restrictions, duly registered in accordance with the term so RA 4726, have been met
 Voluntary dissolution of condominium corporation: By affirmative vote of all the
stockholders or members thereof at a general or special meeting duly called for the
purpose, provided that all the requirements of Title VI of the Corporation Code are
complied with

 Rules affecting condominium projects:

o Non-forfeiture of payments: No installment payment made by a buyer in a subdivision or
condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the
owner or developer when the buyer, after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer to develop the subdivision or
condominium project according to the approved plans and within the time limit for complying
with the same. Such buyer may, at his option, be reimbursed the total amount paid including
amortization interests but excluding delinquency interests, with interest thereon at the legal
rate. (Section 23, PD 957)
o Failure to pay installments: The rights of the buyer in the event of this failure to pay the
installments due for reasons other than the failure of the owner or developer to develop the
project shall be governed by RA 6552.

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