SALE 5.

Commutative; In some cases,

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

Reasonable price – generally the market TRANSFER OF OWNERSHIP

price at the time and place fixed by the GENERAL RULE: While a contract of sale
contract or by law for the delivery of the is consensual, ownership of the thing sold
goods is acquired only upon its delivery, actual
or constructive, to the buyer. (Daus vs.
PERFECTION OF SALE Sps. De Leon, 16 June 2003)
GENERAL RULE: It is perfected at the  This is true even if the purchase
moment there is meeting of the minds has been made on credit. Payment
upon a determinate thing (object), and a of the purchase price is not
certain price (consideration), even if essential to the transfer of
neither is delivered. A choice between ownership, as long as the property
rescission and fulfilment, with damages in sold has been delivered.
either case) (Sampaguita Pictures, Inc vs.
Jalwindor Manufacturers, Inc. 93
NOTE: Sale is a consensual contract; SCRA 420)
Hence, delivery and payment are not  Nonpayment only creates a right
essential for its perfection to demand payment or to rescind
EXCEPTION: When the sale is subject to the contract, or to criminal
a suspensive condition by virtue of law or prosecution in the case of
stipulation. bouncing checks. (EDCA Publishing
* The terms and conditions of payment are and Distributing Corp. vs. Santos,
merely accidental, not essential elements 184 SCRA 614)
of the contract of sale except where the
partied themselves stipulate that in EXCEPTIONS:
addition to the subject-matter and the 1. Contrary stipulation or Pactum
price, they are essential or material to the reservati dominii (contractual
contract. reservation of title) – a stipulation,
usually in sales by installment,
Requirements for perfection whereby, despite delivery of the
a. When parties are face to face property sold, ownership remains with
 When an offer is accepted without the seller until full payment of the
conditions or qualifications price is made.
NOTES: 2. Contract to sell
 A conditional acceptance is a 3. Contract of insurance – a perfected
counter-offer contract of sale, even without
 when negotiated thru phone it is delivery, vests in the vendee an
as if it is negotiated face to face equitable title, an existing interest
b. When contract is thru over the goods sufficient to be the
correspondence or thru telegram subject of insurance
 When the offeror receives or has
knowledge of the acceptance by the RULES GOVERNING AUCTION SALES
offeree 1. Sales of separate lots by auction are
NOTE: If the buyer has already separate contracts of sale.
accepted but the seller does not know 2. Sale is perfected by the fall of the
yet of the acceptance, the seller may hammer
still withdraw
3. Seller has the right to bid in the transferred as yet, the parties being
auction, provided: given only the right to demand
a) such right was reserved fulfillment or damages.
b) notice was given that the sale was
subject to a right to bid on behalf of the Policitation
seller  An unaccepted unilateral promise to
c) right is not prohibited by law or by buy or sell. Even if accepted by the
stipulation other party, it does not bind the
4. Advertisements for bidders are simply promissor and maybe withdrawn
invitations to make proposals, and the anytime. This is a mere offer, and has
advertiser is not bound to accept the not yet been converted into a
highest or lowest bidder, unless the contract.
contrary appears.
Option contract
EFFECT OF PROMISE TREATED UNDER
 A contract granting a privilege in one
ART. 1479 Civil Code:
person, for which he has paid a
1. Accepted unilateral promise to sell
consideration, which gives him the
or buy
right to buy certain merchandise, at
 Only one makes the promise, this anytime within the agreed period, at a
promise is accepted by the other. fixed price.
Example: A promises to sell to B, B
 An option without consideration is void
accepts the promise, but does not in
and the effect is the same as if there
turn promise to buy.
was no option
 does not bind the promissor even if * However, in Sanchez vs. Rigos (1972),
accepted and may be withdrawn even though the option was not supported
anytime. by a consideration, the moment it was
NOTE: Pending notice of its withdrawal, accepted, a perfected contract of sale
the accepted promise partakes the nature resulted, applying Art. 1324 of the NCC. In
of an offer to sell which if accepted, view of the ruling of the Supreme Court,
results in a perfected contract of sale the only importance of the consideration
(Sanchez vs. Rigos 45 SCRA3 68). In other for an option is that the option cannot be
words, if the acceptance is made before withdrawn by the grantor after
withdrawal, it constitutes a binding acceptance.
contract of sale although the option is * In an option to buy, the party who has an
given without consideration. option may validly and effectively exercise
 if the promise is supported by a his right by merely notifying the owner of
consideration distinct and separate the former’s decision to buy and
from the price (option money), its expressing his readiness to pay the
acceptance will give rise to a stipulated price.
perfected contract.
Right of First Refusal
2. Bilateral promise to buy and sell  It is a right of first priority all things
 One party accepts the other’s promise and conditions being equal; there
to buy and the latter, the former’s should be identity of the terms and
promise to sell a determinate thing for conditions to be offered to the
a price certain optionee and all other prospective
 it is reciprocally demandable buyers, with optionee to enjoy the
 It requires no consideration distinct right of first priority. A deed of sale
from the selling price executed in favor of a third party who
NOTE: this is as good as a perfected cannot be deemed a purchaser in good
sale. No title of dominion is faith, and which is in violation of the
 of the right of first refusal granted to the buyer upon reserved to the
the optionee is NOT voidable under delivery of the seller and is not to
the Statute of Frauds, such contract is thing sold pass until full
valid BUT rescissible under Article payment
1380 to 1381(3) of the New Civil Code 2. In case of 2. In case of
non-payment, an non-payment, there
(Guzman Bocaling & Co. vs. Bonnavie;
action for specific can be action for
Riviera Filipina, Inc vs. CA et.al. GR performance or specific
No. 117355, April 5, 2002). for rescission can performance
 The basis of the right of first refusal be filed by the
must be the current offer to sell of the injured party
seller or offer to purchase of any 3. Part of the 3. Money given as a
prospective buyer. Only after the purchase price distinct
optionee fails to exercise its right of consideration for an
first priority under the same terms and option contract
within the period contemplated could 4. When given, 4. The would-be
the buyer is bound buyer is not required
the owner validly offer to sell the
to pay the balance to buy
property to a third person, again,
5. Given when 5. Applies to a sale
under the same terms as offered to there is already a not yet perfected
the optionee (Paranaque Kings sale
Enterprises, Inc. vs. CA GR No.
111538, February 26, 1997)
RULES ON RISK OF LOSS AND
 The lessee’s right of first option to buy
DETERIORATION:
the leased property in case of its sale
a. The thing sold is lost before
is but a part of the bigger right to
perfection: Seller bears the loss.
lease the said property from the
b. The thing sold is lost at the time of
lessor. The option was given to the
perfection: Contract is void or
lessee because she was the lessee of
inexistent.
the subject property. It was a
c. The thing sold is lost after perfection,
component of the consideration of the
but before delivery:
lease. The option was by no means an
independent right which can be
GENERAL RULE: Who bears the risk
exercised by the lessee. If the lessee
of loss is governed by the stipulations
is barred by the contract from
in the contract
assigning her right to lease the subject
 In the absence of any stipulation:
property to any other party, the lessee
First view:
is similarly barred to assign her first
Buyer bears the loss as an exception to
option to buy the leased property to
the rule of res perit domino.
another. (Bangayan et.al vs. CA and
EXCEPTIONS:
Lim GR No.123581, August 29, 1997)
1. when object sold consists of
fungible goods for a price fixed
Earnest money – or “ARRAS” is something
according to weight, number or
of value to show that the buyer was really
measure
in earnest, and given to the seller to bind
2. seller is guilty of fraud,
the bargain. It is considered as:
negligence, default or violation of
a) part of the purchase price
contractual terms
b) proof of perfection of the
3. object sold is generic
contract
(Civil Code of the Philippines, Paras)
*It shall be deducted from the total price.
NOTE: This view conforms with
Manresa’s view. Buyer would have
Earnest money Option money been the one to profit from the thing
1. Title passes to 1. Ownership is had it not been lost or destroyed.
  There is warranty that the bulk of the
Contrary view: commodity will correspond in kind,
Where the ownership is transferred by quality, and character with the sample
delivery, as in our code, the exhibited.
application of the axiom res perit
domino, imposes the risk of loss upon NOTE: In a sale by sample and by
the vendor; hence, if the thing is lost description, there is a two-fold warranty.
by fortuitous event before delivery,
the vendor suffers the loss and cannot RIGHTS OF BUYER:
recover the price from the vendee 1) Return the thing and recover the money
(Commentaries and Jurisprudence on paid, or
the Civil Code of the Philippines, 2) Retain the thing and sue for the breach
Tolentino) of warranty.

d. The thing is lost after delivery: Buyer PURCHASE BY MINORS: Contract is

bears the loss. generally voidable but in case of
necessaries, “where necessaries are sold
Question: If one does not comply, the and delivered to a minor or other person
other need not pay? without capacity to act, he must pay a
Answer: True. But this only applies when reasonable price therefore. Necessaries
the seller is able to deliver but does not. are those in Art. 290.”

EFFECT OF LOSS AT THE TIME OF SALE: FORMALITIES OF CONTRACT OF SALE

a. Thing entirely lost at the time of GENERAL RULE: Sale is a consensual
perfection: Contract is void and contract and is perfected by mere
inexistent consent.
b. Thing only partially lost: Vendee may EXCEPTIONS: In order to be enforceable
elect between withdrawing from the by action, the following must be in
contract or demanding the remaining writing:
part, paying its proportionate price 1. Sale of personal property at a
price not less than P500
Sale by description 2. Sale of real property or an interest
therein
 A sale where a seller sells things as 3. Sale of property not to be
being of a certain kind, buyer merely
performed within a year from the
relying on the seller’s representations
date thereof
or descriptions.
4. “Applicable statute” requires that
 There is warranty that the thing sold the contract of sale be in a certain
corresponds to the representations or form
descriptions. NOTE: Statute of Frauds is applicable only
to executory contracts and not to
Sale by sample contracts which are totally or partially
 A sale where a small quantity of a performed.
commodity is exhibited by the seller as
a fair specimen of the bulk, which is
not present and as to which there is no
opportunity to inspect or examine. CAPACITY TO BUY OR SELL
NOTE: The mere exhibition of the GENERAL RULE: All persons who can bind
sample does not necessarily make it a themselves also have legal capacity to buy
sale by sample. This exhibition must and sell.
have been the sole basis or EXCEPTIONS:
inducement of the sale.
 1. Absolute incapacity (minors, Examples of persons especially
demented persons, imbeciles, deaf disqualified by law:
and dumb, prodigals, civil a. Aliens who are disqualified to
interdictees) - party cannot bind purchase agricultural lands
themselves in any case. b. An unpaid seller having a right
2. Relative incapacity – incapacity of lien or having stopped the goods
exists only with reference to in transitu, who is prohibited from
certain persons or a certain class buying the goods either directly or
of property indirectly in the resale of the
same, at public or private sale
Relative Incapacity which he may make
A. Husband and wife (Art. 1490): c. The officer holding the
Generally, a sale by one spouse to another execution, or his deputy.
is void. NOTE: While those disqualified
 The husband and wife cannot sell under Arts. 1490 and 1491 may not
property to each other except: become lessees (Art. 1646), still
1. When a separation of property was aliens may become lessees even if
agreed upon by the spouses they cannot buy lands.
2. When there has been a judicial
separation of property under  Effect of violation:
Article 134 and 135 of the Family a) With respect to nos. 1 to 3: the
Code sale is VOIDABLE.
Reason: only private rights, which
B. Incapacity by reason of relation to are subject to ratification are
property (Art. 1491) violated
 The following persons cannot acquire NOTE: In the case of Lao vs.
property by purchase, even at a public Genato, 137 SCRA 77, the
auction, either in person or through Supreme Court found that the sale
the mediation of another: (GAEP-JO) by the administrator of certain
1. the guardian, with respect to the properties of the estate in order to
property of his ward; settle the existing obligations of
2. agents, with respect to the the estate was made to the
property whose administration or administrator’s son for a grossly
sale may have been entrusted to low price. Furthermore, the said
them, unless the consent of the sale was not submitted to the
principal has been given; probate court for approval as
3. executor or administrator, with mandated by the order
respect to the property of the authorizing the administrator to
estate under administration; sell. The sale was indubitably
4. public officers and employees, illegal, irregular and fictitious, and
with respect to the properties of the court’s approval of the
the government, its political assailed compromise agreement
subdivisions, or GOCCs, that are violated Article 1491 and cannot
entrusted to them; work to ratify a fictitious contract
5. judges, justices, prosecuting which is non-existent and void
attorneys, clerks of courts, etc., from the very beginning
with respect to the property in b) With respect to nos. 4 to 6: the
custogia legis; and sale is NULL AND VOID.
Reason: violation of public policy
6. any other person specially cannot be subject to ratification
disqualified by law.
OBLIGATIONS OF THE VENDOR: (WPD-TT)
1. Transfer ownership (cannot be waived) b. traditio symbolica - to effect
2. Deliver the thing sold (cannot be delivery, the parties make use of a
waived) token or symbol to represent the
3. Warrant against eviction and against thing delivered
hidden defects (can be waived or c. traditio longa manu – seller
modified since warranty is not an pointing out to the buyer the
essential element of the contract of things which are transferred,
sale) which at the time must be in sight.
4. Take care of the thing, pending d. traditio brevi manu – buyer simply
delivery, with proper diligence (Article continues in possession of the
1163) thing but under title of ownership.
5. Pay for the expenses of the deed of e. traditio constitutum possessorium
sale, unless there is stipulation to the – seller continues in possession but
contrary under a different title other than
ownership.
DELIVERY 3. Quasi-tradition – delivery of rights,
 Is a mode of acquiring ownership, as a credits or incorporeal property, made
consequence of certain contracts such by:
as sale, by virtue of which, actually or a. placing titles of ownership in the
constructively, the object is placed in hands of buyer
the control and possession of the b. allowing buyer to make use of
vendee. rights
4. Tradition by operation of law
 Delivery of the thing together with
the payment of the price, marks Constructive delivery requires three
the consummation of the contract things before ownership may be
of sale(PNB vs. Ling, 69 Phil. 611) transferred:
 In all forms of delivery, it is 1. The seller must have control over the
thing
necessary that the act of delivery
2. The buyer must be put under control
be coupled with the intention of
3. There must be the intention to deliver
delivering the thing. The act
the thing for purposes of ownership
without the intention is
insufficient. (Norkis Distributor,
When is the vendor not bound to deliver
Inc. vs. CA, 195 SCRA 694)
the thing sold:
1. If the vendee has not paid him the
 Kinds: price
1. Actual or real – placing the thing under 2. If no period for payment has been
the control and possession of the fixed in the contract
buyer. 3. Even if a period for payment has been
2. Legal or constructive – delivery is fixed in the contract, if the vendee
represented by other signs or acts has lost the right to make use of the
indicative thereof same.
a. delivery by the execution of a
public instrument. Sale or return
NOTE: Gives rise only to a prima facie
presumption of delivery which is
 Property is sold, but the buyer, who
becomes the owner of the property on
destroyed when actual delivery is not
delivery, has the option to return the
effected because of a legal
same to the seller instead of paying
impediment (Ten Forty Realty vs.
the price.
Cruz, 10 Sept. 2003)
 4. Risk of loss or 4. Risk of loss remains
NOTES: injury rests upon with the seller
the buyer
 It is a kind of sale with a condition
subsequent. Instances where Seller is still the Owner
 The buyer must comply with the despite Delivery:
1. Sale on trial, approval or satisfaction
express or implied conditions attached
2. Contrary intention appears by the
to the return privilege; otherwise, the
term of the contract;
sale becomes absolute.
3. Implied reservation of ownership
 Buyer, being the owner, bears the risk (Article 1503)
of loss a. If under the bill of lading, the
goods are deliverable to seller or
Sale on trial, approval, or satisfaction agent or their order;
 A contract in the nature of an option b. If the bill of lading, although
to purchase if the goods prove to be stating that the goods are to be
satisfactory, the approval of the buyer delivered to the buyer or his
being a condition precedent. agent, is kept by the seller or his
agent;
 Rules: a. When the buyer, although the
1. title remains in the seller goods are deliverable to order of
2. risk of loss remains with seller except buyer, and although the bill of
when the buyer is at fault or has lading is given to him, does not
agreed to bear the loss honor the bill of exchange sent
3. buyer must give goods a trial, except along with it.
where it is evident that it cannot
perform the work Transfer of ownership where goods sold
4. period within which buyer must signify delivered to carrier
his acceptance runs only when all the General Rule: Delivery to the carrier is
parts essential for the operation of the deemed to be delivery to the buyer
object have been delivered. Exception: Where the right of possession
5. if it is stipulated that a third person or ownership of specific goods sold is
must satisfy approval or satisfaction, reserved
the provision is valid, but the third
person must be in good faith. If refusal SALE OF GOODS BY A NON-OWNER
to accept is not justified, seller may GENERAL RULE: Buyer acquires no title
still sue. even if in good faith and for value under
6. Generally, the sale and delivery to a the maxim Nemo dat quid non habet
buyer who is an expert on the object (“You cannot give what you do not have”).
purchased is not a sale on approval, EXCEPTIONS: (SMERVS)
trial, or satisfaction. 1. Owner is estopped or precluded by
his conduct
Sale or return Sale on Trial 2. When sale is made by the
1. Subject to a 1. Subject to a registered owner or apparent
resolutory condition suspensive condition
owner in accordance with
2. Depends entirely 2. Depends on the recording or registration laws
on the will of the character or quality of
buyer the goods 3. Sales sanctioned by judicial or
3. Ownership 3. Ownership remains
statutory authority
passes to the buyer in the seller until 4. Purchases in a merchant's store,
on delivery and buyer signifies his fairs or markets
subsequent return approval or 5. When a person who is not the
reverts ownership acceptance to the
in the seller seller
owner sells and delivers a thing,
 subsequently acquires title thereto the owner, if by the terms of the
(Art. 1434) document the bailee issuing the
6. When the seller has a voidable document undertakes to deliver the
title which has not been avoided goods to the order of the person to
at the time of the sale (Art. 1506) whom the possession or custody of the
* “Unlawful deprivation” is no longer document has been entrusted or if at
limited to a criminal act. There is the time of such entrusting the
Unlawful Deprivation where there is no document in such form that it may be
valid transmission of ownership. negotiated by delivery.

Place of delivery of goods * If the holder of a negotiable document of

1. Where there is an agreement, place of title (deliverable to bearer) entrusts the
delivery is that agreed upon document to a friend for deposit, but the
2. Where there is no agreement, place of friend betrays the trust and negotiates the
delivery determined by usage of trade document by delivering it to another who
3. Where there is no agreement and no is in good faith, the said owner cannot
prevalent usage, place of delivery is impugn the validity of the negotiation. As
the seller’s place between two innocent persons, he who
4. In any other case, place of delivery is made the loss possible shall bear the loss,
the seller’s residence without prejudice to his right to recover
5. In case of specific goods, which to the from the wrongdoer.
knowledge of the parties at the time
the contract was made were in some RIGHTS OF PERSON TO WHOM DOCUMENT
other place, that place is the place of HAS BEEN NEGOTIATED:
delivery, in the absence of agreement 1) The title of the person negotiating the
or usage of trade to the contrary document, over the goods covered by the
document;
Time of delivery of goods 2) The title of the person (depositor or
1. Stipulated time owner) to whose order by the terms of the
2. In the absence thereof, within a document the goods were to be delivered,
reasonable time over such goods;
3) The direct obligation of the bailee to
NEGOTIABLE DOCUMENT OF TITLE (NDT) hold possession of the goods for him, as if
 A document of title in which it is the bailee had contracted to him directly
stated that the goods referred to NOTE; Mere transferee does not acquire
therein will be delivered to the directly the obligation of the bailee (in
bearer, or to the order of any person Art. 1513). To acquire it, he must notify
named in such document. the bailee.
 May be negotiated by delivery or
indorsement. WHO CAN DEFEAT RIGHTS OF
TRANSFEREE:
The document is negotiable if: 1. Creditor of transferor
1. The goods are deliverable to the 2. Transferor
bearer; or 3. Subsequent purchaser
2. If the goods are deliverable to the
order of a certain person RULES WHEN QUANTITY IS LESS THAN
AGREED UPON:
Persons who may negotiate NDT: 1. Buyer may reject; or
1. The owner; or 2. Buyer may accept what has been
2. Any person to whom the possession or delivered, at the contract rate
custody thereof has been entrusted by
RULES WHEN QUANTITY IS MORE THAN c. C.O.D. (collect on delivery) – the
AGREED UPON: carrier acts for the seller in
1. Buyer may reject all; or collecting the purchase price,
2. Buyer may accept the goods which the buyer must pay to
agreed upon and reject the rest; obtain possession of the goods.
or
3. Buyer may accept all and must pay SELLER’S DUTY AFTER DELIVERY TO
for them at the contract rate CARRIER
NOTE: Acceptance, even if not express 1. To enter on behalf of buyer into such
may be implied when the buyer exercises contract reasonable under the
acts of ownership over the excess goods. circumstances
2. To give notice to buyer regarding
RULES WHEN GOODS MIXED WITH GOODS necessity of insuring the goods
OF DIFFERENT DESCRIPTION:
 Buyer may accept the goods which are PAYMENT OF THE PURCHASE PRICE
in accordance with the contract and GENERAL RULE: The seller is not bound
reject the rest to deliver the thing sold unless the
purchase price has been paid.
NOTE: If the subject matter is indivisible, EXCEPTION: The seller is bound to
in case of delivery of larger quantity of deliver even if the price has not been
goods or of mixed goods, the buyer may paid, if a period of payment has been
reject the whole of the goods fixed.

DELIVERY TO THE CARRIER Sale of Real Property by Unit

GENERAL RULE: Where the seller is  Entire area stated in the contract must
authorized or required to send the goods be delivered
to the buyer, delivery to the carrier is  When entire area could not be
delivery to the buyer. delivered, vendee may:
EXCEPTIONS: 1. Enforce the contract with the
1. When a contrary intention appears corresponding decrease in price
2. Implied reservation of ownership 2. Rescind the sale:
under pars. 1,2,3 of Art. 1503 a. If the lack in area is at least
1/10 than that stated or
 Kinds of Delivery to the Carrier stipulated
a. C.I.F. (cost, insurance, freight) – b. If the deficiency in quality
signify that the price fixed covers specified in the contract
not only the costs of the goods, exceeds 1/10 of the price
but the expense of the freight and agreed upon
the insurance to be paid by the c. If the vendee would not have
seller bought the immovable had he
b. F.O.B. (free on board) – goods are known of its smaller area of
to be delivered free of expense to inferior quality irrespective of
the buyer to the point where they the extent of lack of area or
are F.O.B. The point of F.O.B., quality
either at the point of shipment or
the point of destination, Sale for a Lump Sum (A Cuerpo Cierto)
determines when the ownership  Vendor is obligated to deliver all the
passes. land included within the boundaries,
NOTE: the terms C.I.F. and F.O.B. regardless of whether the real area
merely make rules of presumption should be greater or smaller
 Ordinarily, there can be no rescission to do so although he has been handed
or reduction or increase whether the the document, there is no registration.
area be greater or lesser, unless there  Possession is either actual or
is gross mistake. constructive since the law made no
NOTE: The Civil Code presumes that the distinction (Sanchez vs. Ramos 40
purchaser had in mind a particular piece Phil614)
of land and that he ascertained its area  Possession in Art.1544 includes not
and quality before the contract of sale was only material but also symbolic
perfected. If he did not do so, or if having possession (Ten Forty Realty vs. Cruz,
done so he made no objection and 10 Sept. 2003.)
consented to the transaction, he can  Title means title because of sale, and
blame no one but himself (Teran vs. not any other title or mode of
Villanueva Viuda de Riosa 56 Phil 677). acquiring property (Lichauco vs.
What is important is the delivery Berenguer 39 Phil 642)
of all the land included in the boundaries.  Hernandez vs. Katigbak Rule: When
the property sold on execution is
DOUBLE SALE (Art. 1544) registered under Torrens, registration
 Requisites: VOCS is the operative act that gives validity
1. two or more transactions must to the transfer or creates a lien on the
constitute valid sales; land, and a purchaser on execution
2. they must pertain exactly to the same sale is not required to go behind the
object or subject matter; registry to determine the conditions of
3. they must be bought from the same or the property. Exception: Where the
immediate seller; AND purchaser had knowledge, prior to or
4. two or more buyers who are at odds at the time of the levy, of such
over the rightful ownership of the previous lien or encumbrance, his
subject matter must represent knowledge is equivalent to
conflicting interests. registration.

 Rules of preference: CONDITION

1. Personal Property  Effect of Non-fulfillment of Condition
a. first possessor in good faith 1. If the obligation of either party is
2. Real Property subject to any condition and such
a. first registrant in good faith condition is not fulfilled, such
b. first possessor in good faith party may either:
c. person with oldest title in good a. refuse to proceed with the
faith contract
b. proceed with the contract ,
NOTES: waiving the performance of
 Purchaser in Good Faith – one who the condition.
buys the property of another without 2. If the condition is in the nature of
notice that some other person has a a promise that it should happen,
right to or interest in such property the non-performance of such
and pays a full and fair price for the condition may be treated by the
same at the time of such purchase or other party as breach of warranty.
before he has notice of the claim or
interest of some other person in the NOTE: A distinction must be made
property (Veloso vs. CA). between a condition imposed on the
perfection of a contract and a condition
 Registration requires actual recording; imposed merely on the performance of an
if the property was never really
obligation. The failure to comply with the
registered as when the registrar forgot
first condition would prevent the juridical
relation itself from coming into existence, NOTE: A mere expression of opinion, no
while failure to comply with the second matter how positively asserted, does not
merely gives the option either to refuse or import a warranty unless the seller is an
proceed with the sale or to waive the expert and his opinion was relied upon by
condition. the buyer.

 The mere fact that the second 2. IMPLIED - that which the law derives
contract of sale was perfected in good by implication or inference from the
faith is not sufficient if, before title nature of the transaction or the
passes, the second vendee acquires relative situation or circumstances of
knowledge of the first transaction. the parties, irrespective of any
The good faith or innocence of the intention of the seller to create it.
posterior vendee needs to continue a. Warranty against eviction
until his contract ripens into b. Warranty against hidden defects
ownership by tradition or registration. c. Warranty as to Fitness and
(Palanca vs. Dir. Of Lands, 46 PHIL Merchantability
149) NOTE: An implied warranty is a natural,
not an essential element of a contract,
and is deemed incorporated in the
EFFECT IF BUYER HAS ALREADY SOLD contract of sale. It may however, be
THE GOODS: waived or modified by express stipulation.
General Rule: The unpaid seller’s right to (De Leon)
lien or stoppage in transitu remains even if There is no implied warranty as to the
buyer has sold the goods. condition, adaptation, fitness or suitability
Except: or the quality of an article sold as a
1) When the seller has given consent second-hand article. But such articles
thereto, or might be sold under such circumstances as
2) When the buyer is a purchaser in good to raise an implied warranty.
faith for value of a negotiable document * A certification issued by a vendor that a
of title. second-hand machine was in A-1 condition
is an express warranty binding on the
WARRANTY vendor. (Moles vs. IAC [1989])
 a statement or representation made
A. Warranty against eviction
by the seller of goods,
contemporaneously and as a part of  Warranty in which the seller
the contract of sale, having reference guarantees that he has the right to sell
to the character, quality, or title of the thing sold and to transfer
the goods, and by which he promises ownership to the buyer who shall not
or undertakes to insure that certain be disturbed in his legal and peaceful
facts are or shall be as he then possession thereof.
represents.
 Elements:
 Kinds: 1. vendee is deprived, in whole or in
1. EXPRESS – any affirmation of fact or part, of the thing purchased;
any promise by the seller relating to 2. the deprivation is by virtue of a
the thing if the natural tendency of final judgment;
such affirmation or promise is to 3. the judgment is based on a prior
induce the buyer to purchase the same right to the sale or an act
and if the buyer purchases the thing imputable to the vendor;
relying thereon
 4. the vendor was summoned in the the obligation to answer for eviction
suit for eviction at the instance of shall be void if he acted in bad faith.
the vendee; AND  Kinds of Waiver:
5. no waiver of warranty by the a. Consciente – voluntarily made
vendee. by the vendee without the
knowledge and assumption of
 Vendor's liability shall consist of: the risks of eviction
1. Total eviction: (VICED) NOTE: vendor shall pay only the
a. Value of the thing at the time of value which the thing sold had at
eviction; the time of eviction
b. Income or fruits if he has been b. Intencionada – made by the
ordered to deliver them to the vendee with knowledge of the
party who won the suit; risks of eviction and
c. Costs of the suit; assumption of its
d. Expenses of the contract; AND consequences
e. Damages and interests if the sale EFFECT: vendor not liable
was in bad faith. NOTE: Every waiver is presumed to be
consciente. To consider it intencionada,
2. Partial eviction: it must be accompanied by some
a. to enforce vendor’s liability circumstance which reveals the vendor’s
for eviction (VICED); OR knowledge of the risks of eviction and his
b. to demand rescission of intention to submit to such
contract. consequences.

Question: Why is rescission not a remedy WHERE IMMOVABLE SOLD ENCUMBERED

in case of total eviction? WITH NON-APPARENT BURDEN
Answer: Rescission contemplates that the 1. Right of vendee
one demanding it is able to return a) recission, or
whatever he has received under the b) indemnity
contract. Since the vendee can no longer
restore the subject-matter of the sale to 2. When right cannot be exercised:
the vendor, rescission cannot be carried a) if the burden or servitude is
out. apparent
b) if the non-apparent burden or
* The suit for the breach can be directed servitude is registered
only against the immediate seller, not c) if vendee had knowledge of the
sellers of the seller unless such sellers had encumbrance, whether it is registered or
promised to warrant in favor of later not
buyers or unless the immediate seller has 3. When action must be brought
expressly assigned to the buyer his own - within ONE YEAR from the execution
right to sue his own seller. of the deed of sale
NOTE: The disturbance referred to in the
case of eviction is a disturbance in law B. Warranty against hidden defects
which requires that a person go to the  Warranty in which the seller
courts of justice claiming the thing sold, guarantees that the thing sold is free
or part thereof and invoking reasons. Mere from any hidden faults or defects or
trespass in fact does not give rise to the any charge or encumbrance not
application of the doctrine of eviction. declared or known to the buyer.

 Vendor’s liability is waivable but any  Elements: (SHENPW)

stipulation exempting the vendor from
 1. defect must be Serious or less the value of the thing at the
important; time of its loss.
2. it must be Hidden; NOTE: the difference between the
3. it must Exist at the time of the price paid and the value of the thing
sale; at the time of its loss represents the
4. vendee must give Notice of the damage suffered by the vendee and
defect to the vendor within a the amount which the vendor enriched
reasonable time; himself at the expense of the vendee
5. action for rescission or reduction  If the vendor acted in bad faith:
of price must be brought within  vendor shall pay damages to the
the proper Period (within 6 mos. vendee
from delivery of the thing or 40
days from date of delivery in case C. Implied Warranties of Quality
of animals); and Warranty of Fitness
6. no Waiver of the warranty.  Warranty in which the seller
guarantees that the thing sold is
 Remedies of the Vendee: reasonably fit for the known particular
a. Accion redhibitoria (rescission) purpose for which it was acquired by
b. Accion quanti minoris (reduction the buyer
of the price)
NOTES: GENERAL RULE: There is no implied
 Hidden faults or defects pertain only warranty as to the quality or fitness for
to those that make the object unfit for any particular purpose of goods under a
the use for which it was intended at contract of sale
the time of the sale. EXCEPTIONS:
 This warranty in Sales is applicable in 1. Where the buyer, expressly or by
Lease (Yap vs. Tiaoqui 13Phil433) implication manifests to the seller
Effect of loss of thing on account of the particular purpose for which
hidden defects: the goods are required
1. If vendor was aware of hidden defects, 2. Where the buyer relies upon the
he shall bear the loss and vendee shall seller’s skill or judgment
have the right to recover: (PED)
a. the price paid Warranty of Merchantability
b. expenses of the contract  Warranty in which the seller
c. damages guarantees, where the goods were
2. If vendor was not aware, he shall be bought by description, that they are
obliged to return: (PIE) reasonably fit for the general purpose
a. price paid for which they are sold
b. interest thereon  It requires identity between what is
c. expenses of the contract if paid by described in the contract AND what is
the vendee tendered, in the sense that the latter
is of such quality to have some value
Effect if the cause of loss was not the
hidden defect Instances where implied warranties are
 If the thing sold had any hidden inapplicable:
fault at the time of the sale, and 1. As is and where is sale - vendor makes
should thereafter be lost by a (1) no warranty as to the quality or
fortuitous event OR (2) through the workable condition of the goods, and
fault of the vendee: that the vendee takes them in the
 the vendee may demand of the condition in which they are found and
vendor the price which he paid
 from the place where they are 2. To pay the price of the thing sold in
located. legal tender unless another mode has
2. Sale of second-hand articles been agreed upon
3. Sale by virtue of authority in fact or NOTE: A grace period granted the vendee
law in case of failure to pay the amount/s due
is a right not an obligation. The grace
Caveat Venditor (“Let the seller period must not be likened to an
beware”): the vendor is liable to the obligation, the non-payment of which,
vendee for any hidden faults or defects in under Article 1169 of the Civil Code, would
the thing sold, even though he was not still generally require judicial or extra-
aware thereof. judicial demand before “default” can be
said to arise (Bricktown Dev’t Corp vs.
Caveat Emptor (“Let the buyer Amor Tierra Dev’t Corp. 57SCRA437)
beware”): requires the purchaser to be
aware of the supposed title of the vendor B. Other Obligations
and one who buys without checking the 1. To take care of the goods without the
vendor’s title takes all the risks and losses obligation to return, where the goods
consequent to such failure. are delivered to the buyer and he
rightfully refuses to accept
RULES IN CASE OF SALE OF ANIMALS
1. When two or more animals have been NOTES:
sold at the same time and the redhibitory  The buyer in such a case is in the
defect is in one, or some of them but not position of a bailee who has had
in all, the general rule is that the goods thrust upon him without his
redhibition will not affect the others assent. He has the obligation to
without it. It is immaterial whether the take reasonable care of the goods
price has been fixed for a lump sum for all but nothing more can be
the animals or for a separate price for demanded of him.
each.  The goods in the buyer’s
2. No warranty against hidden defects of possession under these
animals sold at fairs or at public auctions, circumstances are at the seller’s
or of livestock sold as condemned. This is risk
based on the assumption that the defects 2. To be liable as a depositary if he
must have been clearly known to the voluntarily constituted himself as such
buyer. 3. To pay interest for the period between
3. Sale of animals shall be void when: delivery of the thing and the payment
a) animals sold are suffering from of the price in the following cases:
contagious disease a. Should it have been stipulated
b) if the use or service for which they b. Should the thing sold and
are acquired has been stated in the delivered produce fruits or income
contract, and they are found to be unfit c. Should he be in default, from the
therefor time of judicial or extra-judicial
4. Limitation of the action: 40 days from demand for the payment of the
the date of their delivery to the vendee price
5. Vendor shall be liable if the animal
should die within 3 days after its purchase  Pertinent Rules:
if the disease which caused the death 1. The vendor is not required to deliver
existed at the time of the contract the thing sold until the price is paid
nor the vendee to pay the price before
OBLIGATIONS OF THE VENDEE: the thing is delivered in the absence of
A. Principal Obligations: an agreement to the contrary (Article
1. To accept delivery 1524).
2. If stipulated, the vendee is bound to receipt without acceptance and there
accept delivery and to pay the price at may be acceptance without receipt
the time and place designated;  Unless otherwise agreed upon,
3. If there is no stipulation as to the time acceptance of the goods by the buyer
and place of payment and delivery, does not discharge the seller from
the vendee is bound to pay at the time liability for damages or other legal
and place of delivery remedy like for breach of any promise
4. In the absence of stipulation as to the or warranty
place of delivery, it shall be made
wherever the thing might be at the When vendee may suspend payment of
moment the contract was perfected the price:
(Article 1251) 1. If he is disturbed in the possession or
5. If only the time for delivery has been ownership of the thing bought
fixed in the contract, the vendee is 2. If he has well-grounded fear that his
required to pay even before the thing possession or ownership would be
is delivered to him; if only the time disturbed by a vindicatory action or
for payment has been fixed, the foreclosure of mortgage
vendee is entitled to delivery even
before the price is paid by him (Article NOTES:
1524)  If the thing sold is in the possession of
the vendee and the price is already in
Ways of accepting goods: the hands of the vendor, the sale is a
1. Express acceptance consummated contract and Article
2. Implied acceptance 1590 is no longer applicable. Article
a. When buyer does an act which 1590, presupposes that the price or
only an owner can do, any part thereof has not yet been paid
b. Failure to return goods after and the contract is not yet
reasonable lapse of time consummated.
 Under Article 1590, the vendee has no
NOTES:
cause of action for rescission before
 The retention of goods is strong final judgement, otherwise the vendor
evidence that the buyer has accepted might become a victim of
ownership of the goods. machinations between the vendee and
 Delivery and acceptance are two the third person
separate and distinct acts of different  Disturbance must be in possession and
parties ownership of the thing acquired
 Delivery is an act of the vendor  If the disturbance is caused by the
and one of the vendor’s
existence of non-apparent servitude,
obligations; vendee has nothing to
the remedy of the buyer is rescission,
do with the act of delivery by the
not suspension of payment.
vendor
 Acceptance is an obligation of the
vendee; acceptance cannot be
When vendee cannot suspend payment
regarded as a condition to
of the price even if there is disturbance
complete delivery;
in the possession or ownership of the
 seller must comply with the
thing sold:
obligation to deliver although
1. if the vendor gives security for the
there is no acceptance yet by the
return of the price in a proper case
buyer
2. if it has been stipulated that
 Acceptance by the buyer may precede notwithstanding any such contingency,
actual delivery; there may be actual
 the vendee must make payment (see  Remedies:
Article 1548 par.3) 1. Possessory lien over the goods
3. if the vendor has caused the 2. Right of stoppage in transitu after
disturbance or danger to cease he has parted with the possession
4. if the disturbance is a mere act of of the goods and the buyer
trespass becomes insolvent
5. if the vendee has fully paid the price 3. Special Right of resale
4. Special Right to rescind the sale
REMEDIES FOR BREACH OF CONTRACT 5. Action for the price
A. Remedies of the seller 6. Action for damages
1. Action for payment of the price (Art.
1595) 3. Article 1484 or Recto Law
2. Action for damages for non-  Remedies of vendor in sale of personal
acceptance of the goods (Art. 1596) property by installments
3. Action for rescission (Art. 1597)  Requisites:
B. Remedies of the buyer 1. Contract of sale
1. Action for specific performance (Art. 2. Personal property
1598) 3. Payable in installments
2. Action for rescission or damages for 4. In the case of the second and third
breach of warranty (Art 1599) remedies, that there has been a
failure to pay two or more
A. REMEDIES OF THE SELLER FOR installments
BREACH OF CONTRACT NOTE: Apply likewise to contracts
 IN CASE OF MOVABLES purporting to be leases of personal
1. Ordinary Remedies property with option to buy
a. Movables in General – Failure of  Art. 1484 does not apply to a sale:
the vendee to appear to receive
1. Payable on straight terms (partly
delivery or, having appeared,
in cash and partly in one term)
failure to tender the price at the
2. Of Real property
same time, unless, a longer period
for its payment has been
 Remedies:
stipulated 1. Specific performance upon
vendee’s failure to pay
 action to rescind the sale (Art. NOTE: Does not bar full recovery for
1593)
judgment secured may be executed on
b. Sale of Goods –
all personal and real properties of the
 action for the price (Art. 1595) buyer which are not exempt from
 action for damages (Art. 1596) execution (Palma v. CA.)
2. Unpaid Seller 2. Rescission of the sale if vendee
 Types: shall have failed to pay two or
a. The seller of the goods who has more installments
not been paid or to whom the NOTES:
price has not been tendered  Nature of the remedy – which
b. The seller of the goods, in case a requires mutual restitution – bars
bill of exchange or other further action on the purchase
negotiable instrument has been price (Nonato vs. IAC.)
received as conditional payment,  GENERAL RULE: cancellation of
AND the condition on which it was sale requires mutual restitution,
received has been broken by that is all partial payments of
reason of the dishonor of the price or rents must be returned
instrument, insolvency of the EXCEPTIONS: a stipulation that
buyer or otherwise. the installments or rents paid shall
 not be returned to the vendee or
lessee shall be valid insofar as the  IN CASE OF IMMOVABLES
same may not be unconscionable 1. Ordinary Remedies
under the circumstan-ces (Article a. In case of anticipatory breach –
1486).  rescission (Article 1591)
3. Foreclosure of the chattel b. Failure to pay the purchase price –
mortgage on the thing sold if  rescission upon judicial or
vendee shall have failed to pay
notarial demand for rescission
two or more installments. In this
(Article 1592)
case, there shall be no further
action against the purchaser to
 the vendee may pay, even
recover unpaid balance of the after the expiration of the
price. period, as long as no demand
for rescission has been made
NOTES: upon him
NOTE: Article 1592 does not apply
 Further recovery barred only from the to:
time of actual sale at public auction
1) Sale on instalment of real
conducted pursuant to foreclosure
estate
(Macondray vs. Tan.)
2) Contract to sell
 Other chattels given as security cannot 3) Conditional sale
be foreclosed if they are not subject of 4) Cases covered by RA 6552:
the installment sale (Ridad vs. Filipinas Realty Installment buyer
investment and Finance Corp. GR 39806, protection act
Jan. 28, 1983)
 If the vendor assigns his right to a 2. R.A. No. 6552 or Maceda Law
financing company, the latter may be  An Act to Provide Protection to buyers
regarded as a collecting agency of the of Real Estate on Installment Payments
vendor and cannot therefore recover any  Law governing sale or financing of real
deficiency from the vendee (Zayas vs. estate on installment payments
Luneta Motors Co.)  Requisites:
 When the vendor assigns his credit to 1. transactions or contracts involving
another person, the latter is likewise the sale OR financing of real
bound by the same law. Accordingly, estate on installment payments,
when the assignee forecloses on the including residential condominium
mortgage, there can be no further apartments; and
recovery of the deficiency and the vendor- 2. buyer defaults in payment of
mortgagee is deemed to have renounced succeeding installments.
any right thereto (Borbon II vs.
Servicewide Specialist, Inc. 258SCRA658)  Rights of the buyer:
NOTE: However, Article 1484(3) does NOT A. If Buyer has paid at least two (2)
bar one to whom the vendor has assigned years of installments
on with a recourse basis his credit against 1. The buyer must pay, without
the vendee from recovering from the additional interest, the unpaid
vendor the assigned credit in full installments due within the total
although the vendor may have no right of grace period earned by him.
recovery against the vendee for the There shall be one (1) month grace
deficiency (Filipinas Invest. & Finance period for every one (1) year of
Corp. vs. Vitug, Jr. 28SCRA658) installment payments made
NOTE: This right shall be
NOTE: Remedies are alternative and exercised by the buyer ONLY once
exclusive
 in every 5 years of the life of the NOTE: Down payments, deposits or
contract AND its extensions. options on the contract shall be included
2. Actual cancellation can only take in the computation of the total number of
place after 30 days from receipt installment payments made
by the buyer of the notice of
cancellation OR demand for Remedies of Unpaid Seller
rescission by a notarial act AND I. Possessory Lien
upon full payment of the cash  When may be exercised:
surrender value to the buyer 1. Where the goods have been sold
(Olympia Housing vs. Panasiatic, without any stipulation as to credit
16 January 2003.) 2. When the goods have been sold on
NOTE: The seller shall refund to credit, but the term of credit has
the buyer the cash surrender value expired
of the payments on the property 3. Where the buyer becomes
equivalent to 50% of the total insolvent
payments made. After five (5)  When lost:
years of installments, there shall 1. Delivery of the goods to a carrier
be an additional 5% every year but or bailee for the purpose of
not to exceed 90% of the total transmission to the buyer without
payments made reserving ownership or right of
3. The buyer shall have the right to possession
sell his rights or assign the same 2. When the buyer lawfully obtains
to another person OR to reinstate possession of the goods
the contract by updating the 3. By waiver of the lien
account during the grace period NOTE: Possessory lien is lost after the
and before actual cancellation of seller loses possession but his lien as an
the contract unpaid seller remains; hence he is still an
4. The buyer shall have the right to unpaid creditor with respect to the price
pay in advance any installment or of specific goods sold. His preference can
the full unpaid balance of the only be defeated by the governments
purchase price any time without claim to the specific tax on the goods
interest and to have such full themselves (Arts. 2247 and 2241).
payment of the purchase price NOTE: The bringing of an action to
annotated in the certificate of recover the purchase price is not one of
title covering the property. the ways of losing the possessory lien. An
unpaid seller does not lose his lien by
B. If Buyer has paid less than 2 reason that he has obtained a money
years of installments judgement or decree for the price of
1. The seller shall give the buyer a goods (Art. 1529, last paragraph).
grace period of NOT less than 60
days from the date the installment II. Stoppage of goods in transitu
became due. If the buyer fails to  Requisites:
pay the installments due at the
1. Seller must be unpaid
expiration of the grace period, the
2. Buyer must be insolvent
seller may cancel the contract
3. Goods must be in transit
after 30 days from receipt by the
4. Seller must either:
buyer of the notice of cancellation
a. actually take possession of the
or the demand for rescission of
goods sold OR
contract by a notarial act.
b. give notice of his claim to the
2. Same No. 3 and 4 paragraph A
carrier or other person in
above
possession
 5. Seller must surrender the OR has stopped the goods in transitu
negotiable document of title, if AND under ANY of the following
any, issued by the carrier or bailee conditions:
6. Seller must bear the expenses of 1. Where the goods are perishable in
delivery of the goods after the nature
exercise of the right 2. Where the right to resell is
expressly reserved in case the
GOODS ARE CONSIDERED IN TRANSITU: buyer should make a default
1. after delivery to a carrier or other 3. Where the buyer delays in the
bailee and before the buyer or his agent payment of the price for an
takes delivery of them; and unreasonable time
2. If the goods are rejected by the buyer,
and the carrier or other bailee continues IV. Rescission
in possession of them  Types:
1. Special Right to Rescind Under
GOODS ARE NO LONGER CONSIDERED IN Art. 1534 – If the seller has either
TRANSITU: the right of lien OR a right to stop
1. after delivery to the buyer or his agent the goods in transitu AND under
in that behalf; either of 2 situations:
2. if the buyer or his agent obtains a. Where the right to rescind on
possession of the goods at a point before default has been expressly
the destination originally fixed; reserved
3. if the carrier or the bailee b. Where the buyer has been in
acknowledges to hold the goods on behalf default for an unreasonable
of the buyer; and time
4. if the carrier or bailee wrongfully 2. Under Art. 1597 (“technical
refuses to deliver the goods to the buyer rescission”)

 Effects of the exercise of the right V. Action for the price

1. The goods are no longer in transit.  When may be exercised:
2. The contract of carriage ends; instead 1. Where the ownership has passed to
the carrier now becomes a mere the buyer AND he wrongfully
bailee, and will be liable as such. neglects OR refuses to pay for the
3. The carrier should not deliver anymore price
to the buyer or the latter’s agent; 2. Where the price is payable on a
otherwise he will clearly be liable for day certain AND he wrongfully
damages. neglects OR refuses to pay for the
4. The carrier must redeliver to, or price, irrespective of the delivery
according to the directions of the or transfer of title
seller. 3. Where the goods cannot readily be
resold for a reasonable price AND
WAYS OF EXERCISING THE RIGHT TO the buyer wrongfully refuses to
STOP: accept them even before the
1. By taking actual possession of the ownership of the goods has passed,
goods if Article 1596 is inapplicable.
2. By giving notice of his claim to the
carrier or bailee VI. Action for damages
 When may be exercised:
III. Special Right of Resale 1. In case of wrongful neglect or
 May be exercised only when the refusal by the buyer to accept or
unpaid seller has either a right of lien
 pay for the thing sold (Art. 1596 1. Same causes as in all other obligations
par.1) 2. Conventional Redemption
2. In an executory contract, where 3. Legal Redemption
the ownership in the goods has not
passed, and the seller cannot CONVENTIONAL REDEMPTION
maintain an action to recover the  The right which the vendor reserves to
price (Art 1595) himself, to reacquire the property sold
3. If the goods are not yet identified provided he returns to the vendee:
at the time of the contract or b. the price of the sale;
subsequently c. expenses of the contract;
B. REMEDIES OF THE BUYER FOR d. any other legitimate payments
BREACH OF CONTRACT made therefore and;
e. the necessary and useful expenses
1. Action for specific performance (Art. made on the thing sold; and
1598) f. fulfills other stipulations which
 Where the seller has broken the may have been agreed upon.
contract to deliver specific or
ascertained goods
 The judgment or decree may be A sale with conventional redemption is
unconditional, or upon such terms and deemed to be an equitable mortgage in
conditions as to damages, payment of any of the following cases: (IPERTOD)
the price and otherwise as the court 1. Unusually Inadequate purchase price;
may deem just 2. Possession by the vendor remains, as
lessee or otherwise;
2. Remedies of buyer for breach of 3. Extension of redemption period after
warranty by seller (Art. 1599): expiration;
1. Recoupment – accept the goods and 4. Retention by the vendee of part of the
set up the seller’s breach to reduce or purchase price;
extinguish the price 5. Vendor binds himself to pay the Taxes
2. Accept the goods and maintain an of the thing sold;
action for damages for breach of 6. Any Other case where the parties
warranty really intended that the transaction
3. Refuse to accept the goods and should secure the payment of a debt
maintain an action for damages for or the performance of any obligation;
breach of warranty or
4. Rescind the contract by returning or 7. When there is Doubt as to whether
offering the return of the goods, and contract is contract of sale with right
recover the price of any part thereof of repurchase or an equitable
NOTE: These are alternative remedies. mortgage.

When rescission by buyer not allowed: Equitable Mortgage

1. if the buyer accepted the goods  One which lacks the proper
knowing of the breach of warranty without formalities, form of words, or other
protest requisites prescribed by law for a
2. if he fails to notify the seller within a mortgage, but shows the intention of
reasonable time of his election to rescind the parties to make the property
3. if he fails to return or offer to return subject of the contract as security for
the goods in substantially as good a debt and contains nothing impossible
condition as they were in at the time of or contrary to law (Cachola vs. CA
the transfer of ownership to him 208SCRA496)
EXTINGUISHMENT OF SALE
* When can there be presumption as to who acquires a thing by (1) purchase
Equitable Mortgage? or (2) dation in payment, or (3) by any
1) Parties must have entered into a other transaction whereby ownership
contract denominated as a contract of sale is transferred by onerous title.
2) The intention of the parties was to  May be effected against movables or
secure an existing debt by way of immovables.
mortgage  It must be exercised within thirty (30)
NOTE: In the cases referred to in Arts. days from the notice in writing by the
1602 and 1604, the apparent vendor may vendor.\
ask for the reformation of the instrument.
Remedy of Reformation: To correct the
instrument so as to make it express the NOTE: Written notice under Article 1623 is
true intent of the parties. mandatory for the right of redemption to
commence (PSC vs. Sps. Valencia 19
Redemption Period August 2003.)
a. if there is an agreement: period
agreed upon cannot exceed 10 years BASIS OF LEGAL REDEMPTION: Not on any
b. if no agreement as to the period: 4 proprietary right, which after the sale of
years from the date of the contract the property on execution, leaves the
c. the vendor who fails to repurchase the judgment debtor and vests in the
property within the period agreed purchaser, but on a bare statutory
upon may, however, exercise the right privilege to be exercised only by the
to repurchase within 30 days FROM the persons named in the statute.
time final judgment was rendered in a
civil action on the basis that the  Tender of payment is not necessary;
contract was a true sale with right of
offer to redeem is enough.
repurchase
 This refers to cases involving a
PRE-EMPTION REDEMPTION
transaction where one of the
1. arises before 1. arises after sale
parties contests or denies that the sale
true agreement is one of sale with 2. no rescission 2. there can be
right to repurchase; not to cases because no sale as rescission of the
where the transaction is yet exists original sale
conclusively a pacto de retro sale. 3. the action is 3. action is directed
Example: Where a buyer a retro directed against against the buyer
honestly believed that he entered the prospective
merely into an Equitable seller
Mortgage, not a pacto de retro
transaction, and because of such Instances of legal redemption:
belief he had not redeemed within A. Under the Civil Code (legal
the proper period. redemption):
NOTE: Tender of payment is sufficient 1. Sale of a co-owner of his share to
to compel redemption, but is not in a stranger (Article 1620)
itself a payment that relieves the 2. When a credit or other incorporeal
vendor from his liability to pay the right in litigation is sold (Article
redemption price (Paez vs. Magno.) 1634)
3. Sale of an heir of his hereditary
rights to a stranger (Article 1088)
LEGAL REDEMPTION 4. Sale of adjacent rural lands not
 The right to be subrogated, upon the exceeding one hectare (Article
same terms and conditions stipulated 1621)
in the contract, in the place of one
 5. Sale of adjacent small urban lands  He can be made to pay again by
bought merely for speculation the assignee
(Article 1622)
B. Under special laws: Warranties of the assignor of credit:
1. An equity of redemption in cases a. He warrants the existence of the
of judicial foreclosures credit
2. A right of redemption in cases of b. He warrants the legality of the
extra-judicial foreclosures credit at the perfection of the
3. Redemption of homesteads contract
4. Redemption in tax sales NOTE: There is no warranty as to the
5. Redemption by an agricultural solvency of the debtor unless it is
tenant of land sold by the expressly stipulated OR unless the
landowner insolvency was already existing and of
public knowledge at the time of the
assignment
ASSIGNMENT OF CREDIT
 a contract by which the owner of a NOTE: The seller of an inheritance
credit transfers to another his rights warrants only the fact of his heirship but
and actions against a third person in not the objects which make up his
consideration of a price certain in inheritance.
money or its equivalent
Liabilities of the assignor of credit for
NOTE: Transfer of rights by assignment violation of his warranties
takes place by the perfection of the 1. Assignor in good faith
contract of assignment without the  Liability is limited only to the
necessity of delivering the document price received and to the expenses
evidencing the credit. of the contract, and any other
 this rule does not apply to legitimate payments by reason of
negotiable documents and the assignment
documents of title which are 2. Assignor in bad faith
governed by special laws.  Liable not only for the payment of
the price and all the expenses but
 Effects of Assignment: also for damages
1. transfers the right to collect the full
value of the credit, even if he paid a Legal Redemption in Sale or Credit or
price less than such value other incorporeal right in litigation
2. transfers all the accessory rights  Requisites:
3. debtor can set up against the assignee 1. There must be a sale or assignment of
all the defenses he could have set up credit
against the assignor 2. There must be a pending litigation at
the time of the assignment
Effect of payment by the debtor after 3. The debtor must pay the assignee:
assignment of credit a. price paid by him
1. Before Notice of the assignment b. judicial cost incurred by him; AND
 Payment to the original creditor is c. interest on the price from the date
valid and debtor shall be released of payment
from his obligation
2. After Notice 4. The right must be exercised by the
 Payment to the original creditor is debtor within 30 days from the date
not valid as against the assignee the assignee demands (judicially or
extra-judicially) payment from him
  As to matters not provided for by the
SALE OF CREDIT OR OTHER INCORPOREAL provisions on barter, the provisions on
RIGHTS IN LITIGATION sales will apply suppletorily
GENERAL RULE: Debtor has the right of
legal redemption in sale of credit or BULK SALES LAW (Act No. 3952)
incorporeal rights in litigation When Sale or Transfer in Bulk:
EXCEPTIONS:  Any sale, transfer, mortgage, or
a. Sale to a co-heir or co-owner assignment:
b. Sale to a co-owner 1. Of a stock of goods, wares,
c. Sale to the possessor of property merchandise, provisions, or materials
in question otherwise than in the ordinary course
of trade and the regular prosecution of
BARTER business; or
2. Of all or substantially all, of the
business or trade; or
BARTER 3. Of all or substantially all, of the
 contract whereby one of the parties fixtures and equipment used in the
binds himself to give one thing in business of the vendor, mortgagor,
consideration of the other's promise to transferor or assignor (section 2)
give another thing (Article 1638)
When sale or transfer in bulk not
NOTE: Barter is similar to a sale with the covered by Bulk Sales Law:
only difference that instead of paying a 1. If the sale or transfer is in the ordinary
price in money, another thing is given in course of trade and the regular
lieu of the purchase price prosecution of business of the vendor;
2. If it is made by one who produces and
PERFECTION and CONSUMMATION delivers a written waiver of the
 Perfected from the moment there is a provisions of the Bulk Sales Act from
meeting of minds upon the things his creditors
promised by each party in 3. If it is made by an executor,
consideration of the other administrator, receiver, assignee in
insolvency, or public officer, acting
 Consummated from the time of under judicial process (Section 8); and
mutual delivery by the contracting 4. If it refers to properties exempt from
parties of the things promised attachment or execution (Rules of
Court, Rule 39, Section 12)
NOTES:
 Where the giver of the thing bartered Protection Accorded to Creditors by Bulk
is not the lawful owner thereof, the Sales Law:
aggrieved party cannot be compelled 1. It requires the vendor, mortgagor,
to deliver the thing which he has transferor or assignor to deliver to the
promised and is also entitled to vendee, mortgagee, or to his or its
damages. agent or representative a sworn
 Where a party is evicted of the thing written statement of names and
exchanged, the injured party is given addresses of all creditors to whom said
the option, either to recover the vendor, etc. may have been indebted
property he has given in exchange with together with the amount due or to be
damages or only claim an indemnity due (Section 3)
for damages. 2. It requires the vendor, mortgagor,
transferor or assignor, at least 10 days
before the sale, transfer, mortgage,
 assignment to make a full detailed  A sale not in compliance with the
inventory showing the quantity and Bulk Sales Law is valid against all
the cost of price of goods, and to persons other than the creditors.
notify every creditor of the price 2. As against creditors
terms and conditions of the sale, etc.  A purchaser in violation of the law
(Section 5) acquires no right in the property
purchased as against the creditors
Effects of False Statements in the of the seller
Schedule of Creditors:  His status is that of a trustee or
1. Without knowledge of buyer receiver for the benefit of the
 If the statement is fair upon its creditors of the seller; as such, he
face and the buyer has no is responsible for the disposition of
knowledge of its incorrectness and the property
nothing to put him on inquiry
about it, he will be protected in Remedies Available to creditors:
its purchase  The proper remedy is one against the
 The remedy of the creditor is not goods to subject them to the payment
against the goods but to prosecute of the debt, such as execution,
the seller criminally attachment, garnishment, or by a
2. With knowledge or imputed proceeding in equity
knowledge of buyer  An ordinary action against the
 The vendee accepts it at his peril purchaser to obtain money judgement
 The sale is valid only as between will not lie, unless the purchaser has
the vendor and the vendee but sold or otherwise disposed of, or dealt
void against the creditors with the property, so as to become
personally liable to creditors for value
3. With names of certain creditors of it.
without notice are omitted from the Acts Punished by Bulk Sales Law:
list 1. Knowingly or wilfully making or
 The sale is void as to such delivering a statement required by the
creditors, whether the omission Act which does not include the names
was fraudulent or not, of all the creditors of the vendor, etc.
4. With respect to an innocent with the correct amount due or to
purchaser for a value from the become due or which contains any
original purchaser false or untrue statement; and
 An innocent purchaser for value 2. Transferring title to any stock of
from the original purchaser is goods, wares, merchandise, provisions
protected or materials sold in bulk without
 However if the circumstances are consideration or for nominal
such as to bind the subsequent consideration (Section 7)
purchaser with constructive notice
that the sale to the vendor RETAIL TRADE LIBERALIZATION ACT
(original purchaser) was (RA 8762)
fraudulent, the property will be
liable in his hands to creditors of Retail Trade
the original vendor  Any act occupation or calling of
Effect of violation of law on Transfer: habitually selling direct to the general
1. As between the parties public merchandise, commodities or
 The Bulk Sales Law does not in any goods for consumption, but the
way affect the validity of the restrictions of this law shall not apply
transfer as between the to the following:
intermediate parties thereto
1. Sales by manufacturer, processor, 2. Category B:
laborer, or worker, to the general  Minimum paid-up capital of the
public the products manufactured, equivalent in Philippine Peso of
processed produced by him if his $2,500,000 US Dollars, but
capital does not exceed P100,000; <$7,500,000
2. Sales by a farmer or agriculturalist  May be wholly owned by foreigners
selling the products of his farm except for the first two years after
3. Sales in restaurant operations by a the effectivity of this Act wherein
hotel owner or inn-keeper irrespective foreign participation shall be
of the amount of capital; provided limited to not > 60% of total
that the restaurant is incidental to the equity.
hotel business; and 3. Category C:
4. Sales which are limited only to  Paid-up capital of the equivalent
products manufactured, processed or
in Philippine Peso of:
assembled by a manufacturer through
$7,500,000 US Dollars or more
a single outlet, irrespective of
capitalization
 May be wholly owned by foreigners
NOTE: In no case shall the
High-End or Luxury Goods investments for establishing a
store in Categories B and C be less
 Goods which are not necessary for life than the equivalent in Philippine
maintenance and whose demand is
Peso of: US $830,000
generated in large part by the higher
4. Category D:
income groups
 Enterprises specializing in high-end
 Shall include but not limited to: or luxury products with paid-up
jewelry, branded or designer clothing
capital of the equivalent in
and footwear, wearing apparel, leisure
Philippine Peso of: $250,000 US
and sporting goods, electronics and
Dollars per store
other personal effects
NOTE: A natural-born citizen of the
 May be wholly owned by foreigners
Philippines who has lost his citizenship but
who resides in the Philippines shall be
granted the same rights as Filipino NOTES:
citizens  Foreign investor shall be required to
maintain in the Philippines the FULL
Foreign Equity Participation: amount of the prescribed minimum
 Foreign-owned partnerships, capital, UNLESS the foreign investor
associations and corporations formed has notified the SEC and the DTI of its
and organized under the laws of the intention to repatriate its capital and
Philippines may, upon registration cease operations in the Philippines
with SEC and DTI, or in case of  Failure to maintain the full amount of
Foreign-owned single proprietorship the prescribed minimum capital prior
with the DTI, engage or invest in retail to notification of the SEC and the DTI
trade business, subject to the shall subject the foreign investors to
following categories: penalties or restrictions on any future
1. Category A: trading activities/business in the
 Paid-up capital of the equivalent Philippines
in Philippine Peso of: <
$2,500,000 US Dollars NOTE: Foreign Investors Acquiring Shares
of Stock of existing retail stores whether
 Reserved exclusively for Filipino or not publicly listed whose net worth is in
citizens and corporations wholly
excess of the Peso equivalent of US
owned by citizens
$2,500,000 may purchase only up to the the plan with respect to the building
maximum of 60% of the equity thereof or buildings included in the
within the first 2 years, and thereafter, condominium project in accordance
they may acquire the remaining with the National Building Code (R.A.
percentage consistent with the allowable No. 6541).
foreign participation as herein provided  The subdivision plan, as so approved,
shall then be submitted to the Director
NOTE: All retail Trade enterprises under of Lands for approval in accordance
categories B and C in which foreign with the procedure prescribed in
ownership exceeds 80% of equity shall Section 44 of the Land Registration Act
offer a minimum of 30% of their equity to (Act No. 496, as amended by R.A. No.
the public through any stock exchange in 440): Provided, that it case of complex
the Philippines within 8 years from the subdivision plans, court approval shall
start of the operations no longer be required. The
condominium plan as likewise so
Qualification of Foreign Retailers approved, shall be submitted to the
1. Minimum of $200,000,000 US Dollars Register of Deeds of the province or
net worth in its parent corporation for city in which the property lies and the
Categories B and C and $50,000,000 same shall be acted upon subject to
net worth in its parent corporation for the conditions and in accordance with
Categories D the procedure prescribed in Section 4
2. 5 retailing branches or franchises in of the Condominium Act (R.A. No.
operation anywhere around the world 4726).
unless such retailer has at least 1 store
capitalized at a minimum of  National Housing authority (now
$25,000,000 US Dollars Housing and Land Use Regulatory
3. 5-year track record in retailing; and Board) has the exclusive jurisdiction to
4. Only nationals from, or juridical regulate the real estate trade and
entities formed or incorporated in business.
Countries which allow to engage in
retail trade in the Philippines License to sell
 Such owner or dealer to whom has
been issued a registration certificate
shall not, however, be authorized to
PD 957 (SUBDIVISION AND CONDOMINIUM sell any subdivision lot or
BUYERS’ PROTECTIVE DECREE condominium unit in the registered
project unless he shall have first
Registration of Projects obtained a license to sell the project
 The registered owner of a parcel of within two weeks from the registration
land who wishes to convert the same of such project.
into a subdivision project shall submit
his subdivision plan to the HOUSING Exempt transactions
AND LAND-USE REGULATORY BOARD,  A license to sell and performance bond
which shall act upon and approve the shall not be required in any of the
same, upon a finding that the plan following transactions:
complies with the Subdivision 1. Sale of a subdivision lot resulting from
Standards' and Regulations enforceable the partition of land among co-owners
at the time the plan is submitted. The and co-heirs.
same procedure shall be followed in 2. Sale or transfer of a subdivision lot by
the case of a plan for a condominium the original purchaser thereof and any
project except that, in addition, said subsequent sale of the same lot.
Authority shall act upon and approve
3. Sale of a subdivision lot or a 1. Consensual
condominium unit by or for the 2. Principal
account of a mortgagee in the ordinary 3. Nominate
course of business when necessary to 4. Purpose is to allow enjoyment or
liquidate a bona fide debt. use of a thing (the person to enjoy
is the lessee; the person allowing
Grounds for Revocation of registration the enjoyment by another is the
certificate and license to sell of owners lessor
or dealers 5. Subject matter must be within the
1. Is insolvent; or commerce of man
2. Has violated any of the provisions of 6. Purpose to which the thing will be
this Decree or any applicable rule or devoted should not be immoral
regulation of the Authority, or any 7. Onerous (there must rent or price
undertaking of his/its performance certain)
bond; or 8. Period is Temporary (not
3. Has been or is engaged or is about to perpetual, hence, the longest
engage in fraudulent transactions; or period is 99 years)
4. Has made any misrepresentation in any 9. Period is either definite or
prospectus, brochure, circular or other indefinite
literature about the subdivision  If no term is fixed, we should
project or condominium project that apply Art.1682 (for rural leases)
has been distributed to prospective and Art. 1687 (for urban leases)
buyers; or  If the term is fixed but
5. Is of bad business repute; or indefinite, the court will fix the
6. Does not conduct his business in term under the law of obligations
accordance with law or sound business and contracts
principles. 10. Lessor need not be the owner

LEASE NOTE: A usufructuary may thus lease

the premises in favor of a stranger,
such lease to end at the time that the
LEASE
usufruct itself ends
 consensual, bilateral, onerous, and
commutative contract by virtue of Rent
which one person binds himself to
 The compensation either in
grant temporarily the use of the thing
money, provisions, chattels, or
or to render some service to another
labor, received by the lessor from
who undertakes to pay some rent.
the lessee.
Kinds of Leases (From the view point of
the subject matter
1. Lease of things NOTES:
2. Lease of service  When a student boards and lodges in a
3. Lease of work dormitory, there is no contract of
lease. The contract is not designated
NOTE: Since lease is consensual and is not specifically in the Civil Code. It is an
imposed by law, only the lessor has the innominate contract. It is however,
right to fix the rents. However, the believed that the contract can be
increasing of the rent is not an absolute denominated as the contract of board
right on the part of the lessor. and lodging.
 There is a contract of lease when the
Characteristics or Requisites for Lease of use and enjoyment of a safety deposit
Things
 box in a bank is given for a price there is said price cannot be
certain. This is certainly not a contract destruction of lawfully demanded
of deposit. the work through if the work is
fortuitous event destroyed before it
 A lease of personal property with
is finished and
option to buy (at a nominal amount) at accepted
the end of the lease can be considered
a sale.

LEASE SALES Lease of Agency

1. only use or 1. ownership is Services
enjoyment is transferred It is based on It is based on
transferred employment – representation –
2. transfer is 2. transfer is the lessor of agent represents his
temporary permanent services does not principal and enters
3. lessor need not 3. seller must be represent his into juridical acts.
be the owner the owner at the employer nor
time the property does he execute
is delivered juridical acts.
4. the price of the 4. usually, the Principal Preparatory
object, selling price is contract contract
distinguished from mentioned
the rent, is usually
not mentioned Rule for Lease of Consumable Goods
GENERAL RULE: Consumable goods
cannot be the subject matter of a contract
Lease of Lease of Services of lease of things.
Things Why? To use or enjoy hem, they will have
1. object of 1. object is some to be consumed. This cannot be done by a
contract is a work or service
lease since ownership over them is not
thing
transferred to him by the contract of
2. lessor has to 2. lessor has to
deliver the thing perform some work lease.
leased or service EXCEPTIONS:
3. in case of 3. in case of a. If they are merely exhibited
breach, there breach, no action b. If they are accessory to an
can be an action for specific industrial establishment
for specific performance
performance RECORDING OF LEASE OF PERSONAL
PROPERTY
Lease of Contract for a GENERAL RULE: Lease of real property is
Services Piece of Work personal right
(locatio (locatio operas) EXCEPTIONS: Lease partakes of the
operatum) nature of real right if:
1. the 1. the important a. Lease of real property is more
important object object is the work
is the labor
than 1 year
done
performed by the b. Lease of real property is registered
lessor regardless of duration
2. the result is 2. the result is
generally not generally NOTE: Lease of personal property cannot
important, important; be registered. To be binding against third
hence the generally, the price persons, the parties must execute a public
laborer is is not payable until instrument.
entitled to be the work is
paid even if completed, and
* Lease may be made orally, but if the direct action
lease of Real Property is for more than 1 against the lessor
year, it must be in writing under the
Statue of Frauds. RIGHTS OF LESSOR IF SUBLEASE
PROHIBITED BUT ENTERED INTO BY
Persons Disqualified to be Lessees LESSEE:
Because Disqualified to Buy 1) Rescission and damages, or
1. A husband and a wife cannot lease to 2) Damages only (Contract will be allowed
each other their separate properties to remain in force)
except: 3) Ejectment
a. if separation of property was
agreed upon Instances when sublessee is liable to the
b. if there has been judicial lessor:
separation of property a. All acts which refer to the use and
Persons referred to in Art. 1491 are preservation of the thing leased in
disqualified because of fiduciary the manner stipulated between
relationships the lessor and the lessee
b. The sublessee is subsidiarily liable
SUBLEASE to the lessor for any rent due from
 A separate and distinct contract of the lessee.
lease wherein the original lessee NOTE: The sublessee shall not be
becomes a sublessor to a sublessee. responsible beyond the amount of rent due
 Allowed unless expressly prohibited. from him.
 The sublessee is subsidiarily liable for Accion Directa: direct action which the
any rent due. The lessor has an accion lessor may bring against a sublessee who
directa against the sublessee for misuses the subleased property.
unpaid rentals and improper use of the
object. OBLIGATIONS OF THE LESSOR (DnM)
a. Delivery of the object (cannot be
SUBLEASE ASSIGNMENT OF waived)
LEASE b. Making of necessary repairs
1. there are two 1. there is only one c. Maintenance in peaceful and
leases and two juridical
adequate possession
distinct juridical relationship, that of
relationships the lessor and the
although assignee, who is OBLIGATIONS OF THE LESSEE (R2EN2U)
immediately converted into a a. to pay rent
connected and lessee b. to use thing leased as a diligent
related to each father of a family, devoting it to
other the use stipulated
2. the 2. the personality of c. to pay expenses for the deed of
personality of the lessee lease
the lessee does disappears d. to notify the lessor of usurpation
not disappear
or untoward acts
3.the lessee does 3. the lessee
not transmit transmits absolutely e. to notify the lessor of need for
absolutely his his rights to the repairs
rights and assignee f. to return the property leased upon
obligations to the termination of the lease
sublessee
4. the sublessee, 4. the assignee has Effect of Destruction of the Thing
generally, does a direct action Leased:
not have any against the lessor
1. Total destruction by a fortuitous 1. only to dwelling place or any other
event building intended for human
 Lease is extinguished habitation
2. even if at the time the contract was
perfected, the lessee knew of the
dangerous condition or waived the
right to rescind on account of this
2. Partial destruction condition
a. Proportional reduction of the rent, Rules on Alteration of the Form of the
or Lease
b. Rescission of the lease  The Lessor can alter provided there is
When lessee may suspend payment of no impairment of the use to which the
rent: thing is devoted under the terms of
1. lessor fails to undertake necessary the lease
repairs  Alteration can also be made by the
2. lessor fails to maintain the lessee in Lessee so long as the value of the
peaceful and adequate enjoyment of property is not substantially impaired
the property leased
Rules in case of Urgent Repairs
NOTE: “Suspend”- for the intervening  The lessee is obliged to tolerate the
period, the lessee does not have to pay work although it may be very annoying
the rent. to him and although during the same
time he may be deprived of a part of
EFFECTIVITY OF THE SUSPENSION: the premises
The right begins: 1. If repairs last for more than 40 days:
a) In the case of repairs, from the time he Lessee cannot act for reduction of rent
made the demand for said repairs, and the or rescission
demand went unheeded. 2. If 40 days or more: lessee can ask for
b) In the case of eviction, from the time proportionate reduction
the final judgment for eviction becomes NOTE: In either case, rescission may be
effective. availed of if the main purpose is to provide
a dwelling place and the property becomes
Alternative remedies of Aggrieved party uninhabitable.
(Lessor/Lessee) in case of Non-
fulfillment of duties: Effects if Lessor fails to make Urgent
1. Rescission and damages Repairs
2. Damages only, allowing the contract to 1. Lessee may order repairs at the
remain in force – Specific Performance lessor’s cost
NOTE: Damages Recoverable in ejectment 2. Lessee may sue for damages
cases are the rents or the fair rental value 3. Lessee may suspend the payment of
of the premises. The following cannot be the rent
successfully claimed: 4. Lessee may ask for rescission, in case
1. Profits plaintiff could have earned of substantial damage to him
were it not for the possible entry
or unlawful detainer TRESPASS IN LEASE:
2. Material injury to the premises 1. Trespass in fact (perturbacion de
3. Actual, moral, or exemplary mere hecho):
damages  physical enjoyment is reduced
 Lessor will not be held liable.
Immediate termination of lease under 2. Trespass in law (perturbacion de
Art. 1660 applies: derecho):
  A third person claims legal right to Hence, ordinarily the lessee at the end of
enjoy the premises the original period may either:
 Lessor will be held liable a) leave the premises; or
b) remain in possession
NOTE: While the Japanese Occupation was 4) In co-ownership, assent of all is needed;
a fortuitous event, the lessor is still not otherwise, it is void or ineffective as
excused from his obligation to warrant against non-consenting co-owners.
peaceful legal possession. Lease is a 5) Where according to the terms of the
contract that calls for prestations both contract, the lease can be extended only
reciprocal and repetitive; and the by the written consent of the parties
obligations of either party are not thereto, no right of extension can rise
discharged at any given moment, but must without such written consent.
be fulfilled all throughout the term of the
contract. (Villaruel vs. Manila Motor Co.) Rule if Lessor Objects to the Lessee’s
continued Possession:
Duration of Lease  Requisites:
1. Lease made for a determinate time 1. Contract has expired
or fixed Period 2. Lessee continued enjoying the thing
 Lease will be for the said period 3. Lessor Objected to this enjoyment
and it ends on the day fixed  If the three requisites are present, the
without need of a demand lessee shall be considered a possessor
in bad faith
2. If there is no fixed period
A. For Rural Lands (Article 1680) IMPLIED NEW LEASE (Tacita
 it shall be for all time necessary Reconducion)
for the gathering of fruits which  lease which arises if at the end of the
the whole estate may yield in 1 contract the lessee should continue
year, or which it may yield once enjoying the thing leased for 15 days
B. For Urban Lands (Article 1687) with the acquiescence of the lessor,
a. If rent is paid daily: lease is from unless a notice to the contrary had
day to day previously been given by either party.
b. If rent is paid weekly: lease is
from week to week  Requisites:
c. If rent is paid monthly: lease is a. the term of the original contract
from month to month has expired
d. If rent is paid yearly: lease is from b. the lessor has not given the lessee
year to year a notice to vacate
c. the lessee continued enjoying the
RULES ON EXTENSION OF THE LEASE thing leased for at least 15 days
PERIOD: with the acquiescence of the
1) If a lease contract for a definite term lessor
allows lessee to extend the term, there is
no necessity for lessee to notify lessor of  When there is no implied new lease:
his desire to so extend the term, unless 1. When before or after the
the contrary is stipulated. expiration of the term, there is a
2) “May be extended” as stipulation: notice to vacate given by either party.
lessee can extend without lessor’s consent 2. When there is no definite fixed
but lessee must notify lessor. period in the original lease contract as
3) “May be extended for 6 years agreed in the case of successive renewals.
upon by both parties” as stipulation: This
must be interpreted in favor of the lessee.  Effects:
 a. The period of the new lease is not e. sale is made with right of
that stated in the original contract repurchase
but the time in Articles 1682 and
1687. GROUNDS FOR EJECTMENT UNDER ART.
b. Other terms of the original 1673: (ELVU)
contract are revived. 1. Expiration of the period agreed upon
or the period under Arts. 1682 and
NOTE: Terms that are revived are only 1687;
those which are germane to the enjoyment 2. Lack of payment of the price
of possession, but not those with respect stipulated;
to special agreements 3. Violation of any of the conditions
agreed upon in the contract; and
which are by nature foreign to the right of 4. Unauthorized use or service by the
occupancy or enjoyment inherent in a lessee of the thing leased.
contract of lease – such as an option to
purchase the leased premises (Dizon vs.
Magsaysay GR No. 23399, May 31,1974)
RENTAL REFORM ACT OF 2002
Perpetual Lease (R.A. No. 9161)
 A lease contract providing that the  Effectivity: January 1, 2002.
lessee can stay in the premises for as  Coverage:
long as he wants and for as long as he a. All residential units of NCR and other
can pay the rentals and its increases. highly urbanized cities, the total
 This is not permissible; it is a purely monthly rental for each of which does
potestative condition because it leaves not exceed P7,500;
the effectivity and enjoyment of b. All residential units in other areas the
leasehold rights to the sole and total monthly rental for each of which
exclusive will of the lessee does not exceed P4,000 as of 1/1/02,
without prejudice to pre-existing
NOTE: In Jespajo Realty vs. CA, 27 Sept. contracts.
2002, the SC upheld a lease contract,
which provides that “the lease contract  Grounds for judicial ejectment:
shall continue for an indefinite period SANORE
provided that the lessee is up-to-date in 1. Assignment of lease or subleasing of
the payment of his monthly rentals” for residential units including the
the contract is one with a period subject acceptance of boarders or bedspacers
to a resolutory condition. without written consent of the owner
or lessor;
PURCHASE OF THE LEASED PROPERTY 2. Arrears in payment of rent for a total
GENERAL RULE: Purchaser of thing of 3 months;
leased can terminate lease. 3. Legitimate needs of the owner or
EXCEPTIONS: lessor to repossess for his own use or
a. lease is recorded in Registry of for the use of any immediate member
Property of his family as a residential unit,
b. there is stipulation in the contract provided:
of sale that purchaser shall a. owner or immediate member not
respect the lease being owner of any other available
c. purchaser knows the existence of residential unit within the same city or
the lease municipality;
d. sale is fictitious b. lease for a definite period has
expired;
 c. lessor has given lessee formal 1. Ordinary fortuitous event – no
notice 3 months in advance; and reduction
d. owner or lessor is prohibited from 2. Extraordinary fortuitous event
leasing the residential unit or allowing a. if more than ½ of the fruits were
its use by a third person for at least 1 lost, there shall be a reduction,
year. unless there is a stipulation to the
4. Absolute ownership by the lessee of contrary
another dwelling unit in the same city b. if ½ or less, there shall be no
or municipality which may be lawfully reduction
used as his residence provided lessee  Lease duration: If not fixed, it shall
is with formal notice 3 months in be for all time necessary for the
advance; gathering of fruits which the whole
5. Need of the lessor to make necessary estate may yield in 1 year, or which it
repairs in the leased premises which is may yield once.
the subject of an existing order of
condemnation by appropriate Special Provisions for Urban Lands
authorities concerned in order to make  Repairs for which urban lessor is
said premises safe and habitable; and liable:
6. Expiration of period of the lease 1. special stipulation
contract. 2. if none, custom of the place
3. in case of doubt, the repairs are
NOTE: chargeable against him
 Except when the lease is for a definite
period, the provisions of Art. 1673(1)
of the Civil Code (CC), insofar as they  Lease duration:
refer to residential units, shall be 1. If there is a fixed period, lease will be
suspended during the effectivity of for said period.
R.A. 9161, but other provisions of the 2. If no fixed period, apply the following
CC and the Rules of Court on lease rules:
contracts insofar as they are not in a. If rent is paid daily: day to day
conflict with the provisions of R.A. No. b. If rent is paid weekly: week to
9161 shall apply. week
 No increase in monthly rental by more c. If rent is paid monthly: month to
than 10% is allowed. month
d. If rent is paid yearly: year to year
TERMINATION OF THE LEASE
 If made for a determinate time, it
ceases upon the day fixed without the
need of a demand.
1) By the expiration of the period
2) By the total loss of the thing
3) By the resolution of the right of the
lessor
4) By the will of the purchaser or
transferee of the thing
5) By rescission due to non-performance of
the obligation of one of the parties

Special Provisions for Rural Lands

 Effect of loss due to fortuitous event: