CHAPTER 6: CONSUMMATION STAGE/PERFORMANCE STAGE

Stage where parties both comply with their obligation

Nature of diligence required: diligence of good father of family unless other requirement is stipulated

Consequence: Seller will guilty of breach if thing is lost through his fault
OBLIGATIONS OF THE VENDOR

Under this provision, the risk of loss is borne by the buyer after perfection of the contract and even before
delivery, as an exception to the rule of res perit domino.

after delivery: goods are at the buyers risk

1. PRESERVE THE THING PENDING DELIVERY (Art. 1163)

Chrysler Philippines Corp. v. CA

The general rule is that before delivery, the risk of loss is borne by the seller who is still the owner, under the
principle of res perit domino.

RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT OF THING:

before perfection of the contract: the seller bears the risk of loss/deterioration

1.

TRANSFER OWNERSHIP OF AND DELIVER THING WITH FRUITS AND ACCESSORIES

The vendor must have ownership of the thing sold at the time when the ownership is to pass, and not
necessarily at the time of the perfection of the contract (Article 1459).

generally, the ownership of the thing sold is transferred upon actual or constructive delivery (Article
1477)

at the time of perfection (Article 1493):

if the thing is entirely lost, the contract shall be without any effect

if the thing is lost in part only, the vendee may withdraw from the contract or demand the remaining part,
paying its proportionate price
after perfection but before delivery (Articles 1504 and 1538):

GEN. RULE: the risk of loss is borne by owner of the thing under the rule res perit domino

remember that generally, delivery transfers ownership

EXCEPTIONS:
i.
buyer assumes risk at the time of delivery where the seller reserves ownership, despite delivery,
to secure performance of buyers obligations
ii.
party who causes delay in actual delivery bears the loss which might have occurred but for such
fault

Quijada v. CA
Ownership by the seller of the thing sold at the time of the perfection of the contract of sale is not an element for its
perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is
delivered. Perfection per se does not transfer ownership and a perfected contract of sale cannot be challenged on
the ground of non-ownership on the part of the seller at the time of its perfection.

The thing sold and its accessions and accessories must be delivered in the condition in which they were upon
the perfection of the contract (Article 1537).
The vendee has a right to the fruits from the time of perfection of the contract (Article 1537).

LOSS OF THING
without sellers fault
the obligation shall be extinguished

thru sellers fault

seller shall be obliged to pay damages

DETERIORATION OF THE THING

without sellers fault
thru sellers fault
the impairment is to be borne by the buyer
the buyer may choose between:

rescission

specific performance with damages in either case

IMPROVEMENT OF THE THING

by nature or time
at sellers expense
improvements shall inure to the benefit of the
seller shall have no other right than that granted to the
buyer
usufructuary

VILLANUEVA: The rules are different for loss and deterioration/improvement because in the former, the
obligation to transfer ownership arises upon delivery while in the latter, the buyer becomes owner of the fruits,
accessions and accessories upon mere perfection of the contract.

Article 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment
of the perfection of the contract to the time of delivery, shall be governed by articles 1163 to 1165, and 1262.
This rule shall apply to the sale of fungible things, made independently and for a single price, or without
consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be
imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the latter has
incurred in delay.

DELIVERY OF THE THING

Transfer ownership (tradicion) twin obligation:

1.
transfer title(ownership) SELLER must be owner of thing at the time of consummation to validly transfer
title
2.
delivery of the thing

Different kinds of delivery:

1.
Actual

when thing sold is placed in the control & possession of the buyer
2.
Constructive
DIFFERENT FORMS OF CONSTRUCTIVE DELIVERY:
1.
Traditio Longa Manu

Delivery of thing by mere agreement; when SELLER points to the property without need of actually
delivering
1.
Traditio Brevi Manu
1.
Before contract of sale, the would be buyer was already in possession of the would be subject matter
of sale (ex: as lessee)
2.
Symbolic delivery

As to movables ex: delivery of the keys to a car

3.
Constitutum possessarium

at the time of perfection of contract, seller continues to hold possession merely as a holder
4.
Execution:

Exception:
a.
when there is stipulation to contrary, execution does not produce effect of delivery
b.
when at the time of execution of instrument, subject matter was not subject to control of the seller

subject matter should be within control of seller; he should have capacity to deliver at the time
of execution of public instrument when he wants to effect actual delivery

such capacity should subsist for reasonable time after execution of instrument (reason time
depends on circumstances of persons, places & things)

5.

6.

Effect when 2 requisites do not concur: no constructive delivery; no compliance on part of SELLER to
deliver
Even when thing is mortgaged, seller can still deliver because naked title still belongs to him & can still do
acts of ownership including conveyance
Negotiable documents of title & non negotiable instruments (1501)
transferee acquires title of transferor
when delivered without negotiation, it is a mere assignment
Intangibles/ incorporeal property

through public instrument

execution is equivalent to delivery if from the deed, contrary does not appear

Pasagui v. Villablanca
While the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land, this
presumptive delivery only holds true when there is no impediment that may prevent the passing of the property from
the vendor to the vendee. It can be negated by the fact that the vendees actually failed to obtain material
possession of the land subject of the sale.
Dy, Jr. v. CA
Constructive delivery be the execution of a public instrument would produce the effect of tradition, insofar as title is
concerned, provided that at the time of the execution there was no legal impediment on the part of the seller to
transfer title to the buyer, even if at the time of the sale, control or possession of the subject matter was not in the
hands of the seller.
DELIVERY OF FRUITS & ACCESSIONS/ ACCESSORIES

Right to fruits & accessions/accessories accrue from time sale is perfected

but no real right over it until it is delivered

DELIVERY THROUGH CARRIER
1. FAS FREE ALONG SIDE

When goods delivered alongside the ship, there is already delivery to the buyer (twin effects deemed
fulfilled)
2. FOB-FREE ON BOARD
a.
Shipment when goods are delivered at ship at point of shipment; delivery to carrier by placing goods on
vessel is delivery to buyer
b.
Destination when goods reach the port even if not disembarked yet from the vessel, there is delivery to
the buyer
3. CIF COST, INSURANCE, FREIGHT
a.
when buyers pays for services of carrier delivery to carrier is delivery to buyer; carrier is agent of the
buyer
b.
when buyer pays seller the price from moment the vessel is at port of destination, there is already
delivery to buyer.
c.
Behn, Meyer & Co. v. Yangco
Behn, Meyer & Co. (vendor) entered into a contract of sale and delivery with Yangco (vendee). The shipping terms
were c.i.f. Manila on the goods coming from New York. Yangco only received 9 of the 80 drums of caustic soda
ordered, and such were in bad condition. The Court held that the loss is to be borne by the vendor. The phrase c.i.f.
Manila signifies that the price fixed covers not only the cost of the goods, but also the expense of freight and
insurance to be paid by the seller. The terms "C. I. F." and "F. O. B." merely make rules of presumption which yield to
proof of contrary intention, which was not present in this case.
General Foods v. NACOCO
Under an ordinary C.I.F. agreement, delivery to the buyer is complete upon delivery of the goods to the carrier and
tender of the shipping and other documents required by the contract and the insurance policy taken in the buyer's
behalf. However, the parties may, by express stipulation or impliedly, modify a CIF contract and throw the risk upon
the seller until arrival in the port of destination. In this case, the parties agreed that the payment of the price was to
be according to the "net landed weight" upon arrival in the port of destination. Therefore, notwithstanding the CIF
contract, delivery to the carrier in Manila was not delivery to the buyer and the vendor bore the risk of loss.

Contracts of Sale or Return, and of Sale on Trial or Approval or Satisfaction (Article 1502)
a.
sale or return: where the buyer has the option to purchase or return the goods, ownership of the goods
passes to the buyer upon delivery but is re-vested in the seller upon its return
b.
sale on trial or approval: where the satisfaction of the buyer is a condition precedent to the perfection of
the contract, the ownership passes to the buyer upon:
i.
the buyers approval of the goods
ii.
retention of the goods by the buyer without giving notice of rejection
Industrial Textile Manufacturing Co. v. LPJ Enterprises, Inc.
For a sale to be considered and construed as a sale or return or sale on approval, there must be a clear agreement
to either of such effect. Parol or extrinsic testimony could not be admitted for the purpose of showing that an invoice
purporting to embody a sale without condition or restriction constituted a contract of sale or return. If the purchaser
desired to incorporate a stipulation securing to him the right of return, he should have done so at the time the
contract was made. On the other hand, the buyer cannot accept part and reject the rest of the goods since this falls
outside the normal intent of the parties in the "on approval" situation.
Where Specific Goods are Shipped (Article 1503)
GEN. RULE: The ownership in the goods sold passes to the buyer upon their delivery to the carrier (Article 1523).
EXCEPTIONS: The seller reserves ownership in the goods where:
a.
a contrary intention appears by the terms of the contract
b.
by the bill of lading the goods are deliverable to the seller, his agent or to the order of the seller or his agent
c.
possession of the bill of lading is retained by the seller or his agent
d.
the seller transmits the bill of exchange and the bill of lading together to the buyer to secure acceptance or
payment of the bill of exchange
EFFECTS WHERE BILL OF EXCHANGE IS NOT HONORED BY THE BUYER:
a.
buyer is bound to return the bill of lading
b.
if buyer wrongfully retains the bill of lading, he acquires no additional right thereby
c.
a purchaser in good faith for value from the buyer will obtain ownership in the goods
SELLERS DUTY AFTER DELIVERY TO CARRIER (Article 1523):
a.
to make such contract with the carrier on behalf of the buyer as may be reasonable under the circumstances

if the seller omits to do so, the buyer may:

b.

decline to treat the delivery to the carrier as delivery to himself

hold the seller responsible in damages

to give notice to the buyer regarding necessity to insure the goods, unless the buyer had all the information
necessary to insure

if the seller fails to do so, the goods shall be deemed to be at his risk during such transit

COMPLETENESS OF DELIVERY
1. MOVABLES delivery of thing plus accessories & accessions in the condition in which they were upon the
perfection of the contract including the fruits
a.
LESS buyer has 2 options:
i.
reject
ii.
accept
(1) when accepts with knowledge that seller is not going to perform contract in full, he must pay at
price stipulated
(2) when accepts & consumes before knowledge that buyer will both perform contract in full, liable
only for fair value of goods delivered
b.
LARGER buyer has 2 options;
i.
accepts per contract & reject the rest
ii.
accept the whole pay price stipulated
iii. reject whole if subject matter is indivisible
c.
MIXED WITH GOODS OF DIFFERENT DESCRIPTION buyer has 2 options:

2.

i.
accepts good w/c are in accordance with contract & reject the rest
ii.
reject goods entirely if indivisible
IMMOVABLES
a.
sold per unit or number

with statement of its area, rate at certain price

deliver all that may heave been stated in the contract

if impossible, remedies of buyer:

LESS IN AREA
i.
rescission
ii.
proportional reduction of price LACK IN AREA SHLD NOT BE LESS THAN 1/10 OF AREA
AGREED UPON

GREATER IN AREA
i.
accept per stipulation & reject the rest
ii.
accept whole area pay at contract rate

Not applicable to judicial sales

b.
sold for lump sum

When price per unit not indicated

Is area delivered is either greater or lesser price will not be adjusted accordingly

Sta. Ana v. Hernandez

Where two parcels of land sold were identified by the conspicuous boundaries that separated the lands in question
from the rest of the property, the sale made was of definite and identified tract that obligated the vendors to deliver
to the buyer all the land within the boundaries, irrespective of whether the real area should be greater or smaller
than what is recited in the deed. This is particularly true where the area given is qualified to be approximate only,
i.e., more or less. To hold the buyer to no more than the area recited on the deed, it must be made clear therein that
the sale was made by unit of measure at a definite price for each unit. As between the absence of a recital of a given
price per unit of measurement, and the specification of the total area sold, the former must prevail and determines
the applicability of the norms concerning sales for a lump sum.
TIME & PLACE OF DELIVERY
1. follow stipulation in contact, or
2. follow usage of trade, or
3. sellers place of business or his residence
4. specific goods place where the thing is
5. at reasonable hour

In case of specific goods, the place of delivery is that where such goods were at the time the contract was
made.

The seller shall not be released until the 3 rd person with possession of goods acknowledges being the bailee for
the buyer.

The seller bears the expenses to place the thing in a deliverable state, unless otherwise agreed.

RULES GOVERNING TIME OF DELIVERY, in the following order:

a.
time agreed upon
b.
time determined by usage of trade
c.
if no time is fixed, the seller is bound to send the goods to the buyer within a reasonable time
GEN. RULE: The vendor shall not be bound to deliver the thing sold unless the price be paid (Article 1524).
EXCEPTION: The thing must be delivered though the price be not first paid, if a time for such payment has been
fixed in the contract.
EFFECTS OF DELIVERY: Title to thing is transferred/ownership is transferred
Except: contrary is stipulated as in the case of:
1. contract to sell
2. sale on acceptance/approval

3. sale or return
4. there is implied reservation of ownership
WHO BEARS EXPENSES OF DELIVERY Seller
Sale by description/sample
1.
Sample goods must correspond with sample shown
2.
Description goods must correspond with description or sample

Effect if there is no compliance: RESCISSION may be availed of by the buyer

OBLIGATION OF BUYER
1. Pay the price

Buyer is obligated to pay price according to terms agreed upon regarding time, place & amount

If payment of interest is stipulated must pay; if amount of interest not mentioned apply legal rate

When buyer defaults constitutes breach: subject to specific performance/rescission & damages ; interest
to be paid also from of default
2. Accept delivery of thing sold

Where to accept: at time & place stipulated in the contract; if none specified at the time & place of
delivery

Goods; there is acceptance when:

a.
He intimates to seller that he has accepted
b.
When delivered & does any act inconsistent with ownership of seller
c.
Retains without intimating to seller that he has rejected

Sale of Goods on installment:

a.
Goods must be delivered in full, except when stipulated
b.
When not examined by buyer not accepted until examined or at least had reasonable time to
examine

Acceptance of goods in general, absent contrary express stipulation, does not discharges seller from
liability in case of breach of warranties (unless no notice or failure to give it within reasonable time)

When buyer has a right to refuse goods, no need to return; shall be considered as depositary; unless there
is stipulation to contrary
DOUBLE SALE- where the same property is sold to different vendees.
General Rule: FIRST IN TIME, PRIORITY IN RIGHT
When does it apply: when not all requisites embodied in 1544 concur
SPECIAL RULE: 1544

Requisites;
1.
exactly same subject matter
2.
exactly same immediate seller
3.
they buyers represent conflicting interest
4.
both sales are valid
RULES ACCORDING TO 1544:
1. MOVABLE

owner is first to posses in good faith

2. IMMOVABLE

First to register in good faith

No inscription, first to possess in good faith

No inscription & no possession in good faith Person who presents oldest title in good faith

Sales of immovable property are subject to the Mortgage Law and Land Registration Law (Article 1637).
GOOD FAITH
1.
one who buys property without notice that another person has a right or interest in such property
2.
one who has paid price before notice that another has claim or interest

lis pendens notice that subject matter is in litigation

adverse claim notice that somebody is claiming better right

POSSESSION

Both actual or constructive

REGISTRATION
1.
registered under Torrens system

1544 applies
2.
not registered under the Torrens system

1544 still applies

decided case which excluded unregistered land dealt with judicial sale whereby buyer acquires right of
transferor; outside of such situation must apply to conflicting sale over same unregistered parcel of land
3.
when situation is sale 1 deals with land when not yet registered & sale 2 is done when land already registered
apply FIRST IN TIME, PRIORITY IN RIGHT
Agricultural & Home Extension v. CA
A purchaser in good faith is one who buys the property of another without notice that some other person has a right
to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he
has notice of the claim or interest of some other person in the property. The annotation of lis pendens on the title to
the property by 3rd parties does not place the buyer in bad faith since such does not establish a lien or encumbrance
on the property affected.
Cheng v. Genato
The rules on double sales under Art. 1544 are not applicable to a contract to sell. For Art. 1544 to apply, there must
be valid sales transactions and the buyers must be at odds over the rightful ownership of the subject matter who
must have bought from the very same seller. Such circumstances are lacking in a contract to sell since there is no
transfer of ownership and no sale has yet been consummated. Nevertheless, the governing principle of Art. 1544
should apply, mainly the principle of primus tempore, portior jure (first in time, stronger in right).
Gatmaitan v. CA
If immovable property is sold 2 different parties, the ownership shall pertain to the person acquiring it who, in good
faith, first registered it in the Registry of Property. This rule however, admits of an exception, and that is where the
2nd purchaser had knowledge of the other sale, prior to or at the time of the sale. In such case, his knowledge is
equivalent to registration and taints his purchase with bad faith. The applicable rule in this case would be that the
ownership shall pertain to the person who, in good faith, first entered into possession of the property or, in the
absence of possession, to the person who presents the oldest title, provided there is good faith.
Navera v. CA
Where both sales were not recorded in the Registry of Property, the law clearly vests the ownership upon the person
who in good faith was first in possession of the disputed lot. The possession mentioned in Article 1544 for
determining who has better right when the same piece of land has been sold several times by the same vendor
includes not only the material but also the symbolic possession, which is acquired by the execution of a public
instrument. In the case at bar, both sales were executed through public instruments. Ownership should therefore be
recognized in favor of the first vendee.
Cruz v. Cabana
Prior registration by the 2nd buyer does not by itself confer ownership or a better right over the property. Such
registration must be coupled with good faith. The governing rule is primus tempore, potior jure (first in time,
stronger in righs). Knowledge gained by the 2nd buyer of the first defeats his rights even if he is first to register the
sale, since such knowledge taints his prior registration in bad faith.
Baricuatro v. CA (2000)
Galeos sold 2 lots of a subdivision, on installment basis, to Baricuatro and subsequently sold the entire village to
Amores. Galeos told Baricuatro that he should make full payment to Amores. After Baricuatro failed to make
payment to Amores, the latter sold the same 2 lots to the Nemenio spouses. The 2 nd vendee obtained title to the lots
and asked Baricuatro to vacate. When the latter refused to do so, the Nemenios filed an action to quiet title. The SC
declared the sales to Amores and Nemenio as null and void. It ruled that even if Amores and the Nemenios were
purchasers in good faith, they did not act in good faith when they registered their titles to the disputed lots as they

already had knowledge of the sale to Baricuatro before such registration. For a 2 nd buyer to successfully invoke Art.
1544, he must possess good faith from the time of acquisition of the property until the registration of the deed of
conveyance covering the same.
Carumba v. CA
While under Article 1544, registration in good faith prevails over possession in the event of a doubt sale by the
vendor of the same piece of land to different vendees, said article is of no application to unregistered land at an
execution sale. The reason is that the purchaser of unregistered land at a sheriff's execution sale only steps into the
shoes of the judgment debtor. He merely acquires the latter's interest in the property sold as of the time the property
was levied upon. In this case, the first vendee bought the property before the land was levied upon. Therefore, he
has a better right to the land even if the 2nd vendee was first to register the land in good faith.
CHAPTER 7: DOCUMENTS OF TITLE
DOCUMENTS OF TITLE

not creations of law but by merchants to allow them to deal with merchandise without having to physically
carry them around

pertains to specific type of movables only : GOODS

2 FUNCTIONS
1. evidence of existence & possession of goods described therein
2. medium by which seller is able to transfer possession of goods
2 FORMS
1. negotiable
a. deliver to bearer (negotiation by mere delivery)
b. deliver to specific person or his order (negotiation by endorsement + delivery)

even if face of instrument says NON-NEGOTIABLE it is still NEGOTIABLE; limiting words not to destroy
negotiability

if order instrument & no endorsement was made equivalent to assignment

IMPORTANT CONSIDERATIONS
1. Negotiation gives better right than assignment
NEGOTIATION
ASSIGNMENT
transferor/holder acquires title to goods
acquires title to goods against transferor
bailee has direct obligation to holder as if
acquires right to notify bailee so that he acquires obligation of
directly dealt with him
bailee to hold goods for him
2. Assignee takes document with defects of the assignor
3. Obligation of bailee bailee is immediately bound to the document
WARRANTIES ON NEGOTIATION/ASSIGNMENT THE SAME
1.
the document is genuine
2.
he has legal right to negotiate or transfer it
3.
he has knowledge of no fact which would impair the validity or worth of the document
4.
he has right to transfer title to goods and goods are merchantable/fit
RULES OF LEVY/GARNISHMENT OF GOODS COVERED BY DOCUMENTS OF TITLE
1.
Non negotiable

Notification is operative act to transfer title/possession of goods in favor assignee

Before notification can be garnished but not when there is notification already
2.
Negotiable

Can not be levied or garnished when docs already with purchaser in good faith, unless:
a.
Document is first surrendered
b.
Document is pounded by court
c.
Negotiation is enjoined
Siy Cong Bieng v. Hongkong and Shanghai Banking Corp.
Between the owner of a negotiable document of title who indorsed it in blank and entrusted it to a friend, and the
holder of such negotiable document of title to whom it was negotiated and who received it in good faith and for

value, the latter is preferred. This is because of the principle that as between two persons, he who made the loss
possible should bear the loss.
CHAPTER 8: SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE
1. SALE BY NON-OWNER
Perfection Stage
a.
sale by owner valid
b.
sale by non-owner valid;

because ownership is necessary only transfer title to goods; at perfection stage, no obligation on part of
seller to transfer ownership

law on estoppel further bolster it: title passes by operation of law to grantee when person who is not owner
of goods sold delivers it and later on acquires title thereto

since valid, action to annul is improper; there is perfected contract

Consummation Stage

Contract of sale is valid because it has passed perfected stage, despite:

a.
seller is not owner
b.
seller has no authority to sell

What is void is the transfer of title/ ownership did not pass

Effect: buyer acquired no better right than transferor

Legal effect: CAVEAT EMPTOR BUYER BEWARE

a.
co-owner sells whole property prior to partition sale is void as to his spiritual share
b.
co-owner sells definite portion to partition sale is void as to other co-owner but valid as to his
spiritual share

Exception:
a.
owner by his conduct is precluded from denying sellers authority (ESTOPPEL)
b.
contrary is provided for in recording laws (pd 1529)
c.
sale is made under statutory power of sale or under a court of competent jurisdiction
d.
sale is made under merchants store in accordance with code of commerce & special laws
City of Manila v. Bugsuk
A principal office is not a store. A store is defined as any place where goods are kept for sale, whether by wholesale
or retail, or any place where goods are deposited and sold by one engaged in buying and selling them.
Aznar v. Yapdiangco
Under Article 1506, it is essential that the seller should have a voidable title at least. It is clearly inapplicable where
the seller had no title at all. Where the would-be buyer took possession of the subject matter by stealing the same
while it was in the custody of the vendor's agent, there is unlawful deprivation and the owner has the right to recover
the thing not only from the finder, thief or robber, but also from third persons who may have acquired it in good faith
from such finder, thief or robber, pursuant to Art. 559, CC.
EDCA Publishing v. Santos
An impostor, identifying himself as a professor, obtained delivery of books from EDCA for which he issued a check
that subsequently bounced. The impostor sold the books to Santos for value. According to the SC, the non-payment
of the purchase price by the impostor, although amounting to fraud, did not amount to unlawful deprivation under
Art. 559. Such fraud may be considered a vitiation of consent, making the contract voidable, but valid until annulled.
Hence, the sale to Santos was valid.
2.

SALE BY SELLER WITH VOIDABLE TITLE

Perfection Stage
Valid sale buyer acquires title of goods
Consummation Stage

Valid sale if title has not yet been avoided buyer buys goods under following condition:
a.
in good faith
b.
for value
c.
without notice of sellers defect of title

TITLE

AS TO

MOVABLE PROPERTIES

Rule: POSSESSION IS EQUIVALENT TO TITLE

Requisites:
a.
Possession of a movable
b.
In good faith

Exception:
a.
Owner lost movable owner can recover w/o reimbursing price
b.
Owner is unlawfully deprived owner can recover w/o reimbursing price

Exception to Exception:
a.
movable is bought at public sale owner can only recover after reimbursing price
b.
in good faith & for value
III.
OBLIGATIONS OF THE VENDEE
ACCEPTANCE OF DELIVERY

The vendee is bound to accept delivery of the thing sold at the time and place stipulated in the contract (Article
1582).

if no time and place is stipulated = see rules under Place and Time of Delivery
express acceptance (Article 1585): when the buyer intimates to the seller acceptance of delivered goods
implied acceptance (Article 1585):

when the buyer does an act, in relation to the delivered goods, which is inconsistent with the sellers ownership

when the buyer retains the goods after the lapse of reasonable time, without intimating to the seller that he has
rejected the goods

GEN. RULE: Acceptance of goods by the buyer shall not discharge the seller from liability for breach of any promise or
warranty.
EXCEPTIONS:
1.
where there is an agreement to the contrary
2.
where the buyer fails to give notice to the seller of any breach of promise or warranty within a reasonable time
after he comes to know or ought to have known of it
1.
Delivery in Installments (Article 1583)
GEN. RULE: The buyer is not bound to accept goods delivered in installments.
EXCEPTION: where there is a stipulation to the contrary
WHERE GOODS ARE TO BE DELIVERED IN INSTALLMENTS AND PAID FOR SEPARATELY:

if seller makes defective delivery or if the buyer fails to take delivery or make payment, it depends upon each
case whether the breach affects the entire contract or just a part thereof

where breach affects entire contract, the injured party may refuse to proceed further and sue for damages for
breach of the entire contract

where breach is severable, it will give rise to a claim for compensation for the particular breach only
2.

Right of Examination (Article 1584)

unless otherwise stipulated, the buyer is not deemed to have accepted the goods delivered to him until he has
had reasonable opportunity to examine them

when the seller tenders the goods, the buyer must request for the opportunity to examine the goods

where goods are delivered to a carrier and delivery to the buyer is withheld until payment of the price, the
buyer is not entitled to examine the goods before payment of the price, in the absence of agreement or
usage of trade permitting the examination

3.

Refusal to Accept
a.
justified refusal (Article 1587):

buyer is not bound to return the goods to the seller, it being sufficient that he notifies the seller of his
refusal to accept

goods are at the risk of the seller even if such are in the possession of the buyer, unless the latter
should voluntarily constitute himself a depositary thereof
wrongful refusal (Article 1588): title passes to the buyer, and he bears the risk of loss

b.

La Fuerza v. CA
The thing sold is understood as delivered when it is placed in the control and possession of the vendee. From the
time of installation and trial run of the conveyors, the vendees were in a position to decide whether or not it was
satisfied with the goods, and, hence, to state whether the same were accepted or rejected. The vendee's failure to
express categorically whether they accepted or rejected the conveyors does not detract from the fact that the same
were actually in its possession and control, and that the period prescribed in Art. 1571, CC had begun to run.
B.
1.

PAYMENT OF PRICE
Liability of Vendee for Interest (Article 1589)
for the period between delivery and payment
a.

b.
c.
2.

if stipulated

stipulated rate governs; otherwise, the rate is 12%

stipulation may be oral

if the thing delivered produce fruits or income
if the buyer is in default, from the time of judicial or extrajudicial demand for payment

Suspension of Payment (Article 1590)

a.
should the vendee be disturbed in possession or ownership of the thing by vindicatory action or foreclosure
of mortgage
b.
should the vendee have reasonable grounds to fear disturbance of possession or ownership by vindicatory
action or foreclosure of mortgage

in a mere promise to sell where the title remains with the vendor until full payment of the price

IN CASE OF SUBDIVISION OR CONDOMINIUM PROJECTS (P.D. 957):

no installment payments made by the buyer shall be forfeited in favor of the owner or developer when the
buyer desists from further payment due to the failure of the owner or developer to develop according to the
approved plan and within the time limit for complying with the same

buyer must give due notice to the owner or developer

the buyer is granted the option to be reimbursed the total amount paid

Legarda Hermanos v. Saldaa

Legarda Hermanos sold 2 lots to Saldaa on installment basis. After 8 years of continuous payments, Saldaa
defaulted and because of this, Legarda Hermanos cancelled the contract. According to the SC, the vendor could not
rescind the sale of both lots since the payments made by Saldaa were enough to cover the purchase price of one
lot. In this case, there was substantial performance on the part of Saldaa as to prevent rescission.
Siska Development v. Office of the President
The sending of a notice of cancellation to the buyer is mandated by R.A. 6552 (the Maceda Law) which took effect on
September 14, 1972. Section 3(b) provides that "the actual cancellation of the contract shall take place 30 days from
receipt of the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and
upon full payment of the cash surrender value to the buyer." While the contract was entered into before the
effectivity of the Maceda Law, the rescission took place when the said law was in full force and effect. But even
before the effectivity of said law, jurisprudence made necessary a notice of rescission. As stressed in University of
the Philippines v. Walfrido De los Angeles, the act of the party in treating a contract as cancelled should be made
known to the other.
Moreover, unilateral cancellation of a contract to sell is not warranted if the breach is slight or casual.

vendee may suspend payment until the vendor has caused the disturbance or danger to cease

Odyssey Park, Inc. v. CA

In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not
the breach contemplated under Art. 1191 CC (where breach is the obligors failure to comply with an obligation
already extant, not a failure of a condition to render binding that obligation).

where vendee cannot suspend payment:

if the vendor gives security for the return of the price

if it has been stipulated that the vendee should pay notwithstanding the disturbance or danger

if the vendor causes the disturbance or danger to cease

if the disturbance is a mere act of trespass

Bricktown Devt. Corp. v. Amor Tierra Devt.

A grace period is a right, not an obligation, of the debtor. When unconditionally conferred, the grace period is
effective without further need of demand either calling for the payment of the obligation or for honoring the right.
The grace period must not be likened to an obligation, the non-payment of which, under Article 1169 of the Civil
Code, would generally still require judicial or extrajudicial demand before "default" can be said to arise.

3.

Rescission of Sale of Immovable Property

4.

ACTION BROUGHT BY VENDOR (Article 1591): should he have reasonable grounds to fear the loss of the immovable
and its price

contemplates a situation where the immovable has been delivered but the price has not yet been paid

should such ground not exist, Article 1191 shall be observed

WHERE AUTOMATIC RESCISSION FOR NON-PAYMENT IS STIPULATED (Article 1592):

vendee may still pay, even after expiration of the period, as long as no demand for rescission has been made
either judicially or by a notarial act

after demand, the court may not grant the vendee a new term

vendee may no longer pay the price after the expiration of the period:

in sales on installments wherein the parties have laid down the procedure to be followed in case of default
by vendee

Rescission of Sale of Movable Property (Article 1593)

Vendor can rescind the sale as a matter of right if the vendee does not:
a.
accept delivery
b.
pay the price

exception: where a longer period has been stipulated for payment

reason why immovable property treated differently from movable property:

personal properties are not capable of maintaining a stable price such that any delay in their disposal may
prejudice the vendor

CHAPTER 9: LOSS, DETERIORATION, FRUITS & OTHER BENEFITS

CIVIL LAW
No valid contract involving generic subject matter;
To have a valid contract of sale, subject matter must be determinate
(law on loss, deterioration, fruits, applies only to determine subject

COMMON LAW
Perfection of K of sale which is not
conditional covers good that are
determinable
Perfection is the mode which transfers
ownership to buyer;

matter)
Not a title but a mode

Tradition is merely a means to perform

obligation
Res perit domino; owner bears risk of
loss

Perfection of contract of sale which is not

Conditional include goods which are not deliverable; transfers risk to
buyer

WHO BEARS RISK OF LOSS/DETERIORATION/FRUITS

1.
Before perfection

Res perit domino

Owner is seller so seller bears risk of loss

2.
At Perfection

Res perit domino

Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale

Seller cannot anymore comply with obligation so buyer cannot anymore be compelled
3.
After Perfection but before delivery
a.
Loss confused state
2 views:
Paras: BUYER
Tolentino: SELLER
b.
Deterioration & fruits - Buyer bears loss
4.
After delivery

Res perit domino

Owner is buyer so buyer bears risk of loss

Delivery extinguish ownership vis-a-vis the seller & creates a new one in favor of the buyer
CHAPTER 10: REMEDIES OF PARTIES FOR BREACH OF CONTRACT OF SALE
SUBJECT MATTER: MOVABLES (IN GENERAL)
REMEDIES OF UNPAID SELLER

Any man may not take law in his own hands, must seek remedy through courts

Exception:
1.
DOCTRINE OF SELF HELP
2.
SPECIAL REMEDIES

Requisites:
1.
Subject matter goods
2.
Seller is unpaid not completely paid or received negotiable instrument under a condition & condition has
been breached by reason of dishonor
3.
Physical possession is with seller
1.
2.
3.
4.

possessory lien
stoppage in transitu
special right of re-sale
special right to rescind

Can only be exercised when 2 prior rights

have been exercised

POSSESSORY LIEN

Seller not bound to deliver if buyer has no paid him the price

Right to retain; cannot be availed when seller does not have custody

Exercisable only in following circumstances:

a.
goods sold without stipulation as to credit
b.
goods sold on credit but term of credit has expired
c.
buyer becomes insolvent

When part of goods delivered, may still exercise right on goods undelivered

Instances when possessory lien lost:

a.
seller delivers goods to carrier for transmission to buyer without reserving ownership in goods or right to
possess them
b.
buyer or agent lawfully obtains possession of goods
c.
waiver

loses lien when he parts with goods (still has stoppage in transitu)

notice by seller to buyer not essential

STOPPAGE IN TRANSITU

Requisites:
1.
Goods are in transit

When goods are in transit

From the time goods are delivered to carrier for purpose of transmission to buyer

Goods rejected by buyer & carrier continues to possess them

When goods no longer in transit

Reached point of destination

Before reaching destination, buyer met seller along the way

Goods are supposed to have been delivered to buyer but carrier refused
2.
Shown by seller that buyer is insolvent ( failure to pay when debts come due )

How is right exercised:

a.
Obtain actual possession of goods
b.
Give notice of claim to carrier / bailee in possession thereof

Notice by seller to buyer is not required; notice to carrier is essential

SPECIAL RIGHT TO RESELL THE GOODS

Requisites:
1.
goods are perishable
2.
stipulated the right of resale in case buyer defaults in payment
3.
buyer in default for unreasonable time

notice by seller to buyer not essential

why special there are things which seller cannot do in ordinary sale:
1.
ownership is with buyer but seller can sell goods
2.
title accorded to buyer is destroyed even without court intervention
SPECIAL RIGHT TO RESCIND

why special ownership of goods already with buyer but seller may still rescind; ownership is destroyed even
without court intervention but in ordinary sale, need to go to court to destroy transfer of ownership

Requisites:
1.
Expressly stipulated
2.
Buyer is in default for unreasonable time

Notice needed to be given by seller to buyer

REMEDIES OF BUYER

When Seller fails to deliver, buyer may seek SPECIFIC PERFORMANCE WITHOUT GIVING SELLER OPTION TO
RETAIN GOODS ON PAYMENT OF DAMAGES
SALE OF MOVABLES ON INSTALLMENT
REMEDIES OF UNPAID SELLER (1484)
1.
Exact fulfillment should the buyer fail to pay
2.
Cancel the sale if buyer fails to pay 2 or more installments
3.
Foreclose on chattel mortgage if buyer fails to pay 2 or more installments

If buyer chooses foreclosure, no further action against buyer to recover any unpaid balance of the price

When is law is applicable: Sale on movables by installment

Sale on installment: payment by several partial payments in small amount

Rationale of the law: Buyer is lulled into thinking that he could afford because of small amounts per
installment & at the same time remedy abuse of commercial houses

Nature of remedies: alternative & not cumulative

Coverage: sale & financing transaction & contracts of lease with option to purchase

Action : Judicial & Extrajudicial

SPECIFIC PERFORMANCE

If already chose specific performance, cannot anymore choose other remedies

Except: after choosing, it has become impossible, rescission may be pursued

RESCISSION

When chosen, there is correlative obligation to restitute

But stipulation that installments paid are forfeited are valid if not unconscionable
Deemed chosen when:
a.
Notice of rescission is sent
b.
Takes possession of subject matter of sale
c.
Files action for rescission
Barring effect on recovery of balance

FORECLOSURE

Barring effect on recover of balance

Extent of barring effect: purchase price

Exception: mortgagor refuses to deliver property to effect foreclosure; expenses incurred in attorneys fees, etc.
IMMOVABLES (IN GENERAL)
REMEDIES OF SELLER
1.
Anticipatory breach

Seller has reasonable grounds to fear loss of immovable sold & its price sue for RESCISSION
2.
Non payment of price

RESCISSION
REMEDIES OF BUYER
1.
Disturbed in possession or with reasonable grounds to fear disturbance

SUSPEND PAYMENT
2.
In case of subdivision or condo projects

If real estate developer fails to comply with obligation according to approved plan:
a)
RESCIND
b)
SUSPEND PAYMENT UNTIL SELLER COMPLIES
IMMOVABLES (BY INSTALLMENT)

1592 Applies only to contract of sale

Maceda Law applies to COS & CTS & Financing

MACEDA LAW

Coverage:
REAL ESTATE defines space v CONDO not defined space (w/ common areas)
1.
contract of sale
2.
contract to sell
3.
financing transactions

Excluded:
1.
industrial
2.
commercial
3.
sale to tenants under agrarian laws

RIGHTS GRANTED TO BUYERS:

1.
Buyer paid at least 2 years installment
a.
Pay without interest the balance within grace period of 1 month for every year of installment payment

Grace to be exercised once every 5 years

b.
When no payment - cancelled; buyer entitled to 50% of what he has paid + 5% for every year
exceeding 90% of payments made

Cancellation to be effected 30 days from notice & upon payment of cash surrender value
2.
Buyer paid lees than 2 years installment
a.
Grace period is 60 days
b.
Cancellation if failure to pay within 60 days grace
c.
30 days notice before final cancellation

buyer can still pay within the 30 days period

with interest

Purpose of law : Protect buyers in installment against oppressive conditions

Notice needed waiver thereof id oppressive

Apply to contracts even before law was enacted

Stipulation to contrary is void

Other rights:
a.
Sell rights to another
b.
Reinstate contract by updating within 30 days before cancellation

c.
d.
e.

Deed of Sale to be done by notarial act

To pay full installment in advance the balance of price anytime without interest
Have full payment annotated in certificate of title

CHAPTER 11: REMEDY OF RESCISSION IN CONTRACTS COVERING IMMOVABLES

RESCISSION (RESOLUTION) 1191
RESCISSION 1385
legal basis is substantial breach
legal basis is lesion (rescissible contract)
principal remedy, retaliatory vs. unjust
subsidiary remedy cannot be instituted except when other remedies
party
exhausted
mutual restitution
mutual restitution

Nature: Judicial

Extra judicial Rescission

allowed if stipulated; burden to sue shifts to party who do not like rescission

court still has final say as to propriety of rescission

Forfeiture of amounts valid being in nature of penal clause

CONTRACT OF SALE
Governed by genus SALE
Ownership passes because of tradition
Non-payment is resolutory condition which may be
basis of breach
Perfection gives rise to reciprocal demandable
obligation

CONTRACT TO SELL
Governed by genus SALE
Ownership passes upon full payment
Non payment is suspensive non-payment extinguishes
contract to sell
Perfection gives rise to reciprocal conditional obligation

CONTRACT OF SALE RESCISSION IS APPLICABLE

CONTRACT TO SELL RESCISSION NOT APPLICABLE

Non payment of purchase price would automatically cancel even without further action for rescission

Except: If subject matter is residential lots, law on rescission applies when there is substantial breach
CHAPTER 12:
CONDITION & WARRANTIES
A. CONDITION

When a contract contains a condition, the non-happening of which would not constitute a breach but
extinguishes the obligation

However, if party to the sales contract has promised that the condition should happen or be performed, the
non-performance of which may be treated by parties as breach
CONDITION
WARRANTY
Purports to existence of obligation
Purports to performance of obligation
Obligation must be stipulated to form part of the obligation
Need not be stipulated; may form part of obligation by
provision of law
May attach itself to obligation of seller to deliver
Relates to the subject matter itself or to obligation of the
possession & transfer
seller as to the subject matter of the sale
B.

EXPRESS WARRANTIES ( REQUISITES )

1.
it must be an affirmation of fact or any promise by seller relating to the subject matter of sale
2.
natural tendency of affirmation or promise is to induce buyer to purchase subject matter
3.
buyer purchases the subject matter relying thereon

when breached, seller is liable for damages

C.

IMPLIED WARRANTIES deemed included in all contracts of sale whether parties are actually aware or not aware
or whether they were intended or not; by operation of law; warranty that seller has a right to sell
refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition
not applicable to sheriff, auctioneer, mortgagee, pledge, person professing to sell by virtue of authority in fact
or law
warranty against eviction

Definition and Requisites

eviction (Article 1548): a judicial process whereby the vendee is deprived of the whole or part of the thing
purchased by virtue of:

a final judgment based on a right prior to the sale

such final judgment is essential (Article 1557)

vendor must be summoned in the suit for eviction at the instance of the vendee to be made liable for
the breach of warranty (Article 1558)

vendee shall ask that vendor be made his/her co-defendant (Article 1559)

Rights of the Vendee Where Immovable is Encumbered with Non-apparent Burden (Article 1560)
a.
rescind the contract
b.
ask for indemnity

to exercise these rights, the burden or servitude:

must be of such nature that the vendee would not have acquired the thing had he been aware thereof

must not be recorded in the Registry of Property (constructive notice)

Kinds and Effects of Waiver of Eviction (Article 1554)

a.
consciente: waiver is voluntarily made by the vendee without knowledge and assumption of risks of
eviction

effect: vendor shall only pay the value which the thing sold had at the time of eviction
b.
intencionada: waiver made by vendee with knowledge of the risk of eviction and assumption of its
consequences

effect: the vendor shall not be liable provided he did not act in bad faith

5.

Rights of the Vendee In Case of Partial Eviction (Article 1556)

a.
enforce vendors liability for eviction
b.
rescind the contract

when exercised:

action for rescission or damages must be brought within 1 year from the execution of the deed

if one year period has elapsed, only the action for damages may be brought within a year from discovery
of the burden or servitude

4. WARRANTY AGAINST HIDDEN DEFECTS

SELLER does not warrant patent defect; caveat emptor

Except when hidden

a.
subject matter may be movable or immovable
b.
nature of hidden defect is such that it should render the subject matter unfit for the use of which
it was intended or should diminish its fitness
c.
had the buyer been aware, he would not have acquired it or would have given a lower price

when defect is visible or even if visible if the buyer is an expert by reason of his trade or profession,
seller is not liable

obligation of seller for breach depends on whether he has knowledge of such defect or not
a.
seller is aware seller should return price & refund expenses of contract with damages
b.
seller is not aware - seller should return price and interest & refund expenses ( no damages )

buyer may elect between withdrawing from contract or demanding proportionate reduction of price
with damages in either case

applicable to judicial sale except judgement debtor not liable for damages

action to prescribe 6 months from delivery of subject matter

The rule on warranty against eviction applies to a judgment debtor in judicial sales, unless otherwise decreed in
the judgment (Article 1552)

Rights of the Vendee In Case of Total Eviction (Article 1555)

a.
return of the value which the thing sold had at the time of eviction, be it greater or less than the price of
the sale
b.
give income or fruits, if the vendee has been ordered to deliver the same to the party who won the suit
c.
costs of the suit of eviction and the suit brought against the vendor for breach of warranty
d.
expenses (registration and execution) of the contract, if paid for by the vendee
e.
damages and interests and ornamental expenses if the sale was made in bad faith

unless there is an express warranty that the thing is free from all burdens and encumbrances
must not be known to the vendee

3. WARRANTY AGAINST ENCUMBRANCES (non- apparent) requisites:

a.
immovable sold is encumbered with non apparent burden or servitude not mentioned in the
agreement
b.
nature of non apparent servitude or burden is such that it must be presumed that the buyer would
not have acquired it had he been aware thereof

when breach of warranty exist: buyer may ask for rescission or indemnity

warranty not applicable when non apparent burden or servitude is recorded in the Registry of
Property unless there is expressed warranty that the thing is free from all burdens & encumbrances

Effect of Acquisitive Prescription (Article 1550)

a.
completed before the sale the vendor shall be liable for breach of warranty
b.
completed after the sale the vendor shall not be liable for eviction since the vendee could easily interrupt
the prescriptive period by bringing the necessary action
4.

if he would not have bought the thing without the part lost through eviction
when 2 or more things have been jointly sold and the vendee would not have purchased
one without the other
vendee has obligation to return the thing without other encumbrances than those which it had when
he acquired it

6.

vendor is liable where property is sold at public auction for non-payment of taxes due him and
unknown to vendee (Article 1551)

GEN. RULE: The vendors liability for breach of warranty against eviction may be increased, diminished or
suppressed by stipulation (Article 1548).
EXCEPTION: Where the vendor acts in bad faith, stipulation waiving liability is void (Article 1553).

bad faith by vendee = selling the thing even with knowledge that there is cause for or risk of eviction

exception to the exception: where the vendee is also in bad faith, vendor cannot be held liable for the
eviction
Escaler v. CA
The Reynoso spouses sold a parcel of land to the petitioners, which sale was warranted against eviction. When the
TCT in favor of the petitioners was declared null and void (on the ground that the property covered by said title is
already previously registered in favor of a 3 rd party), the petitioners sued for the violation of the warranty against
eviction. The SC held that the vendors were not liable because they were not summoned and made co-defendants in
the suit at the instance of the vendees. The vendees merely furnished the vendors a copy of the opposition filed in
the eviction suit by registered mail.
2.

to give the vendee a chance to defend the title he transferred

vendor is liable even if vendee does not appeal from the judgment (Article 1549)
an act imputable to the vendor

i.
ii.

Filinvest Credit Corp. v. CA

In this case, the vendor was not held liable for breach of warranty against hidden defects. Aside from the fact that
the vendee signed a waiver which released the vendor from any liability in relation to warranty, he was also engaged
in business which deals with the particular type of machinery subject of the sale. Accordingly, the vendee should
shoulder the responsibility of protecting himself against product defects. Common sense dictates that a buyer
inspects a product before purchasing it (under the principle of caveat emptor or "buyer beware").

DOCTRINE OF CAVEAT VENDITOR:

The ignorance of the vendor as to the hidden defects or faults does not relieve him from liability to the vendee
for the same (Article 1566).

exception: where the contrary is stipulated and the vendor acted in good faith

The rules on warranty against hidden defects are applicable to judicial sales, except that the judgment debtor
shall not be liable for damages (Article 1570).

no liability for damages since a judgment debtor is forced to sell

5.

DEFECTS ON ANIMALS
even in the case of professional inspection but hidden defect is of such nature that expert knowledge is not
sufficient - defect shall be considered as REDHIBITORY
if vet fails to discover through ignorance or bad faith he is liable for damages
a.
sale of animals on teams ( 2 or more )

when only one is defective, only one is redhibited & not the others

exception:
when it appears that purchase of team will not be done without the
defective one

apply to sale of other things

b.
sale of animals at fair or public auction

no warranty against hidden defects

c.
sale of animals with contagious disease is void
d.
sale of unit of animal

void if use / service for which they are acquired has been stated in the contract and they are
found to be unfit thereof

prescription of action:
40 days from date of delivery to buyer

if sale is rescinded, animals to be returned in same condition when they are acquired; buyer
shall answer for injury / loss due to his fault

buyer may elect between withdrawing from sale or demanding proportionate reduction of price
with damages in either case

E.

ADDITIONAL PROVISIONS GOVERNING WARRANTIES FOR CONSUMER PRODUCTS (Art. 68, RA 7394,
Consumer Act of the Philippines)

1.

Express Warranties
a.
Express warranty is operative from the moment of sale
b.

Seller or manufacturer shall:

state the products or parts covered

state what the warrantor will do in the event of a defect, malfunction of failure to conform to the
written warranty and at whose expense

stipulate the period within which, after notice of defect, malfunction or failure to conform to the
warranty, the warrantor will perform any obligation under the warranty

c.

Sales made by distributors must be reported to the manufacturer, producer, or importer of the
product sold within thirty (30) days from date of purchase, unless otherwise agreed upon

report shall contain the date of purchase, model of the product bought, its serial number, name and
address of the buyer

such report shall be equivalent to warranty registration with the manufacturer, producer or importer,
sufficient to hold them liable

failure to make the report or send them the form required by the manufacturer, producer, or importer
shall relieve the latter of its liability under the warranty, provided, the distributor shall be personally
liable under the warranty

the manufacturer shall be obligated to make good the warranty at the expense of the distributor

d.

Retailer is subsidiarily liable under the warranty

in case of failure of both the manufacturer and distributor to honor the warranty

nothing therein shall prevent the retailer from proceeding against the distributor or manufacturer

e.

Enforcement of warranty

purchaser needs only to present to the immediate seller either the warranty card of the official receipt
along with the product to be serviced or returned to the immediate seller

f.

Designation of written warranties:

i.
full warranty meets the minimum requirements
ii.
limited warranty does not meet the minimum requirements

minimum requirements:

remedy the product within a reasonable time and without charge in case of a defect, malfunction
or failure to conform to such written warranty

permit the consumer to elect whether to ask for a refund or replacement without charge of such
product or part

g.

Remedies in case of breach

have the goods repaired

warranty work must be made to conform to the express warranty within 30 days by either the
warrantor or his representative

period may be extended by conditions beyond the control of the warrantor/his representative
refund of purchase price

2.

Breach in Case of Implied Warranties

the consumer may:

i.
retain in the goods and recover damages
ii.
reject the goods, cancel and contract and recover from the seller so much of the purchase price
as has been paid, including damages

D.

SPECIFIC IMPLIED WARRANTIES IN THE SALE OF GOODS

1.
Warranty as to fitness & quality; requisites:
a.
buyer makes known to seller the particular purpose for which goods are acquired and it appears that
the buyer relied on the sellers skill or judgement
b.
goods are bought by description from seller who deals in goods of that description

no warranty unless there is stipulation in case of sale of specified article under its patent or trade
name

measure of damage: difference between value of goods at time of delivery and value they would have
had if they had answered to the warranty
2.

E.

the amount directly attributable to the use of the consumer prior to the discovery of the nonconformity shall be deducted

Sale of Goods by sample

If seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from
defect rendering them unmerchantable which would not be apparent on reasonable examination of
the sample

EFFECTS OF WAIVER

Parties may increase or diminish implied warranty against eviction; but effect depends on good faith or bad
faith on the part of the seller.
1.
seller in bad faith & there is waiver against eviction null & void
2.
buyer without knowledge of a particular risk made general renunciation of warranty not waiver but
merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction)
3.
buyer with knowledge of risk of eviction assumed its consequences & made a waiver vendor not
liable (applicable only to waiver of warranty against eviction)

when goods delivered to buyer he cannot rescind sale

if he knew of the breach of warranty when he accepted goods without protest

if he fails to return or offer to return goods to seller in substantially as good condition as they were at time
ownership was transferred


F.

1.

2.
3.

when goods deteriorated, buyer can still return them in that condition if such is due to breach or warranty
EQUITABLE MORTGAGE

a contract with right to repurchase is equitable mortgage if the following requisites concur:
1.
price of sale with right to repurchase is unusually inadequate
2.
seller remains in possession as a lessee or otherwise
3.
upon / after expiration of right to repurchase, another instrument extending the period of redemption is
executed
4.
buyer retains for himself a part of the purchase price
5.
seller binds himself to pay taxes on thing sold
6.
real intention of parties is to secure the payment of a debt or performance of other obligation

BUYERS OPTION IN CASE OF BREACH OF WARRANTY

1.
Accept goods & set up breach of warranty by way of recoupment in diminution or extinction or
the price.
2.
Accept goods & maintain action against seller for damages
3.
Refuse to Accept goods & maintain action against seller for damages
4.
Rescind contract of sale & refuse to receive goods/return them when already received.

CHAPTER 13: EXTINGUISHMENT

GROUNDS:
same grounds whereby obligations in general are extinguished:
a.
payment or performance
b.
loss of the subject matter
c.
condonation or remission
d.
confusion or merger of rights or creditor and debtor
e.
compensation
f.
novation
g.
annulment
h.
rescission
i.
fulfillment of a resolutory condition
j.
prescription
conventional redemption only applies to contract of sale
legal redemption only applies to contract of sale
CONVENTIONAL REDEMPTION

seller reserved the right to repurchase thing sold

coupled with obligation to return price of the sale, expensed of contract & other legitimate payments and the
necessary & useful expenses made on the thing sold

right must be recognized in the deed of sale; must be the same contract
OPTION TO PURCHASE

right to repurchase the thing sold granted to the vendor in a separate instrument from the deed of sale

IN CASE OF DOUBT IN DETERMINING WHETHER IT IS EQUITABLE MORTGAGE OR SALE A RETRO (WITH

RIGHT OF REPURCHASE IT SHALL BE CONSTRUED AS EQUITABLE MORTGAGE)
WHAT
1.
2.

REMEDY
1.
2.

Catangcatang v. Legayada
In the exercise of the right of repurchase, it is not sufficient that the vendor a retro manifests his desire to
repurchase. This statement of intention must be accompanied with an actual and simultaneous tender of payment
which constitutes the legal exercise of the right to repurchase. While consignation of the redemption price is not
necessary in order to allow the repurchase within the time provided by law or by contract, a mere tender being
enough, said tender does not relieve the vendor from the obligation of paying the price. However, when tender of
payment cannot be validly made, the vendor a retro should file a suit for consignation with the courts of the
redemption price within the redemption period.
Ong Chua v. Carr
The pendency of an action brought in good faith and relating to the validity of a sale with pacto de retro, tolls the
term for the right of redemption.

AVAILABLE TO VENDOR:

ask for reformation of contract

RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE:

Circumvention of usury law
Circumvention of prohibition against pactum commissorium creditor cannot appropriate the things given by
way of pledge or mortgage; remedy here is foreclosure

real intention of parties is that the pretended purchase price is money loaned & to secure payment of the loan,
sale with pacto de retro is drawn up
equitable mortgage: a mortgage which lacks the formalities of a mortgage but shows the intention of the
parties to use the property as security for the fulfillment of an obligation

Villarica v. CA
The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument
of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter
granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like
the option to buy in the instant case.
Vda. de Zulueta v. Octaviano
Villarica ruling may only apply if there is adequate showing that the parties acted in good faith in executing the two
separate documents, and not to hide the fact that their transaction is one of sale with right of repurchase, or one of
equitable mortgage.

TO LOOK FOR IN DETERMINING NATURE OF CONTRACT

language of the contract
conduct of parties to reveal real intent

provisions on equitable mortgage were drafted to provide safeguards and restrictions against the evils of sales
with a right of repurchase (pacto de retro sales)
a.
When the price of a sale with right to repurchase is unusually inadequate;
b.
When the vendor remains in possession as lessee or otherwise;
c.
When upon or after the expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed;
d.
When the purchaser retains for himself a part of the purchase price;
e.
When the vendor binds himself to pay the taxes on the thing sold;
f.
In any other case where it may be fairly inferred that the real intention of the parties is that the transaction
shall secure the payment of a debt or the performance of any other obligation.

Any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws.

In case of doubt, Article 1602 applies to pacto de retro sales and absolute sales (Articles 1603 and 1604).

this is an exception to the rule that doubts affecting an onerous contract shall be settled in favor of the
greatest reciprocity of interests
Article 1605. In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for the reformation of
the instrument.

In reformation, there has been a meeting of the minds between the parties, but the written instrument does not
express their true intention (Article 1359). If there has been no meeting of the minds, the remedy is annulment
(Article 1390).

Uy v. CA
The presence of only one circumstance defined in Article 1602 is sufficient for a contract of sale with right to
repurchase to be presumed an equitable mortgage. The said article expressly provides therefor 'in any of the
following cases', hence, the existence of any of the circumstances enumerated therein, not a concurrence nor an

overwhelming number of such circumstances suffices to give rise to the presumption that the contract with right to
purchase is an equitable mortgage.

2.

Balatero v. IAC
Article 1602 is designed primarily to curtail the evils brought about by contracts of sale with right of repurchase, such
as the circumvention of the usury law and pactum commissorium. Being remedial in nature, Article 1602 may be
applied retroactively to cases arising prior to the effectivity of the New Civil Code.
Moreover, the execution of an affidavit of consolidation by the purported buyer to consolidate ownership over the
subject parcel of land is of no consequence and the constructive possession over the parcel of land would not ripen
into ownership, since only possession acquired and enjoyed in the concept of owner can serve as title for acquiring
dominion (Art. 540).

3.

Ignacio v. CA
The mere fact that the price in a pacto de retro sale is not the true value of the property does not justify the
conclusion that the contract is one of equitable mortgage. In a pacto de retro sale, the practice is to fix a relatively
reduced price to afford the vendor a retro every facility to redeem the property. Moreover, private respondents in this
case have not been in actual possession of the subject property. They had been leasing it out at the time the deed
was executed.
Matanguihan v. CA
A document which appears on its face to be a sale absolute or with pacto de retro may be proven by the vendor
to be one of a loan with mortgage. In this case, parol evidence becomes competent and admissible to prove that the
instrument was given merely as security for payment of a loan.

1.
2.
3.
4.

1.
2.

4.

Solid Homes, Inc. v. CA

In a contract of sale with pacto de retro, the buyer has a right to the immediate possession of the property sold,
unless otherwise agreed upon. This is because title and ownership of the property sold are immediately vested in
the vendee a retro , subject only to the resolutory condition of repurchase by the vendor a retro within the stipulated
period.
PERIOD OF REDEMPTION
No period agreed upon 4 years from date of contract
When there is agreement should no exceed 10 years; if it exceeded, valid only for the first 10 years.
When period to redeem has expired & there has been a previous suit on the nature of the contract seller shill
has 30 days from final judgement on the basis that contract was a sale with pacto de retro: rationale: no
redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan.
When period has expired & seller allowed the period of redemption to expire seller is at fault for not having
exercised his rights so should not be granted a new period
EFFECT WHEN THERE IS NO REDEMPTION MADE:
jurisprudence before the NCC: buyer a retro automatically acquires full ownership
under present art 1607: there must be3 judicial order before ownership of real property is consolidate in the
buyer a retro
HOW IS REDEMPTION EFFECTED:
1.
Seller a retro must return first pay the following:
a.
the price of the thing sold
b.
expensed of the contract and other legitimate payments made by reason of the sale
c.
necessary and useful expensed made on the thing sold
2.
Valid tender of payment is sufficient
3.
Mere sending of notice without valid tender is insufficient
Failure to pay useful & unnecessary expenses entitled vendee to retain land unless actual reimbursement is
made
IN CASE OF MULTI-PARTIES
1.
When an undivided thing is old because co-owners cannot agree that it be allotted to on of them vendee a
retro my compel the vendor to redeem the whole thing

4.

When an undivided thing is sold by co-owners / co-heirs, vendors a retro may only exercise his right over his
respective share; vendee a retro may demand that they must come to an agreement first and may not be
compelled to consent to a partial redemption
When rights for co-owners over an undivided thins is sold as regards to their own share vendee retro cannot
compel one to redeem the whole property
Should one of the co-heirs/co-owners succeed in redeeming the property such vendor a retro shall be
considered as trustee with respect to the share of the other co-owners/co-heirs.

FRUITS
1.
what controls is the stipulation between parties as regards the fruits; if none
2.
at time of execution of the sale a retro there should be visible or growing fruits there shall be no pro-rating at
time of redemption of no indemnity was paid by the vendee a retro
3.
at time of execution sale a retro there should be no fruits but there are fruits at time of redemption pro-rated
between vendor a retro & vendee a retro giving the vendee a retro a part corresponding to the time he
possessed the land.
LEGAL REDEMPTION

right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who
acquires the thing by purchase or by dation in payment or by other transaction whereby ownership is
transmitted by onerous title.
1.
among co-heirs

any of heirs sells hereditary right to stranger before partition

2.

any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right:
reimburse buyer of the price of the sale
co-heirs has 1 month from receipt of notice in writing

among co-owners

any or all of co-owners sells their shared to 3 rd person

any co-owner may exercise right of redemption by paying reasonable price of property to the buyer

if 2 or more co-owners desire to exercise right of redemption, they may only do so in proportion to the
share they may respectively have in the thing owned in common

DISTINCTION BETWEEN RIGHT OF REDEMPTION OF CO-HEIRS FROM CO-OWNERS

CO-HEIRS
CO-OWNERS
Heir may redeem for himself alone the
Co-owner may redeem property but even if uses his own funds,
hereditary right sold by a co-heir
redemption inures to the benefit of other co-owners
Sale of hereditary right (1088) over no
Sale of interest in particular property
particular object
Mariano v. CA
The fine distinction between Article 1088 and Article 1620 is that when the sale consists of an interest in some
particular property or properties of the inheritance, the right of redemption that arises in favor of the other co-heirs is
that recognized in Article 1620. On the other hand, if the sale is the hereditary right itself, fully or in part, in the
abstract sense, without specifying any particular object, the right recognized in Article 1088 exists.
3.

among adjoining owners

a.
rural land

where piece of rural land has an area not exceeding 1 hectare, adjoining owner has right to redeem
unless grantee does not own a rural land

if 2 or more adjacent lot owners desire to exercise right to redeem, owner of adjoining lot with smaller
area shall be preferred


b.

if 2 or more adjacent lit owners desire to exercise right to redeem & both have same lot area, one
who first requested shall be granted
urban land

when piece of land is small & cannot be used for any practical purpose & brought merely for
speculation, owner of adjoining land can redeem

2 or more owners of adjoining lot desire to exercise right to redeem, owner whose intention towards
use of land shall be preferred.

San Po Ek v. Martinez (2000)

Martinez, and her mother before her, leased property to San Po Ek for a total of 28 years. After this period, Martinez
wrote the lessee to inform the latter of her intention to sell the leased property. However, the property was
thereafter sold to a 3rd party. San Po Ek filed a case praying for the nullity of this sale. The SC held that San Po Ek
does not have a right of pre-emption/redemption or first refusal to assert against Martinez. Art. 1622 only deals with
small urban lands that are bought for speculation where only adjoining lot owners can exercise the right of preemption or redemption. In this case, San Po Ek is not an adjoining lot owner but a lessee trying to buy the land that
it was leasing. And although the right of first refusal may be provided for in a lease contract, such right was never
stipulated in any of the several lease contracts. The grant of the right of first refusal must be clearly embodied in a
written contract.
Francisco v. Boiser (2000)
Francisco co-owned 4 parcels of land with her 3 sisters and their mother, Blas. Blas then sold her 1/5 share to Boiser
(another sister of Francisco). Francisco received summons for a case filed by Boiser against her to demand the
latters share in the rentals being collected from the lease of a building erected on the parcels of land. Instead of
giving such share, Francisco counterclaimed that she wanted to exercise her right of redemption as a co-owner.
However, both claim and counterclaim were dismissed. Francisco filed another case against Boiser to enforce her
right of redemption, claiming that the 30-day redemption period had not yet begun to run since Blas never informed
her of the sale to Boiser. According to the SC, the notice required under Art. 1623 must be given by the vendor and
not by any other person. This is because the vendor of an undivided interest is in the best position to know who are
his co-owners who under the law must be notified of the sale. Moreover, it is notification from the vendor which can
remove all doubts as to the fact of the sale, its perfection and validity. Therefore, even if Boiser informed Francisco
of the sale, the redemption period had not yet begun to run. The period should be counted from the time Francisco
received summons in the previous case since such amounted to actual knowledge of the sale.
c.

sale of credit litigation

when a credit or other incorporeal right in litigation is sold, debtor shall have a right to extinguish it
by reimbursing the assignee for the price the latter paid therefor plus judicial costs, interest

debtor may exercise right within 30 days from assignee demands payment from him

Lee v. CA
The Simeons sold to Lee a parcel of land acquired under a free patent. Subsequently, the Simeons advised Lee, in
writing, of their "desire to repurchase" the land. Three other letters were sent by the Simeons, but in no instance did
they offer or tender the repurchase price. Lee ignored the letters, except the last to which she replied that she
cannot agree to the repurchase because the redemption period of five (5) years had already expired. The SC held
that the mere sending of letters by the vendor expressing his desire to repurchase the property without an
accompanying tender of redemption price fell short of the requirements of the law. Sec. 119 of CA 141 should be
construed with Art. 1616 CC.
Sta. Ignacia Rural Bank, Inc. v. CA
In this case, the land acquired through homestead patent was foreclosed and sold. According to the SC, the right to
repurchase under Sec. 119 cannot be waived by the party entitled thereto, and applies with equal force to both
voluntary and involuntary conveyances. Moreover, the 5-year redemption period under Sec. 119 begins to run from
the day after the expiration of the 1-year period of repurchase allowed in an extrajudicial foreclosure.
2.

3.

OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION

1.
Redemption of homesteads

Public Land Act

IS

GRANTED

Land acquired under free patent homestead

Subject to repurchase by wife, legal heirs within 5 years from date of conveyance

Granted by law, need not be stipulated

delinquent payer has 1 year to redeem by paying to the revenue District Officer the amount of tax
delinquencies, & interest or purchase price.

Redemption by judgement debtor

1 year to redeem by paying purchaser at public auction with interest

Torres v. Cabling
Written notice of the sale is required to be given to the judgment debtor before the sale of property on execution to
give him the opportunity to prevent the sale by paying the judgment debt sought to be enforced. Moreover, when
there is a 3rd party claim, the sheriff should demand payment in cash from the judgment creditor, if he becomes the
highest bidder, instead of just crediting the amount to the partial satisfaction of the debt.
4.

Redemption in extrajudicial foreclosure

1 year from date of sale and registration

Soriano v. Bautista
The stipulation in a deed of mortgage which renders the mortgagor's right to redeem defeasible at the election of the
mortgagee is not illegal or immoral, being merely an option to buy sanctioned by Article 1479 of the Civil Code, when
supported by a consideration distinct from the purchase price.
5.

WHEN PERIOD OF REDEMPTION BEGINS TO RUN

1.
right of legal pre-emption of redemption shall be exercised within 30 days from notice by the buyer
2.
deed of sale not to be recorded in RD unless accompanied by affidavit that buyer has given notice to
redemptioners
3.
when there is actual knowledge, no need to give written notice; period of redemption begins to run from actual
knowledge

Redemption in tax sales

in case of tax delinquency/failure to pay tax assessments, property is foreclosed

Redemption in judicial foreclosure of mortgage

no right to redeem is granted to debtor mortgagor

except when mortgagee is bank of a banking institution

90 days after finality of judgement

Cases Under Redemption:

Ongoco v. CFI of Bataan
The petition to consolidate ownership under Article 1607 does not partake of the nature of a motion, it not being
merely an ordinary civil action or a special proceeding, but is an ordinary civil action cognizable by the CFI. As such
ordinary action, a complaint or petition must be filed.
De Guzman v. CA
Should one of the co-owners or co-heirs succeed alone in redeeming the whole property, such co-owner or co-heir
shall be considered as a mere trustee with respect to the shares of his co-owners or co-heirs. Therefore, no

prescription will lie against the right of any co-owner or co-heir to demand from the redemptioner to a lien in favor of
the redemptioner for the amount paid by him corresponding to the value of the share.
Mariano v. CA
The giving of a copy of a deed is equivalent to the notice as required by law in legal redemption. Written notice is
indispensable, notwithstanding the actual knowledge of the sale acquired in some other manners by the
redemptioner. He or she is still entitled to written notice to remove all uncertainty as to the sale, its terms and its
validity, and to quiet any doubt that the alienation is not definitive. The law not having provided for any alternative,
the method of notifications remains exclusive, though the Code neither prescribes any particular form of written
notice nor any distinctive method for written notification of redemption.
Alonzo v. CA
In this case, the redemption period began to run and expire although no notice in writing was given to the co-heirs
(vendors a retro). The SC made an exception to the written notice requirement, since the co-heirs lived with the
purchaser in the same lot and are deemed to have received actual notice of the sale. Moreover, the co-heirs sought
to exercise their right of redemption thirteen years after the pacto de retro sale.
Distrito v. CA
The only purpose of the written notice is to insure that all the co-owners shall be actually notified of the sale and to
remove all doubt as to the perfection of the sale. When as in this case the co-owner was actually present and was
even an active intermediary in the consummation of the sale of the property he is and must be considered to have
had actual notice of the sale. A written notice is no longer necessary.
CHAPTER 14: ASSIGNMENT

Sale of credits & other incorporeal things

SALE
Tangibles
Consensual
No recording needed to such effect

EFFECT OF ASSIGNMENT
1.
lack of knowledge or consent of debtor not essential for validity but has legal effect
2.
assignment of rights made w/o knowledge of debtor debtor may set up against assignee the compensation
w/c would pertain to him against assignor of all credits prior to assignment and later ones until he had
knowledge of the assignment
3.
debtor has consented to assignment cannot set up compensation unless assignor was notified that he
reserved his right to the compensation
4.
debtor has knowledge but no consent - compensation may still be set up
TRANSFER OF OWNERSHIP

by tradition & not by perfection

execution of public instrument because intangibles cannot be physically transferred

ACCESSORIES & ACCESSIONS

includes all accessory rights such as guaranty, mortgage, pledge or preference

PNB v. CA
In assignments, a consideration is not always a requisite, unlike in sales. Thus, an assignee may maintain an action
based on his title and it is immaterial whether or not he paid any consideration therefor.

to bind 3rd persons, the assignment of credit must (Article 1625):

appear in a public instrument

if the debtor pays the creditor before knowledge of the assignment, he shall be released from his obligation
(Article 1626)

consent of the debtor is not needed to make an assignment; however, notice to the debtor is needed for
the protection of the assignee

DBP v. CA
An assignment to guarantee an obligation is virtually a mortgage and not an absolute conveyance of title which
confers ownership on the assignee. The assignment cannot be considered as dacion en pago since non-payment on
the loan cannot authorize the assignee to register the assigned property in its name as it would constitute pactum
commissorium.
WARRANTIES
1.
against hidden defect - N/A because intangibles has no physical existence
2.
existence & legality of credit - there is warranty except when what is sold is doubtful account
3.
solvency of debtor - no warranty, unless
a.
there is stipulation
b.
insolvency was prior to assignment & of common knowledge

shall only last for 1 year

4.
one who assigns inheritance right w/o enumerating rights shall be answerable for his character as an heir
5.
one who sells certain rights for a lump sum, shall be answerable for legitimacy of the whole in general but not
for each of the various parts
BREACH OF WARRANTY
1.
if in good faith - expenses of the contract & other legitimate payments made by reason of the assessment
2.
if in bad faith - expenses of contract & other legitimate payments plus useful & necessary expenses

Technical term but basically a sale

WHAT MAKES ASSIGNMENT DIFFERENT FROM SPECIES SALE:

ASSIGNMENT
Subject matter
Intangibles
Form
Consensual
Binding effect to 3rd persons
Recorded in registry of property

be contained in an instrument recorded in the Registry of Property (if the assignment involves real
property)

ASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION

speculative

law would rather benefit the debtor of such credits rather than the one who merely speculates for profit

when credit or incorporeal right in litigation is assigned or sold, debtor has a right to extinguish it by
reimbursing the assignee for the price the buyer paid plus interest

right to redeem to be exercised within 30 days from demand by assignee for payment
RIGHT TO REDEEM BY DEBTOR NOT AVAILABLE IN THE FOLLOWING INSTANCES (NOT CONSIDERED SPECULATIVE)
1.
assignment of credit / incorporeal right to co-heir or co-worker
2.
assignment to creditor in payment for his credit
3.
assignment to possessor of tenement or piece of land which is subject to the right in litigation assigned
CHAPTER 15:
BULK SALES LAW

Protect creditor of merchant stored

3 types of transactions:
1.
Sale of goods other than in ordinary course of business
2.
Sale of business
3.
Sale of fixtures & equipments

Should cover only merchants because creditors cannot get adequate security because goods are sold ordinarily
in course of business

Not covered:
1.
with waiver of creditor of seller
2.
receiver, assignee in insolvency proceeding

Duty of seller to perform the following when transaction is within the coverage of the law
1.
make sworn statement of listing of creditors
2.
delivery of sworn statement to buyer
3.
apply the proceeds pro-data to claims of creditors shown in verified statement
4.
written advance disclosure to creditors
EFFECTS

OF

NON-COMPLIANCE

FAILURE TO:
Prepare & deliver sworn listing of creditors
Apply proceeds pro-rata to listed creditors
Make advance written disclosure of transactions to
creditors
Register sworn statement with DTI
Include or omit names of creditors & correct amount due
in the statement

ON TRANSACTION

ON SELLER

Fraudulent & void

Fraudulent & void
Not void

Criminal Liability
Criminal Liability
No Criminal Liability

Not void
Void

No Criminal Liability
Criminal Liability

Sale for no consideration

Void

Criminal Liability

ANTI-DUMMY LAW

Penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved only for
Filipinos

Management, operation as officers, employees or laborers

Control or non-control position