Beruflich Dokumente
Kultur Dokumente
Edquilag,
Ryan
James
Lopez,
S.
Katherine
D.
Mataac,
Michael
Zachary
R.
Chapter
FORMATION OF SALE
Perfection (Birth)
Consummation (Death)
Policitacion/Negotiation
Policitacion/Negotiation Stage
Policitacion or negotiation stage actually deals with legal matters arising
prior to the perfection of sale, dealing with the concepts of invitation to
make offer, offer, acceptance, right of first refusal, option contract, supply
agreement, mutual promises to buy and sell or contracts to sell, and even
agency to sell or agency to buy.
Offer (Articles 1319-1324, Civil Code)
Advertisements and Invitations (Articles 1325-1326, Civil Code)
Article 1325. Unless it appears otherwise, business advertisements
of things for sale are not definite offers, but mere invitations to
make an offer. (n)
Article 1326. Advertisements for bidders are simply invitations to
make proposals, and the advertiser is not bound to accept the
highest or lowest bidder, unless the contrary appears. (n)
Option Contracts
Determining the Location of Options
Art. 1324
When the offeror has allowed the offeree a certain period to accept, the offer
may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as
something paid or promised
Art. 1479, Par 2
An accepted unilateral promise to buy or to sell determinate thing for a price
certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
Definition and Essence of Option Contract
Adelfa Properties, Inc v. Court of Appeals (G.R. No. 111238;
January 25, 1995)
an option is a continuing offer or contract by which the owner
stipulates with another that the latter shall have the right to buy the
property at fixed price within a certain time, or under a certain
terms and conditions or which gives to the owner the right to sell or
demand
not a purchase but merely secures the privilege to buy
not a sale of property but a sale of the right to purchase
Equatorial Realty Dev., Inc. v. Mayfair Theater (G.R. No. 106063,
November 21, 1996)
involve the choice granted to another for a distinct and separate
consideration as to whether or not to purchase a determinate thing
at a predetermined price
Characteristics and Obligations
Sanchez Doctrine
Treated an accepted promise to sell, although not binding as a contract for
lack of separate consideration, nevertheless having capacity to generate a
bilateral contract of sale upon acceptance
Acceptance to Create Option (Sanchez Doctrine)
Can only apply if the option has been accepted and such acceptance is
communicated to the offeror
Option not Deem Part of Renewal of Lease
Option to purchase attached to a contract of lease when not exercised
within the original period is extinguished and cannot be deemed to have
been included in implied renewal of lease. Principle of tacitareconduccion
Period of Exercise of Option
Villamor v. Court of Appeals
- If it does not contain a period when the option can be exercise, it cannot
be presumed that the exercise can be made indefinitely, and even render
uncertain the status of the subject matter
Art. 1144 (1) of the Civil Code : actions upon written contract must be
brought within 10 years and thereafter, the right of option would
prescribe
Effects
Limson v. Court of Appeals
- the timely, affirmatively and clearly accept[ance of] the offer, would
convert the option contract into a bilateral promise to sell and to buy where
both [parties] were then reciprocally bound to comply with their respective
undertakings.
Summary Rules:
(a) If the period itself is not founded upon or supported by a separate
consideration, the offeror is still free and has the right to withdraw the offer
before its acceptance, or, if an acceptance has been made, before the offerors
coming to know of such fact, by communicating that withdrawal to the offeree.
(In accordance with the Sanchez Doctrine)
(b) The right to withdraw, however, must not be exercised whimsically, or
arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the
Civil Code which ordains that every person must, in the exercise of his right and
in the performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
(c) If the period has a separate consideration, a contract of option is deemed
perfected, and it would be a breach of that contract to withdraw the offer during
the agreed period.
(d) The option, however, is an independent contract by itself, and it is to be
distinguished from the projected main agreement which is obviously yet to be
included. If, in fact, the optioner-offerorwithdraws the offer before its acceptance
by the optionee-offeree, the latter may not sue for specific performance on the
proposed contract since it has failed to reach its own stage of perfection. The
optioner-offeror, however, renders himself liable for damages for breach of the
option.
(e) In these cases, care should be taken of the real nature of the consideration
given, for if in fact, it has been intended to be part of the consideration for the
main contract with a right of withdrawal on the part of optionee, the main
contract could be deemed perfected; a similar instance would be an earnest
money in sale that can evidence its perfection.
Right of First Refusal
A right of first refusal is a contractual right of an entity to be given the
opportunity to enter into a business transaction with a person or company
before anyone else can. If the entity with the right of first refusal declines
to enter into a transaction, the owner of the asset is free to open the
bidding up to other interested parties.
A right given to a person to be the first person allowed to purchase a
certain object if it is ever offered for sale.
Right of First Refusal Must Be Contained in Written Contract
In one case, the Supreme Court ruled that when the right of first refusal is
not stipulated in the lease contract, it cannot be exercised, and verbal
grants of such right cannot be enforceable since the right of first refusal
must be clearly embodied in a written contract. The ruling therefore
constituted in effect an addition to the contracts covered by the Statute of
Frauds. (Sen Po Ek Marketing Corp. v. Martinez)
Guerrero v. Yigo
G.R. No. L-5572, October 26, 1954
96 Phil. 37
The registration of the three instruments created a real right in favor of
the mortgagee. But the fact that in the instrument the mortgagor
undertook, bound and promised to sell the parcel of land to the
mortgagee, such undertaking, obligation or promise to sell the parcel of
land to the mortgagee does not bind the land. Itis just a personal
obligation of the mortgagor. So that when [mortgagor] sold one-half of the
parcel of land (the western part) ... the sale was legal and valid. If there
should be any action accruing to [mortgagee] it would be a personal
action for damages against [mortgagor]. If [the buyer] contributed to the
breach of the contract by [mortgagor], the former together with the latter
may also be liable for damages. If [the buyer] was guilty of fraud which
would be a ground for rescission of the contract of sale in his favor,
[mortgagor] and not [mortgagee] would be the party entitled to bring the
action for annulment.
Under a right of first refusal situation, the Court would not allow an action
for specific performance or a rescission of the sale to a third party which
constitute the breach of the promise, even when the third-party buyer was
entering into the purchase of the subject property in bad faith. The only
remedy afforded to the promissee was an action to recover damages.
Guzman, Bocaling& Co. v. Bonnevie
G.R. No. 86150; March 2, 1992
206 SCRA 668
[T]he respondent court correctly held that the Contract of Sale was not voidable
but rescissible. Under Articles 1380 to 1381(3) of the Civil Code, a contract
otherwise valid may nonetheless be subsequently rescinded by reason of injury
to third persons, like creditors. The status of creditors could be validly accorded
the [lessees] for they had substantial interest that were prejudiced by the sale of
the subject property to the petitioner without recognizing their right of first
priority under the Contract of Lease.
It was incorrect to say that there was no consideration in an agreement of right
of first refusal, since in reciprocal contracts, such as a lease, the obligation or
promise of each party is the consideration for that of the other. It also recognized
that a buyer of a real property who is aware of the existing lease agreement over
it cannot claim good faith nor lack of awareness of the right of first priority
provided therein, for it is its duty to inquire into the terms of the lease contract,
and failing to do so, it has only itself to blame.
Ang Yu Asuncion v. Court of Appeals
G.R. No. 109125, December 2, 1994
238 SCRA 602
In the law on sales, the so-called "right of first refusal" is an innovative juridical
relation. Needless to point out, it cannot be deemed a perfected contract of sale
under Article 1458 of the Civil Code. Neither can the right of first refusal,
understood in its normal concept, per se be brought within the purview of an
option under the second paragraph of Article 1479, aforequoted, or possibly of
an offer under Article 1319 of the same Code. An option or an offer would
require, among other things, a clear certainty on both the object and the cause
or consideration of the envisioned contract.
In a right of first refusal, while the object might be made determinate, the
exercise of the right, however, would be dependent not only on the grantor's
eventual intention to enter into a binding juridical relation with another but also
on terms, including the price, that obviously are yet to be later firmed up. Prior
thereto, it can at best be so described as merely belonging to a class of
preparatory juridical relations governed not by contracts (since the essential
elements to establish the vinculum juris would still be indefinite and
inconclusive) but by, among other laws of general application, the pertinent
scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a
final judgment, like here, its breach cannot justify correspondingly an issuance of
a writ of execution under a judgment that merely recognizes its existence, nor
would it sanction an action for specific performance without thereby negating the
indispensable element of consensuality in the perfection of contracts. It is not to
say, however, that the right of first refusal would be inconsequential for, such as
already intimated above, an unjustified disregard thereof, given, for instance, the
the cause which are to constitute the contract. The offer must be certain and the
absolute acceptance.
Definition of Consent
Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. (Article
1319, Civil Code)
Offer Must Be "Certain"
For the perfection of a valid sale, there must be a "meeting of minds,"
which means that an "offer certain" is met by an "absolute acceptance"
any other offer which is not certain, no matter how absolutely it is
accepted, can never give rise to a valid sale.
Acceptance Must Be "Absolute"
In one case, it was held that in order for an acceptance to have the effect
of converting an offer to sell into a perfected contract, it must be plain and
unconditional, and it will not be so, if it involves any new proposition, for in
that case, it will not be in conformity with the offer, which is what gives
rise to the birth of the contract. (Zayco v. Serra)
In Beaumont v. Prieto, held that promises are binding when and so long as
they are accepted in the exact terms in which they are made, and that it
would not be legally proper to modify the conditions imposed by the
offeror without his consent. In order that the acceptance of a proposition
or offer may be efficacious, perfect and binding upon the parties thereto, it
is necessary that such acceptance should be unequivocal and
unconditional and the acceptance and proposition shall be without any
variation whatsoever. Any modification or deviation from the terms of the
offer annuls the latter and frees the offeror.
In Yuvienco v. Dacuycuy, the use of the term to negotiate in the
acceptance letter given by the buyer was held to indicate that there was
as yet no absolute acceptance of the offer made, since the term is
practically the opposite of the idea that an agreement has been reached.
In DBP v. Ong, the Court held that placing the word Noted and signing
such note at the bottom of the written offer cannot be considered an
acceptance that would give rise to a valid sale.
Acceptance May Be Express or Implied
Acceptance may be evidenced by some act, or conduct, communicated to
the offeror, either in a formal or an informal manner, that clearly manifest
the intention or determination to accept the offer to buy or sell.
In Oesmer v. Paraiso Dev. Corp., acceptance of the terms of the sale of coownership rights through an agent was expressed by the co-owners
signing as witnesses to the covering deed of sale.
Acceptance by Letter or Telegram
Acceptance made by letter or telegram does not bind the offeror except
from the time it came to his knowledge. Therefore, even if an acceptance
has been mailed or sent to the offeror, the offeror may still withdraw his
offer anytime before he has knowledge of the acceptance.
Acceptance Subject to Suspensive Condition
Even when there is a meeting of minds as to the subject matter and the
price, there is deemed to be no perfected sale, if the sale is subject to
suspensive condition.
Acceptance in Auction Sales
A sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer, or in other customary manner. Until
such announcement is made, any bidder may retract his bid, and the
auctioneer may withdraw the goods from the sale, unless the auction has
been announced to be without reserve
Earnest Money
Function of Earnest Money
Under Article 1482 of the Civil Code, whenever earnest money is given in a
sale, it shall be considered as part of the price and as proof of the
perfection of the contract. The rule is no more than a disputable
presumption and prevails only in the absence of contrary or rebuttal
evidence.
Distinguishing Earnest Money and Option Money
Earnest Money
Earnest money is part of
the purchaseprice
Earnest money is given
only where there isalready
a sale
When earnest money is
given, the buyeris bound to
pay the balance
Option Money
option money is the
moneygiven as a distinct
consideration for anoption
contract.
option money applies to a sale
not yet perfected
when the would-be buyer gives
option money,he is not
required to buy, but may
evenforfeit it depending on the
terms of the option.
Sales
Questions and Answers for Chapter 5
Formation of Sale
Edquilag, Ryan James S.
Lopez, Katherine D.
Mataac, Michael Zachary R.
1. Explain the nature of option contract. (2002 Bar Question)
Answer: An option contract is one granting a privilege to buy or sell
within an agreed time and at a determined price. It must be supported by
a consideration distinct from the price. (Articles 1479 and 1482, Civil
Code)
2. Bert offers to buy Simeons property under the following terms
and conditions: P1 million purchase price, 10% option money, the
balance payable in cash upon the clearance of the property of all
illegal occupants. The option money is promptly paid and Simeon
clears the property of illegal occupants in no time at all. However,
when Bert tenders payment of the balance and ask Simeon for the
deed for absolute sale, Simeon suddenly has a change of heart,
claiming that the deal is disadvantageous to him as he has found
out that the property can fetch three times the agreed purchase
price. Bert seeks specific performance but Simeon contends that
he has merely given Bert an option to buy and nothing more, and
offers to return the option money which Bert refuses to accept.
a. Wil Berts
Explain.
action
for
specific
performance
prosper?
EbrahimMacalawi, Asmairah M.
Vinluan, Rachelle Anne Maureen M.
The Transferee has a right to the fruits of the thing from the time
the obligation to deliver it arises; however, he shall acquire no real
right over them until the same has been delivered to him. (Art.
1164)
The Seller is bound to deliver the thing sold and its accessions and
accessories in the condition in which they were upon the perfection
of the contract, and all the fruits shall pertain to the buyer from the
day on which the contract was perfected. (Art. 1537)
(a) When deemed made: when the thing sold is placed in the control and
possession of the vendee [Art. 1497]
(b) Not always essential to passing of title [Art.1475]
(c) Parties may agree when and on what conditions the ownership shall
pass to the buyer [E.g.: Art 1478 where ownership will only pass after full
payment of the price]
2. CONSTRUCTIVE DELIVERY
(a)Execution of public instrument[Art 1498, par.1]
General rule: produces the same legal effects of actual delivery.
Exceptions:
i.
The intention of the parties is otherwise.
ii.
At the time of execution, the subject matter was not subject to
the control of the seller which must subsist for a reasonable
length of time after execution.
Control over thing sold must be such that seller is capable of physically
transferring it to buyer.
(b) Symbolic Delivery
(1) Delivery of keys of the place or
depositary where the movable is
stored
or kept. [Art1498, CC]
(2) Unless otherwise agreed, when
symbolic delivery has been made,
the
seller is not obliged to remove tenants
to place the buyer in actual
possession of the property as he has already
complied with his obligation
to transfer ownership of and deliver the thing sold.
(c) ConstitutumPossessorium
Seller continues to be in possession of theproperty sold, by virtue of a
lease contract agreement with the vendee.
(d) Tradition Brevi Manu (Short Hand)
MOVABLE is delivered when the
buyer had thething already in his possession before the sale took place, not as
owner
but as lessee, borrower, or depositary.
(e) Tradition Longa Manu (Long Hand)
i. Delivery of thing by mere agreement.
ii. Example: Seller points to the property
without actually transferring
physical
possession thereof.
iii. When an employer assigned all its rights and title to all surplus
property
salvaged bythe contractor, tradition
longa manu takes place.
Delivery is upon the moment a thing is salvaged.
(f) Delivery of Incorporeal Property
Incorporeal property has no physical
effected by constructive delivery.
delivered he must pay for them at the contract rate; if the subject matter
is indivisible, the buyer may reject the whole of the goods; or
Where the seller delivers to the buyer the goods he contracted to sell
mixed with goods of a different description not included in the contract,
the buyer may accept the goods which are in accordance with the contract
and reject the rest; if the subject matter is indivisible, the buyer may reject
the goods entirely.
Article 1502, when goods are delivered to the buyer on sale or return to
give the buyer the option to return the goods instead of paying the price,
the ownership passes to the buyer on delivery, but he may revest the
ownership in the returning or trending the goods within the time fixed in
the contract, or if no time has been fixed, within a reasonable time.
Sale on Approval, Trial, Satisfaction, or acceptance
ART 1502 provides that when goods are delivered to the buyer on approval
or on trial or on satisfaction, or other similar terms, the ownership therein
passes to the buyer only:
(a) When he signifies his approval or acceptance to the seller or does any
other act adopting the transaction; or
(b) If the seller does not signifies his approval or acceptance, but retains the
goods without giving notice of rejection, then if a time has been fixed for
the return of goods, on the expiration of such time, and, if no time has
been fixed, on the expiration of a reasonable time.
Form of such special sales
Sale to be considered and construed as a sale or return or a sale on
approval, there must be a clear agreement to either of such effect,
otherwise the provisions of ART 1502 of the NCC governing such sales
cannot be invoked by either party to the contract, and therefore must be
in writing.
Written proof of delivery
In cases of goods, delivered is generally evidenced by a written
acknowledgement of a person that he has actually received the thing or
the goods, as in delivery receipt.
Time and place of delivery
The place of delivery of delivery is sellers place of business, if he has one,
and if not, his residence.
The seller is bound to send the goods to the buyer within a reasonable
time.
Demand or tender of delivery may be treated as ineffectual unless made
at a reasonable hour is a question of fact.
Seller shall pay expenses of delivery
Unless otherwise agreed, the expenses in putting the goods into a
deliverable state must be done by the seller.
RULES ON EFFECT OF DELIVERY FOR IMMOVABLE
WHERE IMMOVABLES SOLD PER UNIT OR NUMBER
Sale of real estate should be made with a statement of its area, at the rate
of a certain price for a unit of measure or its area, at the rate of a certain
price for a unit of measure or number, the seller is obliged to deliver to the
buyer, if the latter should demand it, all that may have been stated in the
contract.
Where immovable sold for a lump sum
There shall be no increase or decrease of the price, although there be
greater or lesser area or number than that stated in the contract.
a.
b.
c.
d.
The policy of law has always been that where the rights and interests of a
vendor come into clash with that of an innocent buyer for value, the
latter must be protected
Protecting innocent 3rd parties who have made purchases at merchants
stores in good faith and for value appears to be a WISE and
NECESSARY rule, not only to facilitate commercial sales on
movables but to give stability to business transactions.
D. Sale at Merchant Store
Rule presented it is necessary in our country where free enterprise
prevails, for a buyer cannot be reasonably expected to look behind the
title of every article when he buys at a store.
The doctrine of caveat emptor is now rarely applied L and if it is ever
mentioned it is more of an exception rather than the general rule.
Merchant store we must first define a store as any place where
goods are kept for sale
To be classified as a merchant store, the necessary element is that such
place be goods or wares stored therein or ON DISPLAY, and provided also
that the firm or person maintaining that office is actually engaged in
business of buying and selling.
Other exceptions !
A. Under Article 1506, the sale by a seller who at the time of delivery had
voidable title to the thing delivered;
B. In case of MOVABES, under Article 559, acquisition of possession in good
faith under a claim of ownership, where the real owner has not lost or
been unlawfully deprived of the movable, makes the possessor the rightful
owner of the movable; and
C. Special rights of an unpaid seller of goods to resell under Articles 1526 and
1533 of the Civil Code. *Chapter 10 topic*
A. Sale by a Seller who has voidable title on the Subject matter sold
Under Article 1506: Where the seller of the goods has a voidable title
thereto, but his title has not be avoided at the time of sale, the
buyer acquires good title to the goods, provided he buys them in good
faith, for value, and without notice of the sellers defect of title.
Title has not been avoided at the time of sale?
In resolving, we must first know the stage of the sale that is being referred
to as the cut-off point.
CONSUMMATION as 1506 talks of title or ownership to the property
which covers this stage
A. Sale by a Seller who has voidable title on the Subject matter sold
The cut-off point then is the DELIVERY of the subject matter to the buyer
by the seller
If sellers voidable title thereto is avoided after the perfection of the sale
but BEFORE DELIVERY, the buyer does not obtain good title to the
property.
Good faith of the buyer; how to determine.
From the language of the deed of sale, as held in Limketkai Sons Milling,
inc. v. CA, 250 SCRA 523 (1995)
The language of the deed of sale may show bad faith on the part of
the buyer.
A. Sale by a Seller who has voidable title on the Subject matter sold
In the deed, instead of the buyer insisting that the seller guarantee its
title to the land and recognize the right of the buyer to proceed against
the seller if the title of the land turns out to e defective as when the land
belongs to another person, and instead the reverse is found in the deed of
sale, the title turns out to be vested in another person are to be borne by
the buyer alone, show that the buyer did not purchase the subject matter
in good faith without notice of any defect in the title of the seller.
B. Applicable Rules to immovables
1505 and 1506 does not apply to immovables, except for the application
of the Torrens system.
Illusatration:
If a seller at the time of sale and delivery, has only voidable title to the
subject parcel of land, would the buyer in good faith for value take a
better title to the land than that of his seller, following the
principle under Article 1506?
No, since the essence of the coverage of such Articles would be goods which
require not only a valid underlying sale, but necessarily the element of transfer
of possession embodied as the primary test of ownership for movables
under Article 559 of the Civil Code
B. Applicable Rules to immovables
Consequently, the seller of the parcel of land has only voidable or void title
to the property
The buyer, even though in good faith and for value, and in spite of actual
or constructive delivery, takes only the same title to the land which his
seller had.
ONLY EXCEPTION to Nemo dat quod non habet is the registration in good
faith as the operative act doctrine embodied in Sec. 113 of P.D. 1529
B. Applicable Rules to immovables
Section 113. Recording of instruments relating to unregistered lands.
No deed, conveyance, mortgage, lease, or other voluntary instrument
affecting land not registered under the Torrens system shall be valid,
except as between the parties thereto, unless such instrument shall have
been recorded in the manner herein prescribed in the office of the Register
of Deeds for the province or city where the land lies.
B. Applicable Rules to immovables
113(a) The Register of Deeds for each province or city shall keep a Primary
Entry Book and a Registration Book. The Primary Entry Book shall contain,
among other particulars, the entry number, the names of the parties, the
nature of the document, the date, hour and minute it was presented and
received. The recording of the deed and other instruments relating to
unregistered lands shall be effected by any of annotation on the space
provided therefor in the Registration Book, after the same shall have been
entered in the Primary Entry Book.
B. Applicable Rules to immovables
113(b) If, on the face of the instrument, it appears that it is sufficient in
law, the Register of Deeds shall forthwith record the instrument in the
manner provided herein. In case the Register of Deeds refuses its
administration to record, said official shall advise the party in interest in
writing of the ground or grounds for his refusal, and the latter may appeal
the matter to the Commissioner of Land Registration in accordance with
the provisions of Section 117 of this Decree. It shall be understood that
any recording made under this section shall be without prejudice to a third
party with a better right.
B. Applicable Rules to immovables
113(c) After recording on the Record Book, the Register of Deeds shall
endorse among other things, upon the original of the recorded
instruments, the file number and the date as well as the hour and minute
when the document was received for recording as shown in the Primary
Entry Book, returning to the registrant or person in interest the duplicate
of the instrument, with appropriate annotation, certifying that he has
recorded the instrument after reserving one copy thereof to be furnished
the provincial or city assessor as required by existing law.
B. Applicable Rules to immovables
113(d) Tax sale, attachment and levy, notice of lispendens, adverse claim
and other instruments in the nature of involuntary dealings with respect to
unregistered lands, if made in the form sufficient in law, shall likewise be
admissible to record under this section.
113(e) For the services to be rendered by the Register of Deeds under this
section, he shall collect the same amount of fees prescribed for similar
services for the registration of deeds or instruments concerning registered
lands.
B. Applicable Rules to immovables
Illustration; Cavite Development Bank v. Spouses Cyrus Lim, 291 SCRA
495 (1998); the Court applied the rule that the Sale is void for being
based on a fictitious transfer from a previous to a current seller, the
General rule that the direct result of a previous contract cannot be valid, is
inapplicable when it will directly contravene the Torrens system of
registration. Thus:
Being a sale, the rule that the seller must be the owner of the thing
sold also applies in a foreclosure sale. This is the reason why Article 2085
of the Civil Code, in providing for the essential requisites of the contract of
mortgage, requires among other things, that the mortgagor or pledgor be
the absolute owner of the thing mortgaged, in anticipation of a possible
foreclosure sale should the mortgagor default in the payment of the loan.
B. Applicable Rules to immovables
There is however, a situation where, despite the act that the mortgagor is
not the owner of the mortgaged property, his title being fraudulent, the
mortgage contract and any foreclosure sale arising therefrom are given
effect by reason of public policy. This is the doctrine of the mortgagee in
good faith based on the rule that all persons dealing with property
covered by a Torrens certificate of title, as buyers of mortgagees, are NOT
required to go beyond what appears on the face of the title.
The public interest in upholding the indefeasibility of a certificate of title,
as evidence of the lawful ownership of the land or any encumbrance
thereof, protects a buyer or mortgagee who, in good faith, relied upon
what appears on the face of the certificate of title.
C. Title as to movable properties
Art. 559 of the Civil Code: Possession of movable property acquired in
good faith is equivalent of title. and in addition one who has lost any
movable or has been unlawfully deprived thereof, may recover it from the
person in possession of the same.
Thus if the possessor of a movable lost or of which the owner has been
unlawfully deprived , has acquired it in good faith at a public sale, the
owner cannot obtain its return without reimbursing the price paid
therefore.
Unlawfully deprived covers situations when the original owner has been
dispossessed without his consent, which includes cases of theft, robbery,
swindling, and estafa, subject to the following exceptions:
Code commission
Adopted the common law principle that it should be the owner of the subject
matter of the sale that should bear the risk of loss (res perit domino); but they
maintained the civil law principle that ownership can only be transferred by
delivery.
BEFORE PERFECTION
The rules on loss, deterioration, fruits and improvement of the purported subject
matter are the same: such loss, deterioration, fruits and improvements shall
pertain to the purported seller, since he owns the thing.
The purported subject matter bears no legal or even equitable relationship to the
purported buyer, and therefore no assumption of risk of loss or deterioration can
be ascribed to the latter.
Roman vs gilmat
HELD: Ownership is not considered transmitted until the property is actually
delivered and the purchaser has taken possession of the same and paid the price
agreed upon, in which case the sale is considered perfected.
Although the Court used the word perfected, such a statement of course
belied the consensual nature of the contract of sale, perfected by mere consent
without need of delivery.
Had the contract been perfected even without the schooner being delivered to
the buyer to transfer ownership, the buyer would have borne the risk of loss.
Sale of specific goods and without the knowledge of the seller, the goods
have perished in part or have wholly or materially deteriorated in quality
The buyer may treat the sale as either avoided, or as valid in all of the
existing goods or in so much thereof as have not deteriorated, and as binding the
buyer to pay the agreed price for the goods in which the ownership will pass, if
the sale was divisible.
HOWEVER, if the subject matter is lost, there is really no point in pursuing the
contract.
Seller is not in the position to comply with his obligation to deliver the subject
matter.
The civil law principle that ownership of the thing sold shall be transferred to
the buyer only upon actual or constructive delivery thereof is no clearly
expressed in Art. 1477
1504 General Rule: Vendor bears risk of loss until ownership is transferred
by delivery
1538 the rules in Art 1189 shall be observed, the vendor being considered
the debtor.
Art. 1189 the following rules shall be observed in case of the
improvement, loss or deterioration of the thing:
a.) if the thing is lost through the fault of the seller, the seller shall be
obliged to pay damages
b.) if the thing is lost without the fault of the debtor (seller), the
obligation shall be extinguished
ART. 1189
a. When the thing deteriorates without the fault of the seller, the impairment
is to be borne by the buyer
b. if the thing deteriorates through the fault of the seller, the buyer may
choose between the rescission of the obligation and its fulfillment, with
indemnity for damages in either case
d. if the thing is improved at the expense of the seller, he shall have no other
right than that granted to the usufructuary
ART. 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 Art. 1163 to 1165, and 1262.
After Delivery
Under Article 1504
When ownership of goods has been transferred to the buyer, the goods shall
be at the buyers risk.
B. Where actual delivery has been delayed through the fault of either the
buyer or the seller the goods are at the risk of the party in fault.
The buyer has no risk or participation in any of those aspect since neither the
title nor interests over the subject matter pertains to him.
After delivery which transfer both title and beneficial interest to the buyer, he
then must bear the risk of loss, deterioration and as well as the benefits from
the fruits and improvements of the subject matter of the sale.
It is only after perfection and before delivery that the title and beneficial
interests is not vested under one person since the title remains in the seller
while the beneficial interest is now with the buyer.
This is clearly stated in the provisions of the New Civil Code under
Obligations and Contracts.
Article 1163
Every Person obliged to give something is also obliged to take care of it wit
proper diligence of a good father of a family.
Article 1164
The oblige has a right to the fruits of the thing from the time the obligation to
deliver arises.
Article 1170
When what is to be delivered is a determinate thing, the obligor who incurs
fraud, negligence or delay or contravene the tenor of their agreement, are liable
for damages.
Article 1166
The obligation to give a determinate thing includes that of delivering all its
accessions and accessories, even though they may not have been mentioned.
When the seller intends to have control over the goods until the buyer has
complied with certain obligations such as C.O.D. sale, where the buyer does
not intend to have dominion, use or control over the goods until certain
conditions are met, such as sale on approval or trial.
GENERAL RULE: Owner must bear the risk of loss, which in this case the
seller.
To simplify, the doctrine on the risk of loss, deterioration, and improvement, the
same shall always be for the account of the person or the party who has both
title and beneficial interest over the property or subject matter of the sale.
RECTO LAW
REFERENCES:
http://www.batasnatin.com/law-library/civil-law/sales/2359-installment-sales-lawrecto-law.html
diorysdiction.yolasite.com/.../15462086-Sales-General-Principles-Dean-CLV.ppt
MACEDA LAW
RA NO. 6552
Janielle Anne D. Relativo
REPUBLIC ACT NO. 6552
RA 6552 is know as the Realty Installment Buyer Protection Act - deals
primarily with one's rights as a real estate investor or a real estate buyer paying
in installments. It also describes the rights of a buyer defaulting in payments for
such purchases
ROLE OF MACEDA LAW
A declared policy to protect buyers of real estate on installment payments
against onerous and oppressive conditions. (Sec 2 RA 6552)
The courts have used the Maceda Law as a policy statement of the state in
protecting the interest of buyers of residential real estate of installments
The housing shortage problem in our country prompted buyers to buy on
installment basis and it is upon the government to protect buyer of real estate on
installment basis against onerous and oppressive conditions ( Active Realty &
Dev Corp Daroya 382 SCRA 152)
TRANSACTIONS COVERED
Covers primarily residential real estate bought on installment
Also covers the financing of real estate on installment
The Maceda law also covers contracts to sell.
Include subdivisions, condominiums and those under PD 957
TRANSACTIONS EXCLUDED FROM COVERAGE
Sales covering industrial lots
Sales covering commercial buildings and lots
Sales to tenants under agrarian reform laws
RESCISSION
Art. 1191
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
Due to substantial breach of contract violating reciprocity
Art. 1144: actions upon written contracts prescribe in 10 yrs.
Ex. Breach of warranty, non-performance of condition
He may choose rescission even after initiating action for fulfillment first when the latter becomes
impossible
Can be by mutual restitution
Art. 1381
1-2: Those which are entered into by guardians or administrator whenever their wards or absentees
suffer lesion, by more than of the value of the things which are the object thereof;
3: Those undertaken in fraud of creditors when the latter cannot collect the claims due them;
4: Those which refer to things under litigation if they have been entered into by the defendant without
the knowledge and approval of the litigants or of competent judicial authority;
5: Contracts specially declared by law to be subject to rescission.
Based on prejudice on economic interests
Art. 1389: The action to claim rescission must be commenced within 4 years
MUTUAL RESTITUTION
-obligation to return the things which were the object of the contract, together with their fruits, and the
price with its interests; it can be carried out only when he who demands rescission can return
whatever he may be obliged to restore
Limitations:
1. When the thing is already in possession of 3rd party in good faith
2. It becomes impossible to returnobligation to return the things which were the object of the contract,
together with their fruits, and the price with its interests; it can be carried out only when he who
demands rescission can return whatever he may be obliged to restore
Art. 1592 in sale of IMMOVABLE, vendee may pay even after expiration of stipulated period as long
as no DEMAND for RESCISSION was made (judicially or by notarial act).
After the demand, the court may not grant him a new term.
Even if there is stipulation for automatic rescission upon failure to pay within a certain period
Not applicable to contract to sell
Art. 1234: If the obligation has been substantially performed in good faith, the obligor may recover
as though there had been a strict and complete fulfillment, less damages suffered by the obligee.
- court allows defaulting party opportunity to fulfill his obligation in the interest of justice and equity
When forfeiture of payments is allowed: Rescission
In Manila Racing Club v. The Manila Jockey Club, the Court held that a provision in the contract
providing for forfeiture of the amounts paid in a contract of sale is valid being in the nature of a panel
clause and within the ambit of the freedom of the parties to stipulate in a contract, since in its double
purpose of insuring compliance with the contract and of otherwise measuring beforehand the
damages which may result from non-compliance, it is not contrary to law, morals or public order
because it was voluntarily and knowingly agreed upon.
Article 1486 provides a stipulation that the installments or rents paid shall not be returned to the
vendee or lessee shall be valid insofar as the same may not be unconscionable under the
circumstances.
In Gomez v. Court of Appeals, such forfeiture even in the absence of a forfeiture clause, as a
reasonable compensation for the use of the subject matter of the contract.
WHO MAY DEMAND RESCISSION
Injured party
Laforteza v. Machuca, held that when rescission of a contract of sale is based on Article 1191, mutual
restitution is required to bring back the parties to their original situation prior to the inception of the
contract; and that consequently, rescission can be carried out only when the one who demands
rescission can return whatever he may obliged to restore.
Judicial rescission
Whether express or implied, the remedy of rescission is inherently judicial in nature, in accordance
with the general principle that No man may, even one with a valid and lawful cause of action, take the
law into his own hands and must resort to the aid of the courts to enforce his rights. The remedy of
rescission in reciprocal contracts is not absolute, since the third paragraph of Article 1191 which
provides that the courts shall decree the rescission claimed, unless there be just cause authorizing
the fixing of the period has been the statutory by which the court has held that the injured party
himself cannot resolve obligation, and requires confirmation of such remedy by the courts.
Extrajudicial Rescission
To the general principle that rescission must be exercised judicially, the Court has recognized the
validity and effectivity of an express stipulation by the parties to a reciprocal contract that rescission in
case of default by one party, may be resorted to by the other party extrajudicially.
Automatic Rescission
Rescission is remedy that would have no automatic application, even when thefactual basis therefore
(substantial breach) be present in the situation. Being primarily a remedy, rescission requires a
positive act on the part of the injured party, since it is legally possible that he may waive rescission
and proceed with specific performance. This principle is affirmed in the language of Article 1592 that
does not allow automatic.
CONTRACT OF SALE VS. CONTRACT TO SELL
CONTRACT OF SALE
Obligation to give; consent is an element
Transfer ownership:
a. Absolute sale usually simultaneous with delivery
b. Conditional sale subject to positive suspensive condition; when the thing is already
delivered, ownership automatically transfers upon fulfillment
NON-PAYMENT: ground for rescission or demand for performance
Judicial action
breach of contract
CONTRACT TO SELL
Obligation to do; no consent but only a promise
Title remains with the vendor until purchase price is fully paid which would trigger the obligation to
execute a contract of sale (Deed of Sale), even if theres prior delivery.
NON-PAYMENT: terminates the contract to sell.
No need for judicial action because ownership was never transferred to the
would-be buyer
Conditional Sale vendor can unilaterally rescind contract based on non-fulfillment of condition OR
waive the condition for specific performance (Art. 1545)
Breach by seller Damages & proprietary remedy
CONTRACT TO SELL
CANCELLATION
Breach by would-be seller Claim for damages only or recovery of possession if theres prior
delivery
Contract to sell
To protect seller against a buyer who intends to buy the property in INSTALLMENT by withholding
ownership until full payment
Requires the following stipulations:
1. Ownership shall remain with seller until full payment of purchase price or stipulation on
execution of Deed of Absolute Sale =>reservation of title clause
2. Right of seller to extrajudicially rescind or cancel contract in case of buyers default
3. Payment of price is a suspensive condition where failure is NOT A BREACH but an event that
prevents obligation of seller to convey title
CONTRACT OF SALE
Legal effect of DELIVERY
Conditional Sale vendor can unilaterally rescind contract based on non-fulfillment of condition OR
waive the condition for specific performance (Art. 1545)
Breach by seller Damages & proprietary remedy
CONTRACT TO SELL
Legal effect of DELIVERY
New Civil Code 1191 & 1592; 1545 for conditional sale
Maceda Law
CONTRACT TO SELL
Laws Applicable:
Maceda Law
Two alternative remedies where obligation of the other party to a contract of sale is subject to
a condition, and such is not performed:
1. Refusal to proceed with contract
2. Waive performance of the condition.
Distinction between condition imposed on perfection and imposed on performance. Romero
vs Court of Appeals (250 SCRA 223)
CONDITION IMPOSED ON
Perfection
Performance
Failure to comply results in Failure to comply results in the
failure of contract
two remedies being available to
the other party.
deemed fulfilled when the seller takes any action to prevent its happening. De Leon vs Ong
(611 SCRA 381)
Contract of sale to become effective upon happening of the condition. Heirs of Escanlarvs
Court of Appeals (281 SCRA 176)
o Non-happening did not affect validity of the contract only the effectivity.
A provision this Contract of Sale of rights, interests and participations shall become effective
only upon the approval by the Honorable Court, in the event of non-approval by the courts,
affect only the effectivity and not the validity of the contract of sale. Heirs of Pedro
Escanlarvs Court of Appeals (281 SCRA 176)
The phrase as is, where is in sale pertains solely to the physical condition of the thing sold,
not to its legal situation. The vendor is bound to transfer the ownership of and deliver, as well
as warrant the thing which is the object of the sale. Assets Privatization Trust vs T.J.
Enterprises (587 SCRA 481)
Stipulation that deed of sale would issue after the condition does not prevent perfection of the
contract. David vsTiongson (313 SCRA 63)
When ownership has not passed, buyer may treat the fulfillment of the seller of his obligation
under the contract as a condition for his obligation to accept and pay.
If the party promised that a condition would be performed or would happen, other party may
treat non-performance of such as a breach of warranty.
o Such stipulation elevates the condition to a warranty
o And entitle the other party to damages
CONDITION
Non -happening of condition
does not amount to a breach
Goes into root of existence of
the obligation
Must be stipulated by theparties
WARRANTY
Non -fulfillment of warranty
constitutes a breach
Goes into performance May
constitute an obligation in itself
May form part of the obligation by
provision of law, even without
stipulation
Relates to subject matter itself,
or obligations of the seller as to
thesubject matter
Definition
ARTICLE 1341
A mere expression of an opinion does not signify fraud,
unless made by an expert and the other party has relied on
the former's special knowledge. (n)
Affirmation of value or statement of seller's opinion is not a warranty (Article 1341). Unless
seller made such statement as an expert, and was relied upon by the buyer.
o "The law allows considerable latitude to seller's statements, or dealer's talk; and
experience teaches that it is exceedingly risky to accept it at its face value. Assertions
concerning the property which is the subject of a contract of sale, or in regard to its
qualities and characteristics, are the usual and ordinary means used by sellers to
obtain a high price and are always understood as affording to buyers no ground for
omitting to make inquiries. A man who relies upon such an affirmation made by a
person whose interest might so readily prompt him to exaggerate the value of his
property does so as his peril, and must take the consequences of his own
imprudence." SongcovsSellner (37 Phil. 254)
Assertions concerning the property's characteristics are the usual and ordinary means of
sellers to get a high price. A man who relies upon such affirmation...does so at his own peril.
Azarraga v. Gay (52 Phil. 599)
Prescription of Warranties
A breach in the warranties of the seller entitles the buyer to a proportionate reduction of the
purchase price. PNB v. Mega Prime Realty and Holding Corp. (567 SCRA 633)
The prescriptive period for instituting actions based on a breach of express warranty is that
specified in the contract, and in the absence of such period, the general rule on rescission of
contract, which is four years, while for actions based on breach of implied warranty, the
prescriptive period is six months from the date of the delivery of the thing sold. Angvs Court
of Appeals (567 SCRA 53)
IV. Implied Warranties
ARTICLE 1547
In a contract of sale, unless a contrary intention appears,
there is:
(1) An implied warranty on the part of the seller that he has a
right to sell the thing at the time when the ownership is to
pass, and that the buyer shall from that time have and enjoy
the legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from any
hidden faults or defects, or any charge or encumbrance not
declared or known to the buyer.
This article shall not, however, be held to render liable a
sheriff, auctioneer, mortgagee, pledgee, or other person
professing to sell by virtue of authority in fact or law, for the
sale of a thing in which a third person has a legal or equitable
interest. (n)
Implied Warranties
o Those which by law constitute part of every contract of sale, whether or not the
parties were aware of or intended them.
Who is liable?
o General Rule: Only a seller is bound by the implied warranties.
o Exception: Express stipulation in contract may make the agent of the seller bound by
these.
of the Republic of the Philippines," he gave a warranty against eviction, and the
prescriptive period to file a breach thereof is six months after the delivery of the
vehicle. Angvs Court of Appeals (567 SCRA 53)
B.1. When There Is Breach of This Warranty
1. Purchaser has been deprived of/evicted from the whole or part of the thing sold;
o The buyer need not resist the eviction.
2. Eviction is by final judgment;
o The warranty cannot be enforced until a final judgment has been rendered whereby
the buyer loses the thing acquired or a part thereof.
o The buyer need not appeal from the decision in order that the seller may become
liable for eviction.
3. Basis thereof is a right prior to the sale made by the seller; and
4. Seller has been summoned and made co-defendant in the suit for eviction at the instance of
the buyer.
o In order to constitute notice of eviction to the seller, the seller must have been made a
party to the case.
Warranty cannot be enforced against seller when buyer merely mailed seller
a copy of the opposition of buyer to the eviction suit. Seller must be
summoned in the suit for eviction at the instance of the buyer (Article 1558),
and be made a co-defendant (Article 1559); or made a third-party defendant.
Escalervs Court of Appeals (138 SCRA 1)
o This is the only condition that is required to be complied with by the vendee. Once
this is proven, the buyer's right to the warranty is perfect, and the seller cannot set up
anything against it. JovellanovsLualhati (47 Phil. 371)
No action for breach of this warranty when buyer was well aware of the
presence of tenants, and even undertook the job of ejecting these squatters.
Power Commercial vs CA (274 SCRA 597)
B.2. Eviction in Part
ARTICLE 1556
Should the vendee lose, by reason of the eviction, a part of
the thing sold of such importance, in relation to the whole,
that he would not have bought it without said part, he may
demand the rescission of the contract; but with the obligation
to return the thing without other encumbrances that those
which it had when he acquired it.
He may exercise this right of action, instead of enforcing the
vendor's liability for eviction.
The same rule shall be observed when two or more things
have been jointly sold for a lump sum, or for a separate price
for each of them, if it should clearly appear that the vendee
would not have purchased one without the other. (1479a)
B.3. Particular Causes Given By Law
ARTICLE 1550
When adverse possession had been commenced before the
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if
the sale was made in bad faith. (1478)
B.6. Waiver of Warranty and Effects
ARTICLE 1553
Any stipulation exempting the vendor from the obligation to
answer for eviction shall be void, if he acted in bad faith.
(1476)
(b)Should diminish its fitness for such use to such an extent that the buyer would not have
acquired it or would have given a lower price for it.
The seller is responsible (movable and immovable subject matters) to the buyer for any hidden faults
or defects in the thing sold, even though he was not aware thereof.
The seller is not answerable for patent defects or those which are visible, or even for those
which are not visible if the buyer is an expert who, by reason of his trade or profession,
should have known them.
a. Requisites for Breach of Warranty (Nutrimix Feeds Corp. v CA)
(a) Defect must be hidden;
(b) Defect must exist at the time the sale was made;
(c) Defect must ordinarily have been excluded from the contract;
(d) Defect, must be important (render the thing unfit or considerably decreases fitness);
(e) Action must be instituted within the statute of limitations.
b. Remedies of Buyer and Obligation of Seller for Breach of Warranty
In the event of breach of the warranty against hidden defects, Nutrimix Feeds Corp. also confirmed
the principle under Article 1567 of the Civil Code that the remedy of the buyer is either to withdraw
from the contract (accionredhibitoria) or to demand a proportionate reduction of the price
(accionquantiminoris) with damages in either case.
A choice of remedies is available to the buyer only when the thing has not been lost. If the subject
matter of sale is actually lost the extent of the obligations of the seller for breach of warranty
against hidden defects depends upon the: cause of the lost, knowledge of the hidden defect by
seller, and whether there has been a waiver of the warranty, thus:
(a) If the thing sold should be lost as a consequence of the hidden faults:
(i) If the seller was aware of them, he shall bear the loss, and shall be obliged to return the price and
refund the expenses of the contract, with damages; or (ii) If seller was not aware of them, the
seller is obliged only to return the price and interest thereon, and reimburse the expenses of the
contract which the buyer might have paid, but not for damages.
(b) If thing is lost through a fortuitous event or through the fault of the buyer, then:
(i) If the seller was not aware of the hidden defects, the buyer may demand from
the seller the price which he paid, less the value which the thing had when it was lost; (ii) If the seller
acted in bad faith, in addition he shall pay damages to the buyer.
c. Waiver of Warranty
If there has been a stipulation exempting the seller from hidden defects, then:
(a) If the seller was not aware of the hidden defects, the loss of the thing by virtue of such defect will
not make the seller liable at all to the buyer; or
(b) If the seller was fully aware of such defect, such waiver is in bad faith, and the seller would still
be liable for the warranty.
In Filinvest Credit Corp. v. Court of Appeals, the Court held that a provision in a contract of lease
with option to purchase (which it treated as a sale of movable on installments) that the buyerlessee absolutely releases the lessor from any liability whatsoever as to any and all matters in
relation to warranty in accordance with the provisions hereinafter stipulated, was an express
waiver of warranty against hidden defects in favor of the seller-lessor which absolved the [sellerlessor] from any liability arising from any defect or deficiency of the machinery they bought..
d. Applicability to Judicial Sales
The warranty against hidden defects shall be applicable to judicial sales, except that the judgment
debtor shall not be liable.
e. Prescriptive Period
Actions on warranties against hidden defects shall be barred after six (6) months from the delivery of
the thing sold.
e. Prescriptive Period
Actions on warranties against hidden defects shall be barred after six (6) months from the delivery of
the thing sold.
E. Redhibitory Defects of Animals
Under Article 1576 of the Civil Code, even when professional inspection has been made, if the hidden
defect of animals should be of such a nature that expert knowledge is not sufficient to discover it, the
defect shall be considered as redhibitory. But if the veterinarian, through ignorance or bad faith,
should fail to discover or disclose it, he shall be liable for damages.
a. Sale of Team
Under Article 1572 of the Civil Code, if two or more animals are sold together, whether for a lump sum
or for a separate price for each of them, the redhibitory defect of one shall only give rise to its
redhibition, and not that of the others; unless it should appear that the buyer would not have
purchased the sound animal or animals without the defective one. The latter case shall be presumed
when a team, yoke, pair, or set is bought, even if a separate price has been fixed for each one of the
animals composing the same.
Note: applicable to the sale of other things.
b. Other Rules on Sale of Animals
There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live
stock sold as condemned. The sale of animals suffering from contagious diseases shall be void.
A contract of sale of animals shall also be void if the use or service for which they are
acquired has been stated in the contract and they are found to be unfit therefor.
c. Prescriptive Period
The redhibitory action, based on the faults or defects of animals, must be brought within forty
(40) days from the date of their delivery to the buyer. If the animal should die within three (3) days
after its purchase, the vendor shall be liable if the disease which cause the death existed at the time
of the contract. When the buyer returns the objects bought and demands the payment of the purchase
price, he is in effect withdrawing from the contract as provided in Article 1567, where the
prescriptive period is six (6) months from the delivery of the thing sold.
d. Obligation of Buyer to Return
If the sale be rescinded, the animal shall be returned in the condition in which it was sold and
delivered, the buyer being answerable for any injury due to his negligence, and not arising from the
redhibitory fault or defect.
e. Remedies of Buyer
In the sale of animals with redhibitory defects, the buyer may also elect between withdrawing
from the contract and demanding a proportionate reduction of the price, with damages in either
case; but he must make use thereof within the same period which has been fi xed for the
exercise of the redhibitory action
IMPLIED WARRANTIES IN SALES OF GOOD
1. Warranty as to Fitness or Quality (Article 1562)
(a) Where the buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are acquired, and it appears that the buyer relies on the sellers skill or
judgment (whether he be the grower or manufacturer or not),
(b) Where the goods are bought by description from a seller who deals in goods of that
description (whether he be the grower or manufacturer or not). In the case of contract of sale of
a specified article under its patent or other trade name, there is no warranty as to its fitness for any
particular purpose, unless there is a stipulation to the contrary.
a. Requisites for Breach of Warranty to Apply (Nutrimix Feeds Corp. v. Court of Appeals)
(a) That the buyer sustained injury because of the product;
(b) That the injury occurred because the product was defective or unreasonably unsafe; and
(c) The defect existed when the product left the hands of the seller.
A manufacturer or seller of a product cannot be held liable for any damage allegedly caused by the
product in the absence of any proof that the product in question is defective; that the defect must be
present upon the delivery or manufacture of the product, or when the product left the manufacturers
or sellers, or when the product was sold to the purchaser; or the product must have reached the user
or consumer without substantial change in the condition it was sold.
b. Measure of Damage In Case of Breach of Warranty on Quality
In the absence of special circumstances showing proximate damage of a greater amount, the
difference between the value of the goods at the time of delivery to the buyer and the value they
would have had if they had answered to the warranty.
2. Sale of Goods by Sample and/or by Description
Mendoza v. David held that in a sale by sample, there is an implied warranty that the goods shall be
free from any defect which is not apparent or reasonable upon examination of the sample and which
would render the goods unmerchantable.
On the other hand, in a sale of goods by description, Mendoza held that a sellers description of the
goods which is made part of the basis of the transaction creates a warranty that the goods will
conform to that description. Where the goods are bought by description from a seller who deals in the
goods of that description, there is an implied warranty that the goods are of mechantable
quality.
3. Buyers Option in Case of Breach of Warranty (Article 1599)
(a) Accept or keep the goods and set up against the seller, the breach of warranty by way of
recoupment in diminution or extinction of the price;
(b) Accept or keep the goods and maintain an action against the seller for damages;
(c) Refuse to accept the goods, and maintain an action against the seller for damages;
(d) Rescind the contract of sale and refuse to receive the goods or if the goods have already been
received, return them or offer to return them to the seller and recover the price or any part thereof
which has been paid.
4. Waiver of Remedies by Buyer
When goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of
warranty when he accepted the goods without protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the
seller in substantially as good condition as they were in at the time the ownership was transferred to
the buyer. But if deterioration or injury of the goods is due to the breach of warranty, such deterioration
or injury shall not prevent the buyer from returning or offering to return the goods to the seller and
rescinding the sale.
5. Obligation of Buyer on the Price
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the
price upon returning or offering to return the goods. If the price or any part thereof has already been
paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return
of the goods, or immediately after an offer to return the goods in exchange for repayment of the
price.
6. Refusal of Seller to Accept Return of Goods
Buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to
secure payment of any portion of the price which has been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid seller by Article 1526 of the Civil Code.
ADDITIONAL TERMS OF WARRANTIES FOR CUSTOMERS
The term consumer products is defined under Article 4(q) of the Consumer Act of the Philippines, to
cover goods which are primarily for personal, family, household or agricultural purposes, which shall
include but not limited to, food, drugs, cosmetics, and devices. Article 68 of the Consumer Act
provides that when the seller or manufacturer gives an express warranty, it shall be operative from the
moment of sale, and consequently such seller or manufacture shall:
(a) Set forth the terms of warranty in clear and readily understandable language and clearly
identify himself as the warrantor;
(b) Identify the party to whom the warranty is extended;
(c) State the products or parts covered;
(d) State what the warrantor will do in the event of a defect, malfunction or failure to conform to the
written warranty and at whose expense;
(e) State what the consumer must do to avail of the rights which accrue to the warranty; and
(f) 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.
1. Subsidiary Liability of Retailer
The retailer shall be subsidiary liable under the warranty in case of failure of both the manufacturer
and distributor to honor the warranty, and that in such case the retailer shall shoulder the expenses
and costs necessary to honor the warranty. The remedy of the retailer in such case would be to
proceed against the distributor or manufacturer.
2. Enforcement of Warranty
The warranty rights can be enforced by presentment to the immediate seller either the warranty card
or the official receipt along with the product to be serviced or returned to the immediate seller. No
other documentary requirement shall be demanded from the purchaser.
3. Duration of Warranty
The seller and the consumer may stipulate the period within which the express warranty shall be
enforceable. But if the implied warranty on merchantability accompanies an express warranty, both
will be of equal duration. Any other implied warranty shall endure not less than sixty (60) days nor
more than one (1) year following the sale of new consumer products.
4. Breach of Warranties
In case of breach of express warranty, the consumer may elect to have the goods repaired or its
purchase price refunded by the warrantor. In case the repair of the product in whole or in part is
elected, the warranty work must be made to conform to the express warranty within thirty (30) days by
either the warrantor or his representative. The thirty-day period, however, may be extended by
conditions which are beyond the control of the warrantor or his representatives.
In case the refund of the purchase price is elected, the amount directly attributable to the use of the
consumer prior to the discovery of the non-conformity shall be deducted. In case of breach of implied
warranty, the consumer may retain the goods and recover damages, or reject the goods, cancel the
contract and recover from the seller so much of the purchase price as has been paid, including
damages.
5. Contrary Stipulations
All covenants, stipulations or agreements contrary to the provisions of Article 68 are specifically
declared null and void, and without legal effect.
EXTINGUISHMENT
SALE
Chapter 13
LAW ON SALES
Tuesday Class, 7:30 pm 9:30 pm
Submitted by
ARIZALA, VENUS KEIZYL A.
RAMOS, BRYAN ANGELO D.
SANDOVAL, ANTHONY B.
Submitted to
ATTY. LYDIA A. BUNDAC
Professor
6 December 2016
OF
EXTINGUISHMENT OF SALE
The modes or causes of extinguishing the contract of sale may be classified into:
(1) Commonor those causes which are also the means of extinguishing all
other contracts like payment, loss of the thing, condonation, etc. (see Art.
1231.);
(2) Special or those causes which are recognized by the law on sales (such as
those covered by Articles 1484, 1532, 1539, 1540,1542, 1556, 1560,
1567, and 1591.); and
(3)Extra-specialor those causes which are given special discussion by the
Civil Code and these are conventional redemption and legal redemption.
(see 10 Manresa 300, 303.)
I. In General (Articles 1231 and 1600)
ART. 1231. Obligations are extinguished by:
(1) Payment or performance;
Only extinguishes the obligations to which they pertain to in a contract of
sale, but not necessarily the contract itself, since the relationship between
the buyer and the seller remains after performance or payment, such as
the continuing enforceability of the warranties of the seller
(2) Loss of the thing due;
(3) Condonation or remission of the debt;
(4) Confusion or merger of the rights of the creditor and debtor;
(5) Compensation;
(6) Novation.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment
of resolutory condition, and prescription, are governed elsewhere in this Code. (1156a)
ART. 1600. Sales are extinguished by the same causes as all other obligations, by those
stated in the preceding articles of this Title, and by conventional or legal redemption.
(1506)
Right of Redemption/Right to
Redeem
Not a separate contract, but merely
part of a main contract of sale
Cannot exist unless reserved at the
time of the perfection of the
contract of sale
Must be imbedded in a contract of
sale upon its perfection
1
2
Does
not
need
a
separate
consideration in order to be valid
and effective
The redemption period cannot
exceed ten (10) years
The exercise of a right of
redemption requires notice to be
accompanied by a
tender of payment, including
consignment
when
tender
of
payment
cannot
be
made
effectively on the buyer;
The exercise of a right of
redemption
extinguishes
an
existing contract of sale
5
6
Option to Purchase/Buy
Generally a principal, albeit
preparatory, contract
May be created independent of
another contract
May exist prior to or after the
perfection of the sale, or be
imbedded in another contract, like a
lease, upon that contracts perfection
Must have a consideration separate
and distinct from the purchase price
in order to be valid
The redemption period may exceed
ten (10) years
The exercise of a option to purchase
requires only a notice of such
exercise be given totheoptioner
The four year period was held to begin from the happening of
the stipulated conditioncontained in the covering deed of sale,
rather than from the date of the contract, and even when the entire
covered period from the date of the contract would exceed ten (10)
years. (Misterio v. Cebu State College of Science and Technology, 461
SCRA 122 [2005])
redemption was agreed upon, the law imposed a 4-year limitation. This means that
from the time the school was merged to Cebu State College, they had 4 years, or until
June 1987 to redeem the property. However, they failed to do so within the period.
Failure to redeem automatically consolidates ownership in favor of the vendee. The
fact that the right to redeem was annotated does not make it imprescriptible; it only
serves to notify third persons.
Art. 1608. The vendor may bring his action against every possessor whose
right is derived from the vendee [buyer], even if in the second contract no
mention should have been made of the right to repurchase without prejudice
to the provisions of the Mortgage Law and the Land Registration Law with
respect to third persons [who may have bought in good faith and for value].
a. How Redemption Exercised
Redemption in joint
sale
by
coowners/co-heirs
of
undivided
immovable.
Redemption
in
separate sales by coowners of undivided
immovable.
Redemption against
heirs of vendee.
Should there have been no fruits at the time of the sale, and some exist at
the time of redemption, they shall be prorated between the redemptioner
and the vendee, giving the latter the part corresponding to the time he
possessed the land in the last year, counted from the anniversary of the
date of the sale.
RIGHT OF VENDOR A RETRO TO RECOVER THING SOLD FREE FROM CHARGES
Art. 1618. The vendor who recovers the thing sold shall receive it free from
all charges or mortgages constituted by the vendee, but he shall respect the
leases which the latter may have executed in good faith, and in accordance
with the customs of the place where the land is situated.
LEGAL REDEMPTION
subrogation
Does not have to be expressly
reserved (it is a right granted by law),
and covers sales and other onerous
[transfers of] title
Given to a third-party to the sale
although it extinguishes the original
sale, the exercise actually constitutes
The following are the requisites for the exercise of the right under
this article:
(1) Both the land of the one exercising the right of redemption and
the land sought to be redeemed must be rural;
(2) The lands must be adjacent;
(3) There must be alienation;
(4) The piece of rural land alienated must not exceed one
(1hectare;
(5) The grantee or vendee must already own any other rural land;
and
(6) The rural land sold must not be separated by brooks, drains,
ravines, roads and other apparent servitudes from the adjoining
lands.
The lands mentioned in paragraph 2 of Article 1621 are not really
adjacent.
When the land exceeds one (1) hectare, the adjacent owners are
not given the right of legal redemption because this may lead to
the creation of big landed estates. The right cannot be exercised
against a vendee if he is also an adjacent owner. The last
paragraph of Article 1621 refers to a situation where the vendee of
a piece of rural land is not an adjoining owner.
Among
Owners
Lands
Adjoining
of Urban
Redemption
Sales
of
in
Redemption
Judgment Debtor
Redemption
Extrajudicial
Foreclosure
Tax
by
in
Redemption
in
Judicial Foreclosure
Foreclosures
by
Banking Institutions
Period of Redemption
When
Rural
Bank
Forecloses
Legal
Right
to
Redeem
under
Agrarian
Reform
Code
CHAPTER 13 QUESTIONS