University of Negros Occidental Recoletos Bar Operations 2017

Civil Law

Chapter 1- CONTRACT OF SALE

Contract of Sale- One of the contracting parties V. DISTINGUISHED FROM OTHER

CONTRACTS
obligates himself to transfer the ownership of
and to deliver a determinate thing, and the
other to pay therefore a price certain in money
or its equivalent. A contract of sale may be Donation Sale
Gratuitous or onerous Onerous
absolute or conditional.
Formal Contact Consensual contract

Governed by law on donation Governed by law on

donation
Contract of Contract to Sell
Sale
Absolute Conditional
Barter Sale
Real obligation – Personal
Consideration: giving of Consideration: giving of
obligation to obligation –
a thing money as payment
give obligation to do
Title passes to Ownership is
the buyer upon reserved in the Governed by law on Species of the genus
delivery seller and will sales; sales;
pass to the
buyer only upon If consideration consists – look at manifest
full payment of party in money and intention
the price partly by thing
Non-payment of Full payment is If intention is not clear:
the price is a a positive value of thing is more If intention is not clear:
negative suspensive than amount of money – value of thing is equal or
resolutory condition, the barter less than amount of
condition failure of which money – sale
is not a breach
Contract for piece of Sale
but prevents
work
the obligation
of the vendor to
convey title to Goods are to be Contract for delivery of an
manufactured specially for article which the vendor in
arise
a customer and upon the ordinary course of
Remedies remedies special order and not for business manufactures or
available: available: the general market procures for general market
1. specific 1. resolution (whether on hand or not)
performance 2. damages Essence is service Essence is object
2. rescission Jurisprudence:
3. damages 1. Timing test under art 1467:
whether the thing transferred
would have never existed but
for the order
I. ELEMENTS OF A CONTRACT OF SALE 2. Habituality test if
1. Consent manufacturer engages in
2. Determinate subject matter activity with need to employ
3. Price certain in money or its equivalent extraordinary skills and
II. STAGES IN LIFE OF CONTRACT OF SALE equipment (Celestino v CIR)
1. Negotiation
2. Perfection 3. Nature of the object test
3. Consummation each product’s nature of
III. OBLIGATIONS CREATED – 2 sets of real obligations to give execution differs from the
others; products are not
IV. CHARACTERISTICS OF CONTRACT OF SALE: ordinary products of
1. Nominate manufacturer (EEI v CIR
2. Principal
3. Consensual
4. Bilateral
5. Reciprocal
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6. Onerous
7. Commutative
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8. Title and not a mode

Law on Sales Reviewer

Sale NOTE: GENERAL RULE – All persons who are authorized

Agency to Sell
in this Code to obligate themselves may enter into a
Agent not Buyer pays for price
contract of sale.
obliged to pay for of object
price, merely I. MINORS INSANE AND DEMENTED PERSONS AND
obliged to deliver DEAF MUTES
price received
from buyer. 1. Conflicts are voidable, subject to annulment or ratification
Principal remains Buyer becomes owner
owner even if object of thing; in agency
2. Also includes: (a) State of drunkenness; (b) Hypnotic
delivered to agent
spell; (c) Where necessaries are those sold and delivered to a
Agent assumes no Seller warrants
minor or other person without capacity to act, he must pay a
risk/liability as long
reasonable price therefore
as within the
authority given

May be revoked Not unilaterally revocable II. SPOUSES - A spouse may, without the consent of
unilaterally because the other spouse, enter into sales transactions in
fiduciary and even if
revoked w/o ground the regular pursuit of their profession, vocation, or
trade
Agent not allowed to Seller receives profit
profit Art. 1490. The husband and wife cannot sell property to
each other, except; (1) When a separation of property was
Personal Contract; Real Contract
agreed upon in the marriage settlements or (2) When there
Rescission is not
has been a Judicial separations or property under Article
available
191.

Dation in Payment Sale

Pre-existing credit No pre-existing credit
Obligations are Obligations are
NOTE: Prohibition likewise applies to common-law spouses
extinguished created
Debtor’s Consideration of seller:
consideration: price Consideration of III. OTHERS - TRUST RELATIONSHIPS
extinguishment of buyer: acquisition of
the debt the object 1. Art 1491 Two groups of parties prohibited from acquiring
Creditor’s By purchase a certain properties:
consideration:
acquisition of the
object offered in lieu a. Guardianship/Agent/Executors and Administrators;
of the original credit - Direct or indirect
Less freedom in
- Maybe ratified since only private wrong is involved
Greater freedom in
determining the price determining the price
b. Public Officers and employees/Officers of the Court;
Payment is received by Buyer still has to pay i. Cannot be ratified since public wrong is involved
the debtor before the the price
contract is perfected ii. Requisites for the prohibition to apply to attorneys:
1. Existence of attorney client relationship;
Lease Sale
2. Property is the subject matter in litigation;
Use of thing is for a specified period only
specified period only with an obligation to 3. while in litigation (from filing of complaint to final
with an obligation to return Judgement.
return Obligation to absolutely
transfer ownership of NOTE: Exception to the prohibition against
thing
Attorneys contingent fee arrangement where the
Consideration is rent Consideration is price Amount of legal fees is based on a value of a property
Lessor need not be Seller needs to be Involved in litigation.
owner owner of thing to
transfer ownership

NOTE: Lease with opinion to buy: really a contract of

sale but designated as lease in name only; it is
A sale by installments.

CHAPTER II-PARTIES TO CONTRACT OF SALE

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Art. 1492. The prohibitions in the two preceding articles are

applicable to sales in legal redemption, compromises and
renunciations.

III. Legal Status of Contract
1. Void (case law) –
guardian/ executor/public
officers / officers of the court
2. Voidable (civil code) – agent; VALID if with
consent
CHAPTER. 3 - SUBJECT MATTER OF SALE
1. REQUISITES: 1. Things a. “Possible” - existing,
future, and contingent i. whether the subject
matter is of a type and nature that exists or could
be made to exist to allow the seller reasonable
certainty of being able to comply with his
obligations b. Licit i. not outside the commerce of
man ii. if illicit, contract is void c. Determinate or
determinable i. determinate: particularly designated
or physically segregated from all others of the same
class ii. determinable: 1. thing is capable of being
made determinate 2. without the necessity of a
new further contract 2. Rights – must be
transmissible, except: a. future inheritance b.
service
Emptio rei speratae Emptio spei
Object is a future thing Object is a present thing
which is the hope or
expectancy
NOTE: Quantity of subject matter is not essential for
perfection; must determine nature and quality of subject
matter
NOTE: Seller need not be the owner of the subject matter at
the time of perfection: sufficient that he is the owner at the
time of delivery. exception: foreclosure sale
CHAPTER. 4 - PRICE
I. REQUISITES:
1. Real
a. when at the perfection of the contract of sale, there is
every intention on the buyer to pay the price, and every
expectation on the part of the seller to receive such price
as the value of the subject matter he obligates himself to
deliver
2. In money or its equivalent
a. consideration for a valid contract of sale can be the
price and other valuable consideration; at the very least,
a true contract of sale must have price as part of its
consideration
3. Certain or ascertainable

Sale of an expected Sale of a mere hope or

a. certain: expressed and agreed in terms of specific pesos
thing expectancy that the thing and/or centavos
will come to existence; sale
b. ascertainable:

Sale is subject to the
condition; that the
thing will exist; if it
does not, there is no
contract
Uncertainty is with
regard to the quantity
and quality of the thing
and not the existence of
the thing
sale of the hope itself
Sale is effective even if
the thing does not
come into existence,
unless it is a vain hope
The uncertainty is with
regard to the existence of
the thing
i. by third persons
ii. by the courts – in cases where the third person fixes the price
in bad faith or by mistake
iii. by reference to a definite day, particular exchange or market
iv. by reference to another thing certain
v. but never by one party to the contract
4. Jurisprudence: Manner of payment must be agreed upon
(Marnelego v. Banco Filipino Savings and Mortgage Bank
II. EFFECT OF GROSS INADEQUACY OF PRICE
NOTE: Mere inadequacy of the price does not affect the validity
of the sale, except (1) When there is fraud, mistake, or undue
influence indicative of a defect in consent is present, (2)When it
shows that the parties really intended a donation or some other
act or contract.
III. EFFECT WHERE PRICE IS SIMULATED
1. The act may be shown to have been in reality a donation, or
some other act or contract.
2. If not and neither party had any intention whatsoever that
the amount will be paid (absolutely simulated): the sale is void
3. If there is a real price but what is stated in the contract is not
the one intended to be paid (only relatively simulated): the
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contract of sale is valid but subject to reformation

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Art. 1474. Where the price cannot be determined in accordance San Miguel Philippines v Cojuangco consideration in an option contract
with the preceding articles, or in any other manner, the may be anything of value, unlike in sale where it must be price certain
contract is inefficacious. However, if the thing or any part in money

thereof has been delivered to and appropriated by the buyer he

must pay a reasonable price therefore. What is a reasonable
price is a question of fact dependent on the circumstances of
each particular case.
CHAPTER. 5 - FORMATION OF A CONTRACT OF SALE
I. 3 STAGES IN LIFE OF A CONTRACT OF SALE
1. Policitacion/Negotiation Stage - offer is floated,
acceptance is floated but they do not meet; the time
when parties indicate their interest but no concurrence of
offer and acceptance.
2. Perfection - concurrence of all requisites; meeting of
the minds.
3. Consummation - parties perform their respective
undertakings
3. How exercised: notice of acceptance should be
communicated to offer or without actual payment as long as
there is delivery of payment in consummation stage
4. SITUATIONS IN AN OPTION CONTRACT:
a. with separate consideration
i. option contract is valid
ii. offeror cannot withdraw offer until after expiry period
iii. object to rescission, damages but not to specific
performance because this is not an obligation to give
b. without separate consideration
i. OLD RULE - offer is still valid, but option contract is void and
not subject to rescission, damages
ii. NEW RULE: Right of first refusal recognized

II. Policitacion 1. RULES:

1. offer is floated
2. offer floated with a period
prior to acceptance, may be Option Contract Right of First Refusal
withdrawn at will by offeror
Principal contract; stands on Accessory; cannot stand on
its own its own
without acceptance,
extinguished when period has
Needs separate consideration Does not need separate
ended and maybe withdrawn
consideration
at will by offeror; right to
withdraw must not be There must be subject matter
Subject matter and price
arbitrary otherwise, liable to but price not important
must be valid
damage under Art 19, 20, 21
of Civil Code

3. offer floated w/ condition Extinguished by

happening/non happening of
condition
Not conditional Conditional
4. offer floated without continues to be valid
Not subject to specific Subject to specific
period/without condition depending upon
performance performance
circumstances of time, place
and person

5. offer is floated and there is original offer is destroyed,

counter-offer there is a new offer; can not
IV. RIGHT OF FIRST REFUSAL:
go back to original offer

1. creates a promise to enter into a contract of sale and it has no

6. offer is floated
7. offer accepted absolutely
no authority of offeror to
separate consideration, not subject to specific performance because
modify offer
there is no contractual relationship here and it is not an obligation to
give (not a real contract)
proceed to perfected stage

2. New doctrine: may be subject to specific performance

III. OPTION CONTRACT - a contract granting an exclusive right
in one person, for which he has paid a separate consideration,
to buy a certain object within an agreed period:
1. No presumption of consideration, needs to be proven
2. Characteristics of Option Contract:
a. not the contract of sale by itself, separate and distinct
b. nominate
c. principal; but can be attached to other principal contracts
d. onerous
e. commutative
f. unilateral – versus contract of sale which is bilateral
Equatorial realty Dev’t Inc. v Mayfair Theatre, the right of first refusal
is only subject to specific performance insofar as it is attached to a valid
written principal contract (e.g. lease). RFR becomes one of the
considerations in the contract.]
3. Effect of new doctrine: turned the world of policitacion upside down
because while valid option contract is not subject to specific
performance, right of first refusal which does not even have a separate
consideration may be subject to specific performance.
4. Recognizes recovery of damage based on abuse of rights doctrine
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CHAPTER. 6 - PERFECTION OF SALE
GENERAL RULE: A contract of sale is perfected at the moment
there is a meeting of the minds upon the thing which is the
object of the contract and upon the price; consensual contract
Exception: When the sale is subject to a suspensive condition
I. REQUIREMENTS:
1. When parties are face to face – when there is absolute
acceptance of an offer that is certain
2. When thru correspondence or telegram – when the offeror
receives or had knowledge of the acceptance
3. When the sale is subject to a suspensive condition – from
the moment the condition is fulfilled.
NOTES: Qualified acceptance: mere counter-offer which needs
to be absolutely accepted to give rise to perfected contract of
sale Business ads are mere invitations to make an offer except
when it appears to be otherwise.
II. RULES GOVERNING AUCTION SALES:
1. Sales of separate lots by auction are separate contracts of
sale
2. Sale is perfected by the fall of the hammer
3. Seller has the right to bid at the auction provided such right
was reserved and notice was given to that effect
III. EARNEST MONEY
1. Money given as part of purchase price
2. Acceptance is the proof that contract of sale exists
3. Nothing in law prevents parties from treating earnest
money differently
4. Old concept: subject to forfeiture when BUYER backs
out
5. New concept: cannot be forfeited – part of purchase
price; must be restored
6. Qualification: if old concept is stipulated – VALID
7. Presumption of perfection of contract of sale and such
earnest money as part of purchase price is disputable.
OPTION MONEY EARNEST MONEY
Money given as distinct Part of the purchased price
consideration for an option
contract
Applies to a sale not Given only when there is
perfected already a sale
Not required to buy When given, buyer is bound
to pay the balance
Art. 1483. Subject to the provisions of the Statute of Frauds and of any
other applicable statute, a contract of sale may be made in writing, or
by word of mouth, or partly in writing and partly by word of mouth, or
may be inferred from the conduct of the parties. (n)
FORM OF SALE
I. Form not important in validity of sale
a. Sale being consensual may be oral or written, perfected
by mere consent as to price and subject matter.
b. If particular form is required under the statute of frauds:
i. valid and binding between parties but not binding to 3rd
persons.
c. Reason: purposes of convenience only and not for validity
and enforceability; cause of action is granted to sue and
compel other party to execute the document
When form is important for validity; exception by specific
provision of law; a. Power to sell a piece of land granted to
an agent – otherwise VOID b. Sale of large cattle; must
also be registered with Municipal treasurer – otherwise
VOID c. Sale of land by non-Christian if not approved by
Governor– VOID III. When form is important for
enforceability (STATUTE OF FRAUDS Article 1403 (2)) a. A
sale agreement which by its terms is not to be performed
within a year from the making thereof; b. An agreement
for the sale of goods, chattels or things in action, at a price
not less than P500.00; and c. A sale of real property or of
an interest therein.
IV. EXCEPTIONS TO COVERAGE OF STATUTE IN SALES
CONTRACTS:
1. When there is a note or memorandum in writing and
subscribed to by party or his agent (contains essential terms
of the contract)
2. When there has been partial performance/execution
(seller delivers with intent to transfer title/receives price)
3. When there has been failure to object to presentation of
evidence (oral)
4. When sales are affected through electronic commerce
CHAPTER. 7 - CONSUMMATION
STAGE/PERFORMANCE STAGE
NOTE: Stage where parties both comply with their
obligation. Nature of diligence required: diligence of a
good father of the family unless other requirement is
stipulated Consequence: Seller will be guilty of breach
if thing is lost through his fault
I. Delivery of the Thing - Transfer ownership (tradition) c
overs a twin obligations of the seller which are: 1. to transfer
the ownership; and 2. to deliver a determinate thing
PNB vs. Ling, 69 Phil. 611 Delivery of the thing
together with the payment of the price, marks the
consummation of the contract of sale
Norkis Distributor, Inc. vs. CA 195 SCRA 694 The act
of delivery must be coupled with the intention of
delivering the thing and putting the buyer under
control
Addison vs. Felix, 38 Phil. 404 The execution of a
public Instrument is equivalent to delivery. But to
be effective, it is necessary that the vendor have such
control over the thing sold that, at the moment of
sale, its material delivery could have been made
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II. Different kinds of delivery:
1. Actual or real- when thing sold is placed in the control and
possession of the buyer
2. Legal or Constructive- can take several forms and may be any
manner signifying an agreement that the possession is
transferred from the vendor to the vendee.
III. Different forms of Constructive Delivery - Constructive
delivery has same legal effect as actual or physical delivery
Ten Forty Realty vs. Cruz, 10 Sept. 2003 Gives rise only to a
prima facie presumption of delivery which is destroyed
when actual delivery is not affected because of a legal
impediment.
1. Traditio Longa Manu − Delivery of thing by mere agreement;
when SELLER points to the property without need of actually
delivering
2. Traditio Brevi Manu − Before contract of sale, the would be
buyer was already in possession of the would be subject matter
of sale (ex: as lessee)
3. Symbolic delivery − As to movables – ex: delivery of the
keys to a car.
4. Constitutum possessarium − When at the time of the perfection of
the contract of sale, seller had possession of the subject matter in
the concept of owner and pursuant to the contract, seller continues
to hold physical possession no longer in the concept of an owner but
as a lessee or any other form of possession other than in the concept
of owner.
5. Quasi-tradition − Delivery of rights, credits or incorporeal property,
made by: a. Placing titles of ownership in the hands of the buyer
b. Allowing buyer to make use of rights.
6. Tradition by operation of law
IV. WHEN EXECUTION OF PUBLIC INSTRUMENT DOES NOT PRODUCE
THE EFFECTS OF DELIVERY
1. When there is stipulation to contrary,
execution does not produce effect of delivery
2. When at the time of
execution of instrument, subject matter was not subject to control
of the seller
3. 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
4. Such capacity should subsist for a reasonable time after execution
of instrument (reasonable time depends on circumstances of persons,
places and things
V. Delivery of Fruits and Accessions/ Accessories - Right to
fruits and accessions/accessories accrue from time sale is
perfected but no real right over it until it is delivered
VI. Delivery Through Carrier - General Rule: Where the seller is
authorized or required to send the goods to the buyer, delivery
to the carrier is delivery to the buyer. Exceptions: a contrary
intention appears or implied reservation of ownership under
pars. 1,2,3 of Art. 1503
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 - Shipment – when goods are
delivered at ship at point of shipment; delivery to carrier by
placing goods on vessel is delivery to buyer − 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 − When buyer pays for
services of carrier – delivery to carrier is delivery to buyer;
carrier is agent of the buyer − When buyer pays seller the price
– from moment the vessel is at port of destination, there is
already delivery to buyer.
See Arts. 1522, 1539, 1540, 1541, 1542, 1543.
VII. COMPLETENESS OF DELIVERY 1. MOVABLES a. delivery of
thing plus accessories and accessions in the condition in which
they were upon the perfection of the contract including the
fruits b. When the seller delivers to the buyer a quantity of
goods LESS than he contracted to sell, buyer has the option to
reject or accept it. a. When accepts with knowledge that seller
is not going to perform contract in full, he must pay at price
stipulated b. When accepts and consumes before knowledge
that buyer will not perform contract in full, liable only for fair
value of goods delivered c. When seller delivers to the buyer a
quantity of goods LARGER than he contracted to sell the buyer
has the following options: i. accept per contract and reject the
rest ii. accept the whole – pay price stipulated iii. eject whole if
subject matter is indivisible d. When the seller delivers to the
buyer the goods he contracted to sell, MIXED with goods of a
different description not included in the contract, buyer has 2
options: i. accept good w/c are in accordance with contract and
reject the rest ii. reject goods entirely – if indivisible
2. IMMOVABLES a. Sold per unit or number i. If the sale should
be made with statement of its area, rate at certain price, deliver
all that may have been stated in the contract if impossible,
remedies of buyer: ii. If Less in area: - rescission - proportional
reduction of price – LACK IN AREA SHLD NOT BE LESS THAN
1/10 OF AREA AGREED UPON iii. If Greater in area: - accept per
stipulation and reject the rest - accept whole area – pay at
contract rate - Not applicable to judicial sales iv. Sold for lump
sum - When price per unit not indicated - If area delivered is
either greater or lesser – price will not be adjusted accordingly
VIII. TIME AND PLACE OF DELIVERY 1. Follow stipulation in
contact, or 2. Follow usage in trade, or 3. Seller’s place of
business or his residence 4. Specific goods – place where the
thing is 5. At reasonable hour
IX. EFFECTS OF DELIVERY - General Rule: The ownership of
the thing sold shall be transferred to the buyer upon the actual
or constructive delivery thereof. Except when the contrary is
stipulated such in the cases of: 1. contract to sell 2. sale on
acceptance/approval 3. sale or return
NOTE: Who Bears Expenses of Delivery? Seller
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X. SALE BY DESCRIPTION/SAMPLE 1. Sample – goods must
correspond with sample shown 2. Description – goods must
correspond with description or sample 3. Effect if there is no
compliance: RESCISSION may be availed of by the buyer
XI. OBLIGATIONS OF BUYER 1. Pay the price a. Buyer is obligated to
pay price according to terms agreed upon regarding time, place and
amount b. If payment of interest is stipulated – must pay; if amount of
interest not mentioned – apply legal rate c. When buyer defaults –
constitutes breach: subject to specific performance/rescission and
damages; interest to be paid also from default
2. Accept delivery of thing sold a. Where to accept: at time and
place stipulated in the contract; if none specified – at the time and
place of delivery goods; there is acceptance when: i. He intimates to
seller that he has accepted ii. When delivered and does any act
inconsistent with ownership of seller iii. Retains without intimating to
seller that he has rejected .
3. Sale of Goods on instalment 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.
4. Acceptance of goods in general, absent contrary express stipulation,
does not discharge seller from liability in case of breach of warranties
(unless no notice or failure to give it within reasonable time)
5. When buyer has a right to refuse goods, no need to return; shall be
considered as depositary; unless there is stipulation to the contrary
Art. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first
taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the absence
thereof, to the person who presents the oldest title, provided there is
good faith. (1473)
DOUBLE SALE
General Rule: FIRST IN TIME, PRIORITY IN RIGHT when does it apply:
when not all requisites embodied in 1544 concur.
I. REQUISITES FOR DOUBLE SALES TO EXIST: (VOCS) 1. Two or more
sales transactions must constitute valid sales; 2. Two or more sales
transactions must pertain to the same object or subject matter; 3. Two
or more buyers at odds over the rightful ownership of the subject
matter must each represent conflicting interests; and 4. Two or more
buyers must each have bought from the very same seller.
Consolidated Rural Bank (Cagayan Valley_ vs. CA [Jan. 17,
2005] If not all the elements are present for Art. 1544 to aply, the
priniciple of prior tempore, potior jure or simply “he who is first in
time is preferred in right” should apply. Undisputably, he is a
purchaser in good faith because at the time he bought the real
property, there was still no sale to as a second vendee.
II. RULES ACCORDING TO 1544: 1. MOVABLE a. Owner is first to
possess in good faith
2. IMMOVABLE a. First to register in good faith b. No inscription, first
to possess in good faith c. No inscription and no possession in good
faith – Person who presents oldest title in good faith d. Good Faith -
one who buys property without notice that another person has a right
or interest in such property; one who has paid price before notice that
another has claim or interest
III. LIS PENDENS – notice that subject matter is in litigation
IV. ADVERSE CLAIM – notice that somebody is claiming better right
V. POSSESSION both actual or constructive
VI. REGISTRATION: any entry made in the books of the registry,
including both registration in its ordinary and strict sense, and
cancellation, annotation, and even marginal notes. It is the entry made
in the registry which records solemnly and permanently the right of
ownership and other real rights. 1. registered under Torrens system
1544 applies 2. Not registered under the Torrens system 1544 still
applies.
Jurisprudence if 2nd sale is a judicial sale (by way of levy on
execution), buyer merely steps into the shoes of the judgment
debtor. Outside of such situation – must apply to conflicting sales
over the same unregistered parcel of land If sale 1 occurs when
land is not yet registered and sale 2 is done when land is already
registered – apply FIRST IN TIME, PRIORITY IN RIGHT
Gabriel v. Mabanta, et al. [2003] Good faith must concur
with registration. To be entitled to priority, the second purchaser
must not only establish prior recording of his deed, but must
have acted in good faith
CONDITION
1. Effect of Non-Fulfillment of Condition The other party may a.
refuse to proceed with the contract b. proceed with the contract,
waiving the performance of the condition If the condition is in the
nature of a promise that it should happen, the non-performance of
such condition may be treated by the other party as breach of
warranty.
2. Effect if buyer has already sold the goods
General Rule: The unpaid seller’s right to lien or stoppage in transitu
remains even if buyer has sold the goods Exception: When the seller
has given consent thereto, or o When the buyer is a purchaser in good
faith for value of a negotiable document of title.
NEGOTIABLE DOCUMENTS OF TITLE See Article 1636
1. Not creation of law but by merchants to allow them to deal with
merchandise without having to physically carry them around 2.
Pertains to specific type of movables only : GOODS a. Documents of
title serve two (2) functions:
i. evidence of existence and possession of goods described
therein ii. medium by which seller is able to transfer possession
of goods 3. A document of title which states that the goods
referred to therein will be delivered to the bearer, or to the
order of any person named in such document 4. Negotiable by
delivery or indorsement.
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TYPES 1. NEGOTIABLE a. deliver to bearer (negotiation by mere
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delivery) b. deliver to specific person or his order (negotiable
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by endorsement + delivery) i. even if face of instrument says
NONNEGOTIABLE, it is still NEGOTIABLE; limiting words does
not destroy negotiability ii. If order instrument and no
endorsement was made – equivalent to assignment
2. NON-NEGOTIABLE
EFFECTS OF UNAUTHORIZED NEGOTIATION The validity of the
negotiation of a negotiable document is not impaired by the
fact that negotiation was done in breach of duty or that the
owner of the document was deprived of the same by loss, theft,
accident, fraud, mistake if the person to whom the document is
delivered is in good faith and without notice of the said
irregularities.
Important Considerations 1. Negotiation gives better right than
assignment 2. Assignee takes document with defects of the
assignor 3. Obligation of bailee – bailee is immediately bound to
the document
Warranties on Negotiation 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
Rules of Levy/Garnishment of Goods Covered by Documents of
Title 2. NON NEGOTIABLE: a. Notification is operative act to
transfer title/possession of goods in favor assignee b. Before
notification – can still be garnished
3. NEGOTIABLE: a. cannot be levied or garnished when
documents are already with purchaser in good faith, unless: b.
Document is first surrendered c. Document is pounded by court
d. Negotiation is enjoined
NEGOTIATION ASSIGNMENT
acquires title to goods
transferor/holder acquires against transferor
title to goods
Bailee has direct obligation to Acquires right to notify
holder as if directly dealt with bailee so that he acquires
him.
obligation of bailee to
hold goods for him
SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE See
Articles 1475, 1477, 1505, 1506
I. SALE BY NON-OWNER 1. PERFECTION STAGE a. Sale by owner
– VALID b. Sale by non-owner – VALID; c. Reason why both sales
are valid: ownership is necessary only at time when transfer
title to goods; at perfection stage, no obligation on part of
seller to transfer ownership d. Law on estoppel further bolsters
it: title passes by operation of law to grantee when person who
is not owner of the goods sold delivers it and later on acquires
title thereto e. Since valid, action to annul is improper; there is
already a perfected contract
2. CONSUMMATION STAGE a. Contract of sale is valid because
it has passed perfected stage, despite seller not being the
owner or seller having no authority to sell b. What is void is the
transfer of title/ ownership did not pass c. Effect: buyer
acquired no better right than transferor d. Legal effect: CAVEAT
EMPTOR – BUYER BEWARE e. Sale of co-owner of whole
property or definite portion GENERAL RULE: i. co-owner sells
whole property prior to partition – sale of property itself is void
but valid as to his spiritual share ii. co-owner sells definite
portion to partition – sale is void as to other coowner but valid
as to his spiritual share if the buyer would have still bought such
spiritual share had he known that the definite portion sold
would not be acquired by him.
II. EXCEPTIONS TO THE RULE ON THE EFFECT OF SALE OF A
DEFINITE PORTION OBY A COOWNER
bailee has direct obligation acquires right to notify bailee so
1. Subject matter is indivisible in nature or by intent; 2. Sale of
a particular portion of a property is with consent of other co-
owners; 3. Co-owner sells 1 of 2 commonly-owned lands and
does not turn over ½ of the proceeds, other co-owner, by law
and equity, has exclusive claim over remaining land.
III. RULES ON LEGAL EFFECTS OF SALE BY A NON-OWNER
GENERAL RULE: Sale by non-owner, buyer acquires no better
title than seller had. EXCEPTIONS: 1. Owner by his conduct is
precluded from denying seller’s authority (ESTOPPEL) 2.
Contrary is provided for in recording laws (PD 1529) 3. Sale is
made under statutory power of sale or under order of a court
of competent jurisdiction 4. Sale is made in a merchant’s store
in accordance with code of commerce and special laws
IV. SALE BY SELLER WITH VOIDABLE TITLE 1. PERFECTION
STAGE a. Valid sale – buyer acquires title of goods
2. CONSUMMATION STAGE a. Valid sale – if title has not yet
been avoided, buyer buys goods under following condition: o in
good faith o for value o without notice of seller’s defect of title
V. TITLE AS TO MOVABLE PROPERTIES GENERAL RULE:
Possession is equivalent to title Requisites: Possession of
movable and Good Faith
VII. EXCEPTIONS: 1. Owner lost movable – owner can recover
w/o reimbursing price 2. Owner is unlawfully deprived – owner
can recover w/o reimbursing price
VIII, EXCEPTIONS TO THE EXCEPTIONS: − movable is bought at
public sale – owner can only recover after reimbursing price −
acquired in good faith and for value from auction
LOSS, DETERIORATION, FRUITS and OTHER BENEFITS See
Articles 1493 and 1494
Legal consequences from point of perfection are the same in
both legal systems: upon perfection of an unconditional
contract of sale involving specific or determinate subject
matter, the risk of loss deterioration and the benefits of fruits
and improvements, were fro the account of the buyer.
WHO BEARS RISK OF LOSS/ DETERIORATION/ FRUITS: 1.
BEFORE PERFECTION a. Res perit domino b. Owner is seller so
seller bears risk of loss
2. AT PERFECTION o Res perit domino o Contract is merely
inefficacious because loss of the subject matter does not affect
the validity of the sale o Seller cannot anymore comply with
obligation so buyer cannot anymore be compelled .
3. AFTER PERFECTION BUT BEFORE DELIVERY o Loss – confused
state o Paras: BUYER o Tolentino: SELLER o Deterioration and
fruits - Buyer bears loss;
4. AFTER DELIVERY o Res perit domino o Delivery extinguishes
ownership visa-vis the seller and creates a new one in favor of
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Law on Sales Reviewer
REMEDIES OF PARTIES FOR BREACH OF CONTRACT OF SALE
See Articles 1594-1596. 1484-1486, 1592
SUBJECT MATTER: MOVABLES (IN GENERAL)
Remedies of Unpaid Seller GENERAL RULE: Any man may not
take law in his own hands, must seek remedy through courts
EXCEPTION: − DOCTRINE OF SELF HELP − SPECIAL REMEDIES
Requisites: 1. Subject matter – goods 2. Seller is unpaid – not
completely paid or received negotiable instrument under a
condition and condition has been breached by reason of
dishonor 3. Physical possession is with seller
The following are the special remedies of unpaid seller 1.
Possessory lien 2. Stoppage in transitu 3. special right of re-
sale 4. special right to rescind
NOTE: Hierarchical Application - only when unpaid seller has
exercised possessory lien or stoppage in transitu can the seller
proceed with his other special rights of resale or to rescind.
I. Possessory Lien 1. Seller not bound to deliver if buyer has not
paid him the price 2. Right to retain; cannot be availed when
seller does not have custody 3. 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 d. When part of goods delivered, may still
exercise right on goods undelivered
Instances when possessory lien lost: 1. seller delivers goods to
carrier for transmission to buyer without reserving ownership
in goods or right to possess them 2. buyer or his agent lawfully
obtains possession of goods 3. Waiver 4. Loses lien when he
parts with goods (still has stoppage in transitu) 5. notice by
seller to buyer not essential.
II. Stoppage In Transitu − Goods are in transit − Requisites
when goods are in transit 1. From the time goods are delivered
to carrier for purpose of transmission to buyer 2. Goods
rejected by buyer and carrier continues to possess them
When goods no longer in transit 1. Reached point of destination
2. Before reaching destination, buyer obtains delivery of the
goods 3. Goods are supposed to have been delivered to buyer
but carrier refused 4. Shown by seller that buyer is insolvent
(failure to pay when debts become due )
How is right exercised 1. Obtain actual possession of goods 2.
Give notice of claim to carrier / bailee in possession thereof 3.
Notice by seller to buyer is not required; notice to carrier is
essential
III. Special Right to Resell the Goods 1. goods are perishable 2.
stipulated the right of resale in case buyer defaults in payment
3. buyer in default for unreasonable time 4. 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
IV. Special Right to Rescind 1. Expressly stipulated 2. Buyer is in
default for unreasonable time 3. Notice needed to be given by
seller to buyer
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
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
Incidents: 1. If buyer chooses foreclosure, no further action
against buyer to recover any unpaid balance of the price 2.
When is the law applicable? Sale on movables by installment o
Sale on installment: payment by several partial payments in
small amount 4. Rationale of the law: Buyer is lulled into
thinking that he could afford because of small amounts per
installment and at the same time remedy abuse of commercial
houses 5. Nature of remedies: alternative and not cumulative 6.
Coverage: sale and financing transaction and contracts of lease
with option to purchase 7. Action : Judicial and Extrajudicial
o Specific Performance i. If already chose specific
performance, can no longer choose other remedies except:
after choosing, it has become impossible, rescission may be
pursued b. Rescission
- When chosen, there is correlative obligation to restitute - But
stipulation that installments paid are forfeited are valid if not
unconscionable - Deemed chosen when: o Notice of rescission
is sent o Takes possession of subject matter of sale o Files
action for rescission Barring effect on recovery of balance
3. Foreclosure i. barring effect on recovery of balance ii. Extent
of barring effect: purchase price iii. Exception: mortgagor
refuses to deliver property to effect foreclosure, recover also
expenses incurred in attorney’s fees, etc. (Perverse Buyer
Mortgagor)
IMMOVABLES (IN GENERAL)
Remedies of Seller Anticipatory breach 1. Seller has reasonable
grounds to fear loss of immovable sold and its price, sue for
RESCISSION 2. Non–payment of price, sue for RESCISSION
Remedies of Buyer 1. In case of subdivision or condo projects,
suspend payment. 2. If real estate developer fails to comply
with obligation according to approved plan: - RESCIND -
SUSPEND PAYMENT UNTIL SELLER COMPLIES
IMMOVABLES (BY INSTALLMENT) Article 1592 – Applies only to
contract of sale .
I. Maceda Law 1. applies to COS and CTS and Financing 2.
Coverage: REAL ESTATE – defined space vs. CONDO – not
defined space (w/ common areas) 3. Excluded: a. Industrial b.
Commercial c. Sale to tenants under agrarian laws
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Law on Sales Reviewer
Rights Granted to Buyers:
o Buyer paid at least 2 years installment 1. Pay without interest the
balance within grace period of 1 month for every year of installment
payment 2. Grace to be exercised once every 5 years 3. When no
payment - cancelled; buyer entitled to 50% of what he has paid + if
after 5 years of installments, 5% for every year but not to exceed 90%
of total payments made 4. Cancellation to be effected 30 days from
notice and upon payment of cash surrender value
o Buyer paid less than 2 years installment 1. 1st Grace period is 60 days
from date installment became due 2. 2nd grace period of 30 days from
notice of cancellation/demand for rescission ƒ buyer can still pay within
the 30 day period ƒ with interest ƒ No payment after 30 day period, can
cancel.
Purpose of law - Protect buyers in installments against oppressive
conditions
Notice needed - waiver thereof if oppressive
Applies to contracts even before law was enacted − Stipulation to
contrary is void
Other rights: o Sell rights to another o Reinstate contract by updating
during grace period and before actual cancellation o Deed of Sale to be
done by notarial act o to pay in advance any installment or the full
balance of price anytime without interest o have full payment
annotated in certificate of title
REMEDY OF RESCISSION IN CONTRACTS COVERING IMMOVABLES See
Articles 1191, 1592
o Nature: Judicial o Extra judicial Rescission a. allowed if stipulated;
burden to sue shifts to party who does not like rescission b. court still
has final say as to propriety of rescission c. Forfeiture of amounts valid
being in nature of penal clause o Contract of Sale – Rescission is
Applicable o Contract to Sell – Rescission not Applicable ƒ Non–payment
of purchase price would automatically cancel even without further
action for rescission ƒ Except: If subject matter is residential lots, law on
rescission applies when there is substantial breach. Maceda law
applies.
CONDITION and WARRANTIES See Articles 1545-1547
I. Condition 1. When a contract contains a condition, the non-
happening of which would not constitute a breach but extinguishes the
obligation 2. 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
II. Warranties A statement or representation made by the seller
contemporaneously and as a part of the contract of sale, having
reference to the character, quality, or title of the goods, and by which
he promises or undertakes to insure that certain facts are or shall be as
he then represents
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 4.
when breached, seller is liable for damages.
Implied Warranties Deemed included in all contracts of sale whether
parties are actually aware or not, whether they were intended or not;
by operation of law ;
1. Warranty that seller has a right to sell o refers to consummation
stage since in consummation stage, it is where ownership is transferred
by tradition o not applicable to sheriff, auctioneer, mortgagee, pledge
2. Warranty against eviction a. implied, unless contrary provision
appears in contract b. when ownership is transferred, buyer shall enjoy
the legal and peaceful possession of the thing c. Requisites of breach of
warranty against eviction: -
- buyer is evicted in whole or in part from the subject matter of sale -
there is a final judgement - basis of eviction is a right prior to sale or an
act imputable to vendor - seller has been summoned in the suit for
eviction at the instance of buyer; or made 3rd party defendant through
3rd party complaint brought by buyer.
Vendor’s liability shall consists of (Total Eviction)(VICED) 1. Value of the
thing at the time of eviction; 2. Income or fruits if he has been ordered
to deliver the to the party who won the suit 3. Cost of the suit 4.
Expenses of the contract; and 5. Damages and interests if the sale was
in bad faith
Partial Eviction 1. to enforce vendor’s liability for eviction (VICED); or 2.
to demand rescission of contract.
a. no appeal needed nor a need for buyer to resist eviction for right to
accrue; it is enough that the aforementioned requisites are complied
with b. warranty cannot be enforced until aforementioned requisites
concur c. applies to judicial sale; judgment debtor responsible for
eviction unless otherwise decreed in judgment d. vendor not liable for
eviction if adverse possession had been commenced before sale but
prescriptive period is completed after transfer e. Rights of buyer when
deprived of only part of the subject matter but would not have bought
such part if not in relation for the whole: 1. Rescission 2. Mutual
restitution.
3. warranty against encumbrances (non apparent) o 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 c. when
breach of warranty exist: buyer may ask for rescission of indemnity d.
warranty not applicable when non– apparent burden or servitude is
recorded in the Registry of Property – unless there is express warranty
that the thing is free from all burdens and encumbrances
4. warranty against hidden defects o SELLER does not warrant patent
defect; caveat emptor o Except when hidden 1. subject matter may be
movable or immovable 2. 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 3. had the buyer been aware, he would not
have acquired it or would have given a lower price a. when defect is
visible or even if not visible but buyer is an expert by reason of his trade
or profession, seller is not liable b. obligation of seller for breach
depends on whether he has knowledge of such defect or not
c. seller is aware – seller should return price and refund expenses of
contract with damages d. seller is not aware - seller should return price
and interest and refund expenses ( no damages ) e. buyer may elect
between withdrawing from contract or demanding proportionate
reduction of price with damages in either case f. applicable to judicial
sale except that judgment debtor not liable for damages g. action to
prescribe 6 months from delivery of subject matter
5. defects on animals a. even in the case of professional inspection but
hidden defect is of such nature that expert knowledge is not sufficient
to discover it - defect shall be considered as REDHIBITORY b. if vet fails
to discover through ignorance or bad faith he is liable for damages c.
sale of animals on teams (2 or more) - when only one is defective, only
one is redhibited and not the others - exception: when it appears buyer
would not have purchased the team without the defective one - apply
to sale of other things d. animals at fair or public auction - no warranty
against hidden defects e. sale of animals with contagious disease is void
f. sale of unfit animals
-- void if use / service for which they are acquired has been stated in
the contract and they are found to be unfit therefor o prescription of
action:40 days from date of delivery to buyer o if sale is rescinded,
animals to be returned in same condition when they were acquired;
buyer shall answer for injury / loss due to his fault - buyer may elect
between withdrawing from sale and demanding proportionate
reduction of price with damages in either case
Specific Implied Warranties in the Sale of Goods Warranty as to
fitness and quality; requisites: 1. Buyer makes known to seller the
particular purpose for which goods are acquired and it appears that the
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buyer relied on the seller’s skill or judgment 2. Goods are bought by
description from seller who deals in goods of that description 3. in case
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Law on Sales Reviewer
II. Conventional redemption
1. Only extinguishes obligations pertaining to contract of sale, not
extinguish contract itself; only applies to contract of sale 2. The right
which the vendor reserves to himself to reacquire the property sold
provided he returns to the vendee: a. the price of the sale, b. expenses
of contract, c. other legitimate payments, d. he necessary and useful
expenses made on the thing sold e. and fulfills other stipulations which
may have been agreed upon 3. The right is exercised only be seller in
whom right is recognized in the contract or by any person to whom
right was transferred; must be in the same contract.
III. Legal redemption
1. Only applies to contracts of sale. 2. The right to be subrogated upon
the same terms and conditions stipulated in the contract, in the place
of one who acquires the thing by (1) purchase OR (2) by dation in
payment OR (3) by other transaction whereby ownership is transmitted
by onerous title. 3. Types of Legal Redemption: a. among co-heirs i. any
of the heirs sell his hereditary rights to stranger before partition ii. 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 iii. co-heirs has 1 month from receipt of notice in writing b. among
co-owners i. any or all of co-owners sells their shares to 3rd person ii.
any co-owner may exercise right of redemption by paying reasonable
price of property to the buyer iii. if 2 or more co-owners desire to
exercise right of redemption, they may only do so in proportion to the
share they respectively have in thing owned in common c. among
adjoining owners i. rural land a. 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 b. if two or more adjacent lot owners
desire to exercise right to redeem, owner of adjoining lot with smaller
area shall be preferred c. if two or more adjacent lit owners desire to
exercise right to redeem and both have same lot area, one who first
requested shall be granted ii. urban land a. when piece of land is small
and cannot be used for any practical purpose and bought
merely for speculation, owner of adjoining land can redeem b. 2 or
more owners of adjoining lot desire to exercise right to redeem, owner
whose intended use is best justified shall be preferred. d. sale of credit
in litigation i. 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
ii. debtor may exercise right within 30 days from the date assignee
demands payment from him
4. Other Instances When Right of Legal Redemption is Granted a.
Redemption of homesteads b. Public Land Act c. 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
5. Redemption in tax sales a. in case of tax delinquency/failure to pay
tax assessments, property is foreclosed b. delinquent payer has 1 year
from date of sale to redeem by paying to the revenue District Officer
the amount of tax delinquencies, and interest or purchase price.
6. Redemption by judgment debtor - 1 year from date of registration of
certificate of sale to redeem by paying purchaser at public auction with
interest 7. Redemption in extrajudicial foreclosure - 1 year from date of
sale and registration 8. 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
judgment 9. When Period of Redemption Begins to Run - Right of legal
pre-emption of redemptionshall be exercised within 30 days from
notice by the seller 10. How exercised - tender of payment is not
necessary; offer to redeem is enough. a. There is no prescribed form
for an offer to redeem to be properly effected. Hence, it can either be
through a formal tender with consignation of the redemption price
within the prescribed period. What is paramount is the availment of
the fixed and definite period within which to exercise the right of legal
redemption. b. deeds of sale are not to be recorded in Register of
Deeds unless accompanied by affidavit of seller that he has given notice
to all possible redemptioners
NOTE: Written notice under Art. 1623 is mandatory for the right of
redemption to commence (PSC vs. Sps. Valencia, 19 Aug. 2003). Thus,
the General Rule is that actual knowledge notwithstanding, written
notice is still required Except when actual knowledge is acquired by co-
heirs living in same land with purchaser, or co-owner was middleman in
sale to 3rd party.
Etcuban vs. CA, et. al. 148 SCRA 507 – Art. 1623 does not
prescribe any distinctive method for notifying the redemptioner
IV. Option to Purchase - Right to repurchase the thing sold granted to
the vendor in a separate instrument from the deed of sale
V. Equitable Mortgage
Cachola vs. CA, 208 SCRA 496 One which lacks the proper
formalities, form of words, or other requisites prescribed by law for
a mortgage, but shows the intention of the parties to make the
property subject of the contract as security for a debt and contains
nothing impossible contrary to law
1. A contract with right to repurchase is deemed to be an equitable
mortgage if the following requisites concur (IPERTI): a. price of sale with
right to repurchase is unusually inadequate b. seller remains in
possession as lessee or otherwise c. upon or after expiration of right to
repurchase, another instrument extending the period of redemption or
granting new period is executed d. buyer retains for himself a part of
the purchase price e. seller binds himself to pay taxes on thing sold f.
real intention of parties is to secure the payment of a debt or
performance of other obligation.
NOTE: In case of doubt – in determining whether it is an equitable
mortgage or a sale a retro, the sale shall be construed as an equitable
mortgage.
2. What to Look for in Determining Nature of Contract a. language of
the contract b. conduct of parties – to reveal real intent
3. Remedy available to vendor: ask for reformation of contract
4. Rationale behind provision on Equitable Mortgage: a. Circumvention
of usury law b. Circumvention of prohibition against pactum
commissorium – creditor cannot appropriate the things given by way of
pledge or mortgage; remedy here is foreclosure. The real intention of
parties is that the pretended purchase price is money loaned and to
secure payment of the loan, sale with pacto de retro is drawn up 5.
Period of Redemption a. No period agreed upon – 4 years from date of
contract b. Period agreed upon – should not exceed 10 years; if it
exceeded, valid only for the first 10 years. c. When period to redeem
has expired and there has been a previous suit on the nature of the
contract – seller still has 30 days from final judgment on the basis that
contract was a sale with pacto de retro: d. Rationale: no redemption
due to erroneous belief that it is equitable mortgage which can be
extinguished by paying the loan. e. This refers to cases involving a
transaction where one of the parties contests or denies that the true
agreement is one of sale with the right to repurchase; not to cases
where the transaction is conclusively a pacto de retro sale. f. Example:
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Where a buyer a retro honestly believed that he entered merely into an
equitable mortgage, not a pacto de retro transaction, and because of
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Law on Sales Reviewer
NOTE: When period has expired and 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.
Paez vs. Magno Tender of payment is SUFFICIENT to compel
redemption, but is not in itself a payment that relieves the
vendor from his liability to pay the redemption price
VI. Effect when There is No Redemption Made 1. jurisprudence before
the NCC: buyer a retro automatically acquires full ownership 2. under
present art 1607: there must be judicial order before ownership of real
property is consolidated in the buyer a retro
VII. How is Redemption Effected 1. Seller a retro must first pay the
following: a. the price of the thing sold b. expenses of the contract and
other legitimate payments made by reason of the sale c. necessary and
useful expenses made on the thing sold d. Valid tender of payment is
sufficient e. Mere sending of notice without valid tender is insufficient f.
Failure to pay useful and unnecessary expenses entitles vendee to
retain land unless actual reimbursement is made may compel the
vendor to redeem the whole thing 2. When an undivided thing is sold
by coowners / 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 3. When rights of co-owners over an undivided thing is sold
as regards to their own share – vendee retro cannot compel one to
redeem the whole property 4. 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.
IX. Fruits 1. what controls is the stipulation between parties as regards
the fruits; if none: a. at time of execution of the sale a retro there are
visible or growing fruits – there shall be no pro-rating at time of
redemption if no indemnity was paid by the vendee a retro b. at time of
execution sale a retro there be no fruits but there are fruits at time of
redemption – pro-rated between vendor a retro and vendee a retro
giving the vendee a retro a part corresponding to the time he possessed
the land.
PRE-EMPTION REDEMPTION
1. Arises before sale Arises after sale
2. No rescission because no There can be rescission of the
sale exists yet original sale
3. The action is directed Action is directed against buyer
against prospective seller
ASSIGNMENT See Arts . 1624 – 1634
I. ASSIGNMENT: The owner of a credit transfers to another his rights
and actions in consideration of a price certain in money or its
equivalent.
1. transfers the right to collect the full value of the credit, even if he
paid a price less than such value 2. transfers all the accessory rights
(e.g. guaranty, mortgage, pledge, preference) 3. debtor can set up
against the assignee all the defenses he could have set up against the
assignor.
II. What Makes Assignment Different From Species Sale?
1. Technical term but basically a sale 2. Sale of credits and other
incorporeal things
III. Effects of Assignment 1. lack of knowledge or consent of debtor not
essential for validity but has legal effects 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 of later ones until he had knowledge of the
assignment 3. debtor has consented to assignment – cannot set up 4.
compensation unless assignor was notified by debtor that he reserved
his right to the compensation 5. debtor has knowledge but no consent
substantially all of business 3. of all or substantially all of fixtures and equipment’s
- may still set up compensation of debts previous to assignment but
not the subsequent ones.
IV. Transfer of Ownership 1. by tradition and not by perfection 2. by
execution of public instrument because intangibles cannot be
physically transferred 3. Without necessity of delivering the document
evidencing the credit. 4. This rule does not apply to negotiable
documents and documents of title which are governed by special laws.
V. Effect of payment of debtor after assignment of credit 1. Before
Notice of the Assignment
a. Payment to the original creditor is valid and debtor shall be released
from his obligation 2. After Notice a. Payment to the original creditor
is not valid as against the assignee b. He may be made to pay again by
the assignee
VI. Warranties of the assignor of credit 1. NO warranty against hidden
defect - N/A because intangibles has no physical existence 2. He
warrants the existence and legality of credit - there is warranty except
when expressly sold as a doubtful account a. NO warranty as to the
solvency of debtor unless it is expressly stipulated OR unless the
insolvency was already existing and of public knowledge at the time of
the assignment b. warranty shall last for 1 year only c. one who assigns
inheritance right w/o enumerating rights shall be answerable for his
character as an heir d. one who sells whole of certain rights for a lump
sum, shall be answerable for legitimacy of the whole in general but not
for each of the various parts the assignee
VII. Breach of Warranty: Liabilities of the assignor of credit for violation
of his warranties 1. Assignor in good faith a. Liability is limited to price
received, expenses of the contract and other legitimate payments made
by reason of the assessment 2. Assignor in bad faith a. Liable ALSO for
(expenses of contract and other legitimate payments plus useful and
necessary expenses) damages
VIII. Assignment of Credit or Incorporeal Right in Litigation -
Requisites: 1. There must be a sale or assignment of credit 2. There
must be a pending litigation 3. The debtor must pay the assignee: a.
price paid by him AND b. judicial costs incurred by him AND c. interest
on the price from the date of payment 4. The right must be exercised
by the debtor within 30 days from the date the assignee demands
(judicially or extrejudicially) payment from him
NOTE: Presumption: buyer’s purpose is speculation and; law would
rather benefit the debtor of such credits rather than the one who
merely speculates for profit.
NOTE: 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
IX. 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-owner; the law does not favor co-ownership 2.
assignment to creditor in payment for his credit a. presumption is that
the assignment is above suspicion; assignment is in the form of dacion
en pago, thus perfectly legal 3. assignment to possessor of tenement or
piece of land which is subject to the right in litigation assigned a.
purpose is to presumably preserve the tenement
BULK SALES LAW
I. Purpose: Protect creditor of merchant stores.
II. When sale or transfer in bulk? - Any sale, transfer, mortgage, or
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assignment 1. Of goods other than in ordinary course of business 2. of
all or
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Law on Sales Reviewer

III. Should cover only merchants because creditors cannot get

adequate security because goods are sold ordinarily in course of
business

IV. When sale or transfer NOT covered by Bulk Sales Law: 1. If the
transfer is in the ordinary course of trade and the regular prosecution
of the business of the vendor 2. If it is made by one who produces and
delivers a written waiver of the provisions of the Bulk Sales Law from
its creditors 3. If it is made by an executor, administrator, receiver,
assignee in insolvency, or public officer, acting under judicial process
(Section 8); and 4. If it refers to properties exempt from attachment or
execution (ROC, Rule 39, Sec. 12)

V. Protection accorded to creditors by Bulk Sales Law: 1. It requires

the vendor, mortgagor, transferor, or assignor to deliver to the vendee, Failure to On Transaction On Seller
mortgagee, or to his or its agent or representative a sworn written Prepare and Fraudulent and Criminal liability
statement of names and addresses of all creditors to whom said deliver sworn Void
vendor, etc. may have been indebted together with the amount due or listing of creditors
to be due (Section 3) 2. It requires the vendor, mortgagor, transferor, or Apply proceeds Fraudulent and Criminal Liability
assignor, at least 10 days before the sale, transfer, mortgage, prorata to listed void
assignment to make a full detailed inventory showing the quantity and creditors
the cost of the price, terms and conditions of the sale, etc. (Sec. 5) Make advance Not void No Criminal liability
written disclosure
VI. Duty of seller to perform the following when transaction is within of transactions to
the coverage of law 1. make sworn statement of listing of creditors 2. creditors
delivery of sworn statement to buyer 3. apply the proceeds pro-rata to
claims of creditors shown in verified statement 4. written advance Register sworn Not void No Criminal liability
disclosure to creditors statement with
DTI
VII. Effects of False Statements in the Schedule of Creditors 1. Without Include or omit Void Criminal liability
knowledge of buyer a. If the statement is fair upon its face and the names of
buyer has no knowledge of its incorrectness and nothing to put him on creditors and
inquiry about it, he will be protected in its purchase b. The remedy of correct amount
the creditor is not against the goods but to prosecute the seller due in the
criminally statement

2. With knowledge or imputed knowledge of buyer a. The vendee Sale for no Void Criminal liability
accepts it at his peril b. The sale is valid only as between the vendor and consideration
the vendee but void against the creditors 3. With names of certain
creditors without notice are omitted from the list a. The sale is VOID as
to such creditors, whether the omission was fraudulent or not. 4. With
respect to an innocent purchaser for value from the original purchaser Anti-Dummy Law
a. An IPV from the original purchaser is protected b. However if the
circumstances are such as to bind the subsequent purchaser with I. Penalizes Filipinos who permit aliens to use them as nominees or
constructive notice that the sale to the vendor (original purchaser) was dummies to enjoy privileges reserved only for Filipinos. II.
fraudulent, the property will be liable in his hands to creditors of the Management, operation as officers, employees or laborers. III.
original vendor Includes Control or non-control positions

VIII. Effects of violation of Law on Transfer 1. As between parties a.

The Bulk Sales Law does NOT in any way affect the validity of the
transfer as between the intermediate parties thereto b. A sale not in
compliance with the Bulk Sales Law is valid against all persons other
than creditors 2. As against creditors a. A purchaser in violation of the
law acquires no right in the property purchased as against the creditors
of the seller b. His status is that of a trustee or receiver for the benefit
of the creditors of the seller; as such, he is responsible for the
disposition of the property.

IX. Remedies available to creditors 1. The proper remedy is one against

the goods to subject them to the payment of the debt, such as
execution, attachment, garnishment, or by a proceeding in equity 2. An
ordinary action against the purchaser to obtain money judgment will
NOT lie, unless the purchaser has sold or otherwise disposed of, or
dealt with the property, so as to become personally liable to the
creditors for value of it.

X. Effects of Non-Compliance
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