• Where there is a “stipulation as to credit” !
a period for payment of the
price has been fixed in the contract
• In the absence of any stipulation as to credit ! the seller is entitled to the
payment of the price at the same time that he transfers the possession of
the goods
• The seller has lien upon the goods until payment or tender of the entire
price
EXPIRATION OF THE TERM OF CREDIT
• The buyer is entitled to possession of the goods without paying the price !
but if he fails to exercise high right until the term of the credit has expired
and the price becomes due ! he loses the right which he therefore had
• Obligation of the buyer to pay will also be governed by 1524
INSOLVENCY OF THE BUYER
• When one party to a bilateral contract is incapacitated from performing his
part of the agreement, the other party also is excused from performing
• Insolvency does NOT dissolve the bargain ! it merely revives the seller’s
lien
• Insolvency is one of the grounds for the loss of the right to make use of the
period fixed in an obligation
• Insolvent – A person who either ceased to pay his debts in the ordinary
course of business or cannot pay his debts as they become due, whether
insolvency proceedings have been commenced or not
UNPAID SELLER AS BAILEE FOR THE BUYER
• For the ownership having passed, the seller is necessarily holding the
buyer’s goods and, therefore, acting baliee for him
• And though he is has charged the buyer storage for the goods, the lien
may still be asserted
ART. 1528. Where an unpaid seller has made part of delivery of the goods, he
may exercise his right of lien on the remainder, unless such part delivery has
been made under such circumstances as to show an intent to waive the lien or
right of retention.
LIEN GENERALLY NOT LOST BY PART DELIVERY
• When part of the goods are delivered ! unpaid seller has lien upon the
remainder for the proportion of the price which is due on account of the
goods so retained
• If the delivery of the part is intended as symbolical delivery of the whole
= waiver of any right of retention as to remainder ! lien is lost
o The intent to make such waiver = may be inferred from the
circumstances
Article 1529. The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the ownership in the goods or the
right to the possession thereof;
  © Michelle Duguil, 39
DE LEON SALES REVIEWER
(2) When the buyer or his agent lawfully obtains possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose his lien by
reason only that he has obtained judgment or decree for the price of the
goods. (n)
WHEN UPAID SELLER LOSES HIS POSESSORY LIEN
1. Delivery to the agent or bailee of buyer
2. Possession of the buyer or his agent
3. Waiver of the lien
DELIVERY TO THE AGENT OR BAILEE OF BUYER
• An unconditional deliver to an agent or baliee for the buyer, so far as the
seller’s lien is concern ! is the same delivery to the buyer himself
• It is true that he can stop them, but he no longer has a lien on them since
he is no longer in possession
POSSESSION OF THE BUYER OR HIS AGENT
• If the goods are already in the possession of the buyer at the time of
bargain ! the ownership has transferred and the buyer has no possession
necessary for lien
o E: If goods are taken wrongfully and if possession of buyer is
merely for examination of the goods
WAIVER OF THE LIEN
• The seller may lose his lien either by express agreement to surrender it
• Or by such conduct as estops him from asserting it
REVIVAL OF LIEN AFTER DELIVERY
• If the buyer refuses to receive the goods after they have been delivered
to a carrier or other bailee on his behalf ! seller may reclaim the goods
and revest himself with his lien
• Buyer returns the goods in wrongful repudiation of the sale ! lien on
the purchase price is revived prov that seller makes it clear that is not
assenting to the rescission of the sale
o E: The return of the goods by the buyer to the seller, not in
repudiation of the sale, but for special purpose (ex. repairs or
alteration by the seller) ! X revive lien of the seller
Article 1530. Subject to the provisions of this Title, when the buyer of goods is
or becomes insolvent, the unpaid seller who has parted with the possession
of the goods has the right of stopping them in transitu, that is to say, he may
resume possession of the goods at any time while they are in transit, and he
will then become entitled to the same rights in regard to the goods as he
would have had if he had never parted with the possession. (n)
RIGHT OF SELLER TO STOP GOODS IN TRANSITU
• Right which a seller of goods on credit has to recall them or retake them
while they are in the possession of the carrier or other middleman who
received them for delivery to the buyer, on discovery of insolvency of the
buyer
• Right is exercised either by:
o Obtaining actual possession of the goods or
o By giving notice of his claim to the carrier or other bailee in
possession
• Entitled to the same rights to the goods as if he has never parted with the
possession thereof
• Right continues while the goods are in the hands of the carrier and
terminates when the consignee or bona fide transferee obtains lawful
possession of the goods shipped
• If the seller delivers the goods to the buyers on wharf and the buyer ships
the goods by vessel in his own name ! the seller no longer has right of
stoppage in transitu, as there was an absolute delivery to the buyer
REQUISITES FOR THE EXISTENCE OF THE RIGHT OF STOPPAGE IN
TRANSITU
1. Seller must be unpaid
2. Buyer must be insolvent
3. Goods must be in transit
4. Seller must either actually take possession of the goods sold or give notice
of his claim to the carrier or other person in possession
5. Seller must surrender the negotiable document of title, if any issued by the
carrier or bailee
6. The seller must bear the expenses of delivery of the goods after the
exercise of the right
SALE OR CREDIT
• No right of SIT exists in cash sales
• Sale must be on credit, whether in definite terms or not
TITLE TO GOODS IN THE BUYER
• Right of SIT is not defeated by the fact that title to the goods has passed to
the buyer
• The right applies where the title of the goods in transit has vested in an
insolvent buyer, who has not paid the entire purchase price
INSOLVENCY OF THE BUYER
• Does not require the buyer be absolutely bankrupt or have been formally
adjudged a bankrupt
• Sufficient that he is unable to pay his just debts in the ordinary course of
business
• The following circumstances do NOT justify the exercise of SIT:
1. A buyer was in DEFAULT in the performance of his obligations
  © Michelle Duguil, 40
DE LEON SALES REVIEWER
2. The DEATH of the buyer (unless his estate is insolvent)
3. The fact that the goods have been LEVIED ON by attaching creditors
of the buyer (if the buyer was not insolvent)
• It is sufficient that the buyer became insolvent before he has taken
possession of the goods
• If the seller knew that the buyer was insolvent at the time of sale ! he
cannot claim the right of SIT
EFFECT OF EXERCISE OF RIGHT BY SELLER
1. Right to same position as before sale
2. Right to recover possession
3. Right to recovery agreed price
Article 1531. Goods are in transit within the meaning of the preceding article:
(1) From the time when they are delivered to a carrier by land, water, or air, or
other bailee for the purpose of transmission to the buyer, until the buyer, or
his agent in that behalf, takes delivery of them from such carrier or other
bailee;
(2) If the goods are rejected by the buyer, and the carrier or other bailee
continues in possession of them, even if the seller has refused to receive
them back.
Goods are no longer in transit within the meaning of the preceding article:
(1) If the buyer, or his agent in that behalf, obtains delivery of the goods before
their arrival at the appointed destination;
(2) If, after the arrival of the goods at the appointed destination, the carrier or
other bailee acknowledges to the buyer or his agent that he holds the goods
on his behalf and continues in possession of them as bailee for the buyer or
his agent; and it is immaterial that further destination for the goods may have
been indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses to deliver the goods to the
buyer or his agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or airplane chartered
by the buyer, it is a question depending on the circumstances of the particular
case, whether they are in the possession of the carrier as such or as agent of
the buyer.
If part delivery of the goods has been made to the buyer, or his agent in that
behalf, the remainder of the goods may be stopped in transitu, unless such
part delivery has been under such circumstances as to show an agreement
with the buyer to give up possession of the whole of the goods. (n)
WHEN GOODS ARE IN TRANSIT
• The goods are not yet in transit until they are delivered to a carrier or other
bailee for the purpose of transmission to the buyer
• Mere arrival of the goods at or on the premises of the carier at the point of
destination ! X terminate the transportation and RSIT
• Transit includes not only the carriage of the goods to destination, but
delivery according to the terms of the contract
• Mere act of middleman or carrier giving notice to the buyer regarding the
arrival of the goods ! X terminate transit
THE GOODS ARE IN TRANSIT
1. After deliver to a carrier or other bailee and before the buyer or his agent
takes delivery of them
2. If the goods are rejected by the buyer, and the carrier or other bailee
continues in possession of them
WHEN GOODS CONSIDERED NO LONGER IN TRANSIT
1. After delivery to the buyer or his agent in that behalf
2. If the buyer or his agent obtains possession of the goods at a point before
the destination originally fixed
3. If the carrier or bailee acknowledges to hold the goods on behalf of the
buyer
4. If the carrier or bailee wrongfully refuses to deliver the goods to the buyer
ATTORNMENT BY THE BAILEE
• The right to stop the goods may be terminated not simply by delivery to the
buyer, but by attornment of the bailee to the buyer
• In order to terminate seller RSIT, carrier must enter into a new relation to
hold the goods for the buyer as his agent and not for the purpose of
expediting them to the place of original destination
EFFECT OF REFUSAL OF CARRIER TO ATTORN OR DELIVER GOODS
• Carrier X allowed to enlarge the seller’s right by wrongfully refusing to
deliver or attorn as the buyer’s agent
• BUT a rightful refusal of the carrier (ex. refusal of the buyer or his agent to
pay the freight) ! will not terminate the RSIT
DELIVERY TO A SHIP, ETC, CHARTED OR OWN BY THE BY BUYER
1. CHARTED BY THE BUYER
• Mere fact that the carrier is chartered by the buyer ! X make delivery
to the carrier a delivery to the buyer
2. OWNED BY THE BUYER
• Delivery to a vessel belonging to the buyer is delivery to the buyer
EFFECT OF PARTIAL DELIVERY
• The mere fact that part of the goods has been delivered ! X deprive the
seller of the right to stop with respect to the remainder
  © Michelle Duguil, 41
DE LEON SALES REVIEWER
o E: if it shown that the seller has an agreement with the buyer to
give up possession of the whole of the goods
Article 1532. The unpaid seller may exercise his right of stoppage in transitu
either by obtaining actual possession of the goods or by giving notice of his
claim to the carrier or other bailee in whose possession the goods are. Such
notice may be given either to the person in actual possession of the goods or
to his principal. In the latter case the notice, to be effectual, must be given at
such time and under such circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to the carrier, or
other bailee in possession of the goods, he must redeliver the goods to, or
according to the directions of, the seller. The expenses of such delivery must
be borne by the seller. If, however, a negotiable document of title representing
the goods has been issued by the carrier or other bailee, he shall not be
obliged to deliver or justified in delivering the goods to the seller unless such
document is first surrendered for cancellation. (n)
WAYS OF EXERCISING THE RIGHT TO STOP
1. By taking actual possession of the goods
2. By giving notice of his claim to the carrier or bailee
TAKING ACTUAL POSSESSION OF THE GOODS
• Includes not only the power to stop delivery but to order redelivery to
himself
• Seller has obligation to pay the freight and other necessary expenses of
the delivery
BY GIVING NOTICE OF HIS CLAIM TO THE CARRIER OR BAILEE
• Mere notice to the buyer of the exercise of the seller’s right ! X sufficient
• Seller must make a demand upon the carrier or notice to the carrier to stop
the goods
• No particular form of notice or demand is required
DUTIES AND LIABILITIES OF CARRIER
• The carrier’s refusal to redeliver possession to the seller after proper notice
of the exercise of the RSIT and the tender of freight charges ! will render
the carrier liable to the seller
• If the carrier delivers to the seller notwithstanding the proper notice from
the seller ! the carrier will be liable to the seller for the resulting loss
EFFECT OF OUTSTANING BILL OF LADING
• RSIT applies to straight (non-negotiable) or negotiable bills
• In the case of negotiable bills ! if the goods are covered by a negotiable
document of title, the carrier or bailee has no obligation to deliver the goods
to the seller UNLESS such document is first surrendered for cancellation
Article 1533. Where the goods are of perishable nature, or where the seller
expressly reserves the right of resale in case the buyer should make default,
or where the buyer has been in default in the payment of the price for an
unreasonable time, an unpaid seller having a right of lien or having stopped
the goods in transitu may resell the goods. He shall not thereafter be liable to
the original buyer upon the contract of sale or for any profit made by such
resale, but may recover from the buyer damages for any loss occasioned by
the breach of the contract of sale.
Where a resale is made, as authorized in this article, the buyer acquires a
good title as against the original buyer.
It is not essential to the validity of resale that notice of an intention to resell
the goods be given by the seller to the original buyer. But where the right to
resell is not based on the perishable nature of the goods or upon an express
provision of the contract of sale, the giving or failure to give such notice shall
be relevant in any issue involving the question whether the buyer had been in
default for an unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice of the time and place of
such resale should be given by the seller to the original buyer.
The seller is bound to exercise reasonable care and judgment in making a
resale, and subject to this requirement may make a resale either by public or
private sale. He cannot, however, directly or indirectly buy the goods. (n)
UNPAID SELLER’S RIGHT OF RESALE
1. WHEN RESALE ALLOWABLE
• Unpaid seller can only exercise this when:
1. He has a right of lien
2. Has exercised the RSIT
3. Goods are perishable in nature
4. Where the right to resell is expressly reserved in case the buyer
should make default
5. Where the buyer delays in the payment of the price for an
unreasonable time
• The language is permissive in nature rather than mandatory
• No distinction between resale before the transfer of ownership and
after the transfer of ownership
2. EFFECT OF RESALE
• Seller is not liable for any profit made by such resale
• But if he sells for less than the price ! he may sue for the balance
• The new buyer acquires goods title to the goods as against the original
buyer provided that the resale is made in accordance with Art 1533
(par 2.)
• There is no need for an action for rescission to authorize the seller,
who is still in possession, to dispose of the property where the buyer
fails to pay the price and take delivery
3. NOTICE OF RESALE NOT ESSENTIAL
  © Michelle Duguil, 42
DE LEON SALES REVIEWER
• A notice by the seller of his intention to resell may operate to fix the
time within which it is reasonable that the buyer should perform the
obligations
• GR: Where the right to resell is reserved, the failure to give notice shall
be relevant upon the question whether the buyer has been in default
for an unreasonable time
o E: In cases of perishable goods
4. MANNER OF RESALE
• It is sufficient to have “with a fair sale made in GF according to the
established business methods with no attempt to take advantage of
the vendee”
• Seller cannot however, directly or indirectly buy the goods
5. TIME OF RESALE
• Must be made within a reasonable time after the breach
• But if the seller acts prudently and with reasonable care and judgment,
the time of resale is, to a certain extent at least, is within his discretion
6. PLACE OF RESALE
• The seller is ordinary required to resell the goods at the place of
deliver ! however, this is not a rigid rule
• If the seller is unable to sell readily at a fair price at the place of
delivery and can get a better price by reshipment and sale at another
place ! he may do so
Article 1534. An unpaid seller having the right of lien or having stopped the
goods in transitu, may rescind the transfer of title and resume the ownership
in the goods, where he expressly reserved the right to do so in case the buyer
should make default, or where the buyer has been in default in the payment of
the price for an unreasonable time. The seller shall not thereafter be liable to
the buyer upon the contract of sale, but may recover from the buyer damages
for any loss occasioned by the breach of the contract.
The transfer of title shall not be held to have been rescinded by an unpaid
seller until he has manifested by notice to the buyer or by some other overt
act an intention to rescind. It is not necessary that such overt act should be
communicated to the buyer, but the giving or failure to give notice to the
buyer of the intention to rescind shall be relevant in any issue involving the
question whether the buyer had been in default for an unreasonable time
before the right of rescission was asserted. (n)
UNPAID SELLER’S RIGHT OF RESCISSION
1. WHEN SELLER MAY RESCIND
1. He has a right of lien
2. Has exercised the RSIT
3. Where the right to rescind is expressly reserved in case the buyer should
make default
4. Where the buyer delays in the payment of the price for an unreasonable
time
2. EFFECT OF RESCISSION
 • The seller resumes ownership in the goods
• The seller shall not be liable to the buyer upon the contract of sale !
But the buyer shall be liable to the seller for damages for any loss
occasioned by the breach of contract
3. MANNER OF RESCISSION
• An election by the seller to rescind may be manifested by:
o Notice to the buyer
o Some other overt act showing an intention to rescind
o E to E: Vendor will not be complied to make delivery in case the
vendee shall lose the right to make use of the term provided in
1198 of the CC and such vendee has not yet paid the price.
Article 1198. The debtor [buyer] shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless
he gives a guaranty or security for the debt;

Article 1535. Subject to the provisions of this Title, the unpaid seller's right of
lien or stoppage in transitu is not affected by any sale, or other disposition of
the goods which the buyer may have made, unless the seller has assented
thereto.
If, however, a negotiable document of title has been issued for goods, no
seller's lien or right of stoppage in transitu shall defeat the right of any
purchaser for value in good faith to whom such document has been
negotiated, whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such document, of the
seller's claim to a lien or right of stoppage in transitu. (n)
(2) When he does not furnish to the creditor the guaranties or securities which
he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through a fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the
creditor agreed to the period;
(5) When the debtor attempts to abscond.

EFFECT OF SALE OF GOODS SUBJECT TO LIEN OR STOPPAGE IN

TRANSITU
1. WHERE GOODS ARE NOT COVERED BY NEGOTIABLE DOCUMENT
OF TITLE
• When goods are subject to a legal lien, as they are when an unpaid
seller in possession of them ! a purchaser from the original buyer can
acquire only such right as the buyer had
• The seller can give no larger rights than he has
2. WHERE GOODS COVERED BY NEGOTIABLE DOCUMENT OF TITLE
• If goods are covered by NDT ! the seller’s lien CANNOT prevail
against the rights of a purchaser for value in GF to whom the
document was indorsed
• The term purchaser as used in this article ! includes mortgagee and
pledgee

ART. 1536. The vendor is not bound to deliver the thing sold in case the
vendee should lose the right to make use of the term as provided in article
1198.

RIGHT OF VENDOR TO WITHHOLD DELIVERY IN SALE ON CREDIT

• GR: The vendor is not bound to make delivery if the vendee has not paid
the price
o E: If, however a period has been fixed for the payment ! the
vendor must deliver the thing sold though the price be not first
paid

 
 
 
 
 
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DE LEON SALES REVIEWER

LIEN ON THE GOODS OR RIGHT
TO RETAIN THEM
DEFINITION Lien – a charge upon the property
for the payment or discharge of a
debt or duty. A right, which the law
gives to the debt, satisfied out of a
particular thing.
Possessory lien (1527-1529) -
Entitles the seller to retain
possession of the goods as security
for the purchase price
WHEN 4. Sale without stipulation as to
EXERCISED credit
5. Expiration of the term of credit
6. Insolvency of the buyer
  © Michelle Duguil, 44
DE LEON SALES REVIEWER
SPECIAL REMEDIES OF UNPAID SELLER
RIGHT OF STOPPING THE GOODS IN RIGHT OF RESALE RIGHT TO RESCIND RIGHT OF WITHHOLDING
TRANSITU DELIVERY
Right which a seller of goods on credit has If title X passed to buyer yet
to recall them or retake them while they (unpaid owner retains
are in the possession of the carrier or ownership) ! right of
other middleman who received them for
WITHHOLDING the delivery
delivery to the buyer, on discovery of
insolvency of the buyer
GR: The vendor is not bound to
make delivery if the vendee has
not paid the price
• E: If, however a period
has been fixed for the
payment ! the vendor
must deliver the thing
sold though the price be
not first paid
• E to E: Vendor will not
be complies to make
delivery in case the
vendee shall lose the
right to make use of the
term provided in 1198
of the CC and such
vendee has not yet paid
the price.
REQUISITES FOR EXISTENCE OF RSIT: 1. He has a right of lien 1. He has a right of Article 1198. The debtor [buyer]
7. Seller must be unpaid 2. Has exercised the lien shall lose every right to make
8. Buyer must be insolvent RSIT 2. Has exercised use of the period:
9. Goods must be in transit
3. Goods are perishable the RSIT
10. Seller must either actually take
possession of the goods sold or give in nature 3. Where the right (1) When after the obligation has
notice of his claim to the carrier or 4. Where the right to to rescind is been contracted, he becomes
other person in possession resell is expressly expressly reserved insolvent, unless he gives a
11. Seller must surrender the negotiable reserved in case the in case the buyer guaranty or security for the debt;
document of title, if any issued by the buyer should make should make
carrier or bailee default default (2) When he does not furnish
12. The seller must bear the expenses of 5. Where the buyer 4. Where the buyer to the creditor the guaranties
delivery of the goods after the
delays in the payment delays in the or securities which he has
exercise of the right
of the price for an payment of the promised;
THE GOODS ARE IN TRANSIT unreasonable time price for an
3. After deliver to a carrier or unreasonable time (3) When by his own acts he has
other bailee and before the impaired said guaranties or
buyer or his agent takes securities after their
delivery of them establishment, and when through
4. If the goods are rejected by a fortuitous event they
the buyer, and the carrier or disappear, unless he
other bailee continues in immediately gives new ones
possession of them equally satisfactory;
(4) When the debtor violates
 any undertaking, in
consideration of which the
creditor agreed to the period;

(5) When the debtor attempts to

abscond.
EFFECT When part of the goods are 4. Right to same position as before sale • Seller is not liable for • The seller
delivered ! unpaid seller has lien 5. Right to recover possession any profit made by resumes
upon the remainder for the 6. Right to recovery agreed price such resale ownership in
proportion of the price which is due
on account of the goods so retained EFFECT OF REFUSAL OF CARRIER TO • But if he sells for less the goods
ATTORN OR DELIVER GOODS than the price ! he • The seller shall
If the delivery of the part is intended • Carrier X allowed to enlarge the may sue for the not be liable to
as symbolical delivery of the seller’s right by wrongfully refusing to balance the buyer upon
whole = waiver of any right of deliver or attorn as the buyer’s agent • The new buyer the contract of
retention as to remainder ! lien is • BUT a rightful refusal of the carrier acquires goods title to sale ! But the
lost (ex. refusal of the buyer or his agent the goods as against buyer shall be
• The intent to make such to pay the freight) ! will NOT the original buyer liable to the
waiver = may be inferred terminate the RSIT
from the circumstances provided that the seller for
EFFECT OF PARTIAL DELIVERY resale is made in damages for
• The mere fact that part of the goods accordance with Art any loss
has been delivered ! X deprive the 1533 (par 2.) occasioned by
seller of the right to stop with respect • There is no need for the breach of
to the remainder an action for contract
o E: if it shown that the seller rescission to authorize
has an agreement with the
the seller, who is still
buyer to give up
possession of the whole of
in possession, to
the goods dispose of the property
where the buyer fails
EFFECT OF OUTSTANING BILL OF to pay the price and
LADING take delivery
• RSIT applies to straight (non-
negotiable) or negotiable bills EFFECT OF SALE OF
• In the case of negotiable bills ! if the GOODS SUBJECT TO
goods are covered by a negotiable LIEN OR STOPPAGE IN
document of title, the carrier or bailee
TRANSITU
has no obligation to deliver the goods
to the seller UNLESS such document
is first surrendered for cancellation WHERE GOODS ARE
NOT COVERED BY
NEGOTIABLE
DOCUMENT OF TITLE
• When goods are
subject to a legal lien,
as they are when an
unpaid seller in
possession of them
! a purchaser from
the original buyer can
acquire only such right
as the buyer had
            © Michelle Duguil, 45
DE LEON SALES REVIEWER
 • The seller can give no
larger rights than he
has
WHERE GOODS
COVERED BY
NEGOTIABLE
DOCUMENT OF TITLE
• If goods are covered
by NDT ! the seller’s
lien CANNOT prevail
against the rights of a
purchaser for value in
GF to whom the
document was
indorsed
• The term purchaser as
used in this article !
includes mortgagee
and pledgee
MANNER 1. Obtaining actual possession of the • It is sufficient to have 1. Notice to the
goods or “with a fair sale made buyer
2. By giving notice of his claim to the 2. Some other overt
in GF according to the
carrier or other bailee in possession
established business act showing an
methods with no intention to rescind
attempt to take
advantage of the
vendee”
• Seller cannot however,
directly or indirectly
buy the goods
WHEN LOST 4. Delivery to the agent or bailee WHEN GOODS CONSIDERED NO
of buyer LONGER IN TRANSIT
5. Possession of the buyer or his 5. After delivery to the buyer or
agent
his agent in that behalf
6. Waiver of the lien
6. If the buyer or his agent
obtains possession of the
goods at a point before the
destination originally fixed
7. If the carrier or bailee
acknowledges to hold the
goods on behalf of the buyer
8. If the carrier or bailee
wrongfully refuses to deliver
the goods to the buyer

 
 
 
 
 
  © Michelle Duguil, 46
DE LEON SALES REVIEWER
ART. 1536. The vendor is not bound to deliver the thing sold in case the
vendee should lose the right to make use of the term as provided in article
1198.
RIGHT OF VENDOR TO WITHHOLD DELIVERY IN SALE ON CREDIT
• GR: The vendor is not bound to make delivery if the vendee has not paid
the price
o E: If, however a period has been fixed for the payment ! the
vendor must deliver the thing sold though the price be not first
paid
o E to E: Vendor will not be complied to make delivery in case the
vendee shall lose the right to make use of the term provided in
1198 of the CC and such vendee has not yet paid the price.
Article 1198. The debtor [buyer] shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless
he gives a guaranty or security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which
he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through a fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory;
sale of the accessions and accessories is NOT sufficient to convert title or
right to the former
NOTE:
Accessions - are the fruits of a thing; or additions to, or improvements upon, a thing
such as the young of animals, house or trees on land, etc.
Accessories – anything attached to a principal thing for its completion, ornament, or
better use such as a picture frame, key of house, etc
RIGHT OF VENDEE TO THE FRUITS
1. WHEN VENDEE ENTITLED
• The vendee has the right to fruits of the thing sold from the time the
obligation to deliver arises
• The obligation to deliver arises upon the perfection of the contract
2. WHEN VENDEE NOT ENTITLED
• Rule provided in 1537 par 2 is modified by agreement of the parties
! agreement shall govern
• If the buyer rescinds the contract instead of exacting the fulfillment
! entitled only to damages (interest, atty’s fees) and costs but not
claim of the fruits of the thing sold
• Contract of promise to sell ! only right of the parties is to reciprocally
demand the fulfillment of the contract

(4) When the debtor violates any undertaking, in consideration of which the
creditor agreed to the period;
(5) When the debtor attempts to abscond.
ART. 1537. The vendor 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.
All the fruits shall pertain to the vendee from the day on which the contract
was perfected.
ART. 1538. In case of loss, deterioration or improvement of the thing before its
delivery, the rules in article 1189 shall be observed, the vendor being
considered the debtor.
RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT OF THING
BEFORE DELIVERY
Art. 1189
When the conditions have been imposed with the intention of suspending the
efficacy of an obligation to give, the following rules shall be observed in case of the
improvement, loss, or deterioration of the thing during the pendency of the condition:

CONDITION OF THING TO BE DELIVERED LOST WITHOUT FAULT OF DEBTOR Obligation = extinguished

• The vendor is obliged to preserve the thing pending delivery because the LOST THRU FAULT OF DEBTOR Pay damages
thing sold and its accessions and the accessories must be in the condition
in which they were upon the perfection of the contract **When lost – when it perishes, goes out
• Duty of seller to deliver the thing sold in a condition suitable for its of commerce, or disappears in such a
enjoyment by the buyer for the purposes contemplated way that its existence is unknown or it
• Ex. It is the seller’s (subdivision lot seller) duty to construct the necessary cannot be recovered
roads in the subdivision that could serve as outlets DETERIORATES WITHOUT THE Impairment is borne by creditor
• Sale of a determinate thing (land) includes all its accessions (ex. house) FAULT OF THE DEBTOR
and accessories even though they may not have been mentioned ! the DETERIORATES THRU FAULT OF Creditor may choose between:

 
 
 
 
 
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DE LEON SALES REVIEWER
DEBTOR 1. Rescission + damages
2. Fulfillment + damages
THING IS IMPROVED BY ITS NATURE Improvement shall inure to benefit of the
OR BY TIME creditor
THING IMPROVED AT THE EXPENSE Debtor shall have no other right than
OF THE DEBTOR that granted to the usufructuary
Note: Both under Article 1480 (par 1&2) and 1538, the loss shall be at the risk of the
vendee pending delivery.
**Debtor – Seller ; Creditor – Buyer
ART. 1539. The obligation to deliver the thing sold includes that of placing in
the control of the vendee all that is mentioned in the contract, in conformity
with the following rules:
If the 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 number, the vendor shall be obliged
to deliver to the vendee, if the latter should demand it, all that may have been
stated in the contract; but, should this be not possible, the vendee may
choose between a proportional reduction of the price and the rescission of the
contract, provided that, in the latter case, the lack in the area be not less than
one-tenth of that stated.
The same shall be done, even when the area is the same, if any part of the
immovable is not of the quality specified in the contract.
The rescission, in this case, shall only take place at the will of the vendee,
when the inferior value of the thing sold exceeds one tenth of the price agreed
upon.
Nevertheless, if the vendee would not have bought the immovable had he
known of its smaller area or inferior quality, he may rescind the sale.
SALE OF REAL PROPERTY BY UNIT OF MEASURE OR NUMBER
ENTIRE AREA STATED IN CONTRACT MUST BE DELIVERED
• If the sale of real estate should be made with:
1. Statement of its area
2. At the rate of a certain price per unit of measure or number
• The cause of the contract with respect to the buyer ! the number of such
units, or if you wish, the thing purchased as determined by the stipulated
number of units
• Seller must deliver the entire property agreed upon
• Ex. Land (500 sqm, 1k/sqm) = vendor must deliver the entire area stated
• Immovable must be of the quality specified in the contract
WHERE ENTIRE AREA COULD NOT BE DELIVERED
• If all that is included within the stipulated boundaries is NOT delivered !
object of the contract is not delivered
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DE LEON SALES REVIEWER
• Buyer is entitled to:
1. Rescind it
2. Enforce the contract with corresponding decrease in price
WHEN VENDEE ENTITLED TO RESCIND SALE OF REAL PROPERTY
The right of rescission is available to the buyer in the following cases:
1. Lack in area is at least 1/10 than that stated or stipulated
- 1/10 is based on the area stipulated in the contract and not the real area
which the thing may actually have
2. Deficiency in the quality specified in the contract exceeds 1/10 of the price
agreed upon
3. Buyer would not have bough the immovable had he known of its smaller
area or inferior quality irrespective of the extent of the lack in area or quality
NOTE: The above remedies are also available under the second paragraph of 1542
(sale of real estate made in lump sum)
NOTE: In case of fulfillment ! buyer is entitled only to a proportionate reduction of
the price where there is a deficiency in area or number.
• Rule is different where there is a violation of the warranty against hidden
defects
• Seller is also liable for damages
ART. 1540. If, in the case of preceding article, there is a greater area or number
in the immovable than that stated in the contract, the vendee may accept the
area included in the contract and reject the rest. If he accepts the whole area,
he must pay for the same at the contract rate.
WHERE IMMOVABLE OF A GREATER AREA OR NUMBER
• The seller may accept the area included in the contract and reject the rest
• If he accepts the whole ! he makes himself liable for the price of the same
at the contract rate
• The buyer may NOT withdraw from the contract
ART. 1541. The provisions of the two preceding articles shall apply to judicial
sales.
APPLICATION OF ARTICLES 1539 and 1540 TO JUDICIAL SALES
• Applicable to both private (voluntary) and judicial sales
• When the immovable is lacking in area or is of inferior quality or is greater
in area than stated in the contract
• The reason is that the rules they contain are derived from the very nature
of the contract of sale
• HOWEVER, rules may be varied or suppressed by agreement between the
contracting parties
ART. 1542. In the sale of real estate made for a lump sum and not at the rate of
a certain sum for a unit of measure or number, there shall be no increase or
decrease of the price, although there be a greater or less area or number than
that stated in the contract.
The same rule shall be applied when two or more immovable are sold for a
single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number should
be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number
specified in the contract; and should he not be able to do so, he shall suffer a
reduction in the price, in proportion to what is lacking in the area or number,
unless the contract is rescinded because the vendee does not accede to the
failure to deliver what has been stipulated.
SALE OF REAL ESTATE MADE FOR A LUMP SUM
• In sale involving real estate, the parties may choose between 2 types of
pricing agreement:
1. A unit price contract – wherein the purchase price is determined by
way of reference to a stated rate per unit (ex. 1k/sqm)
2. Lump sum contract – states a full purchase price for an immovable
the area of which may be declared based on an estimate or where
both the area and boundaries are states (ex. 1m for 1k meters)
MISTAKE IN AREA STATED IN CONTRACT IMMATERIAL
• If sale is made in lump sump ! cause of contract is the thing sold
independent and irrespective of its number and measure
• Law presumes that buyer had in mind a determinate price for the real
estate and that he ascertained its area and quality before the contract was
perfected
• Presumption that buyer intended to buy a determinate thing in its entirety
and not just any unit of measure or number, and the price is determined
with relation to it
• Its greater or lesser area cannot influence the increase or decrease of the
price
• The boundaries of the land stated in the contract determine the effects and
scope of the sale, not the area thereof
• Seller is obligated to deliver all the land included within the boundaries
• Possibility of error is a hazard which the parties must be presumed to have
assumed ! hazard works both ways
• The rule in 1542 however has EXCEPTIONS
WHERE AREA OF NUMBER STATED TOGETHER WITH BOUNDARIES
• If the vendor cannot deliver to the vendee all that is included within the
boundaries mentioned in the contract ! the seller buyer has the option to:
1. Reduce the price in proportion to the deficiency
2. Set aside the contract
• “Should he not be able to do so” – refers to a situation when the seller,
either because a part or parcel of the real estate does not belong to him,
cannot deliver all that is included within the boundaries
  © Michelle Duguil, 49
DE LEON SALES REVIEWER
WHEN THERE IS CONFLICT BETWEEN AREA STIPULATED AND TITLE TO
PROPERTY
• The area included within the stipulated boundaries PREVAIL when the
boundaries are certain and no alteration thereof has been proved over that
which the title shows
• Not of vital consequence that a contract on sale of land should disclose the
area with mathematical accuracy
• Sufficient if its extent is objectively indicated with sufficient precision to
enable one to identify it
• It is the boundaries indicated in a deed of absolute sale and not the area in
sq meters mentioned therein that controls in the determination of which
portion of the land a vendee acquires
WHERE IDENTITY ERRONEOUSLY DESIGNATED PROPERTY CLEARLY
ESTABLISHED
• It does NOT vitiate consent of the parties or affect the validity and binding
effect of the contract
• Reason: One sells or buys property as he sees it in its actual setting and by
its physical metes and bounds, and not by the mere lot number assigned to
it in the certificate of title
• REMEDY: Document reformed
WHERE WORDS “ABOUT,” “MORE OR LESS,” ETC ARE USED
• The words when used in connection with quantity or distance, are words of
safety and caution, intended to cover some slight or unimportant
inaccuracy, and while enabling an adjustment to the imperative demands
or fixed monuments, they do NOT weaken or destroy the statement of
distance and quantity when no other guides are furnished
• The words “about,” “approximately,” and “more or less” in connection with
courses and distances ! may be disregarded if not controlled or explained
by monuments, boundaries and other expressions of intention
CONFLICT BETWEEN AREA STATED AND BOUNDARIES
1. WHERE BOUNDARIES GIVEN ARE SUFFICIENTLY CERTAIN
• An erroneous statement relative to the area of the questioned parcel
may be disregarded
• Boundaries prevail over the area because what defined a piece of
ground is not the area, calculated with more or less certainty,
mentioned in its description
2. WHERE BOUNDARIES DO NOT IDENTIFY LAND OR OVERLAPPING
BOUNDARIES EXISTS
• Above rule is NOT applicable where the boundaries relied upon do not
identify the land beyond doubt
• In this case, area stated in the document should be followed
• Where there appeared to be an overlapping of boundaries, the actual
size of the property gains importance
 3. WHERE DISCREPANCY IN MEASUREMENT IS SO GREAT GF
• When the land sough to be registed is almost 7x as much as that IMMOVABLE Ownership shall belong, in the order
described in the deed, the evidence as to natural boundaries must be stated hereunder:
very clear and convincing before that rule can be applied 1. Vendee who first registers the
sale in GF in the RD
ART. 1543. The actions arising from Articles 1639 and 1542 shall prescribe in 6 2. In the absence of registration
months, counted from the day of delivery. ! the vendee who first takes
possession in GF
PRESCRIPTION OF ACTIONS 3. In the absence of both
• The actions based on Article 1539 and 1542 for either: registration and possession !
1. Recission of contract or the vendee who presents the
2. Proportionate reduction of the price oldest title (who first bought
• Must be brought within 6 months counted from the day of delivery the property) in GF

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 possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.
WHEN ART. 1544 APPLICABLE
REQUISITES:
1. The 2 (or more) sales transactions must constitute valid sales;
2. The 2 (or more) sales transactions must pertain to exactly the same
subject matter
3. The 2 (or more) buyers at odds over the rightful ownership of the subject
matter must each represent conflicting interests; and
4. The 2 (or more) buyers at odds over the rightful ownership of the subject
matter must each have bought from the very same seller
NOTE: Art. 1544 CANNOT be invoked where 2 different contracts of sale are made
by 2 different persons, one of them not being the owner of the property sold
RULES AS TO PREFERENCE OF OWNERSHIP IN CASE OF A DOUBLE SALE
• It applies only to purchasers in GF
• If the SAME property is VALIDLY sold by the SAME vendor (who has an
existing right in the property sold and the power to dispose it), to
DIFFERENT vendees, each representing conflicting rights of said vendees
shall be resolved in accordance with the following rules:
KINDS OF PROPERTY OWNERSHIP
MOVABLE Vendee who first takes possession in
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DE LEON SALES REVIEWER
NOTE: The term “vendee” includes a mortgagee, lessee and other encumbrance for
value
PURCHASER IN GOOD FAITH
• One who buys the property of another without notice that some other
person has a right to or interest in, such property and pays full and fair
price for the same
SALES BY SINGLE VENDOR
• Art. 1544 contemplated a case of double or multiple sales by a single
vendor to 2 or more buyers
• Conveyance must have been made by a party who has an existing right in
the thing and the power to dispose of it
• It cannot be invoked where the 2 different contracts of sale are made by 2
different persons, one of them not being the owner of the property sold
• Even if the sale was made by the same person, if the second sale was
made when such person was no longer the owner of the property because
it has been acquired by the first purchaser in full dominion, the second
purchaser cannot acquire any right
TWO OR MORE SALES
1. SALE TO DIFFERENT VENDEES
• There must be at least 2 deeds of sale over the same property
• There is no double sale where after the sale of the property in favor of
a person, the vendor did not anymore execute another sale over the
same property in favor of another
2. VOIDABLE SALE
• 1544 is NOT applicable where there is only one valid sale, the
previous sale having been found fraudulent or where one deed of sale
was registered ahead of the other but said deed if found to a forgery !
the right of the other vendee should prevail
3. CONTRACT OF SALE FICTITOUS OR FORGED, OR SELLER WITHOUT
RIGHT TO SELL
• It does NOT apply if the contract of sale first registered is fictitious or
forged or
 • If the vendor is not the owner of the property sold and had no right to
sell the same
• E: A forged deed of sale of registered land can legally be the root of a
valid title when an IPV intervenes and the certificate of title has
already been transferred from the name of the true owner to the forger
• The remedy of the true owner if to bring an action for damages against
the one who cause or employed the fraud and if the latter is insolvent,
an action against the Treasurer of the Philippines may be filed for
recovery of damages against the Assurance Fund.
4. DONATION
• Art 1544 ✓ APPLIES to donations made to different donees
• A deed of donation executed with all the formalities of law is on the
same footing as a deed of sale in the form of a public instrument
• NOTE: Art. 1544 applies only if the same thing has been “sold” to
different vendees. Therefore, it does NOT apply if one transaction is a
sale and the other is a donation.
5. CONTRACTS TO SELL AND CONDITIONAL SALES
• X apply to contract to sell
• ✓Apply to conditional sales
6. SALE OF PROPERTY TO ONE PARTY AND ASSIGNMENT OF RIGHT
TO THE PROPERTY TO ANOTHER
• Par. 3 1544 does NOT apply to a case where the sale in favor of one
party was the property itself, while the transaction in favor of another
was a mere promise to assign, or at most, an actual assignment of the
right to repurchase the same property.
POSSESSION OF PROPERTY SOLD
• Possession means both actual physical delivery and constructive delivery
o Actual delivery – when the thing is placed under the control and
possession of the vendee
o Constructive delivery – when the sale is made through a public
instrument, the execution thereof shall be equivalent to delivery if
from the deed the contrary does not appear or cannot be clearly
inferred
• After the sale of realty by means of a public instrument, the vendor who
resells it to another, does not transmit anything to the second vendee, and
if the latter, by virtue of the second sale, takes material possession of the
thing, he does it as mere detainer, and it would be unjust to protect this
detention against the rights of the thing lawfully acquired by the first vendee
• The fact that the first sale was notarized does NOT mean that the second
sale cannot be given effect ! if the land is registered under the TS, the
rd
mere execution of a sale by means of a public instrument will not bind 3
persons (including the second buyer).
• If the first sale (albeit notarized) was not registered with the Register of
Deeds, and the second buyer acquired the same property in GF and
registers the sale in GF with the RD ! the second buyer should prevail
REGISTRATION OF IMMOVABLE SOLD
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DE LEON SALES REVIEWER
NOTE: A vendee has a preferred right over another vendee who has not registered
his title even if the latter is in actual possession if the immovable property
NOTE: More credit is given to registration than actual possession
• REGISTRATION MEANING
• Any entry made in the books of the Registry of Property which records
solemnly and permanently the right of ownership and other real rights
• When a deed of sale is inscribed in the registry of property on the
original document itself, what was done with respect to said entries or
annotations and marginal notes amounted to a registration of the sale
• REGISTRATION AS AN OPERATIVE ACT
• PD 1529 (Property Registration Decree)
• Parcels of land brought under the operation of the Torrens system are
considered registered lands
• The act of registration is the operative act to convey or affect the land
in so far as third persons are concerned
• As against privies of the seller, Failure to register will not violate the
vendee’s right of ownership conferred by an unregistered deed of sale
• A sale of registered land that was not registered with the RD will NOT
prevail over a subsequent sale that was registered in GF by the
second buyer
• Each RD us required to keep a primary entry book in which, upon
payment of the entry fee, he shall enter, in the order of their reception,
all instruments relating to the land. The instrument is regarded as
registered from the time so noted.
• Registration in its juridical aspect must be understood as the entry
made in a book or public registry of deeds.
• SALE REGISTERED IN GF
• Mere registration is NOT enough; GF must concur (Registration + GF
= entitled to priority)
• GOOD FAITH – without knowledge of the previous alienation by the
vendor to another or must not have been aware of facts which should
put him upon inquiry to acquaint him with the defect or lack of title of
his vendor
• The defense of indefeasibility of the Torrens Title does NOT extend
to a transferee who takes the certificate of title in BF
o NOTE: This defense refers to sale of lands and not sale of
properties situated therein
• SALE REGISTERED IN BF
• Art, 1544 does not declare void a deed of sale registered in BF ! BUT
it does not mean that such contract is not void
• To give full effect to the provision, the status of the 2 contracts must be
determined and clarified ! one contract must be declared valid so that
one vendee may exercise all the rights of an owner, while the other
contract must be declared void to cut off all rights which may arise
from said contract
• If registration is done in BF = no registration at all ! buyer who has
first taken possession of the property in GF shall be preferred or in the
 absence of possession, to the person who presents the oldest title in
GF.
• UNREGISTERED LAND
• Art. 1544 has NO application to land not registered under the Torrens
System
• NOTICE OF ADVERSE CLAIM WAS REGISTERED PREVIOUS TO
SALE TO POSSESSOR
• The first buyer has a superior right to the property since he was the
first who recorded his right in GF over the immovable property
• REGISTRATION OF DEED OF EXTRAJUDICIAL PARTITION
• Registration of a deed of extrajudicial partition does NOT operate as
rd
registration of the deed of sale in so far as 3 persons are concerned
because what could validly transfer or convey the vendee’s right to the
property to petitioners is the deed of sale and not the DEP which only
mentioned the DS
• ISSUANCE OF 2 CERTIFICATES
• The better approach is to trace the original certificates from which the
certificates of titles in dispute were derived
• Should there be only one common original certificate of title, the
transfer certificate issued on an earlier date along the line must prevail,
absent any anomaly or irregularity tainting the process of registration
• ISSUANCE OF TCT NOTED/NOT NOTED ON THE CT
1. The issuance of a TCT to the second buyer was noted in the OCT which
nd
was cancelled by virtue of the issuance ! 2 buyer acquired ownership
over lot since they were the first register in GF their sale in the DR as
compared to the first buyer whose TCT was never noted on the OCT
REQUIREMENTS OF GOOD FAITH
NOTE:
GF or BF is relevant only where:
o The subject of the sale is registered land and
o The purchase was made from the registered owner,
o Whose title to the land is clean, in which case
o The purchaser who relied on the clean title of the purchaser is
protected if he is a purchaser in good faith for value
If the land is unregistered and the seller had no right to sell it, the purchaser bought
the property at his own peril
Presumption: transferee of registered land is not aware of any defect in the title of
the property he purchased
Actual notice is equivalent to and more binding that presumed notice by registration
1. GOOD FAITH OF THE FIRST BUYER
• Prius tempore, patior jure – first in time, stronger in right
  © Michelle Duguil, 52
DE LEON SALES REVIEWER
• GF of the first buyer remains all throughout despite his subsequent
acquisition of knowledge of the subsequent sale
o E: When the second buyer registers in good faith the second sale
2. GOOD FAITH OF THE SECOND BUYER
• He is deemed a possessor in GF who is not aware that there exists in his
title or mode of acquisition any flaw which invalidates it
• Two fold requirement: Acquisition in GF and registration in GF
• The failure of a prospective buyer to take such precautionary steps would
mean negligence on his part and would thereby preclude him from claiming
or invoking the rights of a purchaser in GF
3. BURDEN OF PROOF
• Good faith is presumed
• It is upon those who allege the BF on the part of the possessor !
rests the burden of proof
• The burden of proving the status of one as a purchaser in GF and for
value ! lies upon him who asserts that status where the seller had none to
transmit to the purchaser and the other claimant is himself a purchaser in
GF from the successor-in-interest of the original title holder
• BF is a question of fact which must be proven by clear and convincing
evidence
• To determine GF or BF, the point in time to be considered is the moment
when the parties actually entered into the contract of sale
4. PRUCHASE MUST BE FOR VALUABLE CONSIDERATION
• Purchaser in Good Faith – one who buys property of another, without
notice that some other person has a right to, or interest in, such property
and pays a full and fair price for the same at the time of such purchase, or
before he has notice of the claim or interest of some other person in the
property
5. ACTUAL KNOWLEDGE
• Knowledge gained by the second buyer of the first sale defeats his rights
even if he is first to register, since such knowledge taints his registration
with bad faith
• The rule in this case would be that the ownership shall pertain to the
person, who in GF, first entered into possession of the property or in the
absence of possession, to the person who presents the oldest title,
provided there is GF
6. DUTY OF PURCHASER TO LOOK BEYOND THE CERTIFICATE
• GR: A buyer may rely on the TT of the seller in the absence of anything
which excited suspicion
o E: Where there exists important facts which would create
suspicion in an otherwise reasonable man to go beyond the
present title and to investigate those that preceded it
o E2: Banking institutions have the standard and indispensable duty
to ascertain the status or condition of the property and the validity
of the vendor’s (or mortgagor’s)
o E3: Financial institutions and realty corporations! requires higher
degree of diligence because of the nature of their business
o E4: Property purchased already peaceably possessed by another
in the concept of an owner
 • This rule only applied to purchasers in GF for value
7. PURCHASER WITH NOTICE OF RIGHT OF REPURCHASE WHICH HAS
ALREADY ELAPSED
• One who buys property with notice that it is subject to the right of
repurchase from his vendor (the vendee a retro in a previous sale),
although such right has already elapsed and there is no annotation of any
repurchase by the vendor a retro BUT the title has not yet been cleared of
the encumbrance, without looking into the right of redemption inscribed on
the title ! X purchaser in GF for he has notice that some other person
could have a right or interest in the property
8. ADVERSE CLAIM OR LIS PENDIS PREVIOUSLY ANNOTATED ON TITLE
OF PROPERTY SOLD
• A subsequent sale of land cannot prevail over an annotated adverse claim
which was previously annotated in the certificate of title of the property
• A prior judicial determination of the validity of the adverse claim before it
can flaw the title of the subsequent transferees X required
• Annotation of an adverse claim – measure designed to protect the
interest of a person over a piece of property and serves as a notice and
warning to third parties dealing with said property that someone is claiming
an interest in the same or may have better right than the registered owner
thereof
o E: When the alleged flaw (notice of lis pendis) was already being
cancelled at the time of purchase
9. PURCHASER EXAMINED ONLY THE LAST CERTIFICATE OF TITLE
• To be a purchaser in GF, it is enough that he examines the latest certificate
of title
• He is not bound by the OCT but only the certificate of title of the person
from whom he purchased the property
SALES INVOLVING UNREGISTERED LAND
1. GENERAL PRINCIPLES
• Art. 1544 does NOT apply to sales involving unregistered lands
• Section 113 of PD1529 – No deed, conveyance, mortgage, lease or other
voluntary instrument affecting land not registered under the TS shall be
valid, except as between the parties thereto, unless such instrument shall
been recorded in the manner prescribed herein in the office of the RD for
the province or city where the land lies… Any recording made under this
section shall be without prejudice to a third party with a better right
• Registration is given some priority, provided that there is no other party
with a better right
2. SALE OF UNREGISTERED LAND
• First buyer would have a better right in view of the fact that his claims is
based on a prior sale coupled with OCEN thereof as an owner
3. UNREGISTERED LAND SUBQUENTLY REGISTERED
• Where the land was unregistered at the time of the first sale, but was
already registered at the time of the second sale ! the second buyer
prevails over the first if the second buyer recorded the sale in GF with the
RD
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DE LEON SALES REVIEWER
4. PREFERENCE OF LEVY OF EXECUTION OR ATTACHMENT OVER PRIOR
UNREGISTERED LAW
• The priority enjoyed by the levy on execution extends with full force and
effect to the buyer at the auction sale conducted by virtue of such levy
• The doctrine is that a levy on execution or attachment duly registered takes
preference over a prior unregistered sale, and that even if the prior
unregistered sale is subsequently registered before the sale on execution
but after the levy was duly made, the validity of the execution sale should
be maintained because it retroacted to the date of levy
EXECUTION SALES
1. REGISTERED LAND
• The second buyer who purchases at an execution sale acquires a better
right over the first buyer where the sale to the first buyer was not recorded
while the levy was recorded and a new TCT was issued in favor of the
second buyer
o E: Where a party has actual knowledge of the claimant’s OCEN
possession of the disputed property at the time the levy or
attachment was registration !
• The preference created by the levy on attachment is not diminished even
by the subsequent registration of the prior sale
• The order of entry in the primary entry book determines the priority in
registration
2. UNREGISTERED LANDS
• Art. 1544 does NOT apply where the second buyer acquired the
unregistered parcel of land at an execution sale (even if the second buyer
was ignorant of the prior sale made by his judgment debtor in favor of the
first buyer)
• Reason: Purchaser of unregistered land at a sheriff’s execution sale only
steps into the shoes of the judgment debtor, and merely acquires the
latter’s interest in the property sold at the time the property was levied upon
3. UNREGISTERED LAND WAS SUBSEQUENTLY REGISTERED
• RULE #1 : Where the sale in favor of the first buyer was executed before
the land was registered, while the conflicting sale in favor of the second
buyer was executed after the same property had been registered ! upon
expiration of the right of redemption, the purchaser or redemptioner shall
be substituted to and acquire all the rights, title interest and claim of the
judgment obligor to the property as of the time of the levy ! subsequent
levy made on the property for the purpose of satisfying the judgment
rendered against the seller in favor of the judgment creditor = void
• RULE #2: Where the first sale involved unregistered land while the second
sale (not an execution sale) was made when the land was already
registered ! the second buyer who purchased the land when it was
already registered and who registered the sale in GF will prevail over the
first buyer who purchased it when it was still unregistered
APPLICABILITY OF ART. 1544 TO CONTRACTS TO SELL
1. NOT APPLICABLE TO CONTRACT TO SELL
 • X apply to contract to sell for neither a transfer of ownership nor a • The registration of a mortgage under ACT. NO. 3344 is without prejudice to
sales transaction has been consummated the better right of third parties
• X apply to a case where there was a sale to one party of the land itself 2. PACTO DE RETRO SALE
while the other contract was a mere promise to sell land • Its is not applicable to a case which involves an earlier pacto de retro sale
2. ART 1544 PRINCIPLES APPLY TO A CONTRACT TO SELL of an unregistered land and the subsequent donation thereof by the vendor
• SC has applied the governing principles of Art. 1544 in a situation a retro to another who, in turn, sold it to a third party while the property was
where the first contract was a contract to sell. still in the possession of the vendee a retro who has already acquired title
• GR: Knowledge gained by the first buyers under a contract to sell of before donation because of the failure of the vendor a retro to repurchase
the new agreement between the seller and the second buyer will NOT • There being no title to the property which the vendor a retro could convey
defeat their rights as first buyers to the supposed done, since he was no longer the owner thereof, no title
o E: Where the second buyer registers or annotates his could be conveyed by the donee by the sale of the property
transaction or agreement on the title of the subject properties 3. SUBSEQUENT MORTGAGE OF LAND REGISTERED UNDER THE
in GF ahead of the first buyers TORRENS SYSTEM, REGISTERED BY MORTGAGEE
• Although the first buyers knew of the second transaction, it will not bar • The registered right of GSIS as mortgagee of the property was held inferior
them from availing of their rights granted by law, among them, to to the unregistered right of M, the previous buyer, the unrecorded sale
register first their agreement as against the second buyer between M as the vendee and Z, the original owner, is preferred
3. APPLICABILITY TO CONDITIONAL SALE • Reason: If Z had parted with his ownership of the land sold, then he no
longer had ownership and free disposal of the same as to be able to
CONTRACT TO SELL CONDITIONAL SALE mortgage it
There being no previous sale of the Upon the fulfillment of the condition, the 4. SALE TO FINANCIAL INSTITUTION QUALIFIED AS INNOCENT PURCHASE
property, the third person buying such sale becomes absolute and this will FOR VALUE
property despite the fulfillment of the definitely affect the seller’s title thereto • When financial institutions exercise extraordinary diligence in determing the
suspensive conditions such as the full ! automatic transfer of ownership upon validity of the certificates of title to properties being sold or mortgaged to
payment, cannot be deemed a buyer in happening of suspensive condition them and still fail to find any defect or encumbrance upon the subject
BF and the prospective buyer cannot properties after said inquiries ! such financial institution should be
seek relief of reconveyance of the protected like any other IPV if they paid full and fair price at the time of the
property. purchase or before having notice of some other person’s claim in the
X double sale Second buyer of the property who may property
have had actual or constructive • A financial institution is not expected to check the technical description of
knowledge of such defect in the seller’s each and every title in the RD in order to determine whethere there is
title, or at least was charged with the another title to the property
obligation to deliver such defect, cannot
be a registrant in good faith SECTION 3. CONDITIONS AND WARRANTIES
Title to the property will transfer to the Second buyer X defeat first buyer’s title
third person after registration because ART. 1545. Where the obligation of either party to a contract of sale is subject
there is no defect in the owner-seller’s to any condition which is not performed, such party may refuse to proceed
title per se with the contract or he may waive performance of the condition. If the other
Owner-seller may be sued for damages In case title is used to the second buyer, party has promised that the condition should happen or be performed, such
by the intending buyer the first buyer may seek reconveyance first mentioned party may also treat the non-performance of the condition as
of the property subject of the sale breach of warranty.

OTHER RULINGS ON APPLICATONS OF RULES
1. SUBQUENT MORTGAGE REGISTERED UNDER ACT NO. 3344
• An unrecorded sale of a house of a prior date is preferred to a recorded
mortgage of the same house of a later date
• Reason: if the original owner had parted with his ownership of the thing
sold, then he no longer had ownership and full disposal of that thing so to
be able to mortgage it
Where the ownership in the thing has not passed, the buyer may treat the
fulfillment by the seller of his obligation to deliver the same as described and
as warranted expressly or by implication in the contract of sale as a condition
of the obligation of the buyer to perform his promise to accept and pay for the
thing.
CONDITION

 
 
 
 
 
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DE LEON SALES REVIEWER
 • An uncertain event or contingency on the happening of which the obligation
(or right) of the contract depends
• The obligation of the contract does not attach until the condition is
performed
• First paragraph of 1545 – contemplates a perfected contract of sale. The
application of this article presupposes that there is a perfected contract of
sale and that one of them fails in the performance of an obligation under
the contract
• The term is not used in the sense of a “promise”
EFFECT OF NON-FULFILLMENT OF CONDITION
A contract of sale may be absolute or conditional.
1. If the obligation of either party is subject to any conditions, and such condition is
not fulfilled, such party may either:
1. Refuse to proceed with the contract; or
2. Proceed with the contract, waiving the performance of the condition
2. 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 a breach of
warranted (1546)
ART. 1546. Any affirmation of fact or any promise by the seller relating to the
thing is an express warranty if the natural tendency of such affirmation or
promise is to induce the buyer to purchase the same, and if the buyer
purchases the thing relying thereon. No affirmation of the value of the thing,
nor any statement purporting to be a statement of the seller’s opinion only
shall be construed as a warranty, unless the seller made such affirmation or
statement as an expert and it was relied upon by the buyer.
WARRANTY
• A statement or representation made by the seller of goods,
contemporaneously and as party of the contract of sale, having reference
to the character, quality, or title of the goods, and by which promises or
undertakes to insure that certain facts are or shall be as he then
represented them.
NECESSITY OF CONTRACT OF SALE
• A warranty is an incident to a contract of sale and assumes or necessarily
implies the existence of a contract of sale
• A warranty is not an essential element of sale, there can no warranty
without a contract of sale
TERMINILOGY USED BY PARTIES NOT CONTROLLING
• It is NOT necessary that the word “warranty”, “warrant”, “representation”, or
“represent” be used by the seller to constitute a warranty
• The fact that stipulation in the contract of sale is specially called a
“warranty” does NOT itself establish that the agreement thus referred to is
a warranty
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DE LEON SALES REVIEWER
• Not easy to determine whether a particular language does or does not
amount to a warranty ! much will depend on the situation of the parties
and the condition of the things when the language is used and to which it
will apply
KINDS OF WARRANTY
• EXPRESS OR IMPLIED
• EXPRESS WARRANTY – one imposed by the parties to the contract
• IMPLIED WARRANTY – Imposed by law
• The seller is luable for his express and implied warranties of title, absence
of hidden defects, fitness or merchantable quality, description and sample
MEANING OF EXPRESS WARRANTY
• An affirmation of fact or any promise by the seller relating to the thing, the
natural tendency of which is to induce the buyer to purchase the thing and
the buyer thus induced, does purchase the same
• The parties may agree as to the extent of an express warranty, which may
be more limited or more extensive that the warranties imposed by law
TYPES OF EXPRESS WARRANTIES
1. A warranty relating to the CONTRACT OR TRANSACTION, such as a
representation by the seller that the execution and delivery of the contract
will not result in a breach of any agreement applicable to the seller
2. A warranty relating to the OBJECT of the contract, such as
representation by the seller that the parcel of land subject matter of the
contract is free from liens and encumbrances
3. A warranty relating to the PARTY to the contract, such as a
representation by the seller that it is a corporation duly organized and
existing under the laws of the RP
NOTE: Express warranties can be given by both the seller and the buyer; in
practice, sellers usually give more extensive representations as compared to
buyers.
EFFECT OF EXPRESS WARRANTY
• A warranty is a collateral undertaking and as such, it follows the principal
wherever it goes
• No intent is necessary to make the seller liable for the warranty – it is
immaterial whether the seller did not know that it was true or false
• It is a natural consequence of what the seller says and the reliance thereon
by the buyer that are alone important
TIME OF WARRANTY
• A warranty must form part of the transaction involving the sale
• Courts are not inclined to treat affirmations made by the seller after the
perfection of the sale as warranties, even if the affirmation is made before
the delivery of the good and payment of the purchase price
o E: If a warranty is given after the contract of sale has been
perfected, the warranty must generally, in order to be effective, be
accompanied by a new and separate consideration
 • A warranty which comes into existence at the time of sale needs no further
consideration since such warranty is supported by the consideration of the
sale
FORM OF WARRANTY
• A warranty need not be in writing; it may be made orally
o E: If the contract of sale is in writing and purports to embody the
whole agreement of the parties, the parol evidence rule will
generally preclude proof of an oral warranty
INTENTION TO MAKE A WARRANTY
• It is unnecessary that the representation or affirmation be actually intended
by the seller as warranty
• Apparent intent to warrant is sufficient
• It is the natural tendency of the affirmation or promise to induce the buyer
to purchase that is important, and not the intention of the seller to warrant,
and the absence of an intention to warranty is of no consequence
KNOWLEDGE AND GOOD FAITH OF THE SELLER
• If the seller makes an express warranty, it is immaterial w/n he acted in GF
in making the statement leading up to the sale
• The seller is liable for breach of warranty even if he acted in good faith in
making the warranty or even if he was not aware of the falsity of the
warranty
DUTY OF BUYER TO INVESTIGATE
• If the seller gives an express warranty, the buyer does not have the duty to
inspect the goods or to investigate the truth of the seller’s statements
• The maxim caveat emptor does not apply to matters included in an express
warranty
• The buyer’s examination of the goods does not necessarily prevent a
sufficient affirmation from being a warranty, especially so where the defects
are of such a character as not to be discoverable on examination
• Even if the buyer investigates, the parties can expressly stipulate that the
investigation by the buyer does not relieve the seller of express warranties
WAIVER OF BREACH OF WARRANTY
• The buyer may waive breach of warranty by:
1. Express agreement
2. Conduct inconsistent with an assertion of the breach
3. Acknowledgment of the satisfaction
EFFECT OF EXPRESSION OF OPINION
• An affirmation or representation which merely expresses the seller’s
opinion, judgment, belief or estimate do not generally constitute a warranty
o E: If the seller made such affirmation or statement as an expert
and it was relied upon by the buyer
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DE LEON SALES REVIEWER
" “The usual exaggeration in trade, when the other party
had an opportunity to know the facts, are not in
themselves fraudulent” (1340)
" “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” (1341)
" “Misrepresentation made in GF is not fraudulent but may
constitute error” (1343)
• The law permits the seller to exaggerate, puff, or enhance the quality of the
product under the civil law maxim “simplex commendation non obligat” (a
simple recommendation is not binding)
• The tendency of the courts however is in the direction of greater strictness
against the seller’s untruthful puffing of his wares
ART. 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
IMPLIED WARRANTY
• That which the law derived by implication or inference from the nature of
the transaction or the relative situation or circumstances of the parties
irrespective of any intention of the seller to create it
• An implied warranty is never in writing
IMPLIED BY LAW
• The implied warranties contemplated under the civil code are warranties
implied by law (as opposed to implied in fact) as attaching to an obligation
of the seller which is not express in any words, irrespective of the intention
of the parties
KINDS
1. Implied warranty as to seller’s title
• That the seller guarantees he has a right to sell the thing sold and
to transfer ownership to the buyer who shall not be disturbed in
his legal and peaceful possession thereof (1548)
2. Implied warranty against hidden defects or unknown encumbrance
 • That the seller guarantees that the thing sold is free from any
hidden faults or defects or any charge or encumbrance not
declared or known to the buyer
3. Implied warranty as to fitness or merchantable quality
• That the seller guarantees that the thing sold is reasonably fit for
the known particular purpose for which it was acquired by the
buyer, or where it was bought by description, that it is of
merchantable quality
RIGHT TO TRANSFER TITLE AT THE TIME OF DELIVERY
• The right of the seller to sell the thing need not reside in him at the time the
contract is perfected
• It is sufficient that the vendor has a right “at the time when the ownership is
to pass” (1459 & 1562)
NATURE OF IMPLIED WARRANTY
• It is a natural, not an essential, element of a contract because it is
presumed to exist even though nothing has been said in the contract on the
subject
• It is incorporated in the contract
• It is an exception to the rule of caveat emptor
• HOWEVER, it may be waived or modified by express stipulation –
warranties will not be implied if they are inconsistent with the express terms
of the sales agreement or contrary to the manifest purpose of the parties
where the facts clearly negative any intention to warrant
WHEN IMPLIED WARRANTY IS NOT APPLICABLE
1. “AS IS AND WHERE IS” SALE
• Means nothing more than the vendor makes no warranty as to the
quality or workable condition of the goods, and that the vendee takes
them in the condition in which they are found and from the place where
they are located
• It does not extend to liens or encumbrances unknown to the vendee
and could not be disclosed by a physical examination of goods
• The term “as is” in the public auction of goods – refers to physical
condition of the merchandise and not to the legal situation in which it
was at the time of the sale
• A provision for the sale and purchase of goods “as is” does not affect
the seller’s obligation to furnish goods which comply with the
description
• It does not prevent fraudulent representation relied on by the buyer
from constituting fraud which makes the contract voidable or a ground
for damages
2. SALE OF SECONDHAND ARTICLES
• There is no implied warranty as to the condition, adaptation, fitness or
suitability for the purpose for which made, or the quality of an article
sold as and for a second-hand article
• BUT such articles might be sold under such circumstances as to raise
an implied warranty (ex. a certification issued by the vendor that a
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DE LEON SALES REVIEWER
secondhand machine was in A-1 condition = express warranty binding
to the seller)
3. SALE BY VIRTUE OF AUTHORITY IN FACT OR LAW
• No warranty of title is implied in a sale by one not professing to be the
owner
• It does not apply to a sheriff, auctioneer, mortgagee, pledgee or other
person who sells by virtue of authority in fact or law ! they are not
liable to a person with legal or equitable interest therein
o E: They are still liable for actual representations, fraud or
negligence in the exercise of their duties
• The risk of defective title here is on the purchaser, the circumstances
surrounding such sales being sufficient to put him on notice as to
interests of third persons in the sold
• The rule of caveat emptor applies to execution sales
SUBSECTION 1. – WARRANTY IN CASE OF EVICTION
SECT. 1548. Eviction shall take place whenever by a final judgment based on a
right prior to the sale or an act imputable to the vendor, and the vendee is
deprived of the whole or part of the thing purchased.
The vendor shall answer for the eviction even though nothing has been said in
the contract on the subject.
The contracting parties, however, may increase, diminish, or suppress this
legal obligation of the vendor.
MEANING OF EVICTION
• The judicial process, whereby the vendee is deprived of the whole or part
of the thing purchased by virtue of a FJ based on a right prior to the sale or
an act imputable to the vendor
WARRANTY IN CASE OF EVICTION
• The seller’s obligation is generally NOT extinguished upon the delivery of
the thing
• The vendor guarantees the buyer’s peaceful possession of the thing sold
rd
and must generally defend against attacks of 3 persons, based on a
defect in the rights of the vendor, on the vendee’s ownership and
possession of the thing sold
ESSENTIAL ELEMENTS OF WARRANTY AGAINST EVICTION
A breach of warranty requires the present of the following circumstances:
1. The buyer is deprived in whole or in part of the thing purchased
2. He is so deprived by virtue of a final judgment
3. The judgment is based on a right prior to the sale or an act imputable to
the seller
 rd
4. The seller was summoned in the suit for eviction and made a co- policy, morals or good customs, or prejudicial to a 3 person with a right
defendant at the instance of the buyer recognized by law
5. There is NO waiver on the part of the buyer o E: Any stipulation exempting the vendor from the obligation to
answer for eviction shall be VOID if he acted in BF
In the absence of these requisites, a breach of warranty against eviction under Art.
1547 cannot be declared EVICTION AND WARRANTY AGAINST EVICTION
• Eviction and warranty are 2 ideas that complete each other, but each one
TYPES OF EVICTION has a separate meaning
• Total – the vendee is deprived of the whole thing purchased
• Partial – EVICTION WARRANTY
o Vendee is deprived of part of part of the thing purchased State of fact Legal Concept
o Vendee is deprived of some items that were jointly sold with other Cause: The act by which the buyer is Effect: As a result of this state of fact
items deprived, in whole or in part, of the thing comes the warranty, which imposes
o If the immovable sold should be encumbered with any non- sold by virtue of a FJ upon the seller the obligation to remedy
apparent burden or servitude, not mentioned in the agreement, of the damage suffered by the vendee who
such a nature that it must be presumed that the vendee would not was deprived of the thing acquired by
have acquired it had he been aware thereof (1560) virtue of a FJ

TYPES OF PROPERTY SOLD
• The warranty against eviction is generally applicable to the sale of all
classes of property
o E1: 1630 – The sale of an INHERITANCE ! in which the seller
shall only be answerable for his character as an heir, but not
ownership of all things that supposedly comprise the inheritance
o E2: 1631 – The sale for a LUMP SUM of the whole of certain
rights, rents or products ! in which case the seller is not obliged
to warrant each of the various parts of which it may be composed,
except in the case of eviction from the whole or the part of greater
value of the things sold
TRESPASS CONTEMPLATED BY WARRANTY AGAINST EVICTION
• Mere TRESPASS IN FACT does NOT give rise to the application of the
doctrine of eviction (1590)
o Mere act of trespass – when the trespasser claims no right
whatever = vendor NOT liable therefor
o Remedy: Buyer has to direct action against the trespasser in the
same way as the lessee has such right
• The disturbance referred to in the case of eviction is a DISURBANCE IN
LAW – which requires that a person go to the courts of justice claiming the
thing sold, or part thereof, and invoking reasons
o If FJ is rendered depriving the buyer of the thing sold or any part
thereof ! the doctrine of eviction becomes applicable
VENDOR’S LIABILITY IS WAIVABLE
• The obligation of the vendor to warrant against eviction is NOT an essential
element of a contract of sale and therefore may be INCREASED,
DIMINISHED, OR SUPPRESSED by agreement of the parties
• The total or partial waiver of the obligation is consistent with Art. 6 – Rights
may be waived, unless the waiver is contrary to law, public order, public
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DE LEON SALES REVIEWER
ART. 1549. The vendee need not appeal from the decision or order that the
vendor may become liable for eviction.
VENDEE HAS NO DUTY TO APPEAL FROM JUDGMENT
• The buyer’s right against the seller is NOT lost because the vendee did not
appeal
• The requirement of law is deemed satisfied upon judgment becoming final
(whatever may be the cause of finality)
• The requirement of FJ does not also mean that the parties have taken all
remedies
• Final judgment may be based on a compromise agreement among the
party litigants
ART. 1550. When adverse possession had been commenced before the sale
but the prescriptive period is completed after the transfer, the vendor shall be
liable for eviction.
EFFECT OF PRESCRIPTION
• Prescription – by prescription, one acquired ownership and other real
rights through the lapse of time in the manner and under the conditions
prescribed by law. In the same way, rights and actions are lost by
prescription.
COMPLETED BEFORE SALE
• The buyer may lose the thing purchased to third person who had acquired
title thereto by prescription
• When prescription has commenced to run against the seller and was
already complete before sale ! the buyer can enforce the warranty against
eviction
• In this case, the deprivation is based on a right prior to the sale and an act
imputable to the seller
COMPLETED AFTER SALE
• Even if prescription has started before the sale but has reached the limit
prescribed by law after the sale ! the seller is NOT liable for eviction
• The reason is that the buyer could have easily interrupted the running of
the prescriptive period by bringing the necessary action
EXCEPTION
• If the property sold, however is registered under the Torrens system, Art.
1550 is NOT applicable
• Under the TS, ownership of land is not subject to prescription
ART. 1551. If the property sold is for nonpayment of taxes due and not made
known to the vendee before the sale, the vendor is liable for eviction.
DEPRIVATION FOR NON-PAYMENT OF TAXES
• If the buyer is deprived of the ownership of the property because it is sold
for non-payment of taxes due from the seller ! the seller is liable for
eviction for an act imputable to him
• It is required, however, that at the time of the sale, the non-payment of
taxes was NOT known to the buyer
ART. 1552. The judgment debtor is also responsible for eviction in judicial
sales, unless it is otherwise decreed in the judgment
LIABILITY OF JUDGMENT DEBTOR
• While the rule on implied warranty does not apply to a sheriff who sells by
virtue of authority in law ! the judgment debtor is RESPONSIBLE for
eviction and hidden defects even in judicial sales, unless otherwise
decreed in the judgement
• Art. 1552 is based on the general principle that a person may not enrich
himself at the expense of another
• If the purchaser of real property sold on execution be evicted therefrom
because the judgment debtor (seller) has no right to the property sold !
the purchaser is entitled to recover the price paid with interest from the
judgment debtor (seller)
• If the sale was effected by the judgment creditor ! the judgment creditor
should NOT be permitted to retain the proceeds of the sale, at the expense
of the purchaser
ART. 1553. Any stipulation exempting the vendor from the obligation to
answer for eviction shall be void, if he acted in bad faith
STIPULATION WAIVING WARRANTY
EFFECT OF SELLER’S BAD FAITH
• Bad faith – knowing beforehand at the time of the sale, the presence of the
fact giving rise to eviction and possible consequence
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DE LEON SALES REVIEWER
• Thus, if the vendor after selling his property to another, sold it again to
another purchaser ! he CANNOT even by stipulation, be exempt from
warranty against eviction, because he acted in BF
EFFECT OF BUYER’S BAD FAITH
• The buyer should also not be guilty of BF in the execution of the sale
• If he knew of the defect of the title at the time of sale, or had knowledge of
the facts which should have put him upon inquiry and investigation as
might be necessary to acquaint him with the defects of the title of the
vendor ! he CANNOT claim that the vendor has warranted his legal and
possession of the property sold on the theory that he proceeded with the
sale with the assumption of the danger of eviction
• He is NOT entitled to warranty against eviction, nor is he entitled to
damages
ART. 1554. If the vendee has renounced the right to warranty in case of
eviction, and eviction should take place ! the vendor shall only pay the value
of which the thing sold had at the time of the eviction. Should the vendee have
made the waiver with knowledge of the risks of eviction and assumed its
consequence ! the vendor shall not be liable.
2 KINDS OF WAIVER EVICTION
1. CONSCIENTE (SIMPLE) – The waiver is voluntarily made by the buyer
without the knowledge and assumption of the risks of eviction
2. INTENCIONADA (CALCIFICADA) – The waiver is made by the buyer with
knowledge of the risks of eviction and assumption of its consequence
EFFECT OF WAIVER BY THE VENDEE
1. If the waiver was only consciente ! the vendor shall pay only the value
which the sold had at the time of eviction
o This is a case of SOLUTIO INDEBITI
o The sole effect of the waiver unaccompanied by the knowledge
and assumption of the danger of eviction is: to deprive the buyer
of the benefits mentioned in Nos. 2,3,4,5 of Art. 1555
2. If the waiver was intencionada ! the seller is exempted from the
obligation to answer for eviction, provided that he did not act in BF
PRESUMPTION AS TO KIND OF WAIVER
o Every waiver is presumed to be CONSCIENTE while the contrary is not
proven
o To consider it intencionada:
o There must be an act of waiver
o Accompanied by some circumstance which reveals the vendee’s
knowledge of the risks of eviction and his intention to submit to the
consequences
ART. 1555. When the warranty has been agreed upon or nothing has been
stipulated on this point, in case eviction occurs, the vendee shall have the COSTS OF THE SUIT • The buyer is also entitled to recover the expenses of
right to demand of the vendor: litigation resulting in eviction, including the costs of the
action brought against the seller to enforce his
(1) The return of the value which the thing sold had at the time of the eviction, warranty
be it greater or less than the price of the sale • “Cost of the suit” – does not include travelling
expenses incurred by the vendee in defending himself
(2) The income or fruits, if he has been ordered to deliver them to the party in the action
who won the suit against him • He is not entitled to recover damages unless the sale
was made by the seller in BF
(3) The costs of the suit which caused the eviction, and in proper cases, those • GR: Does not apply to a situation where the judgment
of the suit brought against the vendor for the warranty is in favor of the seller
o E: In this case, the obligation to
(4) The expense of the contract, if the vendee has paid them reimburse the buyer for costs of suit will
arise if the vendor with fault or
(5) The damages and interests and ornamental expenses, if the sale was negligence, but should be proved
made in BF o Reason: The seller could not expect
that a third party would have the
pretension to disturb the peaceful
RIGHTS AND LIABILITIES IN CASE EVICTION OCCURS possession of the thing sold
• The provisions of the above article specify in detail the rights and liabilities EXPENSES OF THE • In the absence of any stipulation to the contrary, the
of the seller and the buyer in the event eviction takes place “when the CONTRACT expenses in the EXECUTION AND REGISTRATION
warranty has been agreed upon or nothing has been stipulated on this of the sale are borne by the SELLER
point” – that is, in the absence of waiver of eviction by the buyer • If the buyer should have paid for such expenses ! he
shall have the right to demand the same from the
seller
RETURN OF VALUE • If at the time of the eviction the value of the property is DAMAGES AND • The right of the buyer to demand “damages and
OF THING really more or less than its value at the time of sale, INTERESTS interests and ornamental expenses” - qualified by the
by reason of improvement or deterioration ! the condition that the sale was made in BF
seller should pay the excess or not suffer the damage • IF GOOD FAITH IS PRESUMED – The buyer is not
• All kinds of improvements (useful, necessary, entitled to recover damages
recreational expenses) voluntary entered into by the o E: Bad faith of the seller is shown in
buyer or caused by nature or time in so far as they making the sale
may affect the value of property ! are taken into • INTERESTS –
account in determining the increase in value o Does not cover interest on the purchase
price as in lieu thereof, the buyer is
Note: The law does not speak of payment of interest on entitled to the fruits of the thing
the purchase price. The law had intended that the interest o In cases he has been ordered by a
on the price shall be SET OFF against the fruits received court to deliver the fruits to the
by the buyer from the thing while in possession. successful party ! the seller must
INCOME OR FRUITS • The buyer is liable to the party who won the suit indemnify him
OF THING against him for the income or fruits received only if so o Refers to interest on costs other than
decreed by the courts ! the seller must indemnify the purchase price, such as costs of
him suit and expenses of contract
• Reason: To the buyer belongs the use, free of any
liability, of the subject matter of the sale
• This benefit is not by any means gratuitous
• It is offset by the use without interest of the money of
the buyer by the seller

 
 
 
 
 
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DE LEON SALES REVIEWER
RIGHT OF SECOND PURCHASER TO WHOM WARRANTY ASSIGNED
• Where a warranty against eviction was expressly agreed upon in a contract
nd
of sale and the buyer (2 seller) sold the same land to another expressly
assigning to him the right of warranty ! the second purchaser has a right
of action against the first seller to make good the warranty against eviction
• The rule that a contract binds only parties, their assigns and heirs is NOT
applicable in this case
• The basis of the second purchaser’s action if the first buyer’s transfer to
him of the right of warranty, a right which the first buyer had against the
seller and which the second purchaser exercises by virtue of transfer
ART. 1556. Should the vendee lose, by reason of the eviction, a part of 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 than those
which it had when he acquired it.
He may exercise his right of action, instead of enforcing the vendor’s liability
for eviction.
The same rule shall be observed when 2 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.
ALTERNATIVE RIGHTS OF BUYER IN CASE OF PARTIAL EVICTION
• This article contemplates partial eviction
• 1554 – Total eviction
• If there is partial eviction, the vendee has the option to either:
1. Enforce the seller’s liability for eviction
2. To demand rescission of the contract
• The above rule is applicable:
1. The buyer is deprived of a part of the thing sold if such part is of
such importance to the whole that he would not have bought the
thing without said part
2. When two or more things are jointly sold whether for lump sum or
for a separate price for each, and the buyer would not have
purchased one without the other
• The intention of the buyer would be determined as of the perfection of the
sale – it must be demonstrated that the buyer would not have purchased
the thing without the portion subject to eviction
• Art. 1371 – the contemporaneous and subsequent acts shall be principally
considered
REMEDY OF RESCISSION NOT AVAILABLE IN CASE OF TOTAL EVICTION
• The remedy of rescission contemplates that one demanding it is able to
return whatever he has received under the contract
• When this cannot be done (in case of total eviction) ! rescission cannot be
carried out because the buyer can no longer restore the thing to the seller
  © Michelle Duguil, 61
DE LEON SALES REVIEWER
• He has the obligation to return the thing without other encumbrances other
than when he acquired it
ART. 1557. The warranty cannot be enforced until a final judgment has been
rendered, whereby the vendee loses the thing acquired or part thereof
FINAL JUDGEMENT OF EVICTION ESSENTIAL
• The above article merely reiterates the 2 essential elements for the
enforcement of warranty in case of eviction:
1. Deprivation of the whole or part of the thing sold
2. Existence of final judgment
• Eviction may take place by virtue of final judgment of an administrative
office or board, and it is not indispensible that it be rendered by court,
provided it was rendered by competent authority and in conformity with the
procedure prescribed by law
• Roman law also admits that it is sufficient that the judgment be made by an
arbital tribunal. However, that should apply only if the vendor was also
made a party to the arbitration proceeding
ART. 1558. The vendor shall not be obliged to make good the proper warranty,
unless he is summoned in the suit for eviction at the instance of the vendee.
FORMAL SUMMONS ESSENTIAL
• Another essential requisite before a vendor may be legally liable for
eviction is that he should be summoned in the suit for eviction at the
instance of the vendee
VENDOR TO BE MADE PARTY IN SUIT FOR EVICTION
• The vendor should be made party to the suit either by way of asking that
the seller be made:
1. A co-defendant or
2. By filing a third party complaint against said vendor
• Furnishing the seller by registered mail with a copy of the opposition of the
buyer filed in the eviction suit is NOT the kind of notice prescribed by Art.
1558 and 1559
• It is evident that the notification must be given in the action brought by the
third party again the vendee because it is there that the seller must defend
the buyer’s peaceful and legal possession for which he is responsible and
not in the action to enforce warranty itself which already supposes the
eviction
• The requirement is NOT satisfied where the unlawful detainer case filed by
rd
3 persons against the buyer, which led to the ouster of the buyer from the
subject lots, was decided by compromise agreement without impleading
the seller as third-party defendants. In order for the case to prosper, it is a
precondition that the seller must have been summon in the suit for eviction
of the buyer
OBJECT OF THE LAW
• The object is to give the seller an opportunity to intervene and defend the
title that he has transferred because he alone knows the circumstances or
reasons behind the claim of the plaintiff and be in a position to defend the
validity of his title
• In the absence of such opportunity, the seller is NOT bound by his warranty
NOTE: A servitude (or easement) – is an encumbrance imposed upon an
immovable for the benefit of another immovable belonging to a different owner
• Example of apparent servitude: A right of way establishing a permanent
passage, which is continually kept in view by external sign
• Example of non-apparent easement: A party wall which has no exterior
sign

ART. 1559. The defendant vendee shall ask, within the time fixed in the Rules
of Court for answering the complaint, that the vendor be made a co-defendant
VENDOR TO BE MADE CO-DEFENDANT
• The notification required by Art. 1159 refers to a case where the buyer is
the defendant in a suit instituted to deprive him of the thing purchased
• The buyer should call in the seller to defend the action which has been
instituted against him (buyer)
• Rules of Court, Rule 11, Sect. 1 - The buyer should ask the court within
the time allowed him to answer that the vendor be made a co-defendant to
answer the complaint of the plaintiff who seeks to deprive him (buyer) of
the property purchased
ART. 1560. If the immovable sold should be encumbered with any non-
apparent burden or servitude, not mentioned in the agreement, of such a
nature that it must be presumed that the vendee would not have acquired it
had he been aware thereof, he may ask for the rescission of the contract,
unless he should prefer the appropriate indemnity. Neither right can be
exercised if the non-apparent burden or servitude is recorded in the Registry
of Property, unless there is an express warranty that the thing is free from all
burdens and encumbrances.
Within one year, to be computed from the execution of the deed, the vendee
may bring the action for rescission, or sue for damages.
One year having elapsed, he may only bring an action for damages within an
equal period, to be counted from the date on which he discovered the burden
or servitude.
WHERE IMMOVABLE SOLD ENCUMBERED WITH NON-APPARENT BURDEN
WHEN RIGHT CANNOT BE EXERCISED
• The alternative rights granted by 1560 cannot be exercised in the following
cases:
1. If the burden or servitude is APPARENT – “made known and is
continually kept in view by external signs that reveal the use and
enjoyment of the same
2. If the non-apparent burden or servitude is REGISTERED
3. If the buyer had KNOWLEDGE of the encumbrance, whether
registered or not
• The registration of the non-apparent servitude in the registry of property
operates as a constructive notice to the buyer ! seller is relieved from
liability
o E: If there is an express warranty that the immovable is free from
any such burden or encumbrance
" E to E: if the burden is known to the buyer, there is no
warranty
WHEN ACTION MUST BE BROUGHT
• The action for rescission or damages must be brought WITHIN 1 YEAR
FROM THE EXECUTION OF THE DEED OF SALE
• If the period has already elapsed, the buyer may only bring an action for
damages within 1 year from the date of discovery of the non-apparent
burden or servitude
INTENTION
rd st
• There is a difference between the 3 paragraph of Art. 1556 and the 1
paragraph of 1560 on how to appreciate or interpret the intention of the
buyer on whether he had wished to but 2 or more things without any
condition of acquiring all, and whether he had wished to buy the immovable
thing with an encumbrance e

RIGHT OF VENDEE rd st
3 paragraph of 1156 1 paragraph of 1560
• Although the vendee is not deprived of the thing sold, totally or partially, the When 2 or more things have been jointly If the immovable sold should be
buyer may still: sold for a lump sum, or for a separate encumbered with any non-apparent
o Rescind the contract or price for each of them burden or servitude, not mentioned in
o Ask for indemnity the agreement
If the thing sold should be encumbered with any non-apparent burden or It should clearly appear that the buyer It is enough that circumstances indicate
servitude, not mentioned in the agreement of such a nature that the buyer would not have purchased one without a presumption that the buyer would not
would not have acquired it had he been aware thereof the other have purchased the immovable with
• The lack of knowledge on the part of the seller is NOT a defense ! the encumbrance
contract can still be invalidated ON THE GROUND OF MISTAKE More rigorous Less rigorous

 
 
 
 
 
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DE LEON SALES REVIEWER
 SUBSECTION 2. WARRANTY AGAINST HIDDEN DEFECTS OF, OR
ENCUMBRANCE UPON, THE THING SOLD
ART. 1561. The vendor shall be responsible for warranty against the hidden
defects which the thing sold may have, should they render it unfit for the use
for which it is intended, or should they diminish its fitness for such use to an
extent that, had the vendee been aware thereof, he would not have acquired it
or would have given a lower price for it; but said vendor shall not be
answerable for patent defects or those which may be visible, or those which
are not visible if the vendee is an expert who, by reason of his trade or
profession, should have known them
DEFINITION OF TERMS
1. REDHIBITION – the avoidance of a sale on account of some vice or defect
in the thing sold, which render its use impossible, or so inconvenient and
imperfect that it must be supposed that the buyer would not have
purchased it had he known of the vice
2. REDHIBITORY ACTION – An action instituted to avoid a sale on account
of some vice or defet in the thing sold, which render its use impossible, or
so inconvenient and imperfect that it must be supposed that the buyer
would not have purchased it had he known of the vice
3. ACCION MINORIS OR ESTIMATORIS – If the object is to procure the
return of a part of the purchase price paid by the buyer
4. REDHIBITORY VICE OR DEFECT – Is a defect in the article sold against
which defect the seller is bound to warranty
o The vice or defect must constitute an imperfection, a defect in its
nature, of certain importance; and a minor defect does NOT give
rise to redhibition
o The mere absence of a certain quality in the thing sold which the
buyer thought it to contain is NOT necessarily a redhibitory defect
o One thing is that the thing lack certain qualities and another thing
is that it positively suffers from certain defects
REQUISITES FOR WARRANTY AGAINST HIDDEN DEFECTS
1. The defect must be important or serious
2. It must be hidden
3. It must exist at the time of the sale
4. The buyer must give notice of the defect to the seller within reasonable
time
5. The action for rescission or reduction of the price must be brought within
the proper period
a. 6 months from the delivery of the thing sold OR
b. Within 40 days from the date of delivery in case of animals
6. There must be no waiver of warranty on the part of the buyer
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DE LEON SALES REVIEWER
WHEN DEFECT IMPORTANT
• The defect is important if:
1. It renders the thing sold unfit for the use for which it was intended
OR
2. If it diminishes its fitness for such use to an extent that the buyer
would not have acquired it had he been aware thereof or would
have given a lower price for it
• The USE contemplated must be:
1. Stipulated
2. In the absence of stipulation, that which is adopted to the nature
of the thing and to the business of the purchaser
• The imperfection or defect of little consequences does NOT come within
the category of being redhibitory – it must be serious
• Example: Where an expert witness categorically established that a printing
machine sold is in A-1 condition, required many repairs before it could be
used, plus the fact that the buyer never made appropriate use of the
machine from the time of purchase until an action was filed ! attest the
major defect in the said machine justifying rescission of the contract (Moles
vs. IAC)
WHEN DEFECT HIDDEN
• The defect must be hidden
• There is no implied warranty against hidden defects of which the buyer has
full knowledge or of which he has knowledge sufficient to put him on notice
• The defect is hidden (or latent):
o If it was not known and could not have been known to the vendee
o It is one which is hidden to the eyes and cannot be discovered by
ordinarily careful inspection or examination
• There is no warranty if the defect is patent or visible (exception to GR)
• The vendor’s liability for warranty CANNOT be enforced although the
defect is hidden if the buyer is an expert, who by reason of his trade or
profession, should have known it (exception to GR)
o The same defect, therefore, may be hidden with respect to one
person, but not hidden with respect to another
REMEDIES (1567)
1. Rescission of the contract + damages
2. Proportionate reduction of the price + damages
WHERE DEFECT PATENT OR MADE KNOWN
• A warranty does not cover defects which the buyer must have observed
o Ex. If the seller of a horse which is obviously blind and which both
parties known to be blind, says it is sound, the meaning of “sound”
as used in that connect must be sound except as to its eyes
• The same rule is applicable to a defect which is not obvious but of which
the seller TELLS the buyer, or which the buyer KNOWS or SHOULD HAVE
KNOWN
• If the seller successfully uses art to conceal the defect = the seller is liable
 • GR: There is no implied warranty against hidden defects in the sale of
second hand goods
o E: The seller shall be liable if he has been shown to have made
misrepresentation or acted in BF
• The seller may bind himself against patent or obvious defects (manifest
upon causal inspection) if the intent to do so is clearly evident ! the seller
cannot allege as defense that inspection (which the buyer failed to make)
would have disclosed the defect or that the buyer relied on his own
judgment
DEFECT AT THE TIME OF THE SALE
• The seller cannot be held liable for defects suffered by the thing sold after
the perfection of the sale
• The buyer who claims breach of warranty against hidden defects must
prove that the defect existed at the time of sale
ART. 1592. In a sale of goods, there is an implied warranty or condition as to
the quality or fitness of the goods, as follows:
(1) 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 seller’s skill or judgment (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods shall be
reasonably fit for such purpose
(2) 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),
there is an implied warranty that the goods shall be of merchantable quality
IMPLIED WARRANTIES OF QUALITY
• QUALITY OF GOODS – includes their state or condition
o The purpose of holding the seller on his implied warranties is to
promote high standard in business and to discourage sharp
dealings
o They are based on the principle that “honesty is the best policy”
IMPLIED WARRANTY OF FITNESS
• GR: There is no implied warranty as to quality or fitness for any particular
purpose of goods under a contract of sale
o E1: Where the buyer, expressly, or by implication, makes known
to the seller the particular purpose for which the goods are
required
o E2: Whether the buyer relies upon the seller’s skill or judgment
(whether he be the grower or manufacturer or not)
• KNOWLEDGE OF THE SELLER
o GR: there is no general implication of warranty that the goods sold
are fit for the purpose for which they are purchased if the seller is
not informed of, or expressly or impliedly acquainted with such
purpose. The wants and needs of the buyer must be disclosed
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DE LEON SALES REVIEWER
o TEST OF AN EXISTENCE OF IMPLOED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE: Whether the buyer
informed the seller of the circumstances and conditions which
necessitated his purchase of a certain character of article or
material and left it to the seller to select the particular kind and
quality of article suitable for the buyer’s use
• RELIANCE ON JUDGMENT AND SKILL OF THE SELLER
o The buyer must have relied on the skill or judgment of the seller or
circumstances must be shown from which this may be presumed
o The buyer’s reliance on the seller may arise by implication, such
as where the seller is an expert and requests the buyer to rely on
the expert knowledge of such seller
o The buyer’s reliance on the seller need not be a total reliance –
the buyer may rely on his own judgment as to some matters and
on the skill and judgment of the seller on other matters
o Doctrine of implied warranty of fitness – has been said to rest
on the presumed superior knowledge of the seller and cannot
prevail where such knowledge presumably does not exist
" Ex.: If the buyer is an experiences manufacturer and the
seller is an ordinary dealer, there NO such warranty
although the seller knows his purpose.
" If the buyer has superior knowledge, the buyer would
NOT be relying on the skills and judgment of the seller
• PARTICULAR PURPOSE OF THE GOODS
o It is not some purpose necessarily distinct from a general purpose
o Ex.: The general purpose for which all food is bought is to be
eaten, and this would also be the particular purpose in a specific
instance
o It is the purpose expressly or impliedly communicated to the seller
for which the buyer buys the goods; and it may appear from the
very description of the articles (ex. “coatings” or “hot water bottle”)
o But where an article is capable of being applied to a variety of
purpose ! the buyer must particularize the specific purpose he
has in view
• TEST
o Whether the buyer justifiably relied upon the seller’s judgment that
the goods furnished would fulfill the desired purpose, or whether
relying on his own judgment, the buyer ordered or bought what is
frequently called, “a known, described, and definite article”
o The occupation of the seller is important evidence of the
justifiableness of the buyer’s reliance
o Where the buyer had no opportunity for previous inspection, he is
entitled to rely, and will naturally be presumed to have relied, upon
the seller’s skill and judgment
IMPLIED WARRANTY OF MECHANTABLE QUALITY
• Where the goods are bought by description, the seller impliedly warrants
that the goods are merchantable quality
• MERCHANTABLE QUALITY
o The good is of such a quality and in such condition that a
reasonable man would, after full examination, accept it under the
circumstances of the case, in performance of his offer to buy the
goods, whether he buys it for his own use to sell it again
o The goods comply with the description of the contract so that to a
buyer buying goods of that description, the goods would be good
tender -- It does not mean that there will be in fact persons ready
to buy the goods
ART. 1562 ART. 1565
Applied to goods bought by description Applies to goods bought by sample
Refers to an implied warranty that the Implied warranty that goods shall be free
goods are of “merchantable quality” from any defect rendering them
“unmerchantable”
• SALEALIBILITY IN A PARTICULAR MARKET
o The requirement of merchantable quality caries it NO implication
that the goods shall be saleable in a particular market
• CAUSES OF UNMERCHANTABILITY
o Goods may be unmerchantable not because of any defect in their
physical condition but because of some other circumstance
" Ex: Their infringement of trademarks of others renders
them unsaleable
o Other goods than food may be unmerchantable because the use
of them is dangerous or injuries in ways not to be expected from
the goods of the kind
" Ex. If an ingredient of a face power is such as to cause
irritation on the skin, the goods are not merchantable
" Cases of this sort may often involve questions whether
the difficulty is due to peculiar sensitiveness of the buyer
and if so, whether there is ground for a right of action
when goods would not be injurious to most persons
• APPLICABILITY TO GOODS IN THAT DESCRIPTION
o It must be made clear that the warranty that the goods are of
merchantable quality applies to all goods bought from a seller who
deals in goods in that description, whether they are sold under a
patent or trade name or otherwise
• DISTINGUISHED FROM OTHER WARRANTIES
WARRANTY OF MERCHANTABILITY WARRANTY OF FITNESS
Warranty that goods are reasonably fit Warranty that the goods are suitable for
for the general purpose for which they the special purpose of the buyer which
are sold will not be satisfied by mere fitness for
general purpose
  © Michelle Duguil, 65
DE LEON SALES REVIEWER
ART. 1563. In the case of contract of sale of 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.
SALE UNDER A PATENT OR TRADE NAME
• There is no implied warranty of fitness for any particular purpose where the
article is sold under its patent or trade name
• By exactly defining what he wants, the buyer has exercised his own
judgment instead of relying upon that of the seller
o The definition may be given by means of a trade name or in any
other way
o The description must be the buyer’s choice, or the goods must
only be described and definite but known, in order to preclude
warranty of fitness
• E: In case of a “stipulation to the contrary”
o The fact that the article has a trade name does not itself
necessarily preclude the existence of an implied warranty of
fitness for a particular purpose
o The warranty may exist where, although the article has a trade
name, the purchase is not made by, or in reliance on, the name,
but is made for a particular purpose and supplied for that purpose,
in reliance on the seller’s judgment
• The fact that there may be no implied warranty for a particular purpose,
because the articles are sold under its patent or other trade name, does not
preclude the existence of an implied warranty of merchantability
o Thus, in case of articles sold by its trade name, there is an implied
warranty that the articles are merchantable as articles of such
trade name
ART. 1564. An implied warranty or condition as to the quality or fitness for a
particular purpose may be annexed by the usage of trade
EFFECT OF USAGE OF TRADE
• A warranty as to the quality or fitness for a particular purpose may be
attached by usage to a contract containing no express provision in regard
to warranty, though in the absence of usage, no warranty would be implied
• The usage is relied on for the purpose of showing the intention of the
parties
• If there is no usage, the parties would naturally express their intention
• A usage in order to bind both parties must be known to both, or if unknown
to one ! the other must be justified in assuming knowledge on the part of
the person with whom he is dealing with
• Presumption: that the parties are aware of the usage of trade
ART. 1565. In the case of a contract of sale by sample, if the seller is a deal in
goods of that kind, there is an implied warranty that the goods shall be free
from any defect rendering them unmerchantable which would not be apparent
on reasonable examination of the sample
ABSENCE OF DEFECT RENDERING GOODS UNMERCHANTABLE
• There is an implied warranty that the goods shall be free from any defect
rendering them “unmerchantable” which would not be apparent on
reasonable examination of the sample
• The warranty applies only in the case of:
o A contract of sale by sample and
o If the seller is a dealer in goods of that kind
• In a contract of sale by sample, it has been held that it is not enough that
the goods are substantially like the samples as to kind, quality and value to
be merchantable ! the goods must also be free from defects
MERCHANTABILITY OF GOODS SOLD BY SAMPLE
• WHERE SAMPLE NOT MERCHANTABLE
o GR: All the buyer is entitled to, in case of sale or contract to sell
by sample ! is that the goods be like the sample, so he has no
right to have the goods merchantable if the sample which he has
inspected is not
o Reason: Similar with the rule that denies an implied warranty to a
buyer who has inspected the goods which he buys
o E: WHERE THE SAMPLE SUBJECT TO LATENT DEFECT
" Where the defect in the goods is of such a character that
the inspection will not reveal it, so in the case of a sale by
sample, if the sample is subject to a latent defect ! the
buyer reasonably relies on the seller’s skill or judgment,
the buyer is entitled not simply to goods like the sample,
but to goods like those which the samples seems to
represent, that is, merchantable goods of that kind and
character
" REMEDY: The contract may be RESCINDED where the
bulk of goods delivered do not correspond with the
sample (1481)
ART. 1566. The vendor is responsible to the vendee for any hidden faults or
defects in the thing sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated and the
vendor was not aware of the hidden faults or defects in the thing sold.
RESPONSIBILITY OF VENDOR FOR HIDDEN DEFECTS
EFFECT OF IGNORANCE OF THE SELLER
• GR: The ignorance of the seller does NOT relieve him from liability to the
buyer for any hidden faults or defects in the thing sold
• GF cannot be availed of as defense by the vendor
EXCEPTION
• The parties may provide otherwise in their contract provided that:
o The seller acted in GF and
o That he is unaware of the existence of the fault or defect
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DE LEON SALES REVIEWER
• E to E: The vendor is not relieved from liability for making false or
misleading claims about the thing
WHERE VENDEE AWARE OF THE DEFECT
• If the buyer is aware of the defect in the thing he buys or lack of title in the
seller ! he cannot later complain thereof
• He is deemed to have willfully and voluntarily assumed the risk attendant to
the sale
DOCTRINE OF “CAVEAT VENDITOR” AND “CAVEAT EMPTOR”
• Caveat Emptor – let the buyer beware
o ** A basic premise of this doctrine is that there be no
misrepresentation by the seller, This ancient defense of caveat
emptor belong to a bygone age, and has no place in
contemporary business ethics
o The seller’s liability for defects of the goods sold was then
confined to cases of express promise to warrant the quality of
such goods and to those in which the seller had knowledge of the
hidden defects and the sale as made without the seller revealing
them, but in the latter cases, the basis of the seller’s fraud
o At early common law, the implied warranty of quality was not
recognized and the rule was then caveat emptor
• GR: The Old civil code (following the Roman Law) – rejected the maxim
caveat emptor
o The doctrine of caveat venditor (let the seller beware) –
was adopted in accordance with which, “the seller is liable to the
buyer for any hidden faults or defects in the thing sold, even
though he was not aware thereof” (Art. 1566)
o The doctrine is based on the principle that a sound price warrants
a sound article
• E: The maxim of caveat emptor, however, is still applicable in the following
cases:
o Sherriff’s sale
o Sales of animals (1574)
o Tax Sales (1547)
o Double sales of property where the issue is who between 2
vendees has a better right to the property (1544)
• The rule of caveat emptor simply requires the purchaser to be aware of the
supposed title of the vendor and one who buys without checking the
vendor’s title takes all the risks and loses consequent to such failure
• A purchaser of real estate at the tax sale obtains only such title as held by
the taxpayer ! the principle of caveat emptor applies
• GR: A person dealing with registered land is merely charged with notice of
the burdens on the property which are noted on the face of the register or
the certificate of title
o E: The buyer is obliged to investigate or inspect the property sold
to him when there are circumstances that would put him on guard,
such as the presence of occupants other than the registered
owner.
ART. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee
may elect between withdrawing from the contract OR demanding
proportionate reduction of the price, with damages in either case.
ALTERNATIVE REMEDIES OF THE BUYER TO ENFORCE WARRANTY
1. Action for rescission (accion redhibitoria) = Withdraw of the contract +
damages
2. Accion quanti minoris - Proportionate reduction of the price + damages
• The remedies are alternative as they are incompatible with each other
• The same right is given to the buyer in the sale of animals with redhibitory
defects
• The buyer must present proof that he suffered damage as a result of the breach
of the vendor’s warranty to be entitled to actual damages
ART. 1568. If the thing sold should be lost in consequence of hidden faults,
and the vendor 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. If
he was not aware of them, he shall only return the price and interest thereon,
and reimburse the expenses of the contract which the vendee might have
paid.
EFFECT OF LOSS OF THING ON THE ACCOUNT OF HIDDEN DEFECTS
1. SELLER AWARE OF HIDDEN DEFECTS
• If the vendor was ware of the hidden defects in consequence of which the
thing sold was lost, he shall bear the loss because he acted in BF.
• The vendee has the right to recover:
o Price paid
o Expenses of the contract, and
o Damages
2. SELLER NOT AWARE OF HIDDEN DEFECTS
• If the seller was not aware of them, he shall be obliged to return:
o The price paid
o Interest thereon, and
o Expenses of the contract if paid by the vendee.
** He is NOT made liable for damages because is not guilty of BF
ART. 1569. If the thing sold had any hidden fault at the time of the sale, and
should thereafter be lost by fortuitous event or through the fault of the
vendee, the latter may demand of the vendor the price which he paid, less the
value which the thing had when it was lost.
If the vendor acted in BF, he shall pay damages to the vendee.
EFFECT OF LOSS OF DEFECTIVE THING SOLD
• If the thing sold had no hidden defects – its loss through FE or thru the fault
of the buyer is borne by the buyer
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o Seller is however required to return the price paid less the value of
the thing at the time of its loss in case where hidden defects
existed
• In other words, the vendor is still made liable on his warranty
• The difference between the price paid for the thing and the value at the
time of loss = represent damage suffered by the buyer and is at the time
the amount with which the vendor enriched himself at the expense of the
buyer
• If the seller acted in BF, he shall also be liable for damages
ART. 1570. The preceding articles of this subsection shall be applicable to
judicial sales, except that the judgment debtor shall not be liable for damages
WARRANTY IN JUDICIAL SALES
AS TO JUDGMENT DEBTOR
• In judicial sales, it is not really the sheriff who sells but the judgment debtor
• Hence, the provisions regarding warranty are applicable to judicial sales
• The buyer can avail either of the alternative remedies to enforce the
warranty and the provisions of 1568 and 1569
• However, since the judgment debtor is forced to sell ! there can be NO
liability for damages
• The publicity surrounding a judicial sale and the fact that the seller does not
take active part in the sale and in the determination of the price !
precludes the existence of BF
• While in voluntary sales or transaction, the seller or transferor can be
expected to defend his title because of his warranty to the buyer ! no such
obligation is owed by the owner whose land is sold at execution sale
AS TO GOVERNMENT
• In judicial sales, the principle of caveat emptor applies
• The purchaser who acquires by his purchase no higher or better title or
right than that of the judgment debtor
• If the judgment debtor has no right, interest or lien in and to the property
sold ! the purchaser acquires none
• The rule caveat emptor which govern sheriff’s sales puts the purchaser
upon inquiry as to the debtor’s title, there being no warranty of title, such
sales being involuntary as distinguished from voluntary transactions, and if
he buys, he must do so at his own peril
RIGHT OF PURCHASER IN JUDICIAL SALES
• RIGHT AS ASSIGNEE ONLY
o The purchaser of property on sale under execution and levy takes
as assignee only
o At a sheriff’s sale what is sold is not the property advertised, but
simply the interest of the debtor in the property
o If it afterwards develops that the judgment debtor has none, the
purchaser is still liable on his bid because he has offered so much
 for the debtor’s interest in open market and it is for him to
determine before he bids what the debtor’s interest is worth
• RIGHT TO REIMBURSEMENT WHEN JUDICIAL SALE SET ASIDE
o When a judicial sale is voided or set aside without fault of the
purchaser ! the purchaser is entitled to reimbursement of the
purchase money paid by him subject to set-off for benefits he
enjoyed while he has possession of the property (purchase money
paid – benefits he enjoyed = reimbursement)
o A judicial sale can only be set aside upon the return to the buyer
of the purchase price with simple interest and other expenses
incurred by him ! Buyer is ordinarily entitled to a lien on the
property until he is repaid whatever may be due him
ART. 1571. Actions arising from the provisions of the preceding ten articles
shall be barred after 6 months, from the delivery of the thing sold
PRESCRIPTION OF ACTIONS IN CASES OF IMPLIED/EXPRESS WARRANTY
• The action for rescission of the contract or reduction of the purchase price
– prescribes in 6 MONTHS from the date of delivery to the buyer of the
thing sold or when it was placed in his control or possession
• Outside this period – the action is barred
• It follows that a buyer should not be permitted to offer as a defense, hidden
defects in the thing sold 6 months after he received it
• If the action is not for breach of warranty but quasi-delict or negligence –
the prescriptive period is 4 YEARS
• The 10 preceding articles referred to define the seller’s liability for the
defects in the thing sold
• 1571 may be applied only in cases of implied warranty
• Express warranty – the prescriptive period of 4 years applies
o E: if another period is specified in the express warranty
ART. 1572. 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 vendee 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.
SALE OF TWO OR MORE ANIMALS
• When 2 or more animals have been sold at the same time and the
redhibitory defect is in one or some of them but not all – GR: The
redhibition will not affect the other without it.
• It is immaterial whether the price has been fixed for a lump sum for all the
animals or for a separate price of each
• E: When it can be shown by the buyer that he would not have purchased
the sound ones without those which are defective
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• Presumption: Such intention need not be established by the vendee but
shall be presumed when a team, yoke, pair or set is bought
o E: if the seller proves the contrary
• Art. 1572 provides only redhibitory actions ! it does not bar the right of the
vendee to bring an action quanti minoris (If the object is to procure the
return of a part of the purchase price paid by the buyer)
ART. 1573. The provisions of the preceding article with respect to the sale of
animals shall in like manner be applicable to the sale of other things
SALE OF TWO OR MORE THINGS TOGETHER
• The points considered in the preceding article shall also apply to sale of 2
things ! where only one or more of them but not all have hidden defect
ART. 1574. There is no warranty against hidden defects of animals sold at fair
or at public auctions, or of livestock sold as condemned
SALE OF ANIMALS AT FAIRS OR AT PUBLIC AUCTIONS OR AS CONDEMNED
• This article is a limitation of the provisions of art. 1570
• It is based on the assumption that the defect must have been clearly known
to the buyer
• Public auction – judicial or extrajudicial
• Sale of condemned animals – precludes all idea of warranty against hidden
defects ! such animals are bought not because of their quality of capacity
for work
ART. 1575. The sale of animals suffering from contagious disease 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.
WHEN SALE OF ANIMALS VOID
• The article declares the class of animals which cannot be the object of
commerce
o Animals suffering from contagious disease
o Those found unfit for the use or service stated
• The first paragraph requires that the disease be CONTAGIOUS
SALE OF ANUMALS SUFFERING FROM CONTAGIOUS DISEASE
• VOID as against public interest
• Contract produces no effect and is governed by the rules relating to nullity
of contract (1409)
• The action or defense for declaration of the inexistence of contract = X
PRESCRIBE
** Spanish Supreme Court – X void, voidable lang daw
 SALE OF ANIMALS UNFIT FOR USE OR SERVICE
• Where the use or service for which the animals are acquired has been
stated in the contract and they are found to be unfit therefor
• If all essential elements of a contract are present and the buyer,
knowing the defect of the animal, agrees to use it for a purpose
different from what was originally stated in the contract ! he should
not be able to object
ART. 1576. If the hidden defect of animals, even in case of a professional
inspection has been made, should be of such a nature that expert knowledge
is not sufficient to discover it, the defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith, should fail to discover
or disclose it, he shall be liable for damages.
WHAT CONSTITUTES REDHIBITORY DEFECT OF ANIMALS?
• The following constitute redhibitory defects in the animals:
1. If the hidden defect of the animal is of such a nature that even in case
of professional inspection has been made ! it is of such a nature that
expert knowledge is not sufficient to discover it
2. Fault and defects which are determined by law or by local customs as
redhibitory (1577)
• To be considered redhiboitory, the defect in the animal must be
UNKNOWN TO OR HIDDEN from the seller
• The buyer cannot pursue the redhibitory action if the buyer knew the defect
of the animal
EXEMPTION FROM LIABILITY FOR REDHIBITORY DEFECTS
The vendor may exempt from liability for redhibitory defects in the following cases:
1. The buyer has knowledge of the redhibitory defects
2. The buyer is an expert who, by reason of the buyer’s trade or profession,
should have known them
3. There is a stipulation that the seller will not be liable and the buyer was not
aware of the hidden defect
4. The animals were sold at fairs or at public auctions
5. The livestock was sold as condemned
ART. 1577. The redhibitory action, based on the faults or defects of animals,
must be brought within 40 days from the date of their delivery to the vendee.
The action can only be exercised with respect to faults and defects which are
determined by law or by local customs.
LIMITATION OF ACTION IN SALE OF ANIMALS
• The redhibitory action based on faults of animals should be brought within
40 days from the date of their delivery to the vendee
• What should be considered redhibitory defects in the sale of animals ! are
only those determined by LAW or by LOCAL CUSTOMS
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• If the defects are patent – there is NO warranty against such defects
although there exists a redhibitory vice
• Local customs – are those that veterinary professors have determined as
such in the locality
ART. 1578. If the animal should die within 3 days after its purchase, the vendor
shall be liable if the disease which caused the death existed at the time of the
contract.
RESPONSIBILITY OF VENDOR WHERE ANIMAL DIES
• If the animal sold is suffering from a disease and dies after the sale, there
may be questions as to whether the death was due to the disease or
whether the buyer did not take good care of the animal
• If the animals should die within 3 days after its purchase (not date of
delivery) ! the seller shall be liable if the disease which caused the death
existed at the time of the contract
• Claim of the buyer should be based on a finding of an expert that the
disease causing the death existed at the time of the contract
• E: If the death occurs after 3 days or the defect is patent or visible !
seller is NOT liable
• If the loss is caused by a FE or fault of the buyer and the animal has vices
! 1569 applies
SUMMARY:
WHEN ANIMAL DIED W/N SELLER LIABLE
If the animals should die within 3 days Seller shall be liable if the disease which
after its purchase (not date of delivery) caused the death existed at the time of
the contract
If the death occurs after 3 days or the Seller is X liable
defect is patent or visible
If the loss is caused by a FE or fault of 1569 applies
the buyer and the animal has vices
ART. 1579. If the sale be rescinded, the animal shall be returned in the
condition in which it was sold and delivered, the vendee being answerable for
any injury due to his negligence, and not arising from redhibitory fault or
defect.
LIABILITY OF BUYER IN CASE SALE OF ANIMAL IS RESCINDED
• If the buyer avails himself of the remedies granted by Art 1567 ! buyer
must return the animal in the condition in which it was sold and delivered
• In case of injury due to his negligence ! the buyer shall be responsible but
this would be no obstacle to the rescission of the contract due to redhibitory
defect or fault of the animal
• If the animal has died as a result of a redhibitory defect existing at the time
of delivery ! the buyer should be able to file the redhibitory acton even if
the vendee is not able to return the animal in the condiction in which it was
delivered
SUMMARY

Circumstance or condition Liability of buyer CHAPTER 5

If the buyer avails himself of the Buyer must return the animal in the OBLIGATIONS OF THE BUYER
remedies granted by Art 1567 condition in which it was sold and
delivered
In case of injury due to his negligence The buyer shall be responsible but this
would be no obstacle to the rescission of Article 1582. The vendee is bound to accept delivery and to pay the price of
the contract due to redhibitory defect or the thing sold at the time and place stipulated in the contract.
fault of the animal
If the time and place should not have been stipulated, the payment must be
If the animal has died as a result of a The buyer should be able to file the made at the time and place of the delivery of the thing sold.
redhibitory defect existing at the time of redhibitory acton even if the vendee is
delivery not able to return the animal in the PRINCIPAL OBLIGATIONS OF THE BUYER
condiction in which it was delivered 1. To accept delivery of the thing sold
2. To pay the price of the thing sold at the time and place stipulated in the
contract
ART. 1580. In the sale of animals with redhibitory defects, the vendee shall 3. To bear the expenses for the execution and registration of the sale and
also enjoy the right mentioned in article 1567; but he must make use thereof putting the goods in a deliverable state, if such is the stipulation
within the same period which has been fixed for the exercise of the redhibitory
action. GRACE PERIOD FOR EXTENDING TIME OF PAYMENT
• An agreement to extend the time of payment in order to be valid must be
ALTERNATIVE REMEDIES OF VENDEE IN SALE OF ANIMALS for a definite time
• The vendee has the same right to bring at his option either: • Although no precise date is fixed, it is sufficient that the time can readily be
o Redhibitory action determined
o Action quanti minors • The fact that the seller did not act on the request for what amounts to an
• Action must be brought within 40 days from the date of delivery of the indefinite extension may be construed as denial thereof
animals to the buyer • A grace period granted the buyer in case of failure to pay the amount/s due
is a RIGHT, not an obligation
ART. 1581. The form of sale of large cattle shall be governed by special laws. • When unconditionally conferred, it is effective without further need of
demand either calling for the payment of the obligation or honoring the right
FORM OF SALE OF LARGE CATTLE • The grace period must not be likened to an obligation – non-payment of
• Act No. 4177 – Special law governing the sale of large cattle found in which (1169) would generally still require judicial or extra-judicial demand
Section 511 to 536 of the Revised Administrative Code, as amended before “default” can be said to arise
o Providing for the registration, branding, conveyance and slaughter
of large cattle PERTINENT RULES
• The admin code of 1987 superseded the Revised Admin Code In connection with the above obligation, the pertinent rules must be borne in mind:
• PD 533 (Anti-Cattle Rustling Law of 1974) – no person, partnership, 1. In a contract of sale - the seller is not required to deliver the thing sold
association, corporation or entity shall engage in the business of buy and until the price is paid nor the buyer to pay the price before thing is delivered
sell of large cattle without first securing a permit for the said purpose from in the absence of an agreement to the contrary (GR)
the Provincial Commander of the Province where it shall conduct such 2. If stipulated – then the seller is bound to accept delivery to pay the price at
business and the city/municipal treasurer of the place of residence of such the time and place designated
person, partnership, association, corporation or entity. The permit shall only 3. If there is no stipulation as to them time and place of the delivery – the
be valid in such province vendee is bound to pay at the time and place of delivery
• The sale must appear in a public document 4. In the absence of stipulation as to the place of delivery – it shall be
made wherever the thing might be at the moment the contract was
perfected

 
 
 
 
 
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 5. If only the time for delivery of the thing sold has ben fixed in the
contract – the buyer is required to pay even before the thing is delivered to
him
6. If only the time for payment of the price has been fixed – the buyer is
entitled to delivery even before the price is paid by him
LIABILITY OF THE VENDEE FOR OBLIGATIONS OF COMPANY BOUGHT OUT
1. OBLIGATION NOT OF CONSIDERABLE AMOUNT OR VALUE
• In some cases, when one company buys out another and continues
the business of the latter company, the buyer may be said to assume
the obligations of the company bought out when such obligations are:
o Not of considerable amount or value
o Especially when incurred in the ordinary course of trade and
o When the business of the latter company is continued
2. OBLIGATION OF CONSIDERABLE AMOUNT OR VALUE
• When said obligations are:
o Extraordinary value
o Company was bought out not to continue its business but to
stop its operation in order to eliminate competition
• It CANNOT be said that the buyer assumed all the obligations of the
rival company
3. MONETARY LIABILITIES TO SELLING COMPANY’S EMPLOYEE
• GR: Labor contract like collective bargaining agreements are NOT
enforceable against the transferee of an enterprise
o E: Unless expressly assumed or the sale or transfer was
made in BF
• Labor contracts are in personae and thus, binding only between the
parties
• Between the transferee and the transferor’s employees there is no
priority of contract that would make the former a substitute employer
• Principle of absorption – A bona fide buyer or transferee of all or
substantially all the properties of the seller is NOT obliged to absorb
the transferor’s employees
o The most that the purchasing company may do, for reasons
of public policy and social justice is to give preference of re-
employment to the selling company’s qualified separated
employees, who in its judgment are necessary to the
continued operation of the business establishment
Article 1583. Unless otherwise agreed, the buyer of goods is not bound to
accept delivery thereof by installments.
Where there is a contract of sale of goods to be delivered by stated
installments, which are to be separately paid for, and the seller makes
defective deliveries in respect of one or more installments, or the buyer
neglects or refuses without just cause to take delivery of or pay for one or
more instalments, it depends in each case on the terms of the contract and the
circumstances of the case, whether the breach of contract is so material as to
justify the injured party in refusing to proceed further and suing for damages
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for breach of the entire contract, or whether the breach is severable, giving
rise to a claim for compensation but not to a right to treat the whole contract
as broken.
RULES GOVERNING DELIVERY IN INSTALLMENTS
1. GENERAL RULE
• In an ordinary contract of sale of goods, the buyer is not bound to
receive delivery of the goods in installment
• He is entitled to delivery of all the goods at the same time and is bound
to receive delivery of all at the same time
• A buyer has no right to pay the price in installments
• Neither can he be required to make partial payments
• E: By agreement however, the goods may be deliverable by
installments or the price payable in installments
2. WHERE SEPARATE PRICE HAS BEEN FIXED FOR EACH
INSTALLMENT
• Where the contract provides for the delivery of goods by installments
and a separate price has been agreed upon for each installments ! it
depends in each case and circumstances of the case whether the
breach thereof is severable or not (severable – capable of being
divided)
1. Where breach affects the whole contract – if the seller
makes defective, partial or incomplete deliveries or the
buyer wrongfully neglects or refuses to accept delivery or
fails to pay any installment ! the injured party may sue for
DAMAGES for breach of the entire contract if the breach is
so material (eg breach of one installment prevents the
further performance of the contract) as to affect the whole
contract
2. Where breach severable – Where the breach is
severable, it will merely give rise to CLAIM FOR
COMPENSATION FOR THE PARTICULAR BREACH but
not a right to treat the whole contract as broken
3. WHERE SEPARATE PRICE WAS NOT FIXED FOR EACH
INSTALLMENT
• The civil code does not expressly address the scenario where the
contract provides for the delivery of goods by installment and a single
price was agreed for all installments
• In the event the seller fails to deliver an installment – the buyer should
be able to choose between:
o Fulfillment + damages
o Rescission + damages
• The same remedy should apply in the event that the buyer fails to pay
the purchase price within the period agreed upon
• However, the remedy of rescission is NOT available for slight or casual
breaches of contract
• The question of whether the breach is substantial depends upon the
attendant circumstances

Article 1584. Where goods are delivered to the buyer, which he has not
previously examined, he is not deemed to have accepted them unless and
until he has had a reasonable opportunity of examining them for the purpose
of ascertaining whether they are in conformity with the contract if there is no
stipulation to the contrary.
Unless otherwise agreed, when the seller tenders delivery of goods to the
buyer, he is bound, on request, to afford the buyer a reasonable opportunity of
examining the goods for the purpose of ascertaining whether they are in
conformity with the contract.
Where goods are delivered to a carrier by the seller, in accordance with an
order from or agreement with the buyer, upon the terms that the goods shall
not be delivered by the carrier to the buyer until he has paid the price, whether
such terms are indicated by marking the goods with the words "collect on
delivery," or otherwise, the buyer is not entitled to examine the goods before
the payment of the price, in the absence of agreement or usage of trade
permitting such examination.
BUYER’S RIGHT TO EXAMINE THE GOODS
• Acceptance – is assent to become owner of the specific goods when
delivery of them is offered to the buyer
RIGHT OF INSPECTION
• As a rule, the buyer is entitled to fair opportunity to inspect or examine the
article tendered to determine whether it conforms to the contract
• If the article or commodity does not correspond in kind, quality, condition or
amount to that which he has contracted for ! the buyer may reject it
ACTUAL DELIVERY CONTEMPLATED
• The delivery referred to in said article is actual delivery
• In other words, the ownership of the goods shall be transferred only upon
actual delivery subject to a reasonable opportunity of examining them to
determine if they are in conformity with the contract
• The right of examination or inspection under paragraph 1 is thus a
condition precedent to the transfer of ownership
o E: If there is a stipulation the contrary
• Paragraph 2 gives the buyer the right to inspect when the seller tenders
delivery of the goods to the buyer (unless otherwise agreed).
o As no distinction is made between a buyer who has previously
examined the goods prior to delivery and a buyer who has not
previously examined the goods prior to delivery ! the right is
available to both types of buyers
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DE LEON SALES REVIEWER
o Fule vs CA – the buyer examined the jewelry several months
before the contract of sale was executed and again examined the
jewelry prior to delivery
GOODS DELIVERED C.O.D/NOT C.O.D. (COLLECT ON DELIVERY)
• Where in pursuance of the contract of sale, the seller is authorized or
required to send the goods to buyer ! delivery of goods to a carrier for the
purpose of transmission to the buyer is deemed to be delivery to the buyer
• Although title passes to the buyer by the mere delivery to the carrier, the
buyer (unless the goods are sent COD) has the right to examine the goods
BEFORE paying. ! In this case, the right to examine the goods is a
condition precedent to paying the price after ownership has passed
• It should be noted that even in COD sale, the buyer is allowed to examine
the goods before payment of the price should it have been so agreed upon
or if it is permitted by usage
RIGHT OF EXAMINATION NOT ABSOLUTE
• The buyer does NOT have absolute right of examination since the seller is
bound to afford the buyer a reasonable opportunity of examining the goods
only “on request”
• If the seller refused to allow opportunity for the inspection, the buyer may:
o Rescind the contract and
o Recover the price or any part of it that he has paid
RIGHT TO BE EXERCISED WITHIN REASONABLE TIME
• The seller and the buyer may agree on the time for the inspection of the
goods
• In the absence of an agreement – the buyer must inspect the goods within
reasonable time
• Such opportunity to examine must be availed within a reasonable time in
order that the seller may not suffer undue delay or prejudice
• No more definite rule can be laid down that such a time as is reasonable,
having regard to the nature of the goods and all the circumstances of the
case, is permitted
WAIVER OF RIGHT TO EXAMINE
• The right of inspection may be given up by the buyer by stipulation
• The waiver need not be in express terms
• An illustration of a bargain inconsistent with the examination of goods
before payment ! is a contract by which goods are to be sent to the buyer
COD. But the buyer is still entitled to examine the goods after their delivery
and payment of the price. ! Here the right of examination is a condition
subsequent after transfer of ownership and payment of the price.
• The buyer is deemed to have waived his right to inspect in the following
circumstances:
o He fails to inspect within the time permitted by the contract
o Where time and opportunity for inspection are given and the buyer
does not inspect
 o The buyer’s exercise of acts of ownership, such as the sale of
goods
o If the buyer fails, after inspection, to give any indication to the
seller that the goods are rejected or that they are not of the proper
quality
PLACE OF INSPECTION
• The parties may agree on the place of inspection
• Example: The parties may agree that the place of inspection of goods
delivered to a carrier shall be at the place of shipment or some
intermediate point, or at the place of destination
• If the place of inspection is not definitely fixed by the contract ! the
intention of the parties shall govern
o The intention may be gathered from the nature of the contract,
character of the goods (perishable or otherwise), manner of
shipment and packing, etc.
• In the absence of any special agreement – the place of delivery is generally
the place of inspection
• Where goods are delivered to a carrier for transportation to the buyer at a
distant point ! the buyer’s right to inspection continues until the goods are
received and accepted at the final destination, in the absence of any
special agreement or circumstances indicating that an intention that
inspection shall be at the place of shipment, even though title passed to the
buyer by delivery to the carrier at the point of shipment
o In this respect, the carrier is not the buyer’s agent to pass upon
the character, quality and kind of articles ! the right of inspection
still remains in the buyer, together with the right to reject the
goods if they do not comply with the contract
o However, it has been held that the place of shipment is the place
of inspection where the sale is for cash FOB place of shipment
and the buyer had full opportunity for inspection there
EXPENSES INCIDENT TO INSPECTION
• There are divergent views on who should bear the expenses incident to
inspection
• Two views:
o First view: That in the absence of stipulation the contrary, the
seller must bear the expenses incident to inspection
o Second view: While the seller was under obligation to afford the
buyer an opportunity to make the examination, any expenses
incurred thereby, beyond what would be necessary in putting the
goods in a proper place for delivery, would fall upon the buyer
• In one case, the buyer wished to inspect the schooner and asserted that
the seller should go to the expense of placing the vessel in a dry dock for
examination. The court ruled that the seller was under no obligation to incur
an unusual expense and could not be called upon to place the vessel in a
dry dock.
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DE LEON SALES REVIEWER
MODE OF ACQUISITION
• The buyer must exercise the right of inspection in the manner provided in
the contract
• In the absence of stipulation, the inspection should be made in the
customary manner, that is, in the manner which is usually and customary in
the particular trade to which the transaction in question belongs.
• The right if inspection carries with it the right to do things without which it
cannot reasonable and efficiently be accomplished (ex. the buyer may
unpack the goods)
REJECTION OF GOODS
• Where, on inspection, the goods are proved to be unsuitable or fail to
conform to the contract ! he may refuse to accept them
• He is not bound to return them to the seller and it is sufficient if he notifies
the seller that he refuses to accept them
• The option to reject must be exercised and notice of rejection given to the
seller within a reasonable time unless a definite period has been fixed by
the contract
• The receipt of goods under a contract of sale constitutes an acceptance of
them if the right of rejection is not exercised within a reasonable time
• The question of what is reasonable time within which the buyer must
inspect the goods is a question of fact taking into account all the relevant
circumstances
Article 1585. The buyer is deemed to have accepted the goods when he
intimates to the seller that he has accepted them, or when
the goods have been delivered to him, and he does any act in relation to them
which is inconsistent with the ownership of the seller, or when, after the lapse
of a reasonable time, he retains the goods without intimating to the seller that
he has rejected them.
WHAT CONSTITUTES ACCEPTANCE
• ART. 1585 CONTEMPLATES ACCEPTANCE OF TITLE
• Acceptance of title distinguished from:
o Acceptance of quality – AT and AQ are not necessarily
contemporaneous.
" There may be an acceptance of quality before delivery,
as where the goods are selected by the buyer, with
delivery and transfer of title postponed until a later time
o Acceptance of possession – For example, if the buyer expressly
refuses to accept title of the goods tendered, his permission to
place the goods inside his premises for the mutual convenience of
the parties cannot be considered an acceptance of the title
MODES OF MANIFESTING ACCEPTANCE
Article 1585 expresses a definition of acceptance. It may be manifested either
expressly or impliedly.
1. EXPRESS ACCEPTANCE
• Takes place when the buyer, after delivery of the goods, intimates to the
seller, verbally or in writing, that he has accepted them
2. IMPLIED ACCEPTANCE
• When the buyer, after delivery of goods, does any act inconsistent with
the seller’s ownership (ex. when he sells or attempts to sell the goods, or
he uses, or makes alterations in them in a manner proper only for an
owner)
• When the buyer, after the lapse of a reasonable time, retains the goods
without intimating his rejection
o The retention of the goods is strong evidence that the buyer has
accepted the ownership of goods
o While retention may be considered as an act inconsistent with the
ownership of the seller, it is stated as a separate mode of
manifesting acceptance as it is merely a negative indication
which may be due merely to carelessness
USE OF PROPERTY
• GR: The use of goods by the buyer is generally considered an act
inconsistent with the seller’s ownership and prevents the buyer from
claiming that he has not accepted the goods
• The following acts by the buyer have been held to constitute conduct
inconsistent with the seller’s ownership
o Placing brass inventory plate upon the machine coupled with
retention for more than 6 months without rejection
o Retention of motor vehicle for more than 5 months and driving it
more than 3k miles
o Continued use of vehicles after attempted rejection
o Repairing, correcting and altering purchased incinerator
o Movement of boat from one place to another, use in the buyer’s
business and registration in the buyer’s name
• E: A single act of use is not such an act of ownership as will indicate
acceptance is such use does not affect the condition or value of the
property
o Ex. The effect of the use of the article may be modified by the
circumstances surrounding such use, as where the use is for the
purpose of trial
" E: It will be regarded as an acceptance is the buyer
prolongs the trial beyond a reasonable period or uses
more of the goods than is fairly and reasonably
necessary in making the tests
  © Michelle Duguil, 74
DE LEON SALES REVIEWER
OTHER ACTS OF OWNERSHIP INCONSISTENT WITH SELLER’S OWNERSHIP
1. RESALE OR MORTGAGE
• GR: the act of the buyer in selling or mortgaging the goods =
conclusive evidence of his acceptance and precludes a subsequent
rejection or rescission
o E: Where the buyer rejects the goods shipped to him for
failure to comply withi his order and the seller refuses to
assume responsibility or give directions as to the disposition
of the property ! the buyer may resell on account of the
seller w/o having accepted the goods (this is especially true
as regards perishable property such as fruit or produce)
2. ALTERATION
• When the buyer makes an alteration to the goods ! he is ordinarily
deemed to have accepted them
3. CONDUCT AFTER REJECTION
• If the buyer, after rejecting the goods, performs an act inconsistent
with the rejection or with the seller’s absolute ownership over the
goods ! the buyer waives or withdraws the rejection, and the case
stands as though no rejection was made
DELIVERY AND ACCEPTANCE, AS SEPARATE ACTS
Delivery and acceptance are two distinct and separate acts of different parties
1. ACCEPTANCE AS A CONDITION TO COMPLETE DELIVERY
• Acceptance is generally necessary to complete actual delivery
• 1497 – the thing is understood as delivered when it placed in the
control and possession of the buyer
• As a rule, it cannot be said that the thing is placed in the control and
possession of the buyer when the buyer has not yet accepted the
goods
• Delivery has been described as a composite act, a thing which both
parties must join and the minds of both parties concur… delivery
contemplates “the absolute giving up of control and custody of the
property on the part of the seller, and the assumption of the same by
the buyer
2. ACCEPTANCE AND ACTUAL RECEIPT DO NOT IMPLY THE OTHER
• Acceptance of the buyer may precede actual delivery
• There may be an actual receipt without any acceptance and there may be
acceptance without any receipt
Article 1586. In the absence of express or implied agreement of the parties,
acceptance of the goods by the buyer shall not discharge the seller from
liability in damages or other legal remedy for breach of any promise or
warranty in the contract of sale. But, if, after acceptance of the goods, the
buyer fails to give notice to the seller of the breach in any promise or warranty
within a reasonable time after the buyer knows, or ought to know of such
breach, the seller shall not be liable therefor.
ACCEPTANCE, NOT A BAR TO ACTION FOR DAMAGES
• Acceptance, as used in this article, has the meaning explained previously -
assent to receive delivery as transferring possession and ownership in the
goods ! but it does not carry with it the additional agreement that the
property in the goods shall be taken in full satisfaction of all obligations
• Unless otherwise agreed, acceptance of the goods by the buyer ! does
not discharge the seller from liability in damages or other legal remedy (like
rescission) for breach of any promise or warranty in the contract of sale
NOTICE TO SELLER OF BREACH OF PROMISE OR WARRANTY
1. NECESSITY
• 1586 requires that the buyer must give notice to the seller of any
breach within reasonable time to hold the seller liable for breach of
promise or warranty
• Time is counted not simply from the moment the buyer knows of the
defect, but from the from the time when he ought to have known it
• Prompt exercise of opportunity for discovering defects is, therefore,
essential
• The notice required is a notice given within such time as notice would
be given by an ordinarily careful man, acting under the same
circumstances and with respect to goods of the same character
• The contract may fix the time for giving notice
2. PURPOSE
• The purpose is to protect the seller against belated claims which
prevent him from making prompt investigation to determine the cause
and extent of his liability and also to enable him to take any other
immediate steps that his interest may require
3. FORM OF NOTICE
• No particular form of notice is required
4. BURDEN OF PROOF
• Burden is upon the one claiming the breach of warranty to plead and
prove notice within reasonable time
5. BREACH OF ANY PROMISE OR WARRANTY
• 1586 applies not only to defects of quality but to breach of any promise
or warranty
Article 1587. Unless otherwise agreed, where goods are delivered to the buyer,
and he refuses to accept them, having the right so to do, he is not bound to
return them to the seller, but it is sufficient if he notifies the seller that he
refuses to accept them. If he voluntarily constitutes himself a depositary
thereof, he shall be liable as such.
WHERE THE BUYER’S REFUSAL TO ACCEPT IS JUSTIFIED
1. DUTY OF THE BUYER TO TAKECARE OF GOODS WITHOUT
OBLIGATION TO RETURN
• If the goods have been sent to the buyer and he rightfully refused to
accept them (as in the case where the goods are of not the kind and
quality agreed upon) ! he is in the position of a BAILEE who has the
goods thrust upon his without his assent
  © Michelle Duguil, 75
DE LEON SALES REVIEWER
• He has the obligation to take reasonable care of the goods, but
nothing more can be demanded fro him
• He is under no obligation to return the goods to the seller
2. DUTY OF SELLER TO TAKE DELIVERY OF GOODS
• After notice that the goods have not been and will not be accepted !
the seller must have the burden of taking delivery of said goods
3. SELLER’S RISK OF LOSS OF GOODS
• While the goods remain in the buyer’s possession under these
circumstances, they are at the SELLER’S RISK
• The buyer is not deemed and is not liable as a depositary,
o E: He voluntarily constitutes himself as such
4. RIGHT OF BUYER TO RESELL GOODS
• It usually happens that the seller, when notified that the goods are not
in conformity with the contract and when requested to remove them !
fails to do so claiming that the contract has been properly fulfilled
• Under these circumstances, it may be clearly the best thing to do, for
the buyer in whose possession the goods are to sell them at once and
leave the question whether the goods fulfilled the terms of the contract
or not to subsequent determination where goods are perishable or
expensive to keep or of fluctuating value, any other course is attended
with loss to one party to the other
• The buyer, though refusing to take title because the goods do not
conform to the contract, after notifying the seller of his rejection and
requesting him in vain to remove the goods ! resell them on account
of the seller
• Unless the sale is imperative to save the goods before notice can be
given to the seller and a reply received ! a sale by the buyer
constitutes acceptance
• If the buyer acts within his rights in making a resale ! he is entitled to:
o A lien not only for the portion of the price already paid
o Any reasonable expenses incurred in keeping and caring for
the goods and in reselling them
Article 1588. If there is no stipulation as specified in the first paragraph of
article 1523, when the buyer's refusal to accept the goods is without just
cause, the title thereto passes to him from the moment they are placed at his
disposal. (n)
WHERE BUYER’S REFUSAL TO ACCEPT WRONGFUL
• GR: The delivery of the goods to a carrier is deemed to be delivery of the
goods to the buyer
o This is true even if the buyer refuses to accept the goods in case
his refusal is without just case
o The title passes to the buyer and therefore he bears the risk of
loss
• E: In those case where the right of the buyer to inspect the goods at the
time of delivery is a condition precedent to transfer of ownership ! the
ownership passes by operation of law after such inspection
Article 1589. The vendee shall owe interest for the period between the delivery
of the thing and the payment of the price, in the following three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial demand
for the payment of the price.
LIABILITY OF VENDEE FOR INTEREST WHERE PAYMENT IS MADE AFTER
DELIVERY
• This article presupposes that delivery of the thing sold and the full payment
of the price were not made simultaneously ! the thing sold was delivered
first followed by the payment of the price after lapse of a certain period of
time
• The buyer is liable to pay interest from the delivery of the thing until the
payment of the price
INTEREST EXPRESSLY STIPULATED
• The rate stipulated governs
• The stipulation of the parties to pay interest may be oral
• 1956 – “no interest shall be due unless it has been expressly stipulated in
writing” ! X applicable ! only applies to contract of loan
• If the parties fail to fix the rate ! the legal rate of interest shall be due
FRUITS OR INCOME RECEIVED BY THE BUYER FROM THE THING SOLD
• 2 CONDITIONS:
o That the thing sold had been delivered
o That it produces fruits or income
• If the buyer would not be bound to pay interest for the use of the money,
which he should have paid, the principle of bilaterality which characterizes
a contract of sale would no longer exist
• Since the law makes no distinction, the buyer is still bound to pay interest
even if a term has been fixed for the payment of the price
VENDEE GUILTY OF DEFAULT
• If the buyer incurs delay in the payment of the agreed price (1169) ! the
interest is due from the time of judicial or extrajudicial demand by the
vendor for the payment of the price
• This demand by the seller is the starting point for the commencement of
default or delay on the part of the buyer
• E: If the seller, instead of demanding the payment of the purchase price,
files an action to nullify the contract of sale ! 1589 (3) does not apply
• Under nos. 1 and 2 of 1589 – no demand is necessary
PARIAL PAYMENT
• 1589 applies to a situation where the seller delivers the thing to the buyer,
who makes partial payment of the purchase price
  © Michelle Duguil, 76
DE LEON SALES REVIEWER
• Thus, payment to pay the balance of the purchase price will not obligate
the buyer to pay interest if none of the 3 cases mentioned in 1589 applies
Article 1590. Should the vendee be disturbed in the possession or ownership
of the thing acquired, or should he have reasonable grounds to fear such
disturbance, by a vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has caused the disturbance
or danger to cease, unless the latter gives security for the return of the price
in a proper case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A mere act of
trespass shall not authorize the suspension of the payment of the price.
RIGHT OF THE VENDEE TO SUSPEND PAYMENT OF PRICE
WHEN VENDEE HAS RIGHT
• The vendee may suspend the payment of the price in 2 cases only:
1. If he is disturbed in the possession or ownership of the thing bought or
2. If he has a well-grounded fear that his possession or ownership would
be disturbed by a vindicatory action or foreclosure of mortgage
• Under the circumstances provided for by 1590 ! the buyer is only entitled
to retain the price that has not been paid to the vendor
• He is not entitled to recover what has already been paid
• Under the second case – it is not necessary that an action be brought
against the vendee (well-grounded fear is enough)
WHEN VENDEE HAS NO RIGHT
• In the following cases, the buyer cannot suspend the payment of the price
even if there is disturbance in his possession or ownership of the thing
sold:
1. If the seller gives security for the return of the price in a proper case
2. If it has been stipulated notwithstanding any such contingency, the
buyer must make payment
3. If the seller has caused the disturbance or danger to cease
4. If the disturbance is a mere act of trespass
5. If the buyer has fully paid the price
• If the thing sold is in the possession of the buyer and the price is already in
the hands of the seller ! the sale is a consummated contract and 1590 is
no longer applicable
• Article 1590 presupposes that the price or any part thereof has not yet
been paid and the contract has not yet been consummated
RIGHT OF THE VENDEE TO DEMAND RESCISSION
• The buyer has no cause of action for rescission before final judgment
because the seller might become the victim of machinations between the
buyer and the third person
• It must be noted that the disturbance must be in the possession or
ownership of the thing acquire
• The remedy of the buyer is rescission ! where the disturbance is cause by
the existence of a NON-APPARENT SERVITUDE
 o Rescission has the effect of abrogating the contract from its
inception
o It releases the parties from further obligation to each other and
restores them to their original position as if no contract has been
made ! hence they must return what they received pursuant to
the contract
Article 1591. Should the vendor have reasonable grounds to fear the loss of
immovable property sold and its price, he may immediately sue for the
rescission of the sale.
Should such ground not exist, the provisions of article 1191 shall be
observed.
RIGHT OF THE SELLER TO RESCIND SALE OF IMMOVABLE PROPERTY
• This article refers only to a sale of immovable or real property where the
seller has good reasons to fear the loss of the property and its price
• It contemplates a situation where there has been a delivery of the
immovable property but the vendee has not yet paid the price
• 1591 is applicable to both cash sales and to sales in installment
• Pursuant to 1191 of the CC – the seller may sue for either:
o Fulfillment + damages
o Rescission + damages
Upon the buyer’s failure to comply with his obligation to pay the agreed
price
• Rescission is only allowed where the breach is substantial and
fundamental to the fulfillment of the obligation
Article 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a notarial act. After
the demand, the court may not grant him a new term.
RULE WHERE AUTOMATIC RESCISSION OF SALE OF IMMOVABLE
PROPERTY STIPULATED
• GR: The seller may sue for rescission of the contract should the vendee
fail to pay the agreed price
• E: The sale of real property is subject to the stipulations agreed upon by
the parties and to the provisions of 1592 ! which speaks of non-payment
of purchase price as a RESOLUTORY CONDITION
• Art. 1191 is subordinated to the provisions of Article 1592 when applies to
sales of immovable property
THE MERE FAILURE TO FULFILL THE CONTRACT DOES NOT OPERATE IPSO
FACTO AS ITS RESCISSION
  © Michelle Duguil, 77
DE LEON SALES REVIEWER
• Before a demand for the rescission of the contract (for non-payment of the
price) has been made by the seller (judicially or by notarial act) ! the
buyer may still pay the price:
o Even after the expiration of the stipulated period for payment and
o Notwithstanding a stipulation that failure to pay the price on the
stipulated date ipso facto resolves the sale
A JUDICIAL OR NOTARIAL ACT IS NECESSARY BEFORE A VALID
RESCISSION CAN TAKE PLACE W/N AUTOMATIC RESCISSION HAS BEEN
STIPULATED
• It has to noted that the law uses the phrase “even though” – emphasizing
that when no stipulation is found on automatic rescission, the judicial or
notarial requirement still applies
• A letter informing the buyer of the automatic rescission of a contract of sale
of real property does NOT amount to demand for rescission if it is not
notarized
• The offer to pay prior to the demand for rescission is sufficient to defeat the
seller’s right under 1592.
• There is no existing provision in our laws authorizing the automatic
rescission of contracts of sale of real property for non-payment of the
purchase price except Art 1592
NOTE:
• In 1191 and 1592 – the rescission is a principal action which seeks
resolution or cancellation of the contract
• In 1381 (rescissble contracts) – the action is subsidiary one limited to
cases of rescission of lesion as enumerated in the article
• Prescriptive period for 1191 and 1591 – found in 1144 ! the action upon
written contract should be brought within 10 years from the time the right
of action accrues
• The seller can go to court to demand judicial rescission in lieu of a notarial
act of rescission
• An action for reconveyance is NOT an action for rescission ! the judicial
rescission of a contract gives rise to mutual restitution which is not
necessarily the situation that can arise in an action for reconveyance
RIGHT OF SELLER TO RESCIND NOT ABSOLUTE
• In a contract of sale, the remedy of the unpaid seller is either:
o Specific performance + damages
o Rescission + damages
• A seller, however, CANNOT unilaterally and extra-judicially rescind a
contract of sale of immovable property where there is no express
stipulation authoring him to extra-judicially rescind
o E: 1592
• Judicial rescission of a contract us not necessary where the contract
provides for automatic rescission in case of breach
1. COURT MAY GRANT VENDEE A NEW TERM
• GR: The right to rescind is not absolute and the court may extend the
period for payment
 o E: Once a demand for rescission by suit or notarial act is
made ! the court may not grant the buyer a new term
" E to E: Nevertheless, in the interest of justice and
equity, the court may grant the buyer a new term
where he has substantially performed in good faith
2. VENDOR MAY WAIVE HIS RIGHT
• The right of automatic rescission may be waived
• Where the seller granted many extensions to the buyer, in all of which,
the seller never called attention to the proviso on “automatic
rescission” = deemed waiver
• The unqualified acceptance by the seller of payments after the 6-
month period expires = waiver of the period and rescission
3. WRITTEN NOTICE OF CANCELLATION MUST BE GIVEN
• While judicial action for the rescission of the contract is not necessary
where the contract provides that it may be cancelled by violation of its
terms and conditions ! there must still be a written notice sent to the
defaulter informing him of the rescission
• The indispensability of notice of cancellation to the buyer of real estate
is underscored in RA 6552 which specifically provides that the notice
of cancellation or demand for rescission of the contract must be by
notarial act
• A notarial act presupposes signing before a notary public and 2
competent witnesses
• An action for judicial confirmation of rescission and damages =
complies with the requirement of law for judicial decree of rescission
• A crossclaim found in the answer = constitute a judicial demand for
rescission that satisfied the requirement of the law
4. BREACH MUST BE SUBSTANTIAL
• Rescission of a contract will not be permitted for slight or causal breach but
only for substantial and fundamental breach as would defeat the very
object of the parties
• The question of whether a breach of contract is substantial depends upon
the attendant circumstances
WHEN ART 1952 NOT APPLICABLE
1. SALE ON INSTALLMENT OF REAL ESTATE
• 1952 contemplates an absolute sale
• X apply to sales on installment of real property in which the parties
have laid down the procedure to be followed in the event the buyer
failed to fulfill his obligation
2. CONTRACT TO SELL/CONDITIONALS ALE OF REAL ESTATE
• X applicable to mere promise to sell (executory contract to sell) where
the title remains with the vendor until fulfillment of a positive condition,
such as full payment of the purchase price
• Such payment is a positive suspensive condition – the failure of
which is not a breach, casual or serious, but simply an event that
prevents the obligation of the vendor to convey title from acquiring
binding force
• In an absolute sale, non-payment is a resolutory condition
  © Michelle Duguil, 78
DE LEON SALES REVIEWER
3. CASES COVERED BY RA 6552
• This law governs sales of real estate on installment
• The act recognized in conditional sales of all kinds of real estate the
non-applicability of 1592 to such contracts to sell on installments and
the right of the seller to cancel the contract upon non-payment which is
simply an event that prevents the obligation of the vendor to convey
title from acquiring binding force
• The act in modifying the terms and application of 1592 recognizes:
o The seller’s right to cancel unqualifiedly in case of “industrial
lots, commercial buildings and sales to tenants” and
o Requires a grace period in other cases, particularly residential
lots, with a refund of certain percentages of payments made
on account of the cancelled contract
• The buyer has the right to continue occupying the property subject of
the contract to sell and may “still reinstall the contract by updating the
account during the grace period and before the actual cancellation”
• RA 6552 was enacted to protect buyers or real estate on installment
against onerous and oppressive conditions
• The buyer in Nos 1 and 2 above – may no longer pay the price after
the expiration of the time agreed upon although no demand has yet
been made upon him by suit or notarial act
o E: In the case of sale on installment of residential lots – while
the seller’s right to cancel the contract to sell upon breach by
non-payment of the stipulated installments is recognized by
RA 6552 ! a grace period is required, with the buyer entitled
to refund of certain percentages of payments in the event that
the contract is cancelled
• RA 6552 makes no distinction between “option” and “sale” which
virtually includes all transactions concerning land and housing
acquisition including reservation agreements
• This law normally applies to all transaction or contracts, involving the
sale or financing of real estate on installment payments, including
residential condominium apartments, excludes industrial, commercial
and sales to tenants under RA 3844
Article 1593. With respect to movable property, the rescission of the sale shall
of right take place in the interest of the vendor, if the vendee, upon the
expiration of the period fixed for the delivery of the thing, should not have
appeared to receive it, or, having appeared, he should not have tendered the
price at the same time, unless a longer period has been stipulated for its
payment.
RULE WHERE AUTOMATIC RESCISSION OF SALE OF MOVABLE PROPERTY
STIPULATED
• In the sale of real property - the vendor must make a demand for
rescission before he can have the right to rescind the contract
 • In the case of personal property (which has not yet been delivered to the
buyer) – the seller can rescind the contract, as a matter of right if the buyer,
without any valid cause DOES NOT:
1. Accept the delivery
2. Pay the price unless a credit period for its payment has been
stipulated
• The mere failure of the buyer to comply with the terms of the contract does
not rescind the same
• It is necessary that the seller should take some affirmative action indicating
his intention to rescind
o E: The parties may, however, validly enter into an agreement that
violation of the terms of the contract would cause cancellation
thereof without judicial intervention or permission
REASON FOR THE RULE WITH RESPECT TO MOVABLE PROPERTY
• The reason for the difference is that personal parties are not capable of
maintaining a stable price in the market
• Their prices are so changeable that any delay in their disposal might cause
the seller great prejudice
• This is not true in the case of real property which has more or less stable
price in the market and the delay that might result from the requirement
imposed on the vendor to demand rescission being entitled to rescind the
contract will not in any way be detrimental to the interest of the seller.
CHAPTER 6
ACTIONS FOR BEACH OF CONTRACT OF SALE OF GOODS
ART. 1594. Actions for breach of the contract of sale of goods shall be
governed particularly by the provisions of this Chapter, and as to matters not
specifically provided for herein, by other applicable provisions of this Title.
ACTIONS GOVERNING BREACH OF CONTRACT OF SALE OF GOODS
• GOODS
o Include all chattels personal
o But NOT things in action or money of legal tender in the
Philippines
o Includes growing fruits or crops
• Actions for breach of the contract of sale of goods are governed:
o Primarily: Provisions of Chapter 6 (Art. 1595-1599)
o Secondarily: Other provisions of the Title on sales so far as said
provisions can apply
• Provisions concerning the sale of immovable have NO application to the
sale of goods
  © Michelle Duguil, 79
DE LEON SALES REVIEWER
ACTIONS AVAILABLE
1. Action by the seller for the payment of the price (1595)
2. Action by the seller for damages for non-acceptance of the goods (1596)
3. Action by the seller for rescission of the contract for breach thereof (1597)
4. Action by the buyer for specific performance (1598)
5. Action by the buyer for rescission or damages for breach of warranty
(1599)
ART. 1595. Where, under a contract of sale, the ownership of goods has
passed to the buyer, and he wrongfully neglects or refuses to pay for the
goods according to the terms of the contract of sale, the seller may maintain
an action against him for the price of goods.
Where, under a contract of sale, the price is payable on a certain day,
irrespective of delivery or transfer of title, and the buyer wrongfully neglects
or refuses to pay such price, the seller may maintain an action for the price,
although the ownership in the goods has not passed. But it shall be a defense
to such an action that the seller at any time before the judgment in such action
has manifested an inability to perform the contract of sale on his part or an
intention not to perform it.
Although the ownership in the goods has not passed, if they cannot readily be
resold for a reasonable price, and if the provisions of article 1596, fourth
paragraph, are not applicable, the seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them, may notify the buyer that the
goods are thereafter held by the seller as bailee for the buyer. Thereafter the
seller may treat the goods as the buyer’s and may maintain an action for the
price.
SELLER’S RIGHT OF ACTION FOR THE PRICE
The above article provides the 3 cases when an action for the price of goods under
a contract of sale can be maintained by the seller:
1. When the ownership of the goods has passed to the buyer and he
wrongfully neglects or refuses to pay for the price (par. 1)
2. When the price is payable on a certain day and the buyer wrongfully
neglects or refuses to pay such price, irrespective if delivery or of
transfer of the title (par. 2)
3. When the goods cannot readily be resold for a reasonable price and the
buyer wrongfully refuses to accept them even before the ownership in
the goods has passed, if the provisions of Art. 1596 paragraph 4 are not
applicable (par. 3)
The seller’s right of action for the price assumes that there is a breach of contract by
the buyer.
EXAMPLE
S sold to B a specific refrigerator for 8k. S can maintain an action for the price in any
of the following cases:
1. He has delivered the refrigerator to B and the latter wrongfully fails to pay