Sie sind auf Seite 1von 15

Sales Lecture of Atty.

Fabella (Transcribed) 11-25-2017 | JG Soriano

RECTO LAW

Q: What is the Recto Law?


A: A law that provides for the remedies of a seller in case of sale of personal property in installment which is provided in
Art. 1484.

Q: What are the remedies provided in Art. 1484?


A: The remedies are:
(1) Exact fulfillment (specific performance)
(2) Cancel the sale if there is failure to pay two (2) or more installment
(3) Foreclose the mortgage over the thing sold if there is failure to pay two (2) or more installment

Q: What is the nature of these remedies?


A: These remedies are alternative and not cumulative.

MACEDA LAW

Q: What is the Maceda Law?


A: A law that provides for the remedies of the buyer in case of his own failure to pay installment of real property.

The distinction is on the date of payment. For those who already paid installment for more than two (2) years, the law
gives the buyer a grace period of one month for every year of installment made within which to pay the unpaid
installment without interest. If he still fails to pay within the grace period, the seller is free to cancel the sale but only upon
compliance with two (2) conditions:
(1) payment of cash surrender value which is equivalent to 50% of all the payments made
a. Note further that if payment is made for more than 5 years, there is an additional 5% of the payment
made to be added as cash surrender value not exceeding 90% of the total payments made
(2) notice of cancellation should be given to the buyer and the notice should be by way of notarial act.

If both conditions are complied, the sale may effectively be cancelled 30 days from receipt of such notice.

For buyers who have paid installments for less than 2 years, the grace period is different. It is fixed at sixty (60) days grace
period. Within this grace period, the buyer can pay the installment without interest but failure to pay such installment
during the grace period, the seller can cancel the sale by complying with one condition: sending a notice of cancellation
by a notarial act and the sale may effectively be cancelled 30 days from receipt of such notice.

Q: Why is it important to know the grace period?


A: Because at any time during the grace period and prior to the effective cancellation of the sale, the buyer can assign his
credit to anybody who then can step into the shoes of the buyer and become the buyer and therefore effectively wipe out
the liability.

OBLIGATIONS OF THE SELLER

Q: What are the obligations of the Seller?


A: The following are the obligations of the seller:
(1) to preserve the subject matter
(2) to deliver the subject matter
(3) to deliver the fruits and accessories of the thing sold
(4) to warrant the subject matter

Q: What is the degree of diligence required in the preservation of the subject matter?
A: Diligence of a good father of a family
Q: Up to when are you required to preserve the subject matter?
A: Until delivery of the object

Q: When does the right to the fruits and accessories begin?


A: From the moment of perfection of the sale.

Q: A contract was perfected on November 1 covering 1 hectare of property with trees bearing fruits. Delivery is agreed to
happen on Nov. 30. Today is November 25, can the buyer demand the seller to deliver the fruits today? If the buyer is
entitled to the fruits and accessories from the moment of perfection, can the buyer demand the seller to deliver the fruits?
A: NO. The right is inchoate. The right to demand fruits and accessories only happens upon actual delivery of the principal.
The accessory follows the principal. You cannot demand delivery of fruits and accessories if the principal have not yet been
delivered. Only then can the buyer demand all the fruits and accessories that accrued from the moment of perfection up
until delivery.

Q: What are the four major warranties?


A: Warranty against eviction, against hidden defects, to sell, non-apparent servitude.

Transfer of ownership is the essence of contract of sale. It is delivery which transfers ownership. Delivery can either be
actual or constructive. Actual delivery is the actual physical exchange of the property. Constructive delivery is delivery by
way of symbolism such as the giving of a key or a certificate of ownership. But in effect, constructive delivery is the same
as actual delivery. This means that, constructive delivery likewise transfers the ownership to the buyer. However, this is not
always the case.

Q: What is the requisite for a valid and effective transfer?


A: First, there must be an actual intention on the part of the seller to transfer ownership and the intention of the buyer to
receive the object. Second, such intention is premised on a valid contract of sale. Without these two requisites, no amount
of delivery will transfer the ownership.

Q: What if it is premised on a voidable or unenforceable or rescissible contract of sale? Will it still amount to transfer
ownership?
A: It will still transfer ownership. Defective contracts remain to be valid until they are effectively annulled or rescinded.

Constructive Delivery by Execution of a Public Instrument

Q: When does an instrument become public?


A: Upon notarization.

Note: Notarization is for convenience. It is a convenient way of proving the existence of a document. Without notarization,
an instrument is a private one.

Q: Are there any instance or exception where execution of a public instrument does not transfer ownership?
A: YES. The following are the instances:
(1) If there is a stipulation reserving ownership until full payment of purchase price is made
(2) If the subject matter is not within the control of the seller and he does not have the liberty to dispose of the
property

Q: Is there an exception to this exception?


A: YES. If the buyer himself is aware that the ownership is not within the control of the seller and still he agreed to the sale
of the property. The buyer assumed the risk.

Q: How does delivery of rights or incorporeal property happen?


A: By way of constructive delivery because rights are intangible. It can happen by:
(1) Execution of public instrument
(2) Placing of title or proof of ownership to the buyer
(3) If the buyer exercises the rights of an owner over the incorporeal property and such exercise is with the consent of
the seller

Q: How do you consider delivery to be complete?


A: If what was agreed upon has been delivered.

Q: Distinguish between completeness of delivery of immovable property and movable property


A: In movable property, everything included in the agreement, the delivery of those will complete their delivery.

Q: If 100 cavans of rice is agreed upon but 75 cavans was only given, can you accept? And how much should you pay?
A: The buyer may accept or reject. If the buyer knew that the seller cannot complete the delivery and still accepts the
delivery, the buyer should pay the contract rate. If the buyer accepts the delivery upon the representation of the buyer
that the delivery will be completed but the seller fails to do so, the buyer should only pay the fair market value of the
object.

Sale of Real Property: Per Unit or Lump Sum

Q: What does sale of real property per unit or lump sum mean? What is the difference?
A:

Q: What are the rights of the buyer if what was delivered is less than the area stipulated?
A: There are two (2) remedies:
(1) Proportionate reduction of the price; or
(2) Rescission – when at least 1/10 is missing from the area agreed upon

Q: Can the buyer, even if the area delivered is complete, ask for rescission?
A: YES. If the quality of the area delivered is such that at least 1/10 is inferior in value.

Q: What if the buyer refuses to accept the object, can delivery still be considered complete?
A: YES. Delivery is complete if the conditions for delivery is met. It is not subject to the acceptance of the buyer.

OBLIGATIONS OF THE BUYER

Q: What are the obligations of the buyer?


A: The following are the obligations of the buyer:
(1) To pay the price
(2) To pay the interest if any
(3) To accept the delivery

Q; When and where should the buyer pay the price?


A: At the time and place stipulated in the contract

Q: When is he required to pay interest?


A: NO. Interest is only payable when there is a stipulation to that effect. Other instances:
(1) if the goods produce fruits and accessories and those fruits and accessories form part of the interest or is in the
nature of an interest deliverable to the buyer
(2) if the buyer is in default from the time of judicial or extrajudicial demand

Q: When and where to accept the price?


A: At the time and place of delivery. In default, in the seller’s place of business. In default, in his residence.

Q: When is a buyer deemed to have accepted the delivery?


A: He is deemed to have accepted delivery when:
(1) the buyer actually accepts
(2) there is no acceptance but he exercised his right inconsistent with the ownership of the seller
(3) if he retains the object for an unreasonable length of time without rejecting it

Q: What are the remedies of the seller when the buyer wrongfully refuses to accept the goods?
A: The only remedy is an action for damages against the buyer. The basis of the damage is actual damages which is the
estimated loss directly and naturally resulting from the buyer’s non-acceptance. Considering that the buyer rejects the
object, should the seller sell the object to an available market, then the measure of damage would be the difference of the
contract rate and the market value of the object. If the buyer repudiates the object prior the delivery, then all actual
expenses or costs, including labor, may be demanded as damages against the buyer. Finally, the profits which the seller
could have made can also be the measure of damage.

Note: When the refusal is justified, then the action for damages will not lie.

SPECIAL REMEDIES OF AN UNPAID SELLER

Q: What are the special remedies of an unpaid seller?


A: The following are the remedies of an unpaid seller:
(1) Possessory Lien
(2) Stoppage in Transitu
(3) Special Right of Resale
(4) Special Right to Rescind

Q: When do you consider a seller as an unpaid seller?


A: A seller is considered as an unpaid seller:
(1) When the whole of the price has not been paid or tendered
(2) When a bill of exchange has been dishonored

Note: From this definition, this means that even if there is already partial payment, the seller is still unpaid because it must
be the whole of the price.

Q: What is the minimum requirement to avail of these special remedies?


A: The goods must be in the possession of the seller. If you lose possession, the special remedies are also lost.

Q: What is possessory lien?


A: The right to hold on to the object without any consequence.

Q: When do you exercise the right of possession?


A: In the following instances, the right of possession may be exercised by the seller:
(1) when the buyer has not made any payment to the seller
(2) when there is no period for payment fixed by the parties

Q: When can seller exercise the special right of possession?


A: The seller can exercise the special right of possession when:
(1) the goods have been sold without stipulation as to the credit (meaning there is no period of payment or the
period has already expired)
(2) the buyer becomes insolvent

Q: What if the seller made partial delivery, can he still exercise the right of possession?
A: YES. Only as to the remaining portion.

Q: When is the right of possessory lien lost?


A: The right of possessory lien is lost when:
(1) the goods have been delivered to the buyer or the carrier
(2) the buyer or his agent lawfully acquires possession of the object
(3) the seller waives the right of possession

Q: What is the right of stoppage in transtitu?


A: It is the right of the seller to stop the delivery of the object while the object is still in transit

Q: When do you exercise the right of stoppage in transitu?


A: It may be exercised in two instances:
(1) when the object is still in transit
(2) when the buyer becomes insolvent

Q: Do you need to file an action for insolvency before this right can be exercised?
A: NO. It is illogical to wait for the court to act on an insolvency proceeding. Insolvency in the law of sales is a condition
when the buyer has either ceased to pay his debts in the ordinary course of business or cannot pay his debts as they
become due, whether or not insolvency proceedings has been commenced.

Q: What is the similarity and difference between possessory lien and right of stoppage in transitu?
A: Both requires insolvency. In essence, the seller has already lost possession and the possession is supposedly transferred
to the buyer because transfer to the carrier is transfer to the buyer. However, because of the special right of stoppage in
transitu, the law deems it still in possession of the seller because it has not reached the hands of the buyer.

Q; When are goods considered in transit?


A: The goods are considered in transit when:
(1) they are delivered to the carrier (whether land, water, or air) for purposes of transmission to the buyer
(2) if the goods are rejected by the buyer and the carrier continues its possession

Q; How is the right of stoppage in transitu exercised?


A: It is exercised:
(1) by obtaining the actual possession of the object from the carrier holding the object
(2) by giving notice to the carrier who has possession of the goods

Q: What is the special right of resale?


A: *croo* *croo*

Q: When can the special right of resale be exercised?


A: It can be exercised when:
(1) the goods are of perishable nature
(2) the seller expressly reserves the right of resale in case the buyer should be in default
(3) the buyer has been in default for an unreasonable length of time

Q: What is the pre-condition before a special right of resale can be exercised?


A: The seller must have exercised either the right of possession or right of stoppage in transitu

Q: Why is it called a special right of resale?


A: Because the seller does not need any court intervention to allow him to resell the goods. Under regular circumstance, if
the seller exercised possessory lien or right of stoppage in transitu, delivery has been transferred to the buyer. The seller
can no longer sell what he does not own. Therefore, it is special because even if the ownership is transferred due to
delivery, he may still resell.

Q; What is special right to rescind?


A: *croo* *croo*

Q: When is special right to rescind exercisable?


A: It is exercisable when:
(1) there is reservation to rescind the contract when buyer is in default
(2) the buyer is in default for an unreasonable length of time

Note: Just like special right of resale, special right of rescission is called special because there is no need to file an action in
court. You just need to prove that you are an unpaid seller. In regular rescission you have to prove substantial breach to
invoke Art. 1191 of the Civil Code.

Q: Is it required that the seller notifies the buyer if he wants to exercise the right to resell?
A: It depends. If right of resale, notice to the buyer will depend on the ground for resale. If the ground for resale is the
perishable nature of the goods, then you don’t have to notify. Otherwise, the goods will already perish before you can
resell. If the basis for resale is the unreasonable length of time of default, then notice is advised but not required. Notice
will prove that the buyer is actually in default for an unreasonable length of time.

Q: Is it the same in right to rescind?


A: In right to rescind, notification is not merely advised but is actually required.

Q: Is there any requirement how notification should be done?


A: There is no requirement. It may be verbal or written or by overt acts of intention to rescind.

REMEDIES OF THE BUYER FOR FAILURE OF SELLER TO COMPLY WITH HIS OBLIGATION

Q: What is the remedy of the buyer if the seller fails to deliver?


A: Specific performance with damages.

Q: What is the remedy of the buyer if the seller breaches his warranties?
A: The following are the remedies of the buyer:
(1) he may accept the goods and set up against the seller breach of warranty by way of diminution or extinction of
the price (meaning he will accept the goods but will not pay for it)
(2) he may accept the goods and ask for damages for breach of warranty
(3) he may refuse the goods but maintain an action for breach of warranty for damages
(4) he may rescind the contract of sale
a. refuse to receive the goods
b. if goods are delivered, he may return or offer to return them and recover the price or any amount thereof
that was already paid

Q: What is anticipatory breach on the part of the seller?


A: The fear of disturbance by the buyer as regards his possession or ownership of the object.

Q: What is the remedy of the buyer?


A: If the buyer has reasonable ground to fear that his possession or ownership will be disturbed, then he has two
remedies:
(1) he may vindicate himself and excuse himself from the obligation
(2) he may foreclose on the mortgage
a. if there is no mortgage available, he may suspend payment until such disturbance cease to exist.

Q: When can seller still require the buyer to pay even if there is such fear of disturbance of possession or ownership?
A: On the following instance:
(1) If the seller gives security to return the price in case such disturbance of ownership or possession happens
(2) If there is a prior stipulation that regardless of such fear of disturbance, payment is still required

Q: What is the anticipatory breach on the part of the buyer?


A: If the seller has reasonable ground to fear the loss of the immovable property sold and its price

Q: What is the remedy of the seller?


A: The remedy is immediate rescission of the contract.
Q; If he wants to rescind the contract, does he need to notify the buyer?
A: NO. the seller needs to file an action for rescission premised on substantial breach under Art. 1191 of the Civil Code.

Q: What is the remedy of the seller in case of buyer to pay the price?
A: The remedy is rescission under Art. 1592 which is premised upon judicial or notarial demand.

Double Sale

Q: When is there double sale?


A: When the same property is sold to two (2) or more persons

Q: Is it always the case that when the same property is sold to two or more person that the provision of Art. 1544 will
apply?
A: NO. The following are the requisites for Art. 1544 to apply:
(1) There must be two (2) or more valid sale or transaction
(2) There must be two (2) or more sale pertaining to the same subject matter
(3) There must be two (2) or more buyers having conflicting interest over the property
(4) The two or more buyers with conflicting interest must each have bought the property from the same seller

Q; What is the rule if it is a double sale of a movable property?


A: The ownership shall be confirmed to the one who first took possession in good faith

Q: What if immovable property?


A: There is a hierarchy:
(1) The first to register in good faith
(2) If no registration, to the first in possession in good faith
(3) If no registration or possession, to the one who can present the oldest title

Q: Who is a purchaser in good faith?


A: One who buys the property of another without notice or knowledge that the property is sold to some other person or
that some other person has a right or interest over the property and who has fully paid the fair price of the subject matter.

Q; A sold a property to B and they executed a notarized deed of sale. After a month, A entered into another contract of
sale with C via a notarized deed of sale. C registered the sale with the register of deeds. Who has a better right?
A: C has a better right. He is the first in registration.

Q: Under the same set of facts. What if B discovered the sale between A and C so he immediately went to the Registry of
Deeds to register his Deed of Sale. Who has a better right?
A: B has a better right. Good faith is only applicable to subsequent buyers. If you are the first buyer, the rule does not
apply to you. All you have to do is to register it immediately. Your right will be overtaken if somebody else registers it in
good faith.
Sales Lecture of Atty. Fabella (Transcribed) 11-30-2017 | JG Soriano

Condition & Warranties

Q: What is a condition?
A: Something that may or may not happen. If it happens, it may give rise to an obligation or it may extinguish an
obligation.

Q: What are the kinds of condition?


A: Condition could either be: (1) attached to performance or (2) attached to perfection

Q: What is the distinction?


A: In a condition attached to perfection, non-compliance of the condition will not perfect the contract. If the condition is
attached to performance, this means that there is already a perfected contract. The non-perfomance of such condition will
give the other party two (2) options: he may refuse to proceed with the contract for failure to comply with the condition
imposed or he may just waive the condition and proceed to the contract.

Q: When is a condition considered a warranty?


A: A warranty is a condition that is promised to be fulfilled. A condition is something that may or may not happen. But if
that condition is coupled with a promise on the part of the performer then it will definitely happen and the non-
performance of such warranty will result to breach of contract.

Q: Distinction between a condition and warranty?


A: There are three distinctions:
(1) with regard to attachment:
a. condition - it may be attached to perfection or performance
b. warranty - it is always attached to performance
(2) With regard to creation:
a. condition – has to stipulated
b. warranty – may or may not be stipulated (there is express or implied warranty)
(3) with regard to transfer of ownership
a. condition – also attached to transfer of ownership
b. warranty – not necessarily so

Q: What are the kinds of warranties?


A: Express and implied warranties.

Q: What are the requisites of express warranty? When can a warranty be considered as an express warranty?
A: The following are the requisites of express warranty:
(1) there is an affirmation of fact or a promise by the seller relating to the subject matter
(2) such affirmation or promise induced the buyer to buy; and
(3) the buyer actually buys based from that affirmation or promise

Q: What is the exception to this rule? Is there an exception to the exception?


A: The exception is when it is merely an opinion or a dealer’s talk. It is given that a seller would make such affirmation or
promise. Because it is merely an opinion, even if there is a promise, it will not be considered as an express warranty. An
exception to this exception is if he is an expert. Even if he is giving his own opinion and he is an expert on the subject
matter and the buyer relies on that expertise for buying the item, then that will be considered as an express warranty.

Q: What are the implied warranties?


A: The following are the implied warranties: (1) Warranty of Title, (2) Warranty Against Eviction, and (3) Warranty against
Non-Apparent Servitude.

Q: Can you waive a warranty of title?


A: NOT. This is the only warranty that cannot be waived. You cannot waive the obligation to transfer the ownership
because if there is no transfer then that is not a sale.

Q: When is there a breach of warranty against eviction?


A: There breach of warranty against eviction:
(1) when eviction is by final judgment
(2) the buyer is deprived of, or evicted from, the whole or part of the thing purchased
(3) basis thereof is by virtue of a right prior to the sale made by the seller; and
(4) vendor must be notified of the case in the form of summons.

Q: An action for eviction was filed against the buyer for the property he bought from the seller. Upon receipt of the
summons, the buyer complied to the requisite for invoking the warranty against eviction and furnished the seller a copy of
the summons received with the instruction on the part of the seller to participate in the proceedings and defend both
their right. The buyer lost and got evicted from the property. The buyer wants to make the seller liable for breach of
warranty against eviction. Will the action prosper?
A: NO. The notice required to invoke the warranty against eviction is by making the seller a party to the case. It cannot be
done by simply furnishing a copy of the summons. The seller should be impleaded to be included in the case as a co-
defendant. That is the notice required by law. If you fail to do that then you will miss one of the requisites in availing the
warranty against eviction.

Q: In the same situation as above, if the seller is impleaded as a co-defendant in a case for eviction. The seller wants you to
cooperate in defending the case but you simply don’t want to participate such that both of you lost the case. The seller
raises the defense that the buyer lost the opportunity and is in estoppel to question the liability because buyer did not
participate and did not care. Will that defense prosper?
A: The only requirement of the law for the buyer to do is to notify, meaning to implead the seller in the action for eviction.
The law does not require him to actively participate or defend the title because precisely that is the reason for that
warranty: that you will have peaceful possession of the property. If that peaceful possession is disturbed, then you can
claim damages on the ground of breach of warranty against eviction.

Q: What is the measure of the damage you can claim for breach of warranty against eviction? What are the items for
damages?
A: There are five (5) items that the buyer can claim from the seller:
(1) the value of the thing at the time of eviction
(2) incomes or fruits
(3) cost of the suit
(4) expenses of the contract
(5) damages and interest and ornamental expenses

Q: Can the warranty against eviction be waived?


A: YES. Waiver can either be generic or specific. In fact, the liability of the seller as regards the waiver made by the buyer as
to the implied warranty against eviction will depend on if the waiver is generic or specific. If the waiver is generic and the
buyer has no knowledge of any particular risk of eviction then the seller would still be liable if there is eviction later on but
only as regards the payment of the value of the object at the time of the eviction. If the buyer knows there is risk of
eviction but nonetheless gave a general waiver of this warranty then the seller will not be liable if there is eviction later on.

Q: What if the waiver is specific? Will it absolve the seller from liability?
A: It depends. If the buyer gives a waiver on a specific risk of eviction and eviction happens on that risk waived, then the
seller will not be liable. But if the buyer gave a waiver on a particular risk of eviction or cause for eviction and the buyer is
evicted from some other cause, then that specific waiver will not matter. The seller will remain to be liable.

Note: Whether if the waiver is generic or specific, the seller must always be in good faith when the buyer gives his waiver
because if the seller is in bad faith, which means he knew that there will be eviction later on, then no amount of waiver,
whether generic or specific, will absolve him from liability.
Warranty against non-apparent servitude
Examples: easement of light and view, easement not to build higher than is required

In order for this warranty to be invoked, it must be attached to an immovable but is not mentioned in the agreement. And
the nature of that burden or servitude is such that the buyer is presumed not to have bought the property had he known
of such burden or servitude

The warranty will not be applicable if it is mention in the agreement, meaning there is knowledge on both part of the
parties that the immovable property is burdened by such servitude or if such burden or servitude or encumbrance is
registered in the registry of property. The buyer should have made his due diligence in determining whether the property
is encumbered by whatever encumbrance available. If those are present, the buyer cannot invoke breach of warranty for
non-apparent servitude.

Q: When can the buyer claim for damages for breach of warranty against non-apparent servitude?
A: The buyer has two (2) remedies: rescission or damages. If he claims it within one (1) year from the execution of the deed
of sale. If he discovers the breach of warranty against non-apparent servitude beyond one (1) year, then he can no longer
bring an action for rescission. His only remedy now is claim for damages. The prescriptive period of such claim for
damages is within one (1) year from discovery.

Warranty against hidden defect

Q: When do you consider defect as a hidden defect for the purpose of applying the warranty against hidden defect?
A: It must be in such nature that such hidden defect would render the object unfit for the purpose for which it was bought.
Or such hidden defect will diminish the fitness of the object that if the buyer knew of such diminished purpose, he would
not have bought the property. Obviously, when you say hidden defects, these are defects that are not apparent from the
naked eye and the object has been relied upon for the purpose for which it was originally intended.

Q: Can the warranty against hidden defect be waived?


A: YES. It can be waived.

Q: What is the effect of the waiver?


A: The effect of waiver depends on whether or not the seller has knowledge of the hidden defect. If the seller has
knowledge of the hidden defect, then the seller is in bad faith. The waiver made by the buyer does not absolve him from
liability. If he is not aware, his liability will be limited.

Q: What is the extent of liability of the seller in breach of warranty against hidden defect?
A: There should first be a distinction if the seller is aware or not of the hidden defect. If he is aware, then he will be liable
to pay the price of the object, the expenses of the contract, and damages. If he is not aware, he is still liable but only to the
price of the object and expense of the contract.

Q: Can the seller be totally absolved from liability?


A: YES. If there is waiver of liability

Q: What is the remedy of a buyer in case of breach of warranty against hidden defect?
A: The buyer may either withdraw from the contract or demand a proportionate reduction from the price with damages in
either case.

Q: When should this action be brought?


A: Within six (6) months from delivery.

Q: What are the implied warranties in case of sale of goods?


A: Goods are expected to be reasonably fit for the purpose for which they are intended and of mercantable quality.

Q: If the goods do not conform to the implied warranty, what are the remedies of the buyer?
A: The following are the remedies:
(1) The buyer may accept or keep the goods and set up against the seller the breach of warranty by way of
recoupment in diminution or extinction the price;
(2) He may accept or keep the goods and file an action for damages for breach of warranty
(3) He may refuse to accept the goods and file an action for damages for breach of warranty
(4) He may rescind the contract and refuse to receive the goods from the seller but if he already received the goods,
he has the obligation to return the goods and recover the price he paid for such delivery

Q: Can the implied warranty in the sale of goods be waived? When is it considered waived?
A: YES. It is considered waived when:
(1) if the buyer knew of the breach of warranty when he accepted the goods without protest
(2) When he fails to notify the seller within a reasonable time of the action to rescind the contract
(3) If he fails to return or offer to return the goods in substantially as good condition as it were at the time the
ownership was transferred

Note: unreasonable delay in the return of goods is an implied waiver on the part of the buyer for the breach of warranty in
the sale of goods.

Extinguishment of Sale

Q: How is a contract of sale extinguished?


A: In the same way an obligation is extinguished: payment or performance, loss of the thing, condonation or remission,
confusion or merger, compensation, novation, annulment or rescission. Fulfillment of a condition and prescription is also a
mode of extinguishment of a contract of sale. Sale may also be extinguished by way of conventional or legal redemption.

Q: What is a conventional redemption?


A: A conventional redemption takes place when the seller reserves his right to repurchase the thing sold with the
obligation to return the price, expenses of the contract, legitimate payments, and necessary and useful expenses.

Note: What is important in conventional redemption is the timing of when the reservation is made. The law requires that
reservation must be made at the time of the original contract and done in the same instrument.

Q: A and B entered into a contract of sale and as an internal agreement between the parties, they agreed that B has the
right to repurchase but in order for that side agreement to just be known between the parties, they executed a side letter
that is attached to the contract of sale evidencing the seller’s reservation of his right to repurchase. 10 years later, the
seller wants to repurchase. Can the buyer refuse?
A: The buyer can refuse. The condition is that it has to be done at the perfection of the original contract. It should not be
an afterthought and executed later on. The more important condition is that such right of repurchase must be executed in
the same instrument. It has to be embodied beside the contract of sale.

Q: Parties entered in a contract of sale. A month later, the parties, by agreement, signed an addendum to the contract.
(Note: An addendum is part and parcel of a contract itself). In the addendum, the parties agreed that the seller has the
right to repurchase the property. If the buyer wants to repurchase the property on the basis of the addendum attached to
the contract of sale, will his right prevail?
A: NO. An addendum is not a valid reservation. It should not be an afterthought. It should be executed in the instrument
at the time of the perfection of the contract. An addendum does not perfect a contract. The contract has long been
perfected at the execution upon the meeting of the minds of the parties. To allow addendum would circumvent the
requirement of the law that it should be made at the time of perfection of the sale.

Q: What is the distinction between the right to redeem (right to repurchase) and option to purchase?
A: The distinctions are:

Right to redeem Option to purchase


- Contained in the same instrument of sale - A principal contract which is created
independently of any other contract.
- Does not need separate consideration to - Must have a consideration that is distinct
be valid and separate from the purchase price
- Has prescriptive period - May be exercised at any time
- Exercised by actual tender of payment - Exercised by giving notice to the offeror

Q: When should conventional redemption be exercised?


A: Within the period stipulated by the parties. If there is no period stipulated, the period is 4 years. It is also 4 years when
the buyer and seller did not agree on the period.

Q: Can the parties stipulate that the period to exercise redemption can happen within 15 years?
A: A written stipulation of period for redemption cannot exceed 10 years. In case the period stipulated is 15 years, it is
valid up to the extent allowed by law. The excess of 5 years is rendered void ineffective. Case law explains that if the entire
stipulation will be rendered void, that would defeat the intention of the parties to have a period to repurchase the
property.

Q: How is redemption effected?


A: By payment of the price, expenses of the contract, any legitimate payments, and the necessary and useful expenses.

Q: The seller paid the price of the sale, expenses of the contract, and legitimate payments in order to redeem the property.
The buyer on the other hand claims that necessary and useful expenses should be made on the thing sold. After a few
days, the seller now tries to make payment but the buyer says the period of payment has already expired because he
failed to pay the first time. Can the seller still repurchase? Is payment of the necessary and useful expenses a pre-requisite
in order to complete redemption?
A: YES. All expenses attached to the property when redeemed should be paid. Otherwise, the redemption is not complete.

Q: What is the right of the buyer in case the seller does not pay the necessary and useful expenses on the thing sold and
the period of redemption has not yet expired?
A: The buyer has the right to retain the property (right of retention). This is available until the seller completes the
payment.

Q: When is tender of payment sufficient? Is actual payment required to complete redemption?


A: Complete payment must be made. The law terms it as tender of payment. It is sufficient that the seller tenders payment
to the buyer.

Q: Is there an instance when tender of payment is not required and redemption will still be complete?
A: YES. If the whereabouts of the buyer are unknown and the tender of payment is impossible, then consignation in court
is sufficient. Once consignation is made, the running of the prescriptive period is stopped.

Q: A, B, and C, co-owners of a property, sold the property to D with reservation of right to repurchase within 10 years from
th
the execution of the contract of sale. On the 8 year, A wanted to redeem 1/3 of the property from the buyer. Can D be
compelled to resell?
A: NO. If the property is sold by several parties, like co-owners, to a singular buyer, and the sale is made in single
instrument jointly, then the property should be redeemed in its whole. The buyer cannot be compelled to give partial
redemption.

Note: It would be a different case if the sale was made separately (in a separate instrument) and independent of the other
co-owners. The co-owner may redeem that portion of his share in the property and not the entire thing.

Q: What is the 30-day rule from finality of judgment for purposes of right to repurchase?
A: The rule states that the vendor is given 30 days from finality of judgment within which to repurchase the property.

Q: If one of the parties contest the repurchase and an action is filed in court, and the court ultimately rules in favor of the
seller that the contract is actually a sale with right to repurchase, is it automatic that there is 30 days from finality of
judgment within which to make the repurchase? In short, do you have more than the prescriptive period than the 30 days
under this rule?
A: NO. The 30 day from finality of judgment rule does not always apply in instances of the right to repurchase. It only
applies in cases of dispute as to whether the contract is a contract of sale with right to repurchase or an equitable
mortgage.

Note: If the issue brought to court is whether it is a simple sale or sale with right to repurchase and the case is resolved in
favor of right to repurchase, and the period of prescription has actually expired already, then no additional 30 days will be
given to the seller. If the issue is whether the contract is an equitable mortgage or a sale with right to repurchase and the
court resolves that it is in fact a sale with right to repurchase, then the 30 day additional period will be given.

Q: What is the rationale of this rule?


A: If the party thought that the contract was a simple sale, there was no period in the first place. If the party thought that
the contract was sale with right to repurchase, the prescriptive period is controlling. If the party thought that is an
equitable mortgage, there is no period to worry about because he can easily redeem the property at any time prior the
foreclosure sale. In recognition of such confusion, the law provides that when there is dispute of whether the contract is a
pacto de retro sale or an equitable mortgage, and it is later on determined that the contract is sale with right to
repurchase, it is just but fair to grant the seller the period to redeem which is 30 days. Without the 30 day period, the
finding that it is a sale with right to repurchase would be immaterial because the period of prescription expired already.

Equitable Mortgage

Q: What is an equitable mortgage?


A: An equitable mortgage is one which although lacking in some formality, nevertheless reveals the intention of the
parties to charge the real property as security for a debt.

Q: What are the essential requisites of an equitable mortgage?


A: The requisites are as follows:
(1) It must be entered into in a contract denominated as sale
(2) but the real intention of the party was actually to secure the debt or obligation by way of mortgage

Q: What are the instances when a situation is considered as an equitable mortgage


A: Several instance a contract is presumed to be an Equitable Mortgage:
(1) When the price of the sale with right to repurchase is unusually inadequate
(2) When the seller remains to in possession as a lessee or otherwise
(3) When the buyer retains
(4) When buyer binds himself to pay the taxes

Q: What is the remedy of the seller if there is dispute as whether it is an equitable mortgage or not?
A: If there is dispute if it is an equitable mortgage or not, the seller may ask for reformation of the contract, the declaration
of nullity of the contract or for specific performance in case of breach.

Note: This is a contract denominated as a contract of sale but the true intention of the parties is really to secure an
obligation. The seller can ask for reformation of the contract and make it a mortgage in order to conform to the intention
or to nullify the contract based on the fact that it is not the intended agreement entered into by the parties.

Q: What is pactum commissorium?


A: A stipulation in mortgage agreements for the automatic vesting of the title over the property in the name of the
creditor in case of debtor’s default. This stipulation is against public policy.

Note: The mortgagor is always at the mercy of the mortgagee. If pactum commissorium is allowed, then ownership will
always be lost by the mortgagor because of the automatic reconveyance. The law says that there can never be an
automatic reconveyance because if it is a mortgage it has to go through the formalities of foreclosure. You have to
foreclose the property first.
Q: A and B entered into a contract of sale where B mortgaged the object of the sale to secure the performance of the
obligation. The contract provides that upon default of the buyer to pay the obligation, the seller shall acquire the property
by the execution of the buyer of a deed of sale in favor of the seller. Is the stipulation valid? Is there pactum
commissorium?
A: YES, the stipulation is valid. It is not a pactum commissorium because there is an act required before the seller may
acquire the property which is the execution of deed of sale. It does not automatically reconvey the property.

Legal Redemption

Q: What is legal redemption?


A: It is the right to be subrogated upon the same terms and conditions stipulated in the contract in place of one who
acquires a thing by purchase or dation in payment or by any other transaction whereby the ownership is transmitted by
onerous title.

Q: What is the purpose of legal redemption?


A: To minimize co-ownership. The intent is to preserve ownership within the original spectrum of its ownership.

Q: What are the different types of legal redemption?


A: Legal redemption among: (1) co-heirs, (2) co-owners, and (3) adjoining owners.

Q: What is the legal redemption concept between co-heirs?


rd
A: If one of the co-heirs sells his hereditary right to a 3 person, then the other co-heirs may redeem the property from
that stranger and be the owner of the sole hereditary right.

Q: When is the period of legal redemption in case of a sale in a hereditary right?


A: It should be exercised within one month after the other co-heirs are notified in writing by the selling co-heir. The period
of prescription commences upon written notice. Implied knowledge is not accepted. Once the other co-heir redeems the
property within that one month period, the redeeming co-heir becomes the owner of that hereditary right.

Q: What is the legal redemption concept between co-owners?


rd
A: If the property is sold by one of the co-owners to a 3 person or to a stranger, the other co-owners may exercise the
right of redemption by redeeming the property from the stranger.

Q: A, B, and C are co-owners of a property. A, needing money, sold the property to B. C was notified of the sale. C wanted
to exercise his right of redemption as a co-heir with respect to the half of the share of A. Will the action prosper?
A: NO. C cannot exercise legal redemption because the property was sold to the other co-owner and not to a stranger.
There is no right of redemption in this case. Sale of a co-owner to another co-owner does not give rise to right of
redemption.

Q: What is the difference between the legal redemption of a co-heir and co-owner?
A: The legal redemption of a co-owner redounds to the benefit of the other co-owners. For example, if C redeems a
property from D, he will hold it in trust for B’s share in the co-ownership. In co-heir, once a co-heir redeems a hereditary
right, he will own it for himself alone.

Q: What is the legal redemption concept for adjoining owners?


A: In case of a rural land, the owners of an adjoining land with an area not exceeding one (1) hectare shall have the right of
legal redemption once it is sold. If there are 2 or more adjoining owners who want to exercise the right of redemption, the
first adjoining owner with a smaller area shall be preferred. If they have the same area, then the first who requested the
redemption will be preferred.

Q: How about right of first refusal or pre-emption?


A: The right of first refusal or pre-emption is granted under the legal redemption for urban land where a piece of urban
land which is so small and so situated that a portion thereof cannot be used for practical purposes within a reasonable
time, the adjoining owner has two (2) rights: the right of redemption and the right to first refusal.

Note: The legal right of redemption commences from the notice of sale by the co-owner, co-heir, or owner of the
adjoining land. It only commence upon the receipt of such written notice. Notice should be in writing because implied
knowledge will not start the running of the period of redemption.

Q: What is the exception to this rule? Such that even if there is no written notice of the sale, the period of redemption is
deemed to have commenced?
A: The exception is estoppel or laches. But this will only lie if there was actual knowledge of the sale and the co-heir, co-
owner, or adjoining owner did not do anything to repurchase the property.

Q: What if actual knowledge was acquired from due diligence, such as inquiry or checking with the register of deeds, will
that be considered as actual knowledge required for purposes of estoppel or laches to lie?
A: NO. Actual knowledge by way of due diligence will not defeat the right of redemption of a co-owner, co-heir, or
adjoining owner.

Q: What is the difference between the two example abovementioned?


A: In the first example, there is actual knowledge of the transaction without notice coming from anybody. In the second
example, the knowledge came from a notification through the registry of property. Notification should come from the
selling co-heir, co-owner, or adjoining owner, otherwise, it will not start the running of the 30 day prescriptive period.

Redemption of property foreclosed: Judicially or Extrajudicially

Q: What is the prescriptive period?


A: In case of extrajudicial foreclosure, the seller may redeem the property within one (1) year from the registration of
the certificate of sale. In case of judicial foreclosure, the redemption of property is within ninety (90) days after
judgment becomes final or before confirmation of sale.

Note: In judicial foreclosure, it is the court who will order the foreclosure of the property. From finality of such order, if you
want to redeem the property, you have 90 days from such finality and you only have the 90 days if after such order of the
court, no auction sale actually happened. If after the order, the foreclosure is made, then the period of redemption which
is actually termed as “equity redemption” is greatly reduced. This happens after foreclosure but before confirmation of the
sale in court. Once the sale is confirmed, the period expires. This can happen in a day or in a week. So in equity
redemption, there is a limited window of time.

Under the General Banking Law, when it comes to foreclosure of property where the mortgagee is a bank, and the
mortgagor is an natural person, then redemption may be exercised within one (1) year from the registration of the
certificate of sale. In essence, if the mortgagee is a bank, there is no change with respect to the period of redemption
whether judicial or extrajudicial.

Q: A foreclosed the property of B as security for the payment of an obligation. After foreclosure, by way of the special
stipulation allowing the extrajudicial foreclosure of the property, the mortgagee then filed an action for judicial
foreclosure. If foreclosure is ordered by the court, what is the period of redemption? Is it the period provided for judicial
foreclosure or extrajudicial foreclosure?
A: It would be based on the foreclosure ultimately carried out. If the extrajudicial foreclosure did not push through due to
the filing a judicial foreclosure, it is the period provided for judicial foreclosure that will be used.

Q: What is the value of having an extrajudicial foreclosure as opposed to judicial foreclosure and vice versa?
A: The value of having extrajudicial foreclosure instead of judicial foreclosure is the speed of foreclosure. In extrajudicial
foreclosure, all you have to do is to notify the debtor that the property will be foreclosed by reason of non-payment of the
obligation. The advantage of judicial foreclosure is its period of redemption because it is shorter than extrajudicial
foreclosure.

Das könnte Ihnen auch gefallen