Law on Sales

Chapter 5 - OBLIGATIONS OF THE VENDOR

1. Principal obligations of the vendee (Art. 1582)

a. Accept delivery
b. Pay the price at the time and place stipulated in the contract, if not stipulated at the time and place of
the delivery of the thing sold.
2. Delivery of goods in installments
GENERAL RULE: No delivery by installment except if there is stipulation.
If there is stipulation 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 one or more installments, the
injured party may, depending upon the circumstances of the case:
a. Refuse to proceed further with the contract and sue for damages for breach of the entire contract; or
b. Claim compensation but not damages, if the breach is severable. (Art. 1583)
3. Right of the buyer to examine goods before accepting them
GENERAL RULE: The buyer has the right to examine the goods before accepting them.
PROBLEM: On March 26, 2012, B ordered from S 500 sets of pyrex trays. Prior to April 27, 2012, S delivered
some of the items but B outrightly rejected them. After making the proper corrections, S made subsequent
deliveries on April 27, April 30, May 1, May 3, May 12 and May 27, 2012. B’s caretaker duly received the
deliveries. On several occasions, S demanded payment for the total value of the deliveries but B asked for
extension of time within which to pay. On June 20, 2012, B sent a letter to S, telling S that he rejects the
items delivered. Because of this, S sued B for payment. Will the action prosper?
EXCEPTIONS:
a. When there is an agreement to that effect
b. When the goods are delivered C.O.D. unless there is an agreement or a usage of trade PERMITTING
such examination. (Art. 1584)
4. When buyer deemed to have accepted the goods
a. Express acceptance
b. When the buyer does an act which only an owner can do
c. Failure to return after reasonable lapse of time. (Art. 1585)
PROBLEM: Buyer accepted goods despite delay. Buyer also promised later on to pay. Subsequently, buyer
asked for damages on account of the delay. Will the action prosper?
5. Effect of acceptance of goods on seller’s liability for breach of warranty
GENERAL RULE: The seller is not discharged from liability in damages or other remedy for breach of
warranty by the acceptance of the goods.
EXCEPTIONS:
a. If there is an agreement, whether express or implied
b. If the buyer fails to give notice to the seller of any breach of warranty within a reasonable time after
the buyer knows or ought to know of such breach. (Art. 1586)
6. Effect when buyer refuses to accept delivery
a. If the refusal to accept delivery is justified
i. Buyer has no duty to return goods to the seller unless otherwise agreed. (Art. 1587)
ii. Title to the goods does not pass on to him. (Art. 1588)
iii. He shall not be obliged to pay the price.
iv. If he constitutes himself as depository of the goods, he shall be liable as such. (Art. 1587)
NOTE: It is sufficient that the buyer notifies the seller that he refuses to accept the goods (Art.
1587) so that the seller can take action on them.
b. If the refusal to accept is not justified
i. Title to the goods passes to the buyer from the moment the goods are placed at his disposal. (Art.
1588) except in the following:
 When there is stipulation to the contrary
 When the seller has reserved the ownership of the goods as a security for the payment of the
price.

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Law on Sales

ii. He shall be obliged to pay the price.

7. When interest will be paid on the price
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: (Art. 1589)
a. Should it have been so stipulated;
b. Should the thing sold and delivered produce fruits or income;
c. Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price.
8. The buyer may suspend the payment of the price (Art. 1590)
a. There is a well grounded fear (fundado temor)
b. The fear is because of:
i. A vindicatory action or action to recover
ii. A foreclosure of mortgage
NOTE:
a. The fear must not be the result of any other ground, like vendor’s insanity
b. A mere act of trespass is made by one claiming no legal right whatsoever.
PROBLEM: S sold and delivered to B a parcel of land for P2,000,000 payable within 30 days from the date
of the contract. Soon after the sale, X claims ownership over the land by virtue of a prescriptive title. May B
suspend the payment of price? Why? If, in order to avoid trouble, B pays off X to settle the latter’s claim to
the land, may B recover the amount paid as against S upon S’s warranty in case of eviction? Reason.
9. When the seller may immediately sue for the rescission of the sale
The seller must have reasonable grounds to fear that:
a. LOSS of the immovable property sold, and
b. LOSS of the price. (Art. 1591)
10. Pactum commissorium. It is an agreement between the vendor and the vendee in the sale of an
immovable that rescission of the contract shall of right take the place if the vendee fails to pay the price at
the time agreed upon. (Art. 1592)
This agreement is not valid, hence, the vendee may pay even after the expiration of the period for
payment as long as no demand for rescission has been made upon him either judicially or by notarial act.
PROBLEM: S sold to B a specific parcel of land at a price of P100,000 to be paid after 30 days. The contract
provides that the sale shall be automatically rescinded if B failed to pay the price on due date. B failed to
pay on due date, but tendered payment three days after. S, however, refused to accept the payment
asserting that their contract was automatically rescinded according to their stipulation when B defaulted
on due date. Is S correct?
11. Realty Installment Buyer Act (Maceda Law)
Transactions covered.
All transactions or contracts involving the sale or financing of real estate on installment payments,
including residential condominium apartments but excluding industrial lots, commercial buildings and sales
to tenants where the buyer has paid at least two years of installments.
Rights of the buyer.
a. Grace period to pay installment in case of default
1) If at least two (2) years of installments had been paid at the time of default
i. To pay, without additional interest, the unpaid installments due within the total grace period
earned by him, which is fixed at the rate of one (1) month grace period for every one (1) year
of installment payments made. This right shall be exercised by the buyer only once in every
five (5) years of the life of the contract and its extensions, if any.
ii. If the contract is cancelled the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent (50%) of the total payments made, and,
after five (5) years of installments, an additional five per cent (5%) every year but not to
exceed ninety per cent (90%) of the total payments made, Provided, That the actual
cancellation of the contract shall take place after thirty (30) days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by a notarial act and
upon full payment of the cash surrender value to the buyer.

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Law on Sales

 Down payments, deposits or options on the contract shall be included in the computation
of the total number of installment payments made.
2) If less than two (2) years of installment had been paid at the time of default.
The seller shall give the buyer a grace period of not less than sixty (60) days from the date the
installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller may
cancel the contract after thirty (30) days from receipt by the buyer of the notice of cancellation or
the demand for rescission of the contract by a notarial act.
Additional rights
a. The buyer shall have the right during the grace period before the cancellation of the contract:
1) To sell his rights to another by notarial act.
2) To assign his rights to another, by notarial act; or
3) To reinstate the contract by updating the account.
b. To pay in advance any installment or the full unpaid balance any time without interest.
c. To ask for the annotation of the full payment of the purchase price in the certificate of title covering
the property.
PROBLEM: B bought from S Realty Inc. a residential house and lot for P600,000. The terms of the contract
provided for the following: down payment of P60,000, balance payable in 15 years in installments of
P3,000 per month. After paying the down payment and 84 monthly installments, B defaulted in the
payment of the 85th and succeeding installments. As a consequence, S Realty Inc. cancelled the sale. How
much cash surrender value is B entitled to received.
12. Grounds for immediate rescission of sale of movables
a. Failure of the vendee to appear at the time stipulated for the delivery of the thing
b. Failure of the vendee to tender the price at the time of delivery, unless a longer period is stipulated for
its payment. (Art. 1493)
13. When sale rescinded
The sale is not automatically rescinded when any of the foregoing grounds is present. Rescission shall take
place only in the interest if the vendor, i.e., if the vendor so desires. Hence, instead of rescission, the
vendor may opt to demand payment of the price.
EXAMPLE: On March 1, S sold his laptop computer to B for P50,000. The parties agreed that the delivery of
the computer and the payment of the price shall be made on March 10 at the store of S. if on March 10, B
does not appear at the store of S, or having appeared, does not tender payment of the price, S may elect
specific performance (payment of the price), or the rescission of the contract.

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