SALES Articles / Laws to Remember: 1458, 1467, 1477 transfer of ownership, 1505, 559 who can transfer xxx

, 1504, 1544, 1484 Recto Law, R.A. 6552, 1602, 1606, 1620, 1623, Redemption xxx Q: A obliged himself to deliver a would pay a sum of money to A. Is A: Not necessarily. Even if there obligation to transfer ownership, contact of lease. Memorize: Art. 1458 Note: Sale is a contract, so the general principles in oblicon are applicable to sale but note that there are provisions which are contrary. Characteristics of Contract of Sale (COS) 1. Consensual (1475) COS is consensual, it is perfected by mere meeting of the minds of the parties as to the object and price. Note: There is 1 special law which requires a particular form for the validity of a contract of sale in that sale, it can be said that kind of sale is a formal contract . Cattle Registration Decree. In a sale of large cattle, the law provides that the contract of sale of large cattle must be: in a public instrument, registered and a certificate of title should be obtained in order for the sale to be valid. But otherwise, the other contracts are perfected by mere consent or mere meeting of the minds. 2. Principal sale is a principal contract, it can stand on its own. It does not depend on other contracts for its existence and validity. 3. Bilateral (1458) necessarily in a COS, both parties will be obligated. It is not possible that only 1 party is obligated because a contract of sale is essentially onerous. 4. Onerous (1350) COS is essentially onerous. Otherwise, it may be another contract or any other act like it may be a donation if there is no compensation for the transfer of ownership to the other party. 5. Commutative (2010) meaning there is equivalency in the value of the prestation to be performed by both parties. Normally, the thing sold would be equal to the price paid by the other party (buyer). Exception: a contract of sale which is an aleatory contract like sale of hope. In sale of hope, the obligation of 1 party will arise upon the happening of a certain event or condition. Example Sale of Hope: Sale of a lotto ticket, PCSO will have the obligation to pay you only if you got all the 4 or 6 numbers which are drawn Another Example of Aleatory: Insurance 6. Nominate (1458) Classification of Contract of Sale 1. As to Nature of Subject Matter a. Movable b. Immovable Q: Why there is a need to determine? A: Because some concepts will apply if the object is movable or some laws will apply if the object is immovable. Examples: Under the Statute of Frauds, you have to determine if the object certain thing to B. Upon delivery, B that a contract of sale? is an obligation to deliver, if there is no it will not be a contract of sale. It may be a

if movable or immovable in order that statute of frauds will apply. The Recto law will apply if the object is movable. The Maceda law will apply if the object is realty. Article 1544 or Double Sale will require you to determine the nature of the subject matter. 2. As to Nature a. Thing b. Right Q: Why there is a need to determine? A: Relevant in the mode of delivery Distinctions 1. Deed of Absolute Sale (DAS) vs. Conditional Sale (CS) vs. Contract to Sell (CTS) 2. Dation in Payment (DIP) vs. COS 3. Contract for a Piece of Work (CPW) vs. COS 4. Barter vs. COS 5. Agency to Sell (ATS) vs. COS Deed of Absolute Sale (DAS) vs. Conditional Sale (CS) vs. Contract to Sell (CTS) DAS seller does not reserve his title over the thing sold and thus, upon delivery of the thing, ownership passes regardless of whether or not the buyer has paid. CS -condition/s are imposed by the seller before ownership will pass. Normally, the condition is the full payment of the price. In CS, ownership automatically passes to the buyer from the moment the condition happens. There is no need for another contract to be entered into. BE: Receipt receipt xxx for the car Contract to was issued by A to B. The receipt s tenor Date of the Received from B the sum of P75,000.00 as partial payment xxx the balance to be paid at the end of the month xxx . Sell?

SA: No. It does not pertain to a CTS because in a CTS ownership is reserved by the seller despite delivery to the buyer. The buyer does not acquire ownership. This is an Absolute Sale. Q: In a CTS, upon the happening of the condition/s imposed by the seller, would ownership automatically pass to buyer? A: No. While a CTS is considered a special kind of conditional sale, it is a peculiar kind of sale because despite the happening of the condition and actual delivery, the buyer does not automatically acquire ownership. In CTS, if condition/s happen, the right of the buyer is to compel the seller to execute a final deed of sale. So ownership does not automatically pass. Dation in Payment (DIP) vs. COSDIP (1245) whereby property is alienated to the c reditor. It is provided that the law on sales shall govern such transaction. It is specifically provided that the pre-existing obligation must be in money. If not in money and there is DIP, it will not be governed by the law on sales but by the law on novation because practically there is a change in the object of the contract. Example 1: If A owes B P100,000.00 instead of paying P100,000, he offers B and B accepts the car of A as an equivalent performance . this is DIP and will be governed by the law on sales. Example 2: If the pre-existing obligation is to deliver a specific horse but instead of delivering the horse, the debtor told his creditor and the creditor accepted, that he will instead deliver his car . it is still DIP but it will not fall

on 1245 but on novation because there is a change in the object of the obligation which would extinguish the obligation. Note: A guide to distinguish one concept from another is to know the nature, requisites and effects. 1. As to Nature DIP a special form of payment COS - it is a contract 2. As to RequisitesDIP with a pre-existing obligation COS not a requirement 3. As to Effect DIP to extinguish the obligation either wholly or partially. COS obligation will arise instead of being extinguished. Contract for a Piece of Work (CPW) vs. COS BE: A team if basketball players went to a store to buy shoes and out of the 10 members, 5 of them were able to choose the shoes. Theyagreed to pay th e price upon delivery. The other 4 members were able to choose but the shoes were not available at that time but they arenormally man ufactured. The last member could not find shoes that could fit his 16 inches feet and therefore he has to order for such kind of shoes. What transactions were entered into by these players? SA: 1467 . the first 2 transactions involving a total of 9 players would be considered a COS because the shoes which they ordered are being manufactured or procured in the ordinary course of business for the general market. However, the last transaction which will be manufactured only because of the special order of the player and is not ordinarily manufactured for the general market will be considered a CPW which is known as the Massachusetts rule. Faye Marie C. Martinez November 2008 Chato Cabigas Jessica A. Lopez Dian Rosapapan

Massachusetts rule CPW. Barter vs. COS

rule in determining whether the contract is a COS or a

Q: A obliged himself to deliver a determinate car with a market value of P250,000.00. B obliged himself to deliver his watch and P150,000.00 in cash. What kind of contract? A: First, you have to consider the intention of the parties. They may want this transaction to be considered as a sale or barter and that will prevail. But if the intention of the parties is not clear from their agreement then the nature of the contract will depend on the value of the watch. If the value of the watch is greater than P150,000 then this is barter. If the value of the watch is equal or less than P150,000 then this is sale. The value of the car is irrelevant. What is only relevant is the value of the thing (watch) in relation to the cash to be given by one of the parties. Agency to Sell (ATS) vs. COS BE: A gave B the exclusive right to sell his maong pants (he has his own brand of maong pants) in Isabela. It was stipulated in the contractthat B ha s to pay the price of maong within 30 days from delivery to B. It was stipulated that B will receive 20% commission (discount) on sale. The maong pants were delivered to B. However, before B could sell the goods, the store was burned without fault of anyone. Can B be compelled to pay the price? From the wordings of the problem you may have an idea that this is an agency to sell. If this is an ATS, the fact that the agent has not yet sold the maong pants when they were burned will not result in a liability on his part, there being no negligence on his part because with the delivery of the thing from the principal to the agent, ownership does not pass. Under the principle in the Civil Code res perit domino it will be the seller (owner) who will bear the loss. But if this transaction is sale then with the delivery o f the maong pants to B, ownership passed to B because he did not reserve ownership over the pants despite the fact that the other party has not paid the price. So when the pants were burned, it would now be B as the owner who will bear the loss. SA: This is exactly the case of Quiroga vs. Parsons. Article 1466 in construing a contract containing provisions characteristics of both a COS and ATS, you have to go into the essential clauses of the whole instrument. In this problem, one of the clauses B has to pay the price within 30 days . That would make the contract COS and not ATS because in 30 days from delivery, whether or not B has already sold those pants to other persons, he is already obliged to pay a price. That is not an ATS. Being a COS, therefore, after having been delivered, ownership passed to the buyer and hence under res perit domino rule, the buyer bears the loss and therefore he can be compelled to pay the price. Essential Elements of a Contract of Sale 1. Consent of the Contracting Parties 2. Object or Subject Matter which is a determinate thing or right Note: Service cannot be the subject matter of sale. 3. Cause or Consideration as far as seller is concerned, it is the price in money or the equivalent of the payment of the price. CONSENT OF THE CONTRACTING PARTIES

A. No consent of one or both of the parties . the contract is void. Under the law on sales, it is a fictitious contract where the signature of one of the parties was forged. Normally, the seller s signature is forged. If the signature of the seller is forged, that would be a fictitious contract. The alleged seller will not have participation in the execution of the contract. But another kind of contract recognized in the Civil Code is a simulated contract. Simulated parties to this contract actually would have participation. They would voluntarily sign in the deed of sale. However, they do not intend to be bound at all or they may intend to be bound to another contract but they executed a deed of sale. Thus, the law would ratify these contracts considering there is a simulated sale. Kinds of Simulated Contracts 1. Absolutely Simulated they do not intend to be bound at all. Q: Why would they enter into this kind of sale? A: To defraud creditors 2. Relatively Simulated sale where they actually intended another contract which normally would be a donation. B. If consent was given . If consent was given, it does not necessarily mean that the COS is valid. The consent may be given by an incapacitated person or one with capacity to give consent. If given by an incapacitated person, consider the nature of the incapacity. It may be: a. Absolute Incapacity the party cannot give consent to any and all contracts. b. Relative Incapacity the party is prohibited from entering sometimes with specific persons and sometimes over specific things. Kind of Capacity 1. Juridical Capacity it is the fitness to be the subject of legal relations. If a party to a sale has no juridical capacity, the contract is void. Note that all natural living persons have juridical capacity. Even if he is a 1 day old baby, he has juridical capacity. The baby can be the subject of donation. Even if he is conceived, he has provisional personality. Example: One example of a party to a sale without juridical capacity would be a corporation not registered with the SEC. The contract entered by this corporation is a void contract because one of the parties has no juridical capacity to enter into that contract. 2. Capacity to Act it is the power to do acts with legal effects. If the incapacity only pertains to capacity to act, the contract would normally be voidable. Without capacity to act or there are restrictions with one s capacity to act such as minority, insanity, deaf mute and does not know how to write and civil interdiction. Note: Under R.A. 6809 (December 1989) there is no more creature known as unemancipated minor . Before 1989, the age of majority was 21. C. If both parties are incapacitated . not only voidable but unenforceable. Q: What if one of the parties in a COS is a minor and the minor actively misrepresented as to his age? A: The SC said that the minor will be bound to such contract under the principle of estoppel.

Sale of Necessaries In sale of necessaries such as food. Sale between spouses it is void except: a. the minor has to pay a reasonable price. Relative Incapacity (Articles 1490 and 1491) 1. This contract is not voidable. The spouses executed a marriage settlement and in the marriage settlement they agreed for a complete separation of property regime.Atty. Tolentino voidable Justice Vitug & Prof. Faye Marie C. it is void. c. Pineda & Prof. After that. if the contract is prohibited. Uribe s Comment: Estoppel is not a good ground because the minor is not aware. b. The guardian is not actually prohibited from entering into any and all contracts. they can sell to each other. The sale of necessaries will bind the minor and he will be compelled to pay not really the contract price but only to reasonable price. d. Public officers. It is just that he cannot be the buyer of a property of his ward. judges. The executors and administrators of the estate cannot buy a property which is part of the estate. An agent cannot buy without the consent of the principal a property which he was supposed to sell or administer. Martinez November 2008 Chato Cabigas Jessica A. they may have obtained judicial declaration of separation of property. Under Article 1409. clothing and medicine to a minor. clerk of court. If no marriage settlement. de Leon the first 3 are voidable and the last 3 are void. 2. The better answer is void because these persons are prohibited from entering into these contracts. b. A guardian cannot buy the property of the ward. Baviera void Prof. Q: What is the status of the contracts under 1491? A: Prof. Those mentioned in Article 1491 a. stenographers and lawyers are prohibited from buying those properties which are the subject of litigation during the pendency of the case. their staff. Lopez Dian Rosapapan . Then they can sell to each other.

In fact. If the party gave such consent in the name of another without authority of that person or no authority of law . b. Take b. typhoon. Exceptions / when aliens can buy: a. Must be determinate Read Article 1460 RULES AS TO OBJECT OF COS Q: A obliged himself to deliver and transfer ownership over the palay that will be harvested from a specific parcel of rice land in May 2008. 1. Not necessarily because there are excuses to non-performance such as pestilence. What is the status of the sale? b. They can sell. On the 3rd month. on the 9th month. flood and therefore his failure to comply is an excuse. But if the reason of the seller is because of his negligence. Example of authorized by law: notary public has the right to sell in pledge because he has the authority to sell under the law. by express provision of law. As long as these 3 were complied. Take note may be authorized by the person or by law. The thing must be within the commerce of men Examples: sale of a navigable river is void. B sold the land to C. What if by May 2008. OBJECT OR SUBJECT MATTER The requisites in sale as to thing would almost be the same as the requisites of contracts in general.3. FIVUM E. Always consider that in a COS there are only 3 requisites. Another way of acquiring is by succession but this is not a sale D. Former natural born Filipino citizen. sale of a cadaver is void but donation of a cadaver is allowed. sale of things having potential existence (emptio rei sperati) is valid. he cannot find support under Art. 2. unenforceable. Aliens are prohibited from acquiring by purchase private lands note acquiring which means buying not selling. sale of wild flowers or wild animals is void 3. However. there is a valid sale. Even if consent was given by one with capacity to give consent but if the consent is vitiated . (a) What is the status of the sale between A and C? (b) Who will have a better right over the land? . A offered to repurchase the land. May the seller A be held liable for damages for failure to comply with his obligation? A: a. sale of human organs is void. The thing must be licit not contrary to law Examples: sale of prohibited drugs or shabu is void. no palay was harvested? a. 1174. voidable. Under the Constitution they are allowed to buy small land which they can use for residential purpose. Sale of Hope (Emptio Spei) Example: Sale of a lotto ticket Q: Sale of a land to B with a right to repurchase within 1 year which A delivered. sale of marijuana is void. things which are not appropriated like air is void but if appropriated it can be the object of a valid sale.

it may be equivalent like promissory notes whether or not negotiable or letters of credit.A. The exercise of the right is considered a resolutory condition as to the ownership of B. Intransmissible by Nature 2. If that is the case.A. SALE OF RIGHT / ASSIGNMENT OF RIGHT Assignment of right is not necessarily a sale. it has to be in Philippine currency. 8183.: As a rule. the seller cannot compel even though the contract is valid. it is the ownership over the thing. Article 1465 provides that things subject to a resolutory condition may be the object of a COS. (b) As a rule. it may be a donation or dacion en pago. Price Must be Certain Q: Who can fix the price? . it is valid. this is a valid sale even if the object of the sale is a sale with a right to repurchase. C may have a better right. rights and obligations arising from contracts are transmissible. (a) May that be a valid sale? (b) Can the seller compel the buyer to pay in yen? A: (a) Yes. If A exercises the right to repurchase and such would be a valid exercise of such right then the ownership of B would be extinguished. If COS was entered before R. Exceptions: 1. If parties failed to stipulate as to which currency. Basis is Article 1458 because the only requirement of the law is in money . then there is a valid and perfected sale. The payment has to be made in Philippine money. The fact that the object of the sale is subject to a repurchase will not affect the validity of the sale. shares of stock Requisite of a right .A. yes it is valid because of R. The price agreed upon was 1M yen. Examples of right: credit.R. Atty. Hence. 529 in 1996. The mere meeting of the minds as to the object and the price. Intransmissible because of Stipulation 3. C may have a better right if he can claim that he is an innocent purchaser for value. The law states that it may not even be in money. Consider the date of the sale. it would be A as a seller a retro because he has the right to repurchase assuming his repurchase is valid. Even Japanese yen is in money.(Sale with a right to repurchase) A: (a) Be guided by the fact that a COS is a consensual contract. it is a sale. Intransmissible because of Law CAUSE OR PRICE CERTAIN IN MONEY OR ITS EQUIVALENT Q: A deed of sale was entered into by A and B. 8183 which repealed R. If there is no valuable consideration. the only requirement is that the right must not be intransmissible G. Example: maybe the right to repurchase was not annotated at the back of the title of the land and he has no actual knowledge. If there is a valuable consideration for the assignment. Hindi naman yung thing is the subject of resolutory condition. (b) If the contract was entered into today. Uribe: Mas tamang sabihin since the ownership thereof is subject to a resolutory condition.

it may be perfected only if the price fixed by the party who was asked to fix the price was accepted by the other party. Note: Under the law on sales. Hence.A: (1) The best way is for the parties to agree as to the price. if there is gross inadequacy. Q: What if a 3rd person was asked to fix the price A and B agreed that X will fix the price. (2) They may agree that one of them will fix the price. Note: Lesion or gross inadequacy of the price does not as a rule invalidate a contract unless otherwise specified by law. the sale may be void if the third person does not want to fix the price or unable to fix the price. there was no meeting of the minds. Note: The perfection will only be considered at the time of the acceptance of the price fixed by the other party not from the time of the first agreement of the parties. It is not presumed. Lesion must be proven as a fact. Martinez November 2008 Chato Cabigas Jessica A. TIME OF THE PERFECTION OF THE CONTRACT Faye Marie C. Example: The value of the property is P1M but only P10. because the remedy of the other party is to go to court for the court to fix the price. it maybe because actually they intended another contract and that would make the sale a simulated sale and therefore the sale is void. may the sale be void? A: Yes. Lopez Dian Rosapapan . there was no meeting of the minds.000 was written in the contract because they intended it to be a donation . it may reflect vitiation of consent so the SC would normally enjoin the lower courts to be warned of the possibility of fraud in case of lesion. may the sale be void? A: No. Q: If the 3rd person fixed the price but it was too high or too low or maybe there was fraud committed by the 3rd person or he was in connivance with one of the parties. void. If not accepted. Exception: when otherwise provided by law. If there is gross inadequacy. Q: May the sale be perfected if the agreement of the parties was forone of them to fix the price? A: Yes. Example: Article 1381.

. 2 years within which to decide and failure to that he is liable not based on perfected COS but on perfected contract of option. before the offeree could decide to buy. yes because the sale has not been perfected at the moment unless the bidding or auction has been announced to be without reserve. Na-withdraw na eh. Note: Iba pag may option money Q: 2 years within which to decide assuming there was option money. because with the option money. regardless of whether option money was given and in this case no option money was given. Rigos offered to sell her land to Sanchez for a certain price. there is already a perfected sale. he can still withdraw the bid as long as he would do that before the fall of the hammer. may that action prosper there being option money given? A: Yes. an option contract is perfected. the offeror is bound to give the offeree. (a) Can the offeree on the 10th month say I would like to buy ? (b) Can the buyer compel the seller to sell? A: (a) No. Otherwise. the bidder even if he has already made a bid. (b) No. there was no option contract because it was merely an option agreement. In this case. In this case. Earnest Money (EM) OM is not part of the price while EM is part of the price and at the same time. there was merely an offer on the part of Rigos and once the offer was accepted before it was withdrawn. Q: Can the auctioneer withdraw the goods before the fall of the hammer? A: As a rule. Rigos Facts: Mrs. Sanchez told Rigos that he is buying and offered the price agreed upon but Rigos refused claiming that she was not bound by the written option agreement because no option money (consideration) was given by Sanchez.Auction Sale Auction sale is perfected upon the fall of the hammer or any other customary manner. the option contract is void. this contract is known as the option contract. before the fall of the hammer in an auction sale. Rigos gave Sanchez 2 years within which to decide. Note: Before perfection. Before the lapse of 2 years. it is a proof of the perfection of the contract. (Note: The optionee or promisee or offeree is not bound to purchase but he has the option to buy or purchase). a perfected COS was created. Option Money (OM) vs. Thus. (if after the fall of the hammer). According to Rigos. an action for specific performance will not prosper because when he said he will but there was not more offer to be considered. Sanchez has the option. Therefore. there is one contract which maybe perfected. Held: Since Sanchez accepted the offer and decided to buy within the period before the offer was withdrawn. the offeror withdraw on the 6th month. Option Contract Sanchez vs. a perfected COS was created even without option money. Q: If the offeree files an action for damages. Before perfection meaning in the negotiation stage .

The Cattle Registration Decree is an example -where the law itself provides for a particular form for the validity of the sale. This provision is exactly the same as Article 1356 in contracts which provides that contracts may be obligatory in whatever form they may have been entered into provided all the essential requisites are present.G. there can be hundreds of obligations of the vendor but those obligations would be because of the stipulation. If the object of the sale is movable. the sale of a land for P300 is valid and enforceable even if not in writing. Espino sent a letter to Paredes stating that he and his wife agreed to sell the land to Paredes. Espino said he is no longer interested in selling. it will be unenforceable. If the price is at least P500 and the sale is not in writing. It is not void. In this case. Their negotiation was thru letters and telegrams. it has to be in writing to be enforceable. Article 1483 provides that a COS may be in writing. that the deed of sale will be executed upon the arrival of Paredes in Palawan. But the law may require particular form for its enforceability of the sale and that would be 1403 or the statute of frauds. Note that the price of the land is irrelevant if immovable. But there are only few obligations imposed by law. To transfer ownership 2. To warrant the thing . Example: Before.000 for P400 but the law provides for the price. The price is still irrelevant. But then again even Article 1356 just like Article 1475 would provide for exceptions. Paredes is from Northern Luzon. The value may be different from the price. His contention was sustained by the trial court. Espino contended that the contract is unenforceable because it is not in writing. Concretely.: A COS may be in any form. RIGHTS AND OBLIGATIONS OF THE VENDOR In a deed of sale (DOS). To deliver 3. the defendant wrote a letter with his signature on it. Held: This contract is no longer covered by the statute of frauds because there was a letter.R. Article 1403 provides that a note or memorandum signed by the part charged would be sufficient to take that contract out of the operation of the statute of frauds. The 3 most important: 1. He contended that under the statute of frauds it is unenforceable. But presently. you have to consider not the value of the thing but the price agreed upon. Paredes vs. You can sell a thing worth P1. When Paredes arrived. the sale of a parcel of land if not in writin g is valid but unenforceable. Exceptions: The law may require a particular form for its validity. Paredes filed a case to compel Espino to sell the land. partly in writing xxx. The letter took that contract out of the operation of the statute of frauds and therefore he may be compelled to execute the final deed of sale. Espino owns a land in Palawan. Espino Facts: Paredes was a prospective buyer.

B demanded for the delivery. It will become determinate only upon delivery. Is he entitled to the fruits after 6month period during the 1-month period prior to delivery? Yes.R. Obligation to take care of the thing sold with the diligence of a good father of a family prior to delivery. under 1537. the vendor harvested mango fruits and sold them to X. But if the seller does not own the thing. he may have a problem on his obligation to transfer ownership. 2nd paragraph) then there is nothing to be taken cared of.: The thing sold should be determinate because if generic (1460. Obligation to deliver the fruits which is related to the obligation to deliver the thing OBLIGATION TO DELIVER THE FRUITS BE: A sold a mango plantation to B but they stipulated that delivery will be after the signing of the deed of sale. Ownership over the thing sold is not an essential requisite for the sale to be valid. 6. From the time of the perfection up to the time of delivery then there would be obligation to pay for the expenses for the execution and registration of the sale and obligation to pay the capital gains tax would be on the seller as a rule.There are other obligations: 4. then he cannot recover the fruits. the buyer was already in possession of the thing. Maybe he borrowed the thing. The vendor was able to deliver 1 month after the date when he was supposed to deliver themango plantati on. dito hindi natutuloy ang sale dahil hindi magkasundo kung sino magbabayad ng tax. OBLIGATION TO TAKE CARE OF THE THING G. By agreement. Example: he borrowed the car and he decided to buy it the thing was already in his possession. if seller does not own the thing? SA: Yes. Can B recover the mango fruits from Y during the 6th month period? SA: Determine first whether B is entitled to the fruits because if he is not entitled. Exceptions: There are sales transactions wherein the vendor would not have this obligation: a. During this period. the fruits of the thing sold from the time of perfection shall pertain to the buyer. OBLIGATION TO PAY EXPENSES / TAXES These obligations may be the subject of stipulation. The problem would be . in fact. it would be the buyer who will pay xxx Normally. Constructive delivery -brevi manu There would be no obligation on the part of the seller to take care of the thing from the time of perfection because at the time of perfection. After the expiration of the 6-month period. The vendor was able to deliver only after theother fr uits were harvested and sold to Y. 5. OBLIGATION TO TRANSFER OWNERSHIP BE: May a person sell something which does not belong to him? Would the sale be valid? Would the buyer acquire ownership over the thing sold.

Faye Marie C. Martinez November 2008 Chato Cabigas Jessica A. Lopez Dian Rosapapan .

By Estoppel by the principle of estoppel. Article 1434 requires delivery to the buyer. a person is precluded from denying that another person has authority to sell because of his acts. If he has no title then no title can be transferred to the buyer. But the general rule here is under 1505 the buyer acquires no better title than what the seller had. Also known as Estoppel in Pais which is a kind of equitable estoppel because of the acts / representation of the owner. Negotiable Document of Title 6.whether or not the buyer would acquire ownership over the thing sold if the person who sold the thing is not the owner. Sale by an Apparent Owner 5. Estoppel by Deed BE: A and B co-owners of land sold (sale is verbal) to X their land. Exceptions: (When the buyer can acquire a better title than what the seller had. Estoppel by Deed 3. automatically. he may not later on deny the authority of the 3rd person. Q: Who would have the right to sell and therefore they can transfer ownership by way of sale? A: First. Purchases from a Merchant s Store xxx 1. acquires ownership. Q: May a buyer acquire ownership over the thing sold if the seller has no right to sell? A: The answer by way of exception is yes. 1434 would not apply because: . guardians and receivers. If the seller is neither the owner nor does he have the authority to sell. Would Y be considered to have acquired ownership over the land? SA: Under 1434 which is considered as Estoppel by Deed (technical estoppel) when the seller who was not the ownerat the time of the sale. By Estoppel 2. Even if he is not the owner. known as Statutory Power to Sell (Article 1505). And under the facts. Even if the seller does not have the right to sell. Examples: Notary public in pledge. (3) Those who have the authority of the court.) 1. liquidators. the buyer acquires no better title than what the seller had. However. the buyer may acquire ownership over the thing sold because the law so provides and not because the seller was able to transfer ownership to the buyer. 2. X subsequently sold the land to Y. Note: it is as if they have the authority of law because not even the judge can validly sell something if it is not consistent with the law. Estoppel by Record 4. is the owner. he may have the right to sell because: (1) He was given the authority by the owner. ownership passes to the buyer by operation of law. Example: Agent (2) He may be the owner but he may have the authority of the law to sell. Example: Sheriff. If his right is only as a lessee that is the most that can be transferred to the buyer.

Lopez then sold the ref to Velasco. would that action prosper? A: SC said yes because he cannot be allowed now to claim that his nephew was not authorize to sell after he testified in court that he gave such authority. Negotiable Document of Title If goods are covered by a negotiable document of title and it was thereafter negotiated. Sun Brothers sold a ref to Lopez on installment basis. When the uncle testified in court. After acquittal. Mapalo 5. claiming that sa totoo land. I did not authorized my nephew . The uncle refused. Factor s Act B. this ring was anobject of a . Later on. Velasco was the owner of a store. As stipulated. For the accused to be acquitted. When Sun Brothers learned this transaction. Recording Laws *most common question in the bar exam Read: Mapalo vs. Q: Would Velasco acquire ownership? A: No because Article 1505 provides that the buyer acquired no better title than what the seller had. Velasco sold the ref to Ko Kang Chu who paid in full. Velasco Facts: Sun Brothers was the owner of a refrigerator. Sale by an Apparent Owner A. On the next day. Factor s Act Even if agent has no right to sell. 6.500. it filed an action to recover the ref from Ko Kang Chu. Any other provision of law enabling the apparent owner of the goods to dispose of them as if he was really the owner. he asked his uncle to testify that he actually had the authority to sell. Binugbog nya yung owner ng goods. Sun Brothers reserved ownership until full payment. Purchases from a Merchant s Store / Markets / Fairs Sun Brothers vs. Recording Laws C. However. then the buyer may acquire ownership even if the seller has no right to sell. Y likewise acquired ownership by way of estoppel by deed.a) There was no showing there was payment b) No showing that there was delivery of the land to X. lalo na kung bearer document of title. It cannot be said that by operation of law. He will acquire ownership even if the seller did not have the right to sell. Example: The seller may have acquired title by violence. Lopez only paid P300 out of P1. a third person may acquire ownership because he may rely on the power of attorney as written. Pero kung negotiable document of title yan and properly negotiated. Sun Brothers was engaged in the business of selling refrigerator. If the buyer bought it in good faith and for value. BE: F lost her diamond ring in a hold-up. 4. the buyer sued the nephew for estafa. The balance to be paid on installment. A. Since the nephew could not deliver the land. Q: Case was filed against the uncle. 3. This is estoppel by record which is considered a technical estoppel. Estoppel by Record Jurisprudence: Sale by nephew of the owner of the land. the buyer demanded from the uncle the delivery of the land. he will be protected under the law. the nephew is acquitted. B.

Reasonable time will depend on the circumstances of the sale. Sale or Return Q: Ownership passes upon delivery? A: Yes.000 paid upon the execution of DOS. Note: Again in 1505. Obviously. The car was delivered to the buyer. BE: A car was sold for P150. Example: Clauses in subscription magazine which says that you can return within 30 days without payment. Q: How transfer of ownership is effected? A: Under the law. the car was destroyed due to a fortuitous event or was burned xxx Can he still be compelled to pay the balance? Faye Marie C. The balance payable on a monthly basis. Example: Even if he has 10 days within which to decide but on the 2nd day. purpose of the sale. as far as things are concerned. (b) Even before the lapse of the period. there can be no recovery as a matter of right. (c) If there is no period agreed upon.000 was paid. Example: Perishable goods. ownership passes to him. the law says if he did not signify his acceptance he will be considered to have accepted after the lapse of a reasonable time. it is effected by delivery: (a) Actual (b) Constructive There can be no transfer of ownership without delivery. he sold the car to another. Notes: (a) There may be a period agreed upon by the parties within which the buyer would have to decide. P75. there is no right to recover as long as the buyer bought it in good faith from a merchant s store. P75. before he could pay the balance. Article 559 provides that even if the buyer is in good faith so long as the owner is willing to reimburse the buyer of the price paid in that sale. Martinez November 2008 Chato Cabigas Jessica A. Even if he failed to signify his acceptance by the mere lapse of the period. he is deemed to have accepted (impliedly accepted) hence.000.public sale of one pawnshop. However. Can F recover the ring from the buyer in that public sale? SA: Yes. However. Lopez Dian Rosapapan . he is deemed to have accepted the thing because he did an act which is inconsistent with the ownership of the seller like he donated or destroyed the thing. he may be considered to have accepted if he did an act wherein he would be considered to have adopted the transaction then ownership passed to him. the buyer is given the right to revest the title back to the seller normally within a certain period. nature of the thing sold.

SA: Yes. Therefore. F sold the very same parcel of land to C who registered and obtained a new TCT in his name. ownership passed to the buyer. the buyer failed to get the goods. ownership passes to the buyer but physical possession is still with the seller. Even if the goods are destroyed the next day due to fortuitous event. They may have agreed this time that the seller will be the one to deliver the goods to the buyer at a certain date. On the next day. Registration is only one of the requirements good faith is equally an important requirement. If there was constructive delivery. G. he is in delay in delivering the goods to the buyer. When the date arrived. On the date agreed upon. Who would have a better right? SA: Atty. Under the principle of res perit domino Article 1504 the owner bears the loss and hence it can be compelled to pay the price. Can this happen? Yes. Exceptions: 1. the seller will bear the loss. the buyer will not bear the loss like in sale on approval and he has 10 days within which to decide and the thing was lost through a fortuitous event within the 10-day period without fault on his part. Example 1: The buyer and the seller may have agreed that the goods are to be obtained by the buyer at the warehouse of the seller on a specific date. there was no delivery on the part of the seller. the buyer is not yet the owner. Tabora 2. whoever was at fault will bear the loss. Thus. It depends on whether or not C registered the sale in good faith. Q: Who is the owner at that time? A: The seller but there was delay on the part of the buyer hence under 1504 it is the buyer who will bear the loss. the seller demanded the buyer to get the goods. (Note: Wala sa facts na na-retain ng seller and ownership). the warehouse was destroyed due to fortuitous event. DOUBLE SALE (ARTICLE 1544) BE: F sold a registered parcel of land to R who did not register the sale. Note: Determination of when ownership passed is important because if at the time of the loss. who would have the better right? . Example 2: The seller himself maybe the one at fault. Upon the delivery of the car to the buyer. despite demand from the buyer. there being no retention of ownership by the seller. because of constructive delivery. as to which rule applies will depend on the thing sold if movable or immovable. Note that either buyer or seller may be at fault. as a rule. Q: If the thing is sold twice. Despite such.: Res perit domino 1504.R. Read Lawyers Cooperative vs. the ownership has already passed to the buyer but the goods are still with the seller. Thereafter. Delay in the Delivery When there is delay in the delivery due to the fault of one of the parties. Q: Why would this be an exception to the res perit domino rule? A: Ang premise dito. Uribe: I fully agree with the UP Law Center s answer. take note ang owner ay ang buyer na but who will bear the loss? The seller because he was in delay in delivering the goods. Note: In 1544 (double sale).

Because of a judgment in favor of Macke and Chandler. yes. Even the 1st buyer is required to be in good faith. Read: Bautista vs. If there was no registration. OBLIGATION TO DELIVER THE OBJECT OF THE SALE Determine the subject matter if it is a thing or a right because there are different modes of delivery as to thing and as to right. there maybe actual delivery if the third person has authority to receive from the vendee. the buyer. 2. Note: Philippine law does not only require actual delivery constructive delivery may result in transfer of ownership. Obviously. If immovable. Macke & Chandler Facts: The original owner here Stanley and Griffindor (parang Harry Potter . the sheriff levied upon these properties which was still in the possession of Stanley and Griffindor. The properties under execution were questioned by Kuenzle and Streiff. Kuenzle & Streiff vs. Things Kinds of delivery of things as a consequence of sale known as tradition under the law: 1. the properties . CA Facts: Sale of land to B who took physical possession but did not register. Take note control . If no possession in good faith. who first registered in good faith. Q: What if the thing was delivered to a 3rd person? A: Jurisprudence SC said . Constructive by the execution of a public instrument if the contrary intention does not appear on the document. Take note to the vendee . will have the better right. He is nonetheless required to have bought the thing in good faith.A: If movable. the buyer who has the oldest title in good faith. Actual Delivery / Material Delivery / Physical Delivery / Real Delivery the thing is in the possession and control of the vendee. Yung good faith ditto obviously would not pertain to absence of knowledge of the 2nd sale kasi syempre 1st buyer sya. The land became the subject of an execution sale.) and the property involved here are fixtures of a saloon. making him an agent of the vendee and that would still be actual delivery. Macke and Chandler are judgment creditor of Stanley and Griffindor. 1544 would not apply to unregistered lands. ownership passes to the buyer. By the mere execution of the public instrument that is equivalent to delivery. However. B because this land was not registered under the Torrens System. it will be the first who to ok possession in good faith. Hence. He is the first buyer. Warning: Please be careful when you recite you register the sale not the land. Sioson Carumba vs. Kuenzle and Streiff claimed that these things were sold to them prior to the levy. the first buyer would have the oldest title. The buyer became C who registered the sale. Thus. Q: Who would have a better right between C and B (C had no knowledge of the sale)? A: SC Said . the seller (A) is a judgment debtor in one case to a certain creditor named C. the buyer who first took possession in good faith will have the better right. If they claimed that the properties were sold to them. Good faith means that he had no knowledge of the defect of the title of the seller.

De Leon: this also called as symbolic delivery. This is also known as tradition longa manu. Sioson Because a lease agreement was entered into by the buyer and seller after the sale then the buyer became the lessor and the seller became lessee. Held: In order that ownership would pass. By Mere Consent or Agreement of the Parties if at the time of the sale. period of commodatum has to be respected. no longer as a lessee but this time as the owner. it has to be in a public instrument if that would be by constructive delivery. There must be a reason why it cannot be transferred at the time of the sale. 3. Kinds of Constructive Delivery 1. Example 1: The thing was the subject matter of a lease with a 3rd person until the expiration of the lease. Hence. Lopez Dian Rosapapan . the lessee would continue with the possession no longer as an owner. Prof. Take note that Stanley and Griffindor were still in possession of the goods physically. Brevi Manu this is a kind of constructive delivery because the buyer was already in possession of the thing sold at the time of the perfection of the sale so he will continue to be in possession after the sale. Rights Kinds of Delivery of Incorporeal Property / Quasi 1. 4. Example 2: The thing was the subject matter of commodatum. Delivery of the Keys of the place where the goods are located like a warehouse. Martinez Chato Cabigas November 2008 Tradition: Jessica A. Therefore. As a rule. there was no actual delivery. Bautista vs. 2. the thing cannot be delivered. Constitutum Possessorium the seller will continue to be in the possession of the thing after the sale but no longer as an owner but in another capacity like lessee. So dati lessee lang sya that is why he was in possession or maybe depositary lang sya or maybe he was the agent at the time prior to the sale. possession to the goods cannot be transferred to the buyer. Execution of Public Instrument Faye Marie C.should be in their possession.

000 cavans of Milagrosa rice.000.000. Example: delivery of the certificate of shares of stocks. Q: What if instead of 1. Thus. Price agreed upon is P1M. Q: Under the facts.000 sacks Milagrosa and he has the right to reject 100 sacks Burmese rice. Instead of delivering 1. if the goods are indivisible. the vendee may not always have the right to exercise his rights under the shares of stocks.000 pairs of shoes with a specific design as agreed upon. He can be compelled to accept 1. If the buyer refuses to receive the goods. he can afford to give additional 5 sqm. you can only use your right with the consent of the vendor. May the buyer reject everything? A: Yes. dapat 11 sqm or 15 sqm ang kulang. However. More or less 100 sqm. Placing the Title of Ownership in the Possession of Vendee a right would normally be covered by a certificate. the seller delivered 1. What are the remedies of the buyer? A: (1) Specific performance would be a remedy if the seller is still in the position to deliver the balance. so out of 100 kung 85 lang ang nadeliver. So kung 100 sqm.2. it is clear that those are Burmese rice that would not be considered as indivisible. (2) Q: If specific performance is not possible. hence. no one will be recognized except those registered owners. Milagrosa and Burmese rice were mixed. Q: The obligation to deliver 1. Siguro yung katabing lupa sa seller din. is proportional reduction a remedy? A: It depends on whether the sale is considered as a sale with a statement of an area of a rate of a certain measure or if it is a lump sum sale. Concretely. Can the buyer reject everything? A: No. 3.000 cavans of Milagrosa. The seller delivered 1. the books of the corporation will be closed for 30 days before the meeting. if there is a stockholders meeting. You cannot compel the creditor to accept partial fulfillment as a rule because it can be a subject of a stipulation that there can be partial delivery. Meaning each sack of rice. 800 was only delivered? A: The buyer cannot be compelled to receive 800 because partial performance is non-performance. Q: May the buyer be considered in delay for his refusal to accept if . RULES ON SALE AS TO QUANTITY / QUALITY OF THE THING SOLD Q: In a sale involving 1. if the sale occurred when the books are already closed. then rescission is a matter of right. Use by the Vendee of His Rights with the Vendor s Consent Example: Sale of shares of stocks . 95 sqm was delivered.100 cavans of both Milagrosa and Burmese rice. PLACE OF DELIVERY Read 1524. So if you are the buyer of those stocks. The actual area delivered by the seller was only 95 sqm. would rescission be a remedy? A: As a rule no because rescission would only be a remedy if the area lacking is more than 10% of that area agreed upon. 1525 and 1198 The seller delivered the goods to the place of business of the buyer. He has the right to reject only the excess.200 pairs of shoes instead of only 1.000. if it is clear that per sack it is Milagrosa rice and the 100 sacks. Reject the 200 but he can be compelled to accept the 1. the buyer will be considered in delay and therefore will be liable to the seller because of unjust refusal. SALE OF REALTY Q: Sale of a parcel of land.

Where will be the place of delivery? A: Depending on the shipping arrangement agreed upon by the parties. Obligation to transfer 2. Determine if it is determinate or generic. Note: If there is no stipulation when to be delivered. character or title of the thing Any other matter may not be considered as an express warranty.B. So in a C.O.O. it is only presumed that the point of destination is the place of delivery. or C.B. Q: What if at the time of the perfection of sale.there is no place stipulated in the contract? A: It depends on the kind of thing. F.B. Express any affirmation of fact or any promise by the seller relating to the thing. the seller cannot be compelled to deliver. So after all.I.F.I. though the thing is determinate.F.I.B. If there is an agreement as to where and how the price is to be paid that would be the place considered for purposes of delivery and therefore for transfer of ownership. The use of the words / terminologies is not conclusive as to whether or not .I. Cost. Requisites: (a) There is an affirmation of fact (b) The fact must pertain to the thing either to the quality. and C. Obligation to deliver Obligation which can be Waived: 1.O. Freight F.F. Express 2. the F. In a F.F are rules of presumption which would have to give way to the real intention of the parties. they only make rules of presumption. Implied 1. it was on board a ship while in transit. it is only presumed that the place of delivery is the port of origin. arrangements do not really determine the place of delivery. the law provides that it will be the place where the thing is located at the time of the perfection of the contract. arrangement. Insurance. Q: What really determines the place of delivery? A: SC said this indication as to the intention of the parties as to the place of delivery is the manner and place of payment. destination. If the thing is determinate. Free on Board C. Obligation to warrant the thing Kinds of Warranties under the Law: 1.O. Read 1582 Obligations which cannot be Waived: 1. the natural tendency is to induce to purchase the thing. Q: What if the object of the sale is a generic thing? A: Seller s place of business or residence.

Example: I guaranty / warranty you that you will be happy if you buy this car at P100. What he did is to file an action to rescind the contract. the value of the land doubled. the squatters were still occupying the land. Lopez Dian Rosapapan .000. the action will not prosper because rescission may only be invoked by the aggrieved party. Implied Faye Marie C. The balance will be paid within 30 days from the time the occupants (squatters) of the land are evicted. it may turn out that there are better piña cloth. The statement of the seller s opinion is not as a rule considered an express warranty.000 . Martinez November 2008 Chato Cabigas Jessica A. the squatters have not yet been evicted. this does not result in an express warranty Again. I will still buy the land . The seller refused to accept the P900.there is an express warranty. it is an express warranty. Example: This is the best piña cloth . Would the action prosper? SA: If the answer is based on rescission. the seller should return the P100. As long as the seller is not an expert on that field. The buyer refused to accept the P100. if the affirmation of fact pertains to the quality of the thing. The seller offers to return the P100.000 will be paid upon the signing of the DOS. that would be treated merely as an opinion and there can be no liability for breach of an express warranty. It was so stipulated that if within 6 months.000 to the buyer. The seller is not an aggrieved party. So the buyer offered to pay the balance P900. Another stipulation states within the 6-month period. Despite the filing of an eviction suit by the seller and the lapse of the 6-month period. As agreed upon P100.000 and demanded that a DOS be executed by the seller.000. 2. BE: A sold a land to B for P1M in Antipolo. Example: These 10 sacks of fertilizer would result in 200 cavans of rice.000 and told the seller never mind even if the squatters are still there.

Prof. But there are certain instances when there would be no such implied warranty against hidden defects. De Leon regarding this statement.: Please check the book of Prof. a case was filed by a 3rd person against the buyer which resulted in a favorable decision as to the plaintiff resulting in the deprivation of the property by the buyer. 2. (Faye s Caveat .) Even if there is no stipulation as to these warranties. it cannot be said that Philippine law does not adopt caveat emptor buyer beware . If the seller is not aware of the hidden defects. These are 2 different obligations: the obligation to transfer ownership and the obligation to warrant the thing. There may be warranty as to title or against eviction but there is no warranty against hidden defects under certain circumstances. Deprivation must be either: (2. the law itself would provide for these warranties and hence if there are hidden defects he would have remedies under the law or even if he was deprived of the thing he bought he would have a remedy against the seller. Requisites of warranty against eviction: 1. The defect must be hidden. Q: Even if there is such a hidden defect. can . He is expected to know the defect. De Leon: because of this implied warranty. he may not be able to hold the seller liable if he is an expert on the thing. If the defect is patent and the buyer nonetheless bought the thing then he can no longer hold the seller liable. There should be no valid waiver 4. If he was aware. Warranty Against Eviction / Title Q: If the seller was able to transfer ownership to the buyer may the seller nonetheless be held liable for breach of warranty against eviction? A: Yes. The defect must result in the thing being unfit for the purpose of the buyer or at least it diminish the fitness of the thing such that the buyer would not have bought it at the price had he known of such defect. Example: This warranty against eviction would include the warranty that the buyer from the moment of the sale have and enjoy the legal and peaceful possession over the thing sold. The defect must exist at the time of the sale. he can be held liable.1) Based on a 3rd person s prior right over the thing prior to the sale or (2. Q: If the thing which has a hidden defect was lost or destroyed. Hence. 3. his liability will be greater because that makes him a bad faith seller. The action to hold the vendor liable should be filed within the period prescribed by law. Thanks . If the defect started after th e sale there can be no such liability. 2. it is not correct to say that Philippine law has adopted caveat emptor. WARRANTY AGAINST HIDDEN DEFECTS Requisites: 1. 3. In other words.2) Based on an act after the sale but imputable to the vendor. There has to be final judgment depriving him of such thing either wholly or partially. is it possible that the vendee cannot hold the vendor liable despite the fact that there was hidden defect even if he was not informed because maybe the seller was not aware? A: Yes.

Vitug. If the vendor was not aware of the defects. Prof. can he hold the vendor liable? A: Yes. not only the price less value but also to refund the expenses and damages because the vendor was aware of the defects. what are the remedies of the buyer? A: (a) He can seek for the reduction of the price. If there would be a problem here as to the extent of the liability of the vendor. he may file an action for damages. if he was aware. he should first consider the cause of the loss. the liability is greater than if the cause of the loss was a fortuitous event or fault of the buyer. if the cause of the loss was the defect itself. Deleon. ANY CHARGE OR NON APPARENT ENCUMBRANCE NOT DECLARED OR KNOWN TO THE BUYER Q: Would there be an encumbrance over an immovable which is a form of easement or servitude? A: An example of this is a road right of way. after 2 years from discovery no recovery of damages. The vendee can hold the vendor liable for breach of warranty against hidden defects even if the thing was lost due to fortuitous event or due to the fault of the vendee himself because of the hidden defects. If the defect was the cause of the loss. If he filed it for example. he cannot be held liable for damages but he would only be held liable for the price. Again. If he was not aware. Prof.the vendee hold the vendor liable for this breach of warranty? Does it matter if the loss was due to a fortuitous event or maybe the loss was due to the fault of the buyer himself. After that. he may not be held liable for damages unless he can only be held liable for interest. Q: If there is an encumbrance. But the law requires that the action for damages has to be filed within 1 year also but from the time of the discovery of encumbrance. If after 1 year. Q: If the buyer bought the land which turned out to have a road right 3rd of way in favor of a person. nonetheless. damages may be recovered. (c) If he became aware more than a year. WARRANTY OF QUALITY Prof. no more rescission. maybe it was lost due to the defect itself or lost through fortuitous event or lost through the fault of the vendee. Baviera: there is another warranty which is WARRANTY OF QUALITY which includes: (1) . If the cause of the loss of the thing was a fortuitous event. he should determine whether the vendor was aware of the defects or he was not aware. he can only be held liable for the price less value. can he claim breach of warranty against any charge or non apparent encumbrance? A: Of course there are requisites: (1) The encumbrance or easement or burden or the road right of way has to be non apparent. (b) Rescission -the law requires that the action for rescission must be filed within 1 year from the date of the contract. But of course. the vendor would be liable for the return of the price.

then he may hold the seller liable for breach of warranty of fitness for a particular purpose although there is no hidden defect but it is not fit for the purpose of the buyer. Atty. it may not be fit for the purpose of 1 buyer and if all the requisites for this warranty are present. WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE The thing bought may not actually have any defect and for 1 million buyers it would be fit for their purpose. Prof. The defect is a redhibitory defect it is such kind of defect that even by examination of expert it cannot be discovered. Martinez Chato Cabigas Jessica A. can the buyer rescind the entire contract pertaining to all the animals? A: G. Q: If one of the animals has redhibitory defect.R. Lopez Dian Rosapapan November 2008 .: No. If the thing was sold by description or by sample. He cannot rescind the entire contract pertaining to all animals. WARRANTY OF MERCHANTABILITY It pertains to the fact that it is fit for the general purpose. In order for the seller may be held liable: 1. However. SALE OF ANIMALS WITH DEFECTS RULES: 1. it is considered that there is such a thing as warranty of merchantability. Uribe: I cannot agree that the warranty of quality is in the warranty of hidden defects. Baviera that there is a warranty of quality. The buyer has to inform the seller of the particular purpose for which the thing is to be use and 2. He can only rescind the contract pertaining to the animal with redhibitory defect. Vitug and Prof. De Leon. Note: If the thing is sold under the trade name there can be no warranty of fitness for a particular purpose.Warranty of Fitness (2) Warranty of Merchantability To some authors the warranty of quality is considered under the warranty of hidden defects. Faye Marie C. I agree with Prof. The seller manifested that the thing would be fit for the purpose and the buyer relied on such representation of the seller.

does it mean that he already accepted? A: No because receiving is preliminary to accepting. Iuuntog nya ulo nya sa cage nya. Note: Rules on warranty also apply to judicial sale. Sale in public auction Note: There would still be warranty against eviction. Sale which is an as is where is sale which means sale where it is found xxx bahala ka sa buhay mo if you want to buy the thing and you cannot later on claim that there were hidden defects. Example: C. Atty. he may reject the goods if defective. Obligation to accept the thing delivered Q: If the buyer received the goods delivered. they are selling on behalf of another person. Q: In sale by authority of law or in execution sale. (Faye: pls. 2. this is consistent to the right provided by law to the buyer which is the right of inspection or the right of examination. In fact.Exception: If he can prove that he would not have bought the others had he known the defect of one then he can rescind the entire contract. Minsan nga mgsuicide pa sya pag mag isa na lang sya. can there be breach of warranty against eviction? A: Yes. Thereafter. .) Instances whether there would be no warranty against hidden defectsand therefore caveat emptor may be invoked: 1. Sale of 2nd hand items 3. kapag namatay yung isa later on mamatay din yung isa. with interest) 1. Obligation to pay the price (if warranted. Obligation to accept the thing delivered. The law would specifically exempt certain persons from liability for breach of warranty like sheriff. Q: Who has the burden of proof that he would not have bought the others had he known of the defect of one? A: Normally. Sale of animals in fairs 4. The judgment debtor and not the sheriff shall be liable.O. . Obligation to pay the price Q: When? A: (1) As stipulated (2) If there is no stipulation. RIGHTS AND OBLIGATIONS OF THE VENDEE 1. Examples: He bought the animals in teams or in pairs then the presumption arises. arrangement. mortgagee. . it would be the buyer. Uribe will ask the meaning. it would be at the time and place of delivery. research the complete meaning of as is where is sale. But the law under certain circumstances would provide for this presumption that it is presumed that he would have bought the others had he known of the defect of one. 2.D. auctioneer. Right to Inspect / Examine This may be waived. pledge and other persons who sell by virtues of an authority of law like notary public because they are not really selling for themselves.) 2. -Love birds (Ang mga love birds.

The seller may opt to file an action for specific performance or an action for damages. POSSESSORY LIEN Q: Why is it called possessory lien? A: because there another lien in the law. Note: The buyer is not required to be insolvent. The right of resale and the right to rescind may only be exercised if the seller has possessory lien. Unpaid seller is one who has not been fully paif of the price. STOPPAGE IN TRANSITU Requisites: (1) Insolvency of the buyer (2) The seller must have parted possession over the goods (3) The goods must be in transit How right is exercised: (1) By obtaining actual possession of the goods . Note: remedies of the unpaid seller are not necessarily alternative. Remedies under the Maceda Law are cumulative. Q: When would the seller be considered to have lost his lien? A: (1) If he waives his right (2) If the buyer lawfully obtained possession over the goods (3) When the thing is delivered to a common carrier and the seller did not prefer his ownership and possession over the goods. Baviera) Q: Are the remedies under the Maceda Law alternative? Can the buyer be able to exercise 2 or more remedies all at the same time? A: Yes. This is the lien under the rules on concurrence and preference of credit.MACEDA LAW Study Maceda Law and its essential features (see book of Prof. REMEDIES FOR BREACH OF CONTRACT REMEDIES OF AN UNPAID SELLER (ARTICLE 1526) (1) Right to retain the thing in his possession (possessory lien) (2) Right of stoppage in transitu / right to resume possession of the goods (3) Right of resale (4) Right to rescind Q: Are there other remedies aside 1526? A: Yes.

Lopez November 2008 Dian Rosapapan . 1713. The ownership of the 1st buyer will be terminated and such ownership will be vested to the 2nd buyer 2. Baviera 1. Rescission or cancellation will extinguish COS 3. Conventional 2. Payment 2. Note: The resale may be a private sale or a public sale. Martinez Chato Cabigas Jessica A. RIGHT OF RESALE Q: When would the seller have this right? A: (1) If the goods are perishable (2) The right is expressly reserved in the contract (3) The buyer has been in default for an unreasonable time. Redemption Kinds of Redemption 1. Baviera EXTINGUISHMENT OF SALE Pls. read Sales by Prof. Legal LEASE Note: · Read the Definition of Lease under Articles 1643. he will be considered to have regained his possessory lien. Note: The seller should send a notice of the intention to resell to the buyer. 1644. Novation 3. RECTO LAW Pls.(2) This may be exercised by mere notice to the common carrier If the seller validly exercised the right of stoppage in transitu. read Sales by Prof. The only limitation here is that the seller cannot buy directly or indirectly. Loss of the thing Under the law on sales 1. The exercise of the right of resale will result in the extinguishment of the 1st sale. Faye Marie C.

1650 · Implied new lease or tacita recunducion: Article 1670 (important) · Rights and Obligation of the Lessor and Lessee: Articles 1673. Distinguish a Contract for Piece of Work from Contract of AgencyRead: Frensel vs . 1678. · Assignment and Sublease: Articles 1649. but lease of service specifically an employment contract. the most important distinction here with that of commodatum is that in lease. Lease of Things 2. 1878 on Agency to Lease. Aside from that it may be safe to consider as a rule all the other contract as consensual contract. Definition: Q: If a party binds himself to give another the enjoyment or use of thing.g. pledge) and formal contract (antichresis. which are Household Service and Contract of Labor (covered by Labor Law). and Contract of Carriage (covered by Commercial Law). to distinguish lease contract from other legal relationship you have to consider the characteristic of the contract. Mariano Note: In Agency. deposit. as to when. Q: As to the relationship of the taxi driver with his operator. Lease of Right Note: In lease of Service. is this a contract of lease? A: SC. commodatum. 1723 (take note several questions in the bar have appeared under these provisions) · Period of the Lease if the parties failed to Fixed the Period: Articles 1682. what time the drive operates the vehicle. 1687 · Rights of Third Person: Article 1729 (ex: rights of owner of materials against the owner of the building) Note: The first thing to consider in lease is to consider the kind of lease. sale of large cattle. Note: Again. there are four (4) of them but three (3) will not be covered by Civil Law. this is because of the control of the operator over the taxi driver. The only kind of Lease of Service that will be discuss under the Civil Law is the Contract for a Piece of Work.· Consider also on Formalities: Articles 1647. otherwise if there is no valuable consideration for the use or enjoyment of the thing it will be commodatum. Lease of Work or Service 3. The best way to remember the kinds of contract is to know by heart what are the real contract (mutuum. donation). where no particular form is required except in exceptional case: e. Kinds of Lease: 1. it must be for a price certain. the control of the principal over the agent is so pervasive that the principal can control not only the result but also the manner and method of the performance of the obligation which is not present in this case and therefore Merit was not considered an agent of Mariano. 1724 in relation to 1403 on Statute of Frauds and 1403. does that make the contract one of lease of things? A: No. ruled that this is in fact a lease but not a lease of thing. therefore is a consensual contract by mere meeting of the mind as to the object and to the consideration the contract is . As a rule lease. 1680.

3. Characteristic of Lease of things ¨ Consensual Contract ¨ Onerous ¨ Bilateral ¨ Nominate ¨ Principal. The heirs of the lessee may continue to occupy the premises by virtue of the lease because it is not extinguish upon death of lessee. IAC. the defense raise was under 1724 in order that a claim for additional payment for the additional work. this is an obligation of the lessor. Note: the problem in lease would normally be a combination of an agency and lease. Upon the death of parties like death of lessee. Essential Requisites of Contract of Lease 1. however additional work was requested by a person who has the authority of a duly recognize representative of the owner of the plane and the request was merely verbal. OBJECT Q: In lease of things. or when they are accessory to an industrial establishment then it may be a subject of lease. CONSENT 2. BE: Agreement for the repair of a private plane and for a certain sum of money. Note: Lease of things is not essentially personal. Read: Donald Dy vs. under the law the lessor is oblige to make the necessary repairs. when the additional work was completed. RIGHTS AND OBLIGATION OF THE LESSOR As to necessary repairs of the thing lease. may a consumable thing be the subject matter of lease? A: Normally when a consumable thing is use in accordance with its nature it is consumed. the contract is not thereby terminated. the one who rendered the work demanded additional payment. The exception is. such change not being authorized in writing. as a rule therefore consumable things cannot be the subject matter of lease of things. the request was merely verbal then the claim may not prosper. CAUSE FORMALITIES Lease of Service there is no particular form required by law for the validity of the lease not even for the enforceability as a rule.perfected. Heirs of Fausto Dimaculangan vs. the agreement for the additional work must be in writing and the changes should be authorized in writing SA: The suggested answer of UP will sustain the defense because of 1724. when the use of the things is only for exhibition. CA Lease of Things certain provision of the law which requires certain forms to be enforceable. .

A contract of lease is not essentially a personal contract therefore upon the death of the lessee. agent and principal. Lopez Dian Rosapapan10 . lessor. it may be continued until the expiration of period of the lease by the heirs. (Case: Heirs of Dimaculangan vs. The question in the Bar may be as simple as may a lessee sublease the property without the consent of the lessor and what are the respective liabilities of the lessee and sublessee.Read: Gonzales vs. IAC) IMPLIED NEW LEASE Note: one of the most favorite in the bar exam. SA: In a lease of thing. Mariano TERMINATION OF THE LEASE BE: Discuss the effect of death of lessee. Read: Malacat vs. Mateo RIGHTS AND OBLIGATIONS OF THE LESSEE Note: Two (2) favorite articles are 1649 pertaining to assignment of lease. and 1650 on sublease. Requisites: Faye Marie C. Salazar Frensel vs. Articles 1649 and 1650 would tell us that a lessee may not assign his right on the lease without the consent of the lessor however he may sublease the property in whole or in part even without the knowledge of the lessor as long as he was not prohibited from subleasing the premises. Martinez November 2008 Chato Cabigas Jessica A. death of the lessee does not terminate the contract.

formalities Coz a form is required for the validity or for the enforceability of the contrac t entered by the agent-1878. 1874 1892-pertain to appointment of the substitute-effect-may the agent nonetheless be held liable for the loss that incurred by the principle as the result of the appointment of the substitute. in an implied new lease. 1930 and 1931 Either of the agent or principal Revocation-kind of agency. As to the option. Despite the lapse of the 3year pe riod. if B agreed to the request of A. SC held. the term of the renewed lease would not be the term agreed upon but only be of a period depending on the manner the rentals are paid. BE: Pertain to contract of lease entered into for period of 3 years Jan 1. an agency relationship has been created. under the law. AGENCY Definition 1868. Other provisions pertain to the right and obligations of commission agent or more importantly the guaranty commission agent-1907-1908 Effect of death-1919. The lease period has expired and 2. No notice to the contrary from the lessor and the lessee. The lessor refuse. a nominate contract has been created. it was stipulated that the option may be exercise within the period agreed upon (3 years). Is there a nominate contract created between A and B? SA: Better answer. This continued until June 1984 when the lessee stated that he would now buy the property in accordance with the option to buy. 81 up to 1984. Was it correct to say that there was extension of the lease under the facts? SA: Yes. there was an extension known was implied new lease. If the payment is on annual basis. the renewal would only be for a year and if monthly payment of rental is made. the implied new lease would only last for 30 days. First as to the term. the lessee did not exercise the option. Rentals were paid on monthly basis. However. The lessee continues to be in possession of the lease for at least 15 days from the time of the expiration of the lease and 3. only those terms and conditions which are germane in a contract of lease are deemed renewed as to the rest like option to buy. it was renews. Read: Quiroga vs Parsons Distinguishing contact of agency from other contract and other legal .agency coupled with interest-1927 BE: A asked her best friend to B buy for her certain items in a grocerystore. but continued to be in possession of the property and paying the monthly rentals and the lessor accepting the same. It was stipulated that the lessee has the option to buy property at a certain price within a certain period (option to buy). Was the lessor correct? Yes. with the implied new lease it does not mean that all the terms and condition of the contract in the original lease continue also. Even in the facts of the case itself. claiming there was no more option. will not be considered renewed.1. 1874 and 1878.

. this notice itong letter nya kay X remain in full force and effect until it is rescinded in the same manner it was given. Consider the characteristics of a contract of agency as a contract and as a legal relationship business organization. Read: Lepanto Mining case Mariano case Some authors would classify contract of agency into three. Express agency-it is a kind of agency the consent of both parties were expressly given. 1. because an agreement between 2 persons. X demanded payment from B. Apparent / dormant 3. not concepts. not by Flores. 2. Estoppel Kang case Facts: Flores appears to have full control of a restaurant. 1873 so far as 3rd person are concern. express / implied. The only defense raised by the owner was that Flores was not his agent. A did not deliver the proceeds of the sale. owned by Kang and in the administration of the restaurant he bought certain items from Mack.relationship. The defense of B was as of that moment from that certain period he has already revoked the authority of the agent and therefore be bound by any contract entered into by A in representation of B with 3rd person. so Mack ( seller ) went after the owner of the resto. like copra. 4. how would you be able to prove. There is no problem with express agency. Take note: it is very difficult to prove actual agency. In other words A will get the goods from X. Actual agency 2. after a certain period. 3 Actual agency The law itself classify actual agency into as manner of creation. items needed for restaurant but a portion / price to be paid. the owner of the restaurant can be held liable by estoppel because he cloth Flores with full power as if he has the authority to buy those items necessary for the administration of restaurant aside from that Mack was able to prove pieces of evidence like in the lease agreement over the building where restaurant was located and comes the owner of the restaurant as lessee and Flores sign as an agent of the lessee with all this the Held: The owner of the restaurant is liable under the Principle of Estoppel. informing X that A has the authority to enter into a contract with X specifically to obtain goods from X. abaca which goods will be sold by A. Is the claim of B tenable? SA: No. Apparent / Ostensible Q: A letter was sent by B to X. eh kung verbal lang ang agreement dun. Estoppel 1. after the sale a portion can be deducted as a commission and the restaurant to be delivered to X. 3. the goods obtain by A from X remained unpaid.

Hidalgo Q: If a person was asked to administer the property of another to sellthe proper ty. BE: Scope of authority of the agent whether it only pertains to theacts of admin istration or acts of anu yun dominion? SA: Under this provision 1877 if the agency is comes in general term this only comprise acts of administration even if the principal beholds power to the agent or it is stated that the agent may execute any act as may be deemed appropriate. When 2 parties are his silence.Implied agency-were the consent of one parties was only impliedly given on the part of principal-the leading case is Dela Pena vs. and he said nothing.subject matter 3. Acts within the scope of authority 4. the law is clear that it may be oral however the law may require a particular form.present in the same conference hall (b) If 2 persons are in different place. Lopez Faye Marie C. Consent 2. you have to make distinction to determine the scenario under which the said appointment was made. That will still be an agency pertaining to act of administration. ESSENTIAL ELEMENTS OF A CONTRACT OF AGENCY Read: Rallos case The SC enumerated the essential elements or the alleged essentials elements of a contract of agency. one in Manila and the other one in Cebu Compensation As to the compensation in a contract of agency consider if the agency is gratuitous or onerous.1 is in Manila and the other is in Cebu. The acts must be in representation of the principal Chato Cabigas Jessica A. Read: 1909 -the liability of the agent for damage to the principal due to his negligence or even bad faith or fraud committed against the principal may be mitigated if the agency is gratuitous in character. When 2 parties are present. and when the 2 parties are present. by his inactions may be deemed accept agency? A: Not necessarily. 1. Under the law. Execution of the juridical act. As to form. Martinez November 2008 Dian Rosapapan11 . okie! The law would say when the 2 parties are absent.present in the same room (a) 2 persons present.

well 1 author claims that there are 3 parties in a contract of agency that is totally wrong! There are only 2 parties in a contract of agency the principal and the agent. but when the agent entered into a contract it may be a sale. It does not matter. first there was nothing mention about the cause or consideration as a contract. he sent a letter to his sister asking his sister to sell one of his parcels of land and with that letter the sister indeed sold one of his parcels of land to Rabot. however the sister did not remit the proceeds of th sale. the contract entered into between by the principal and the agent. lease or other contract and the 3rd person is not a party to this contract. does it mean that there was no agency at all? Of course not. a contract will never validly have a cause or consideration well it may be liberality pwede naman cause yan but there must have a cause if only for that the enumeration be defective more than that that last 2 mention that the agent act within the scope and that the agent must act in representation are not essential elements of a contract of agency they are actually obligations of agent which means they have been already perfected of contract of agency. there is a contract of agency. Read 1874 Contracts which require a SPA Jimenez vs. however in problems involving agency there may be there would be normally three persons involve. so when Jimenez went see codal . the third persons with whom the agent transacted. the agent may be called attorney-infact. constituent. PARTIES Going to the consent of the parties. medyo mali mali ang enumeration. FORM Agency may be oral. once the contract is valid then the obligations will arise even if the agent acted outside the scope of authority does it mean that the contract of agency is void? Of course not. he can be held liable for acting outside the scope of authority or if he acted not in contemplation of the principal. no obligation will arise kung void ung kontrata kung wala pang valid contract. however any effect of the verbal authorization. proxy. so essential elements are only those elements necessarily for the validity of the contract. the 3rd person is a party to a 2nd contract. no longer part of the concept agency. Under the rule the consequences if the agent did not act in the representation of the principal. OBJECT As to the object of the contract of agency -this is the execution of juridical act. representative. Rabot Facts: Jimenez was the owner of a certain parcels of land in Pangasinan. the contract of agency would be valid but the parties even if it is by verbal agreement. chief. binulsa lng nya. this is the agency.This are allegedly the essential element again some authors would discuss in their books with due respect to the ponente of this case. he was then in the province of North Luzon. the agreement between the agent and the principal if it was only verbal will be in the contract entered into by the agent. that again the parti es is the principal and the agent. they may be called in another names the principal-employer.

he should always remember: a. Q: If indeed he mortgaged the land for a loan in his name. In fact as a 3rd person. under the facts. so that you will know whether in fact he had authority to enter into a contract but sa totoo lng there are some SPA which would be subject of the case up to the SC pertaining to the scope of authority of the agent. Q: If the agent acted within the scope of his authority and in representation of the principal. In carrying out the agency. also his authority to have the property to mortgage to secure a loan. If he mortgaged it as a mortgagor the mortgage is void. would that be a valid and binding mortgage as against the principal? A: Also not. Puno Read: Insular vs. If you remember the question. Q: On other hand even if the agent mortgaged the thing on behalf of the principal. to act in behalf of the principal a. to act within the scope authority b. however if you have read the suggested answer. would that mortgage be valid? A: Definitely not. To carry out the agency 2. so he filed an action against Rabot. The only question pertains to the payment of loan. di tinatanong ng examiner can the bank go after the principal as far as the thing is concerned. PNB BE: A authorize B to borrow sum of money from any bank and he also authorize B to mortgage specific property specific parcel of land to secure that loan what B did he borrow money for himself from a certain bank without disclosing his principal. who will be bound in that such . Another thing of the suggested answer it is totally wrong. Read: Linal vs. Obligations of the Agent: 1. not to secure any other persons loan and that therefore it cannot be within the authority of the agent and therefore any foreclosure of such mortgage will not prosper. the principal is the mortgagor. the agent borrow for himself sya talaga. yun ay na kay Rabot na. there are 2 obligations of the agent. later on he defaulted the question was can the bank go after the principal? A: Of course No.back to Pangasinan. the law requires that the mortgagor must be the absolute owner of the thing mortgage. the defense raised by him that the letter would not be sufficient a power of attorney to bind him as a principal the sale of the parcels of land. the contract is between the agent and the bank only the principal has nothing to do with the contract. you can demand the power of authority. Acting within the scope of authority Q: how would you know if the agent was acting within the scope of authority? A: Be guided by the power of authority. under the facts. the principal authorize the agent to mortgage the property for the loan that will be obtain by the agent in the name of the principal. Held: A letter suffices as a power of attorney. When you sent a letter to your brothers or sisters you do not notarize first. he demanded the property. my 2nd paragraph to the effect that the bank can at least foreclose the mortgage they can after the property of the principal.

000. Martinez November 2008 Chato Cabigas Jessica A. De Leon s book) PARTNERSHIP BE: A. it is possible for the agent himself to be bound in such contract be held liable under such contract? A: Yes. gave Php4. Read: 1898 Appointment of Substitute Read: Substitute vs. B. decided t establish a restaurant. the description of the car was mention in the SPA at least 300k however before the agent would sell the car.000 as financial assistance with the agreement that B will have 22% share of the profits of the business. it will be the principal because again the agent merely representing the principal. Read: Domingo vs. if that buyer has no knowledge of that instruction of the principal then he has all the right to retain the car and that sale will be valid and binding as against the principal. Sub Agent (Prof.contract? A: Aside from the 3rd person. Domingo Read: US vs. As provided under Art. Lopez Dian Rosapapan12 . 1900 so far as 3rd persons are concerned they only rely on the SPA as written they have no obligation to inquire on the special instructions made by the principal which are not mention in the SPA. however. instead of selling the car in QC IBP member chapter he sold the car in Manila not known by the principal for 300k. eh wala naman dun sa SPA na it will be sold to an IBP member chapter in QC. Reyes Obligation to render an accounting If this time the principal authorize the agent to sell his car for 300k. 2. It depends. After 22 years. However. Go after the agent or damages if there is any damage sustain by him for his failure to follow the instructions of the principal. B filed an action to compel A to Faye Marie C. the principal called him by phone instructed him to sell the cart in QC to a member of IBP member chapter. (1) Can the principal recover the car from the buyer if that car is already delivered to the buyer? (2)Any remedy provided by the law to the seller or to the principal? 1. using all his savings in the total amount f Php2. one if he expressly binds himself to that contract.

B was a partner in the business because there was a contribution of money to a common fund and there was an agreement to divide the profit among themselves. supposedly pwede payable every month with a fixed amount. Under the second paragraph of the article. so that if walang profit sa isang taon. they may be considered as co-owners of the same property. It was not a contribution to a common fund. Atty. Uribe: I do not agree with the answer. In co-ownership. Therefore. by express provision of the law. the fact that there is co-ownership does not necessarily mean that there is a partnership existing between two persons. Ex. . Is B a partner of A? SA: Yes. in fact that can be a mode of payment of the loan. it can be said that really B was not a partner but is actually a creditor of A. Thus. B gave Php4. Kasi yung loan. But mas maganda ang agreement na ito. Only kung may profit. he actually became a creditor of A. WHY: In the alternative answer as can be seen from the facts. Co-ownership: Common enjoyment of the thing or right owned in common. A denied that B was his partner. Co-ownership may be created by agreement. Co-ownership Consider the essential features: CREATION Partnership is obviously created by agreement. Di ba that s reasonable agreement. I d rather agree with the alternative answer. they have their respective personalities and no new personality will be created. PURPOSE Partnership: either to divide profits or exercise a profession. wala munang bayad.000 only as a financial assistance. saka lang babayaran. As such. In fact. merely to enjoy the property. wouldthat still be c onsidered a valid partnership contract? A: Yes. Q: What about the stipulation that B will have 22% share of the profits? A: The law on partnership is very clear that a sharing in the profits does not necessarily does not result in a partnership contract because the sharing of the profits may only be a way of compensating the other person. separate and distinct from the individual partner which is obviously not present in co-ownership. 22% of the profits. The sharing in the profits as expressly provided by law does not necessarily result in a partnership contract. two or more persons can form a partnership for the exercise of a profession. Partnership vs. A very important feature of partnership in relation to co-ownership.: two persons may inherit a property from their father or mother. Definition of Partnership Q: What if two or more persons agreed to put up a partnership but they never intended to divide the profits among themselves. but it may also be created by operation of law. and under the law. friendly loan ito. thus they may have different purposes. he did not contribute to a common fund. it has a juridical personality.deliver to him his share in the profits claiming that he was a partner. Kumbaga.

) Cause or consideration: the promise of each partner to contribute money. mas malaki ang interest. whether a business or profession. necessarily the partnership is valid? A: No. there are persons who are prohibited from entering into a contract of partnership. Co-ownership: As a rule. just like in sales and lease.) Consent 2. Formalities Q: If the agreement of the parties to a contract of partnership was only . But not necessarily in partnership. Kapag namatay ang isang co-owner. Q: If the object is to engage in a lawful activity. Cause The promise of each partner to contribute either money. it should have the three essential requisites: 1. However in partnership.POWERS OF THE MEMBERS Partnership: Unless otherwise agreed upon. property or industry. therefore there can be no partnership engaging in such business: banking and insurance. because the sharing in the profits may be stipulated upon by the parties. There are specific business activities wherein the law would require particular business organization which may engage in such business activity. specifically the Corporation Code which provides that only corporation may engage in insurance and banking business. the partnership is dissolved. 3. ESSENTIAL ELEMENTS OF PARTNERSHIP Like any other contract. Q: Will death extinguish co-ownership? A: No. Object To engage in a lawful activity. it may be based on the capital contribution. property or industry Consent of the contracting parties: The rules in contract would be equally applicable but. Pero kung walang stipulation. if one of the partners dies. each partner is an agent of the other partners and of the partnership.) Object: to engage to a lawful activity. PROFITS: Co-owner: Mas malaki ang profits. a co-owner cannot act as an agent of the other coowners unless otherwise agreed upon between the co-owners. his heirs will be the co-owners of the surviving co-owners at pwedeng tulou-tuloy lang yan. if it is a general partnership.

the partnership cannot be considered as a partnership at will because there was a stipulation in the partnership agreement that the debt of the partnership shall paid out of the profits that will be obtained by the bowling business. Art. After all. after all.000 or more. 3. In one case.) It may be dissolved for committing an act of insolvency.) Universal Partnership of Profit TERM OF PARTNERSHIP: Q: If the partners failed to fix a period. But more directly. the law provides that every contract of partnership. The 2nd paragraph of Art. because this is without prejudice to the liability of the partnership (kung may partnership). Even if under Art. par.1. The SC ruled that even if the partners failed to fix a period. dissolved a partnership. 1772 provides that despite failure to comply with the requirements in the preceding paragraph. there is a need to distinguish whether a partnership is a UNIVERSAL or PARTICULAR partnership 2 Kinds of Universal Partnership: 1.) It can own its properties. the law provides. does it mean that the partnersagreed a partnership at will and may be dissolved at any time without any liability so long as they acted in good faith? A: No. Therefore. 1772. From that article alone. claiming it to be a partnership at will. there is a partnership created. Consequences: separate and distinct personality 1. would that be a valid and binding contract? Will there be a juridical personality created? A: As a rule.) Universal Partnership of Property 2. it is clear that despite non-compliance with the requirements of the law as to form. because a partnership may be a partnership for a particular undertaking even if no period was fixed by the parties. this is without prejudice to the liability of the partnership and the individual partners to thi rd persons. a partner. Thus. having a capital of more than Php3. shall be in a public instrument and must be registered with the SEC. 1772. a verbal partnership contract is valid and binding between the parties. the SC ruled that the said partnership is a partnership for a . Pacific Commercial CLASSIFICATION OF PARTNERSHIP: As to the object of the partnership is only to determine whether a person may enter such partnership. 1768.) It can sue and be sued. Read: Campos-Rueda vs. the partnership being involved in a bowling business. yes.a verbal agreement. 2.) It may be found guilty of an act of insolvency. the partnership has a juridical personality separate and distinct from that of each if the partners. for the debts will have to be paid. it cannot be dissolved at will. 4. even in case of failure to comply with the requirements of Art.

Martinez November 2008 Chato Cabigas Jessica A. Lopez Dian Rosapapan13 . CLASSIFICATION OF PARTNERS: According to the liability of the partners: Faye Marie C.particular undertaking.

2. Property rights considered as minor: 1. A limited partner can only contribute money or property.: No. Note: A limited partner cannot be held personally liable for partnership obligations but there are exceptions As to the contribution: 1. 3. in obtaining his consent (he is absent or incapacitated) it would result in irreparable damage to the partnership. if only one partner is appointed as a manager.) General 2. may be a general partner? A: Yes. then the consent of the absent or incapacitated managing partner may be dispensed with. This is also known as management by consensus.) industrial Q: An industrial partner.) right to demand for a formal accounting. Ex. He can be both capitalist and industrial and there will be consequences to that. Q: May an industrial partner be a limited partner? A.) If there was management arrangement agreed upon between the partners.) Solidary Management: -without specification as to each other s duties or without stipulation that one of them shall act without the consent of all. The incapacity of one of the partners. each partner is considered as an agent of the partnership. unless. . PROPERTY RIGHTS 3 Major property rights of a partner: 1. TYPES OF MANAGEMENT: 1.) Joint Management: -two or more managing partners with the stipulation that none of them shall act without the consent of all others.) interest in the partnership. He cannot contribute service.) the right of the partner to participate in the management of the business of the partnership. In a partnership of which the business is into buying and selling cars. A capitalist partner may either be an industrial or general partner. Q: But can a partner be both capitalist and industrial? A: Yes.) capitalist 2. he can execute any acts of administration even if opposed by all the other partners. 2.) right in specific partnership property. 2.) Limited This classification is relevant only in limited partnership. or his absence will not be a valid ground not to obtain his consent to a contract. and 3. he can contribute both money and industry. Into these arrangements.) right to have access to the books of the partnership.1. It has to be by unanimous consent.

if he was appointed as a managing partner only after the constitution of the partnership.) by those partners having controlling interests. To make good his promised contribution: A. for instance. he may be removed as a managing partner. he can never be removed. The problem is. it will be the legal rate of 12%. and 2.the managing partner decided to buy a vintage Mercedes Benz. the partners agreed to contribute Php1 Million with 4 partners. and 3. he cannot be validly removed. the law provides that they will have to share equally. if the managing partner continues to not consider the sentiments of the other partners. because this is forbearance in money. Php1 Million will have to be divided into 4 or the respective contribution will be Php250. Money: In order to know the remedies that may be availed of by the nondefaulting partners and the partnership. will the decision or the act of the managing partner in buying the said car bind the partnership? Ans. property or industry. However. whether he promised to contribute money. can he be easily be removed? Ans. The requirements for the removal of a managing partner would depend on whether he was constituted as such in the articles of partnership or he was merely appointed as managing partners after the constitution of the partnership.: No. In fact. Thus.: Yes. If one partner failed to make good his promised contribution which is a sum of money. If the partner promised to contribute money. Absent one of these conditions. so long as it was done by those partners having controlling interests. to the opposition of the other partners for they consider it bad investment.) Fiduciary duties.) there has to be just cause. OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES AND AS TO THE PARTNERSHIP AND IN CASE OF NON-PERFORMANCE OF THE OBLIGATION 3 Obligations of the partners: 1.) To make good his promised contribution. if the managing partner controls 51% of the partnership. he can be validly removed even without just cause. which is unusual. not only will that defaulting party be . 2. he can only be validly removed under two conditions: 1. because such act is merely an act of administration. in this example.000. If no rate was stipulated by the parties. Aside from paying the interest.) To participate in the losses incurred by the partnership business. The question now is. it must be known first what was promised by the partner. without an agreement as to respective amount to be contributed. even if there is just cause. he can be held liable by the non-defaulting partners up to the amount promised plus interest. If he was constituted as a managing partner in the articles f partnership.

The SC held that even if the act of a partner was made after the termination of the partnership. Lopez Dian Rosapapan14 . he will also be liable to pay damages. if that is the only amount that they are expecting for the partnership. Property: If a partner promised to contribute property. Test to determine whether there was a violation of this duty: Whether the partner has an advantage himself at the expense of the partnership. Q: May a partner may be held liable for breach of fiduciary duty even after the termination of the partnership? A: Yes. who will bear the loss? A: The partner will bear the loss. This duty lasts. in case of damage incurred by another party. It would be a violation of his rights against involuntary servitude. If it was the ownership of the property that was contributed then he would have the obligation to deliver and transfer ownership. The partnership will bear the loss when the thing is already in its possession C. Martinez Chato Cabigas Jessica A. under the law. The remedy would be to demand for the value of the service plus damages. if the foundation of that act was made during the existence of the partnership. the liability will only be payment of interest. Remedies that may be invoked by the non-defaulting partners: 1. in obligations involving money. normally. There need not be a proof of evil motive so long as he has this advantage at the expense of the partnership. Industry Q: If a partner fails to render service as promised.) Dissolution-may be an option by the non-defaulting partners.held liable to pay interest. not only will he be liable to pay interest. then there is a breach of the fiduciary duty. Fiduciary Duties: The duty to observe utmost good faith. honesty. but also of damages. integrity in being with each other. fairness. he would have the obligation to warrant the thing. aside from that. It can be easily done because there is an industry rate.) Specific performance-the other partners can compel him to make good his promised contribution. In partnership. Q: Before the delivery of the thing to the partnership. B. that can still be considered as a breach of Faye Marie C. will specific performance be a remedy? A: Definitely not. until the termination of the partnership. 2. This duty commences even during the negotiation stage. it must be determined as to what was really contributed: was it the property itself or the use of the property. If he has such advantage at the expense of the partnership. Normally.

November 2008 .

he can demand for the presentation of the articles of partnership in order for the third party to know the nature of the business of the partnership.fiduciary duty. Normally. it was executed only after the termination of the partnership. so akala law firm. hindi ko naman alam na restaurant yung business. by a partner who is authorized to enter into that contract to bind the partnership. then would be. OBLIGATIONS OF PARTNER RE: 3RD PERSONS Q: When would a contract entered into by a partner bind the partnership? Ex. whether the partner who represented the partnership had the authority to bind the partnership. under its signature. Whether or not a contract would bind the partnership would depend on the nature of the act of such partner and the nature of the business of the partnership. But the seller would raise the defense. In this example. if a partner would enter into a contract. the partnership is a law office. if a partner bought a complete set of SCRA in the nameof the part nership and signed by that partner. for the account of the partnership. ang negosyo nila restaurant. pinaghandaan na nya yun act during the existence of the partnership.: If a partner went to a furniture shop to buy furniture the of which is Php100. In other words.: Consider first whether there was a stipulation as to losses or there was no stipulation. Participate in the Losses: Q: What will be the share of the partner in the losses incurred in the partnership? Ans. ABC. Thus. if in the agreement the buyer was the partner himself and not the partnership. for the furniture was not bought in the name of the partnership. The SC would tell that the third party contracting with the partnership has the obligation to know at least the nature of the business of the partnership. that contract will bind the partnership. e ang nagrepresent ng partnership si Atty. hindi naman ata na i-bind nya ang partnership to such contract. Therefore. Is that a valid defense? Ans. in this example. the partner bought the set of SCRA.000.: No. . The problem. if the contract would be binding in the partnership. For. and business ng partnership ay restaurant. however. would that contract bind the partnership for the set was bought in the name of the partnership? A: It would depend on the nature of the act and the nature of the business of the partnership. that partner should be held liable. if this time. and such amount remained unpaid. a partnership resolution is not necessary. Q: Concretely. In fact. pero naman. can the seller demand payment from the partnership? A: It depends as to whether the contract was entered into in the name of the partnership. and the partner bought a set of SCRA. DISSOLUTION. WINDING UP AND TERMINATION . that act of buying a set of SCRA will be considered apparently for carrying the business of the partnership the usual way.

) Judicial.) wrongful expulsion. It will still have to go through the process of winding up of the affairs of the business of the partnership before the partnership itself will be terminated.These are three different concepts. INVOLUNTARY CAUSES Q: If one of the partners in a partnership was elected a Senator. b. it is NOT DEEMED dissolved. Judicial Causes: Grounds: 1. kung wala syang pakialam sa management ng business ng partnership.) Extrajudicial. if he has such right to participate in the management . and -such incapacity or insanity must affect the performance of such partner of his obligations with respect to the partnership business. c. That will result in the dissolution of the partnership.) voluntary. CAUSES OF THE DISSOLUTION 1.: No. if one of the partners ceased to be associated in the carrying on of the business of the partnership.) Gross misconduct: a.) Insanity or incapacity: -The courts require that it should be permanent in character.) if one partner would refuse to allow another partner in the management of the partnership business. Q: Even if it is a partnership of lawyers or a law office? Ans. Judicial causes are necessarily voluntary because it is by application. . Again. would this dissolve the partnership by operation of law? Ans. 2. insanity or incapacity is not a valid ground. Extrajudicial causes: 1. Upon dissolution of the partnership. Q: When would there be a dissolution of a partnership? Under the law. 2. 2. that will result in the dissolution of the partnership. In other words.: No. there will be a dissolution if there is a change in the relation of the partners caused by any of the partners ceasing to be associated in the carrying on of the business of the partnership.) involuntary.) if the managing partner would refuse to distribute the profits of the partnership when there is such obligation to distribute the profits.

brother and sister respectively. TRUST 2 KINDS: 1.) Partnership creditors 3. B.) misappropriation of the income of the partnership business. For purposes of convenience. may be proved by parole evidence.: An express trust over an immovable may not be proven by parole evidence.) Implied Implied Trust: 2 Kinds: 1. 2. 2. IMPLIED TRUST Resulting Trust BE: A and B. .) applicability of the parole evidence rule. agreed to have the land registered in the name of A. when the parcels of land were registered in the name of A. 4. Art.based on their agreement as to profits.) Excess profits . N. if the lawyer of the other party did not object to the presentation of the witness. EXPRESS TRUST Q: May an express trust over an immovable be proven by mere testimony of the witness? A: Yes. inherited two identical parcels of land. sister of A. Q: Upon the dissolution of the partnership. A sold one of the parcels of land to a buyer in good faith and for value.B. acquisitive prescription. how will these be distributed? To whom these assets be given? A: As far as partnership assets are concerned: 1.) If there are remaining assets. specifically. and 2.) constructive trust The classification of trust into two kinds (express and implied) and implied trust into two kinds (resulting and constructive) would be relevant in two concepts: 1. to the capitalist partners.) prescription. Can B recover the land from the buyer? What would be the remedy of B? SA: This question clearly pertains to a resulting trust. However. This is specifically. 1451 of the NCC. and there were assets left. This means that implied trust over an immovable may be proven by parole evidence or express trust over a movable.d.) Partnership creditors who are not partners.) resulting trust.) Express 2.

B cannot recover the land from the buyer. Faye Marie C. but he has apparent authority to sell. Lopez Dian Rosapapan15 . who appears to be the owner and the buyer bought the property in good faith. he will acquire ownership over the thing even if the seller has no right to sell. a buyer who had bought the property from a seller who has no right to sell. As discussed in Sales. Martinez November 2008 Chato Cabigas Jessica A.

Resulting trust includes Articles 1448. he sold the property to a thi4rd person who bought the land relying on the TCT. 1451. Q: In constructive trust. Instead of ensuring the registration of the property in the name of A. Lopez Dian Rosapapan16 November 2008 . 1450.B.1452. may the trustee acquire the property by prescription by mere lapse of time. 1449.: Art. he was called in New York to be a chef in a hotel. he had the property registered in his (cousin) name. N. Constructive Trust: BE: A applied for the registration of a parcel of land in his name. 1456. However. Martinez Chato Cabigas Jessica A. When A returned to the Phils. he learned of what his cousin had done. Faye Marie C. So. he asked his cousin to follow up his application for registration of landwhile he w as in New York.. without repudiation? A: Yes. May A recover the parcel of land from the 3rd person who bought the property in good faith and for value? A: No.B s remedy would be to go after her brother for breach of trust in selling the property without her consent. 1455.1453. After which.1454.

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