Professional Documents
Culture Documents
Contract of Sales
Contract of Sales
6. Nominate
7. Principal
There may be a sale against the will of the owner in case of expropriation and the three
different kinds of sale under the law ordinary execution sale, judicial foreclosure sale,
and extra-judicial foreclosure sale.
2. Object or subject matter refers to the determinate thing which is the object of the contract;
Even a future thing not existing at the time the contract is entered into may be the object
of sale, provided it has a potential or possible existence, that is, it is reasonably certain to
come into existence as the natural increment or usual incident of something in existence
already belonging to the seller, and the tile will vest the buyer the moment the thing
comes into existence (Art. 1461).
Payment of
price:
- non-payment of the price is a negative resolutory condition, and the remedy is to exact fulf
the contract.
Contract to Sell
- full payment is a positive suspensive condition, the failure of which is not a breach, casual o
contract but simply an event that prevents the obligation of the vendor to convey title from a
force.
Ownership of - vendor loses and cannot recover ownership of the thing sold and delivered,
vendor:
actually or constructively until and unless the contract of sale itself is resolved
occurs where the purchaser has not seen the article sold and relies on the description given
him by the vendor, or has seen the goods but the want of identity is not apparent on
inspection.If the bulk of the goods delivered does not correspond with the description, the
contract may be rescinded. (Art. 1481.)
Sale of goods by sample
- the parties contracted solely with reference to the sample, with the understanding that the bulk
was like it.- the vendor warrants that the thing sold and to be delivered by him shall conform with
the sample in kind, charater, and quality.
Form of Contract of Sale
Generally, a contract may be entered into in any form provided all the essential requisites for its
validity are present (Art. 1356). It may be in writing, oral, or partly in writing and party oral. It
may even be inferred from the conduct of the parties, since sale is a consensual contract that is
perfected by mere consent.
However, in case the contract of sale should be covered by the Statute of Frauds, the law requires
that the agreement be in writing subscribed by the party charged, or by his agent; otherwise, the
contract cannot be enforced by action [see Art. 1403].
Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the following
contracts must be in writing to be enforceable:
(a)
(b)
sale of real property or an interest therein regardless of the price involved; and
(c) sale of property not to be performed within a year from the date thereof regardless of the
nature of the property and the price involved.
(a)
The Statute Frauds specifies three (3) ways in which contracts of sales of goods within its
terms may be made binding:
the giving of a memorandum;
(b) acceptance and receipt of part of the goods (or things in action) sold and actual receipt of
the same (Art. 1585); and
(c)
Recto Law (Art. 1484) Remedies of Vendor in Sale of Personal Property Payable in
Installments:
(a)
(b)
cancel the sale, if the vendee shall have failed to pay two or more installments;
(c) foreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to
pay two or more installments.
These remedies are alternative and are not to be exercised cumulatively or successively
and the election of one is a waiver of the right to resort to the others [Pacific Commerial
Co. vs De la RAma, 62 Phil. 380; Nonato vs. IAC, 140 SCRA 255].
(a) to pay without additional interest the unpaid installments due within the total grace period
earned by him fixed at the rate of one-month grace period for every one year of installment
payments made this right shall be exercised by him only once in every five (5) years of the life
of the contract and its extension, if any; and
(b) if the contract is cancelled, the seller shall refund to the buyer the cash surrender value of
the payments on the property equivalent to 50% of the total payments made and, after 5 years of
installments, an additional 5% of every year but not to exceed 90% of the total payments made.
[Sec. 3, RA 6552 or the Realty Installment Buyer Protection Act; see Layug vs. IAC, 67 SCRA
627].
(c) The buyer has the right to sell his right or assign the same before actual cancellation of the
contract and to pay in advance any unpaid installment anytime without interest and to have such
full payment of the purchase price annotated in the certificate of title covering the property.
II.
Minor
(b)
(c)
Contracts entered into by a minor and other incapacitated persons are voidable.
However, where the necessaries are sold and delivered to him (without the intervention of
the parent or guardian), he must pay a reasonable price therefor. The contract is therefore
valid, but the minor has the right to recover any excess above a reasonable value paid by
him.
Sale of real property by minors who have already passed the ages of puberty and
adolescence and are now in the adult age, when they pretended to have already reached
their majority, while in fact they have not, is valid, and they cannot be permitted
afterwards to excuse themselves from compliance with the obligations assumed by them
or to seek their annulment. This is in accord with the doctrine of estoppel [Mercado and
Mercado vs. Espiritu, 37 Phil. 265].
2. Relative Incapacity where it exists only with reference to certain persons or class of
property (Art. 1490-1491). The prohibition extends to sales by virtue of legal redemption,
compromises, and renunciations.
(a) Husband and wife to each other except when a separation of property was agreed upon in
the marriage settlements, or when there has been a judicial separation of property
(b)
(c) Agents as to the property whose administration or sale has been entrusted to them, unless
consent of the principal is given
(d)
(e) Public officers and employees as to the property of the State or any subdivision thereof,
or of the government-owned or controlled corporations, the administration of which is entrusted
to them
(f) Judges and government experts who take part in the sale of the property and rights under
litigation
The prohibition is based on the fiduciary relationship (based on trust), to prevent fraud
and undue and improper influence.
With respect to (b) to (d), the sale shall only be voidable because in such cases only
private interests are affected. The defect can be cured by ratification by the seller. With
respect to (e) and (f), the sale shall be null and void, public interests being involved
therein.
(g) Aliens who are disqualified to purchase private agricultural lands under Art. XII, Secs. 3
and 7 of the Constitution
(h) Unpaid seller having a right of lien or having estopped the goods in transitu
(i)
III.
Where the thing is entirely lost at the time of perfection, the contract is inexistent and
void because there is no object. There being no contract, there is no necessity to bring an
action for annulment.
Where the thing is only partially lost, the vendee may elect between withdrawing from
the contract and demanding the remaining part, paying its proportionate price.
The thing is lost when it perishes or goes out of commerce or disappears in such a way
that its existence is unknown or it cannot be recovered.
IV.
The vendor need not be the owner of the thing at the time of perfection of the contract; it
is sufficient that he has a right to transfer the ownership thereof at the time it is delivered
(Art. 1459).
If the seller promised to deliver at a stipulated period and such period is of the essence of
the contract but did not comply with his obligation on time, he has no right to demand
payment of the price. The vendee-buyer is fact may ask for the rescission or resolution of
the sale.
If the failure of the seller to deliver on time is not due to his fault, as when it was the
buyer who failed to supply the necessary credit for the transportation of the goods, delay
on the part of the seller may be said to be sufficiently excused.
to deliver the thing, with its accessions and accessories, if any, in the condition in which they
were upon the perfection of the contract (Art. 1537);
to warrant against eviction and against hidden defects (Arts. 1495, 1547);
to take care of the thing, pending delivery, with proper diligence (Art. 1163);
to pay for the expenses of the deed of sale, unless there is a stipulation to the contrary (Art.
1487).
Delivery or Tradition
Tradition or delivery is a derivative mode of acquiring ownership by virtue of which one has the
right and intention to alienate a corporeal thing, transmits it by virtue of a just title to one who
accepts the same.
Duty to Deliver at Execution Sale: a judgment debtor is not obliged to deliver right away;
he has one (1) year within which to redeem the property.
Actual or Real (Art. 1497) the thing sold is placed in the control and possession of the
vendee or his agent. This involves the physical delivery of the thing and is usually done
by the passing of a movable thing from hand to hand.
2.
Legal formalities applies to real and personal properties, where the delivery is made through
the execution of a public document;
Traditio simbolica to effect delivery, the parties make use of a token symbol to represent the
thing delivered;
Traditio longa manu movable property is delivered by mere consent by the contracting parties
if the thing sold cannot be transferred to the possession of the vendee at the time of the sale;
Traditio brevi manu the vendee already has the possession of the thing sold by virtue of another
title as when the lessor sells the thing leased to the lessee;
Constitotum possessorium the vendor continues in possession of the property sold not as owner
but in some other capacity (e.g., as tenant of the vendee).
3. Quasi-Traditio (Art. 1501) delivery of rights, credits or incorporeal real property,
made by placing the titles of ownership in the hands of the vendee or lawyer, by execution of a
public instrument, or by allowing the vendee to use his rights as new owner with the consent of
the vendor.
(a)
Seller must have control over the thing; otherwise, can he put another in control?
(b)
(c)
There must be the intention to deliver the thing for purposes of ownership.
(b)
(c)
(d) the seller must either actually take possession of the goods sold or give notice of his claim
to the carrier or other person in possession;
(e) the seller must surrender the negotiable document of title, if any, issued by the carrier or
bailee; and
(f)
the seller must bear the expenses of delivery of the goods after the exercise of the right.
3. A right of resale
4. A right to rescind the sale
Rules in case of loss, deterioration, or improvement of thing before delivery
1. If the thing is lost without the fault of the debtor, the obligation shall be extinguished.
2. If the thing is lost through the fault of the debtor, he shall be obliged to pay damages, if is
understood that the thing is lost when it perishes, or goes out of commerce, or disappears
in such a way that its existence is unknown or it cannot be recovered.
3. When the thing deteriorates without the fault of the debtor, the impairment is to be borne
by the creditor.
4. If it deteriorates through the fault of the debtor, the creditor may choose between the
rescission of the obligation and its fulfillment, with indemnity for damages in either case.
5. If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor.
6. If it is improved at the expense of the debtor, he shall have no other right than that
granted to the usufructuary.
Rules as to preference of ownership in case of double sale
1. If the property sold is movable, the ownership shall be acquired by the vendee who first
takes possession in good faith [Villa Rey Transit, Inc. vs Ferrer, 25 SCRA 861].
2. If the property sold is immovable, the ownership shall belong to:
(a) the vendee who first registers the sale in good faith in the Registry of Deeds has preferred
right over another vendee who has not registered his title even if the latter is in actual possession
of the immovable property governed by the principle prius tempore, patior jure (first in time,
stronger in right) knowledge by the first buyer of the second sale cannot defeat the first
buyers right except when the second first registers in good faith the second sale;
(b)
in the absence of registration, the vendee who first takes possession in good faith; and
(c) in the absence of both registration and possession, the vendee who presents the oldest title
(who first bought the property) in good faith.
Article 1544 has no application to lands not registered with the Torrens system.
V. CONDITION AND WARRANTIES
Condition means an uncertain event or contingency on the happening of which the obligation (or
right) of the contract depends.
Warranty is a statement or representation made by the seller of goods, contemporaneously and as
a part of the contract of sale, having reference to the character, quality, or title of the goods, and
by which he promises or undertakes to insure that certain facts are or shall be as he then
represents them.
If the obligation of either party is subject to any condition and such condition is not fulfilled,
such party may either (1) refuse to proceed with the contract, or (2) proceed with the contract,
waiving the performance of the condition.
If the condition is in the nature of a promise that it should happen, the non-performance of such
condition may be treated by the other party as a breach of warranty.
Implied warranty as to sellers title (Art. 1548) that the seller guarantees that he has a right to
sell the thing sold and to transfer ownership to the buyer who shall not be disturbed in his legal
and peaceful possession thereof.
Implied warranty against hidden defects or unknown encumbrance (Art. 1562) that the seller
guarantees that the thing sold is reasonably fit for the known particular purpose for which it was
acquired by the buyer or, where it was bought by description, that it is of merchantable quality.
Essential elements of warranty against eviction
1. the vendee is deprived in whole or in part of the thing purchased;
2. the vendee is so deprived by virtue of a final judgment ;
3. the judgment is based on a right prior to the sale or an act imputable to the vendor;
4. the vendor was summoned in the suit for eviction at the instance of the vendee; and
5. there is no waiver on the part of the vendee.
Kinds of waiver of eviction
1. Consciente the waiver is voluntarily made by the vendee without the knowledge and
assumption of the risks of eviction. If the waiver was only conscious, the vendor shall
pay only the value which the thing sold had at the time of eviction this is a case of
solution indebiti the effect is to deprive the purchaser of the benefits mentioned in Nos.
2, 3, 4 and 5 of Article 1555.
2. Intencionada the waiver is made by the vendee with knowledge of the risks of eviction
and assumption of its consequence. The vendor is exempted from the obligation to
answer for eviction, provided he did not act in bad faith [Andaya vs. Manansala, 107
Phil. 1151].
Rights of the vendee against the vendor in case eviction occurs (Art. 1555)
1. return of the value of the thing sold at the time of eviction;
2. income or fruits if he has been ordered to deliver them to the party who won the suit
against him;
3. costs of the suit;
4. expenses of the contract;
5. damages and interests and ornamental expenses if the sale was made in bad faith.
Redhibition
- the avoidance of a sale on account of some vice or defect in the thing sold, which renders its use
impossible, or so inconvenient and imperfect that it must be supposed that the buyer would not
have purchased it had he known of the vice.
Redhibitory action
- an action instituted to avoid a sale on account of some vice or defect in the thing sold which
renders its use impossible, or so inconvenient and imperfect that it must be supposed that the buyer
would not have purchased it had he known of the vice. The object is the rescission of the contract.
If the object is to procure the return of a part of the purchase price paid by the vendee, the remedy
is known as accion minoris or estimatoris.
Redhibitory vice or defect
- a defect in the article sold against which defect the seller is bound to warrant. The vice or defect
must constitute an imperfection, a defect in its nature, of certain importance; and a minor defect
does not five rise to redhibition. The mere absence of a certain quality in the thing sold which the
vendee thought it to contain is not necessarily a redhibitory defect. One thing is that is positively
suffers from certain defects.
Doctrines of caveat venditor and caveat emptor
Caveat venditor
Caveat emptor
- the vendor is liable to the vendee for any - applies in sheriffs sale, sales of animals,
hidden faults or defects in the thing sold, and tax sales, for there is no warranty of title
even though he was not aware thereof
or quality on the part of the seller in such
(Art. 1566).- Based on the principle that a sales.
sound price warrants a sound article.
- Also applies in double sales of property
where the issue is who between two vendees
has a better right to the property .
- Requires the purchaser to be aware of the
supposed title of the vendor and one who
buys without checking the vendors title
takes all the risks and losses consequent to
such failure [Solvoso vs. Tanega, 87 SCRA
349].
Alternative remedies of the buyer to enforce warranty (Art. 1567):
(a)
(b)
The vendee is obliged to (1) accept delivery; and (2) pay the price of the thing sold.
1. In contract of sale, the vendor is not required to deliver the thing sold until the price is
paid nor the vendee pay the price before the thing is delivered in the absence of an
agreement to the contrary [La Font vs. Pascacio, 5 Phil. 591].
2. If stipulated, then the vendee is bound to accept delivery and to pay the price at the
time and place designated.
3. If there is no stipulation as to the time and place of payment and delivery, the vendee is
bound to pay at the time and place of delivery.
4. In the absence also of stipulation, as to the place of delivery, it shall be made wherever
the thing might be at the moment the contract was perfected (Art. 1251).
5. If only the time for delivery of the thing sold has been fixed in the contract, the vendee
is required to pay even before the thing is delivered to him; if only the time for payment
of the price has been fixed, the vendee is entitled to delivery even before the price is paid
by him (Art. 1524).
Instances when the vendee may suspend the payment of the price:
(b)
should the vendor give security for the return of the price; or
(c)
(d)
Goods include all chattels personal but not things in action or money of legal tender in the
Philippines. The term includes growing fruits or crops.
Actions available for breach of the contract of sale of goods:
Action by the seller for payment of the price (Art. 1595)
Action by the seller for damages for non-acceptance of the goods (Art. 1596)
Action by the seller for rescission of the contract for breach thereof (Art. 1597)
Action by the buyer for specific performance (Art. 1598)
Action by the buyer for rescission or damages for breach of warranty (Art. 1599)
Remedies allowed to the buyer when the seller has been guilty of a breach of promise or
warranty (Art. 1599):
1
2
3
4
Recoupment - accept the goods and set up the sellers breach to reduce or extinguish
the price.The theory of recoupment is that the sellers damages are cut down to an
amount which will compensate him for the value of what he has given.
Set-off or Counterclaim for damages - accept the goods and maintain an action for
damages for the breach of the warranty. Both sides of the contract are enforced in the
same litigation. The buyer (defendant) does not seek to avoid his obligation under the
contract but seeks to enforce the sellers (plaintiffs) obligation and to deduct it from
his liability for the price for breach of warranty.
Action for damages refuse to accept the goods and maintain an action for damages
for the breach of the warranty.
Rescission - rescind the contract of sale by returning or offering the return of the
goods, and recover the price or any part thereof which has been paid. This remedy is
not available in the following cases:
(a) if the buyer accepted the goods knowing of the breach of warranty without
protest;
(b) if he fails to notify the seller within a reasonable time of his election to rescind;
and
(c) if he fails to return or offer to return the goods in substantially as good condition
as they were in at the time of the transfer of ownership to him. But where the injury
to the goods was caused by the very defect against which the seller warranted, the
buyer may still rescind the sale.
VIII.
EXTINGUISHMENT OF SALE
Legal Redemption
(Arts. 1601-1618)
(Arts. 1619-1623)
It is the right which the vendor reserves to It is the right to be subrogated, upon the
himself, to reacquire the property sold
same terms and conditions stipulated in the
provided her returns to the vendee the price contract, in the place of one who acquires a
of the sale, the expenses of the contract, any thing by purchase or dation in payment, or
other legitimate payments made therefore by any other transaction whereby ownership
and the necessary and useful expenses made is transmitted by onerous title.
on the thing sold, and fulfills other
stipulations which may have been agreed
upon.
Nature:
Nature: (a) identical with conventional
redemption, except for the source of the
(a) it is purely contractual because it is a right conventional redemption arises from
right created, not by mandate of the law, but the voluntary agreement of the parties; legal
by virtue of an express contract [Ordoez redemption proceeds from law;
663].
An equitable mortgage is one which lacks the proper formalities, form of words, or other
requisites prescribed by law for a mortgage, but shows the intention of the parties to make the
property subject of the contract as security for a debt and contains nothing impossible or contrary
to law [Cachola vs. CA, 208 SCRA 496].
Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as
the accepted equivalent of the performance of an obligation.
Pacto de retro
Mortgage
Ownership is transferred but the ownership is Ownership is not transferred but the property
subject to the condition that the seller mightis merely subject to a charge or lien as
recover the ownership within a certain periodsecurity for the compliance of a principal
of time.
obligation, usually a loan.
If the seller does not repurchase the propertyThe mortgagor does not lose his interest in the
upon the very day named in the contract, he property if he fails to pay the debt at its
loses all interest thereon.
maturity.
There is no obligation resting upon theIt is the duty of the mortgagee to foreclose the
purchaser to foreclose; neither does themortgage if he wishes to secure a perfect title
vendor have any right to redeem the propertythereto, and after the maturity of the debt
after the maturity of the debt.
secured by the mortgage and before
foreclosure, the mortgagor has a right to
redeem [Basilio vs. Encarnacion, 5 Phil.
360].
Instances when conventional redemption is presumed to be an equitable mortgage:
Redemption
Pre-emption
1 The sale to a third person has already beenThe sale to a third person has not yet been
perfected
perfected
2 Has a much broader scope
Narrower in scope may be exercised
only where there is a prospective resale of
a small piece of urban land originally
bought by the prospective vendor merely
for speculation
3 Directed against the third person who boughtDirected against the prospective vendor
the property
who is about to resell the property
4 Effect is to extinguish a contract that hasEffect is to prevent the birth or perfection
already been perfected or even consummated of a contract
X. BARTER OR EXCHANGE
Barter a contract whereby one person transfers the ownership of non-fungible things to another
with the obligation on the part of the latter to give things of the same kind, quantity, and quality.
The contract is perfected from the moment there is a meeting of the minds upon the things
promised by each party in consideration of the other. It is consummated from the time of mutual
delivery by the contracting parties of things they promised.
Effect where the giver is not the lawful owner of the thing delivered: the aggrieved party cannot
be compelled to deliver the thing he has promised. He is entitled to claim damages (Art. 1639).
[Biagtan vs. Viuda de Oller, 62 Phil. 933].
Remedy in case of eviction: the injured party is given the option to recover the property he has
given in exchange with damages or only claim an indemnity for damages. The right to recover
is, however, subject to the rights of innocent third persons (Art. 1640).
XI.
Purpose of the law (Act No. 3952) is to prevent the defrauding of creditors by the secret sale or
disposal or mortgage in bulk of all or substantially all of a merchants stock of goods.
The general scheme is to declare such bulk sales fraudulent and void as to creditors of the
vendor, or presumptively so, unless specified formalities are observed, such as the demanding
and the giving of a list of creditors, the giving of actual and constructive notice to such creditors,
by record or otherwise, and the making of an inventory.
A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer, mortgage, or
assignment
(a) of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the
ordinary course of trade and the regular prosecution of the business; or
(b) of all or substantially all, of the business or trade; or
(c) of all or substantially all, of the fixtures and equipment used in the business of the vendor,
mortgagor transferor, or assignor.
Acts punished by the law:
1. knowingly or willfully making or delivering a statement as required by the Act which
does not include the names of all the creditors of the vendor, etc. with the correct amount
due and to become due or which contains any false or untrue statement; and
2. transferring title to a any stock of goods, wares, merchandise, provisions or materials sold
in bulk without consideration of for a nominal consideration only.
-O-