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CHAPTER 5Obligations of the Vendee


ARTICLE 1582. The vendee is bound to accept delivery
and to pay the price of the thing sold at the time and place
stipulated in the contract.
If the time and place should not have been
stipulated, the payment must be made at the time and
place of the delivery of the thing sold.
(See page 167 for example)
Principal Obligations of vendee:
1. Accept delivery
2. Pay the price
3. To bear the expenses for the execution & registration
of the sale and putting goods in a deliverable state, if
such is the stipulation
Pertinent Rules:
1. In a contract of sale, the vendor is not required to
deliver the thing sold until the price is paid nor the
vendee to pay the price before the thing is delivered
in the absence of an agreement to the contrary
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;
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.
ARTICLE 1583. Unless otherwise agreed, the buyer of
goods is not bound to accept delivery thereof by
installments.
Where there is a contract of sale of goods to be
delivered by stated instalments, which are to be separately
paid for, and the seller makes defective deliveries in respect
of one or more instalments, or the buyer neglects or refuses
without just cause to take delivery of or pay for one or more
instalments, it depends in each case on the terms of the
contract and the circumstances of the case, whether the
breach of contract is so material as to justify the injured
party in refusing to proceed further and suing for damages
for breach of the entire contract, or whether the breach is
severable, giving rise to a claim for compensation but not to
a right to treat the whole contract as broken.
(See page 169 for example)
Rules governing delivery in installments:
1. GR: The buyer is not bound to receive delivery of
goods in installments. Similarly, a buyer has no
right to pay the price in installments. Neither can
he be required to make partial payments
Exceptions: By agreement, however, goods may
be deliverable by installments or the price payable
in installments.

2.

3.

4.

Where separate price has been fixed for each


installment: it depends in each case on the terms
of the contract and the circumstances of the case
whether the breach thereof is severable or not.
Where breach effects whole contract: The injured
party may sue for damages for breach of the
entire contract if the breach is so material as to
affect the contract as a whole
Where breach divisible: Give rise to a claim for
compensation for the particular breach but not a
right to treat the whole contract broken,

ARTICLE 1584. Where goods are delivered to the buyer,


which he has not previously examined, he is not deemed to
have accepted them unless and until he has had a
reasonable opportunity of examining them for the purpose
of ascertaining whether they are in conformity with the
contract if there is no stipulation to the contrary.
Unless otherwise agreed, when the seller tenders
delivery of goods to the buyer, he is bound, on request, to
afford the buyer a reasonable opportunity of examining the
goods for the purpose of ascertaining whether they are in
conformity with the contract. Where goods are delivered to
a carrier by the seller, in accordance with an order from or
agreement with the buyer, upon the terms that the goods
shall not be delivered by the carrier to the buyer until he
has paid the price, whether such terms are indicated by
marking the goods with the words "collect on delivery," or
otherwise, the buyer is not entitled to examine the goods
before the payment of the price, in the absence of
agreement or usage of trade permitting such examination.
Acceptance: assent to become owner of the specific goods
when delivery of them is offered to the buyer.
1. Actual delivery contemplated
-Ownership of the goods shall be transferred only
upon actual delivery subject to a reasonable
opportunity of examining them to determine if they
are in conformity with the contract
-Right of examination or inspection is thus a
condition precedent to the transfer of ownership
unless there is a stipulation to the contrary
2. Goods delivered C.O.D/ not C.O.D
- C.O.D, buyer has the right to examine the
goods before paying. Right to examine the
goods is a condition precedent to paying price
after ownership has passed
- C.O.D sale, the buyer is allowed to examine
the goods before payment of the price should
it have been so agreed upon or if it permitted
by usage
NOTE:
Buyer does not have absolute right of examination
since the seller is bound to afford the buyer a
reasonable opportunity of examining the goods only
on request
If seller refused to allow inspection, to ascertain
whether they are in conformity with the contract, the
buyers may rescind the contract and recover the
price or any part of it that he has paid

Right of inspection may be given up by the buyer by


stipulation

ARTICLE 1585. The buyer is deemed to have accepted the


goods when he intimates to the seller that he has accepted
them, or when the goods have been delivered to him, and
he does any act in relation to them which is inconsistent
with the ownership of the seller, or when, after the lapse of
a reasonable time, he retains the goods without intimating
to the seller that he has rejected them.
Modes of manifesting acceptance:
1. Express acceptance takes place when the buyer
after delivery of the goods intimates to the seller,
verbally or in writing, that he has accepted them.
2. Implied acceptance takes place:
a. When the buyer, after the delivery of goods,
does any act inconsistent with the sellers
ownership, as when he sells or attempts to
sell the goods, or he uses or make alteration
in them in a manner only for an owner;
b. When the buyer, after the lapse of a
reasonable time without intimating his
rejection.

the seller, but it is sufficient if he notifies the seller that he


refuses to accept them. If he voluntarily constitutes himself
a depositary thereof, he shall be liable as such.
Where buyers refusal to accept justified
1) Duty of the buyer to take care of goods w/o
obligation to return If the goods have been sent to
the buyer and he rightfully refuses to accept them,
as in the case where the goods are not of the kind
and quality agreed upon, he is in the position of a
bailee who is in possession of the goods thrust
upon him w/o his assent.
2) Duty of seller to take delivery of goods: After notice
that goods have not and will not be accepted, the
seller must have the burden of taking delivery of the
said goods.
3) Sellers risk of loss: While the goods remain in the
buyers possession under these circumstances,
they are, of course at sellers risk. But the buyer is
not deemed and is not liable as a depositary, unless
he voluntarily constitutes himself as such.
4) Right of buyer to resell goods: Should the seller
when notified to take delivery of the goods, fail to
do so; the buyer may resell the goods.

Delivery and acceptance, separate acts


a. Acceptance, not a condition to complete delivery
The seller must comply with his obligation to
deliver although there is no acceptance yet by
the buyer
b. Acceptance and actual receipt do not imply the
other Acceptance of the buyer may precede
actual delivery. There may be an actual receipt
w/o any acceptance and there may be
acceptance w/o any receipt.

ARTICLE 1588. If there is no stipulation as specified in


the first paragraph of article 1523, when the buyer's refusal
to accept the goods is without just cause, the title thereto
passes to him from the moment they are placed at his
disposal.

ARTICLE 1586. In the absence of express or implied


agreement of the parties, acceptance of the goods by the
buyer shall not discharge the seller from liability in damages
or other legal remedy for breach of any promise or warranty
in the contract of sale. But, if, after acceptance of the
goods, the buyer fails to give notice to the seller of the
breach in any promise of warranty within a reasonable time
after the buyer knows, or ought to know of such breach, the
seller shall not be liable therefor.

ARTICLE 1589. The vendee shall owe interest for the


period between the delivery of the thing and the payment of
the price, in the following three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or
income;
(3) Should he be in default, from the time of judicial or
extrajudicial demand for the payment of the price.

NOTE:
Acceptance of the goods by the buyer does not
discharge the seller from liability in damages or
other legal remedy for breach of any promise or
warranty in the contract of sale
Requires buyer, in order to hold the seller for
breach of promise or warranty, to give notice to the
seller of any such breach within a reasonable time
Purpose is to protect the seller against belated
claims
ARTICLE 1587. Unless otherwise agreed, where goods are
delivered to the buyer, and he refuses to accept them,
having the right so to do, he is not bound to return them to

Note:

Note:

Under this article, the buyers refusal to accept the


goods is w/o a just cause while under Art 1587, the
refusal is with a right to do so.

This article presupposes that the delivery of the


thing sold and the payment of the price were not
made simultaneously but the thing sold was
delivered first followed by the payment of the price
after the lapse of a certain period of time.
Vendee is liable to pay interest from the delivery of
the thing until payment of the price
Fruits or income received by the vendee from thing
sold, two conditions must exist:
a) Thing sold has been delivered
b) It produces fruits or income.
If the vendee would not be bound to pay interest
for the use of the money, which he should have

paid, the principle of bilaterality which characterize


a contact of sale would no longer exist
If the vendee incurs in delay in the payment of the
agreed price, the interest is due from the time of
judicial or extrajudicial demand by the vendor for
the payment of the price.

ARTICLE 1590. Should the vendee be disturbed in the


possession or ownership of the thing acquired, or should he
have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has
caused the disturbance or danger to cease, unless the
latter gives security for the return of the price in a proper
case, or it has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound to make the
payment. A mere act of trespass shall not authorize the
suspension of the payment of the price.
When vendee can suspend payment of the price:
1) If he is disturbed in the possession or ownership
of the thing bought
2) If he has a well-grounded fear that his possession
or ownership would be disturbed by a vindicatory
action or foreclosure of mortgage
Note: Under Art 1590, the vendee has no cause of action
for rescission before final judgment, the reason being that
otherwise, the vendor might become the victim of collision
(ie., secret agreement or cooperation for a fraudulent
purpose) between the vendee and the third person. But the
remedy of the buyer is rescission, not suspension of
payment, where the disturbance is caused by the existence
of non-payment servitude.
When vendee cannot suspend payment of the price:
1) If the vendor gives security for the return of the
price in a proper case;
2) If it has been stipulated that notwithstanding any
such contingency the vendee must make payment
3) If the vendor has caused the disturbance or
danger to cease
4) If the disturbance is a mere act of trespass
5) If the vendee has fully paid the price
NOTE: There is a mere act of trespass when the third
person claims no right whatever. The vendor is not liable
therefor. The vendee has a direct action against intruder.
ARTICLE 1591. Should the vendor have reasonable
grounds to fear the loss of immovable property sold and its
price, he may immediately sue for the rescission of the
sale.
Should such ground not exist, the provisions of
article 1191 shall be observed.
NOTE:
This article refers only to a sale of real property
where vendor has good reasons to fear the loss of
the property and its price.
It contemplates a situation where there has been
delivery of the immovable property but the vendee
has not yet paid the price.

It is applicable to both cash sales and to sales in


installments

ARTICLE 1592. In the sale of immovable property, even


though it may have been stipulated that upon failure to pay
the price at the time agreed upon the rescission of the
contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court
may not grant him a new term.
NOTE:
GR: the vendor may sue for rescission of the
contract should vendee fail to pay the agreed price
The sale of real property, however, is subject to
the stipulations agreed upon by the parties and to
the provisions of Art 1592.
Before the demand of the rescission of the
contract (not payment of the price) has been made
by the vendor, the vendee may still pay the price
even after the expiration of the stipulated period
for payment and notwithstanding a stipulation that
failure to pay the price on the stipulated date ipso
facto resolves the sale
Right to rescind is not absolute and the court may
extend the period for payment
Once a demand for rescission by suit or notarial
act is made however, under Art 1592, the court
may not grant a new term
Art 1592 does not apply on: a. To sales on
installments of real property; b. A mere promise to
sell (executory contract to sell) where the title
remains with the vendor until full payment of the
price. In other words, the vendee in such cases
may no longer pay the price after the expiration of
the time agreed upon although no demand has yet
been made upon him by suit or notarial act.
ARTICLE 1593. With respect to movable property, the
rescission of the sale shall of right take place in the interest
of the vendor, if the vendee, upon the expiration of the
period fixed for the delivery of the thing, should not have
appeared to receive it, or, having appeared, he should not
have tendered the price at the same time, unless a longer
period has been stipulated for its payment.
(See page 181 for example)
NOTE:
In the case of personal property (which has not yet
been delivered to the vendee), the vendor can
rescind the contract, as a matter of right, if the
vendee, without any valid cause, does not: a.
accept delivery; or b. pay the price unless credit
period for its payment is stipulated.
The mere failure of the vendee to comply with the
terms of the contract, however, does not rescind the
same. It is necessary that the vendor should take
some affirmative action indicating his intention to
rescind.

Reason for the difference is that personal


properties are not capable of maintaining a stable
price in the market. Their prices are so changeable
that any delay in their disposal cause the vendor
great prejudice
In the case of real property which has more or less
stable price in the market and the delay that might
result form the requirement imposed on the vendor
to demand rescission before being entitled to
rescind the contract will not in any way prove
detrimental to the interest of the vendor.

CHAPTER 6 Actions for Breach of Contract of Sale of


Goods
ARTICLE 1594. Actions for breach of the contract of sale of
goods shall be governed particularly by the provisions of
this Chapter, and as to matters not specifically provided for
herein, by other applicable provisions of this Title.
Goods includes all chattels personal but not things in
action or money of legal tender; includes growing fruits or
crops.
Actions available for breach of the contract:
1) Action by the seller for payment of the price
2) Action by the seller for damages for nonacceptance of the goods
3) Action by the seller for rescission of the contract
4) Action by the buyer for specific performance
5) Action by the buyer for rescission or damages for
breach of warranty
ARTICLE 1595. Where, under a contract of sale, the
ownership of the goods has passed to the buyer and he
wrongfully neglects or refuses to pay for the goods
according to the terms of the contract of sale, the seller
may maintain an action against him for the price of the
goods.
Where, under a contract of sale, the price is payable
on a certain day, irrespective of delivery or of transfer of title
and the buyer wrongfully neglects or refuses to pay such
price, the seller may maintain an action for the price
although the ownership in the goods has not passed. But it
shall be a defense to such an action that the seller at any
time before the judgment in such action has manifested an
inability to perform the contract of sale on his part or an
intention not to perform it.
Although the ownership in the goods has not passed, if
they cannot readily be resold for a reasonable price, and if
the provisions of article 1596, fourth paragraph, are not
applicable, the seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them, may notify
the buyer that the goods are thereafter held by the seller as
bailee for the buyer. Thereafter the seller may treat the
goods as the buyer's and may maintain an action for the
price.
See page 186 for example
Sellers right of action for the price:

1) When the ownership of the goods has passed to


the buyer and he wrongfully neglects or refuses to
pay for the price
2) When price is payable on a certain day and the
buyer wrongfully neglects or refuses to pay such
price, irrespective of delivery or of transfer of title
3) When goods cannot readily be resold for a
reasonable price and the buyer wrongfully refuses
to accept them even before ownership in the
goods has passed, if the provisions of Art 1596, 4 th
paragraph are not applicable
NOTE:
Seller cannot maintain an action for the price if the
ownership in the goods has not passed to the
buyer, unless the price is payable on a certain day
or unless the goods cannot readily be resold for a
certain price and the provisions of Art 1596, 4 th par
are not applicable
Art 1588, the tiles to the goods passes to the
buyer from the moment they are placed at his
disposal when his refusal to accept them is w/o
just cause. The seller, may therefore bring an
action for the price upon wrongful refusal of the
buyer to accept.
ARTICLE 1596. Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller may
maintain an action against him for damages for
nonacceptance.
The measure of damages is the estimated loss directly
and naturally resulting in the ordinary course of events from
the buyer's breach of contract.
Where there is an available market for the goods
in question, the measure of damages is, in the absence of
special circumstances showing proximate damage of a
different amount, the difference between the contract price
and the market or current price at the time or times when
the goods ought to have been accepted, or, if no time was
fixed for acceptance, then at the time of the refusal to
accept.
If, while labor or expense of material amount is
necessary on the part of the seller to enable him to fulfill his
obligations under the contract of sale, the buyer repudiates
the contract or notifies the seller to proceed no further
therewith, the buyer shall be liable to the seller for labor
performed or expenses made before receiving notice of the
buyer's repudiation or countermand. The profit the seller
would have made if the contract or the sale had been fully
performed shall be considered in awarding the damages.
See page 189 for example
Sellers right of action for damages:
1) If the buyer w/o lawful cause neglects or refuses to
accept and pay for the goods he agreed to buy, the
seller may maintain an action against him for
damages for nonacceptance
2) In an executory contract, where the ownership in
the goods has not passed and the seller cannot
maintain an action to the price, the sellers remedy
will also be an action for damages

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3) If the goods are not yet identified at the time of the
contract or subsequently, the sellers right is
necessarily confined to an action for damages.

retaining the goods on payment of damages. The judgment


or decree may be unconditional, or upon such terms and
conditions as to damages, payment of the price and
otherwise, as the court may deem just.

Measure of damages for nonacceptance of goods


1) Difference between contract price, that is the
amount of the obligation which the buyer failed to
fulfill and the market price or current price, that is,
the value of the goods which the seller has left
upon his hands. This follows the GR that damages
comprehended not only the actual loss suffered
but also unrealized profit.
2) If there is no available market in which the goods
can be sold at the time, the seller is entitled to the
full amount of damage which he has really
sustained by a breach of the contract
3) Seller is allowed under special circumstances
proximate damages of greater amount than the
diff between the contract price and market price
when such damages may be reasonably attributed
to the non-performance of the obligation

NOTE:
This article apples only where the goods to be
delivered are specific or ascertained.
In reciprocal obligations, it is the injured party
who has right to choose between fulfillment
and rescission w/ the payment of damages in
either case.
Consequently, the right of the injured party to
demand specific performance cannot be
defeated by the guilty partys choice to rescind
the contract.
This is also the rule in this article which grants
to the buyers, as a matter of right, the remedy
of specific performance in case the seller
should violate his obligation to make delivery
The seller cannot retain the goods on payment
of damages because damages are imposed by
law to insure fulfillment of contract and not to
substitute for it.

Measure of damages for repudiation or countermand:


1) The labor performed and expenses incurred for
material before receiving notice of the buyers
repudiation
2) Profit he would have realized if the sale had been
fully performed
ARTICLE 1597. Where the goods have not been
delivered to the buyer, and the buyer has repudiated the
contract of sale, or has manifested his inability to perform
his obligations thereunder, or has committed a breach
thereof, the seller may totally rescind the contract of sale by
giving notice of his election so to do to the buyer.
Sellers right of rescission before delivery:
1) When the buyer has repudiated the contract of
sale;
2) When the buyer has manifested his inability to
perform his obligations thereunder
3) When the buyer has committed a breach of the
contract of sale.
NOTE:
The right granted to the seller follows the GR in
reciprocal obligations that a party to a contract
injured by nonfulfillment, may rescind the contract
and at the same time ask for damages. It should be
noted that the seller is required to give notice of his
election to seek rescission
If the goods have been delivered, the seller may
recover the value of what he has given
ARTICLE 1598. Where the seller has broken a contract
to deliver specific or ascertained goods, a court may, on the
application of the buyer, direct that the contract shall be
performed specifically, without giving the seller the option of

ARTICLE 1599. Where there is a breach of warranty by the


seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller,
the breach of warranty by way of recoupment in diminution
or extinction of the price;
(2) Accept or keep the goods and maintain an action
against the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action
against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the
goods or if the goods have already been received, return
them or offer to return them to the seller and recover the
price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of article 1191.
Where the goods have been delivered to the
buyer, he cannot rescind the sale if he knew of the breach
of warranty when he accepted the goods without protest, or
if he fails to notify the seller within a reasonable time of the
election to rescind, or if he fails to return or to offer to return
the goods to the seller in substantially as good condition as
they were in at the time the ownership was transferred to
the buyer. But if deterioration or injury of the goods is due to
the breach or warranty, such deterioration or injury shall not
prevent the buyer from returning or offering to return the
goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the price
upon returning or offering to return the goods. If the price or
any part thereof has already been paid, the seller shall be
liable to repay so much thereof as has been paid,

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concurrently with the return of the goods, or immediately
after an offer to return the goods in exchange for repayment
of the price.
Where the buyer is entitled to rescind the sale and
elects to do so, if the seller refuses to accept an offer of the
buyer to return the goods, the buyer shall thereafter be
deemed to hold the goods as bailee for the seller, but
subject to a lien to secure the payment of any portion of the
price which has been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid seller by
article 1526.
(5) In the case of breach of warranty of quality,
such loss, in the absence of special circumstances showing
proximate damage of a greater amount, is the difference
between the value of the goods at the time of delivery to the
buyer and the value they would have had if they had
answered to the warranty.
(SEE PAGE 194 FOR EXAMPLE)
Remedy of buyer for breach of warranty by seller:
1) Accept the goods and set up the sellers breach to
reduce or extinguish the price (RECOUPMENT)
2) Accept the goods and maintain an action for
damages for the breach of the warranty
(COUNTERCLAIM FOR DAMAGES)
3) Refuse to accept the goods and maintain an action
for damages for the breach of warranty (ACTION)
4) Rescind the contract of sale by returning or offering
the return of the goods and recover the price
(RESCISSION)
When rescission by the buyer not allowed:
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
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
Rights and obligations of buyer in case of rescission
a) In case of rescission, the buyer shall cease to be
liable for the price, his only obligation being to
return the goods;
b) If he has paid the price or any part thereof, he may
recover from the seller;
c) He has also the right to hold the goods as bailee
for the seller should the latter refuse to return of
the goods
d) He has the right to have lien on the goods for any
portion if the price already paid which lien he may
enforce as if he were an unpaid seller

Chapter 7 Extinguishment of Sale


ARTICLE 1600. Sales are extinguished by the same
causes as all other obligations, by those stated in the
preceding articles of this Title, and by conventional or legal
redemption.
Causes:
1. Common or those causes which are also means
of extinguishing all other contracts like payment,
loss of the thing, condonation, etc.
2. Special or those whose causes which are
recognized by law of sales
3. Extra-special:
Conventional
and
Legal
Redemption
SECTION 1Conventional Redemption
ARTICLE 1601. Conventional redemption shall take place
when the vendor reserves the right to repurchase the thing
sold, with the obligation to comply with the provisions of
article 1616 and other stipulations which may have been
agreed upon.
Conventional redemption is the right which the vendor
reserves to himself, to reacquire the property sold provided
he reimburses the vendee of the price, the expenses of the
contract, any other legitimate payments made therefor and
the necessary and useful expenses made on the thing sold
and fulfills other stipulations which may have been agreed
upon
Note:
Both real and personal property may be the
subject matter of sales with right to repurchase
although there are certain articles which are
applicable only to immovable.
Stipulation is done @ the perfection of sales
Not a right given by the vendee (Right reserved by
the vendor)

ARTICLE 1602. The contract shall be presumed to be an


equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is
unusually inadequate;(2) When the vendor remains in
possession as lessee or otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;

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(5) When the vendor binds himself to pay the taxes on the
thing sold;
(6) In any other case where it may be fairly inferred that the
real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any
other obligation.
In any of the foregoing cases, any money, fruits, or other
benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the
usury laws.
See page 200 for examples
Equitable mortgage is one which, although it lacks the
proper formalities of a mortgage, shows the intention of the
parties to make the property subject of the contract as a
security for the fulfillment of an obligation.
NOTE:
In equitable mortgage, it is void if the property
transferred immediately to the creditor without
going through the proper process of auction
(pactum commissorium-prohibited by law)
Ask for reformation, loan w/ collateral
Equitable mortgage has to go the process of
foreclosure in case of non-payment of loan
Art 1602 provide safeguard and restrictions
against evils of sales with right of repurchase
commonly called pacto de retro sale.
Contract of sale with pacto de retro sale, the price
is usually less than in absolute sales for the
reason that in the former, the vendor expects to
reacquire or redeem the property sold, or else he
may sell his right to redeem and thus recover the
loss he claims suffered by reason of the
inadequacy of price.
ARTICLE 1603. In case of doubt, a contract purporting to
be a sale with right to repurchase shall be construed as an
equitable mortgage. (n)
ARTICLE 1604. The provisions of article 1602 shall also
apply to a contract purporting to be an absolute sale.
Presumption in case of doubt
1. Doubt resolved in favor of equitable mortgage
Whether the sale is absolute or pacto de retro, it
shall be presumed to be an equitable mortgage, if
any cases mentioned in Art 1602 is present. In
case of doubt, a contract purporting to be a sale
with right to repurchase shall still be regarded as
an equitable mortgage.
2.

Presumption, an exception to GR: Art 1603 is an


exception to the rule that doubts affecting an
onerous contract shall be settled in favor of the
greatest reciprocity of interests. An equitable
mortgage effects a lesser transmission of rights
than a contract of sale, since the debtor does not
surrender all rights to his property but simply
concurs upon the creditor the right to collect what

is owing from the value of the thing given as


security.
ARTICLE 1605. In the cases referred to in articles 1602 and
1604, the apparent vendor may ask for the reformation of
the instrument.
See page 203 for examples
REFORMATION remedy in equity by means of which a
written instrument is made or construed so as to express or
conform to the real intention of the parties when such
intention is not expressed in the instrument
NOTE:
If the parties really intended a mortgage but
the instrument states that the property is sold
absolutely or with a right of repurchase, the
same may be reformed or corrected so that
the contract should appear to be a mortgage
and not a pacto de retro or absolute sale
ARTICLE 1606. The right referred to in article 1601, in the
absence of an express agreement, shall last four years
from the date of the contract.
Should there be an agreement, the period cannot
exceed ten years.
However, the vendor may still exercise the right to
repurchase within thirty days from the time final judgment
was rendered in a civil action on the basis that the contract
was a true sale with right to repurchase.
See page 204 for examples
Period to exercise right of redemption
1. No agreement/ granting right No right of
redemption since the sale should be considered
an absolute sale
2. Agreement to the right of redemption but there is
no stipulation as to which repurchase should be
made: period of redemption shall be 4 years from
the date of the contract
3. Definite period of redemption agreed upon Right
to redeemed must be exercised within the period
fixed provided it does not exceed 10 yrs
4. Period of agreed upon exceeds 10 years the
vendor a retro has 10 years from the execution of
the contract to exercise the right of redemption
5. Final judgment by rendered that contract pacto de
retro From the time final judgment was rendered
in a civil action on the basis that the contract was
a true sale with right to repurchase, the vendor
has a retro 30 days within which to exercise the
right to repurchase
ARTICLE 1607. In case of real property, the
consolidation of ownership in the vendee by virtue of
the failure of the vendor to comply with the provisions
of article 1616 shall not be recorded in the Registry of
Property without a judicial order, after the vendor has
been duly heard. (n)
NOTE:

If real property is involved and the vendor


failed to redeem within period agreed upon,
the vendees title becomes irrevocable.
However, the consolidation if ownership in the
vendee sha
ll not be recorded in the Registry of Property
w/o judicial order and until after the vendor
has been duly heard.
REASON: transaction may not be a genuine
pacto de retro but only an equitable
mortgage. Requirement provides additional
protection to debtors.

ARTICLE 1608. The vendor may bring his action against


every possessor whose right is derived from the vendee,
even if in the second contract no mention should have been
made of the right to repurchase, without prejudice to the
provisions of the Mortgage Law and the Land Registration
Law with respect to third persons. (1510)
See page 207 for example
NOTE:

Right to repurchase is of a real character


and should not be considered personal
The vendor a retro cannot exercise his right
of redemption against a subsequent
transferee for value and good faith if his right
is not properly registered or annotated.

ARTICLE 1609. The vendee is subrogated to the vendor's


rights and actions. (1511)
Subrogation transfers to the person subrogated the
credit with all the rights thereto appertaining
ARTICLE 1610. The creditors of the vendor cannot make
use of the right of redemption against the vendee, until after
they have exhausted the property of the vendor.
ARTICLE 1611. In a sale with a right to repurchase, the
vendee of a part of an undivided immovable who acquires
the whole thereof in the case of article 498, may compel the
vendor to redeem the whole property, if the latter wishes to
make use of the right of redemption.
See page 209 for examples
PURPOSE: To discourage co-ownership which is
undesirable since it does not encourage the improvement of
the property co-owned
Partition of the property Co-owner may demand the
partition of the thing owned in common, insofar as his share
is concerned.
A. If a thing is essentially indivisible it may be
allotted to the co-owner who shall indemnify the
others
B. If the co-owners cannot agree that the thing be
allotted to one of them, it shall be sold and its
proceeds distributed

Redemption of the whole property : In either case,


the vendee, who acquired the whole of an undivided
immovable a part of which is subject to a right to
repurchase, has a right to demand that the vendor a retro,
who likes to exercise his right of redemption, redeem the
whole property.
ARTICLE 1612. If several persons, jointly and in the same
contract, should sell an undivided immovable with a right of
repurchase, none of them may exercise this right for more
than his respective share.
The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case each
of the latter may only redeem the part which he may have
acquired.
ARTICLE 1613. In the case of the preceding article,
the vendee may demand of all the vendors or co-heirs that
they come to an agreement upon the repurchase of the
whole thing sold; and should they fail to do so, the vendee
cannot be compelled to consent to a partial redemption.
See page 210 for examples
Redemption in joint by co-owners/co-heirs of undivided
immovable
1. Co-owners of an undivided immovable sold by
them jointly or collectively and in the same
contract w/ the right to repurchase, can exercise
such right only as regards their respective shares
2. Co-heirs of the vendor of an undivided immovable,
can exercise the right of redemption only for the
respective portions they have inherited.
3. The vendee a retro can refuse partial redemption.
He may require all the vendors or all the heirs to
redeem the entire property or to agree to its
redemption by any one of them. The right is given
to the vendee in line with the object of the law to
put an end to co-ownership whenever possible
4. Under Art. 1620, the right of a co-owner who
chooses not to redeem accrues to the benefit of
the others. The extent of the share of the
redeeming co-owner of the redeeming co-owner is
not taken into account except as provided in the
second par.
Effect of redemption by co-owner of entire property
Under Art 1612, a co-owner cannot redeem
more than his share in the co-ownership. The
redemption by a co-owner of the property in
its entirely, shouldering the expenses therefor,
does not make him the owner of all of it. In
other words, it does not put to end the
existing state of co-ownership.
Art 1613, does not provide for a mode of
terminating a co-ownership nor does the fact
that the redeeming co-owner has succeeded
in securing title over a parcel of land in his
name terminate the existing co-ownership.
Registration of property is not a means of
acquiring ownership. It operates as a mere
notice of existing title, if there is one.

9
ARTICLE 1614. Each one of the co-owners of an undivided
immovable who may have sold his share separately, may
independently exercise the right of repurchase as regards
his own share, and the vendee cannot compel him to
redeem the whole property. (1516)
See page 211 for examples
Redemption in separate sales by co-owners of undivided
immovable
If the sale was made separately and independently, it
would be unjust to require the co-owners, to come to
an agreement with regard to the repurchase of the
thing sold, and certainly, it would be worst to deprive
them of their right in case they fail to agree.

ARTICLE 1615. If the vendee should leave several heirs,


the action for redemption cannot be brought against each of
them except for his own share, whether the thing be
undivided, or it has been partitioned among them.
But if the inheritance has been divided, and the thing
sold has been awarded to one of the heirs, the action for
redemption may be instituted against him for the whole.
See page 212 for examples
ARTICLE 1616. The vendor cannot avail himself of the right
of repurchase without returning to the vendee the price of
the sale, and in addition:
(1) The expenses of the contract, and any other
legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on the
thing sold. (1518)
Obligation of vendor a retro in case of redemption
He must return to the vendee a retro:
1. The price - price of sale and not the value of
the thing; It is lawful, however, for the parties to
agree that the price be returned will be more or
less than the original sum paid by the vendee
2. Expenses of contract and other legitimate
expenses Expenses paid for the execution
and registration of the sale paid by the vendee,
the same shall be reimbursed by the vendor.
a.
Necessary expenses: incurred for
the preservation of the thing or those
which seek to prevent the waste,
deterioration or loss of the thing;
b.
Useful expenses: increase the value
of the thing or create improvements
thereon; are refunded to the vendee
a retro because he is considered a
possessor in good faith
Offer to redeem must be bona fide
The mere declaration by the vendor of his intention to
exercise the right of repurchase is not sufficient to
preserve the right of redemption.

The law requires that the offer must be a bona fide


one and accompanied by a tender of the price agreed
upon for repurchase.

ARTICLE 1617. If at the time of the execution of the sale


there should be on the land, visible or growing fruits, there
shall be no reimbursement for or prorating of those existing
at the time of redemption, if no indemnity was paid by the
purchaser when the sale was executed.
Should there have been no fruits at the time of the sale
and some exist at the time of redemption, they shall be
prorated between the redemptioner and the vendee, giving
the latter the part corresponding to the time he possessed
the land in the last year, counted from the anniversary of
the date of the sale.
See page 215 for examples
Rights of parties as to fruits of the land
This article refers only to natural and industrial
fruits. Civil fruits are deemed to accrue daily and belong to
the vendee in that proportion.
a. If there were fruits at the time of the sale and the
vendee paid for them, he must be reimbursed at the
time of redemption as the payment forms part of the
purchase price.
b. If no indemnity was paid by the vendee for the
fruits, the shall be no reimbursement for those
existing at the time of redemption
c. If the property had no fruits at the time of the sale
and some exist at the time of redemption, they shall
be apportioned proportionately between the
redemptioner and the vendee, giving the latter a
share in proportion to the time he possessed the
property during the last year counted from the
anniversary of the date of the sale, to compensate
the vendee for his expenses. The same rule, is also
applicable if there were fruits at the time of the sale
and the vendee paid for them
ARTICLE 1618. The vendor who recovers the thing
sold shall receive it free from all charges or mortgages
constituted by the vendee, but he shall respect the leases
which the latter may have executed in good faith, and in
accordance with the custom of the place where the land is
situated. (1520)
SECTION 2 Legal Redemption
ARTICLE 1619. Legal redemption is the right to be
subrogated, upon the same terms and conditions stipulated
in the contract, in the place of one who acquires a thing by
purchase or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title. (1521a)
NOTE:
Co-owners has the right to redeem of one property
was purchased by a stranger
Has 1 year to redeem
If the property was foreclosed and was purchased,
right of repurchase of prior owner has 1 year right
to redeem

10
ARTICLE 1620. A co-owner of a thing may exercise the
right of redemption in case the shares of all the other coowners or of any of them, are sold to a third person. If the
price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.
`Should two or more co-owners desire to exercise the right
of redemption, they may only do so in proportion to the
share they may respectively have in the thing owned in
common.
See page 217 for example
Requisites for right to exist:
1) There must be co-ownership
2) There must be alienation of all or any of the
shares of the other co-owners
3) The sale must be to a third person or stranger,
i.e, a non-co-owner
4) Sale must be before partition
5) Right must be exercised within period provided
in Article 1623
6) The vendee must be reimbursed for the price of
the sale
By whom and against whom right may be exercised:
1. Co-owners right to redeem is invoked only after
the shares of the other co-owners are sold to a
third party or stranger.
2. Co-owners have no right of legal redemption
against each other to whom the law grants the
same privilege, but only against a third person.
3. Should any of the heirs sells his hereditary right to
a stranger before partition, any or all of the coheirs may be subrogated to the rights of the
purchaser by reimbursing him for the purchase
price, provided it be done within the period of 1
month to be counted from the time they were
notified in writing of the sale by the vendor
4. Right of legal redemption is not granted solely and
exclusively to the original co-owners but applies to
those who subsequently acquires their respective
shares while the community subsists.
Purpose of the right grant to co-owners: to reduce the
number of participants until the community is done
away with, as being a hindrance to the development
and better administration of the property.

should both lands have the same area, the one who
first requested the redemption. (1523a)
Requisites for the exercise of right under this article:
1. Both the land of the one exercising the right
of redemption and the land sought to be
redeemed must be rural;
2. Lands must be adjacent;
3. There must be an alienation
4. Piece of rural alienated must not exceed 1
hectare
5. Vendee must already own some rural land
6. Rural land sold must not be separated by
brooks, drains, ravines, roads and other
apparent servitudes from the adjoining lands.
NOTE:
In case two or more adjacent owners
desire to exercise the right of redemption, the law
gives preference to the owner of the adjoining land
of smaller area but if both lands have the same
area, the one who first asked the redemption
ARTICLE 1622. Whenever a piece of urban land which is
so small and so situated that a major portion thereof cannot
be used for any practical purpose within a reasonable time,
having been bought merely for speculation, is about to be
re-sold, the owner of any adjoining land has a right of preemption at a reasonable price.
If the re-sale has been perfected, the owner of the
adjoining land shall have a right of redemption, also at a
reasonable price.
When two or more owners of adjoining lands wish to
exercise the right of pre-emption or redemption, the owner
whose intended use of the land in question appears best
justified shall be preferred. (n)
See page 221 for examples
Pre-emption: act of purchasing before others;
exercised before the sale or resale against the wouldbe vendor
Redemption: after the sale against the vendee
Requisites:
1.
2.
3.

ARTICLE 1621. The owners of adjoining lands shall


also have the right of redemption when a piece of rural
land, the area of which does not exceed one hectare,
is alienated, unless the grantee does not own any rural
land.
This right is not applicable to adjacent lands which
are separated by brooks, drains, ravines, roads and
other apparent servitudes for the benefit of other
estates.
If two or more adjoining owners desire to exercise the
right of redemption at the same time, the owner of the
adjoining land of smaller area shall be preferred; and

4.
5.

Piece of land is urban land


One exercising the right must be an
adjacent owner;
Piece of land sold must be so small and
so situated that a major portion thereof
cannot be used for any practical purpose
within a reasonable time;
Such urban land was bought by its
owner merely for speculation
It is about to be resold, or that its resale
has been perfected.

Price to be paid is a reasonable price


In case two or more adjoining owners desire to
exercise the right of legal redemption, the law
prefers him whose intended use of the land
appears best justified

11

Purpose of the grant of right of owners of


adjoining urban lands: to discourage
speculation in real estate and the consequent
aggravation of the housing problems in centers
of population

ARTICLE 1623. The right of legal pre-emption or


redemption shall not be exercised except within thirty days
from the notice in writing by the prospective vendor, or by
the vendor, as the case may be. The deed of sale shall not
be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given
written notice thereof to all possible redemptioners.
NOTE: The right of redemption of co-owners is
preferred over that of adjoining owners

Section 3 Conditions and Warranties


ARTICLE 1545. Where the obligation of either party to a
contract of sale is subject to any condition which is not
performed, such party may refuse to proceed with the
contract or he may waive performance of the condition. If
the other party has promised that the condition should
happen or be performed, such first mentioned party may
also treat the nonperformance of the condition as a breach
of warranty.
Where the ownership in the thing has not passed, the
buyer may treat the fulfillment by the seller of his obligation
to deliver the same as described and as warranted
expressly or by implication in the contract of sale as a
condition of the obligation of the buyer to perform his
promise to accept and pay for the thing. (n)
See page 131 for examples
Condition - an uncertain event or contingency on the
happening of which the obligation of the contract
depends; obligation of the contract does not attach until
conditions is performed
Effect of non-fulfillment of condition
1. If the obligation of either party is subject to any
condition and such condition is not fulfilled, such
party may either:
a. Refuse to proceed with the contract,
waiving the performance of the
condition
b. Proceed with the contract, waiving
the performance of the condition
2. If the condition is in the nature of a promise that
it should happen, the non-performance of such
condition may be treated by the other party as a
breach of warranty.
ARTICLE 1546. Any affirmation of fact or any promise by
the seller relating to thething is an express warranty if the
natural tendency of such affirmation or promise is to induce
the buyer to purchase the same, and if the buyer purchases
the thing relying thereon. No affirmation of the value of the
thing, nor any statement purporting to be a statement of the

seller's opinion only, shall be construed as a warranty,


unless the seller made such affirmation or statement as an
expert and it was relied upon by the buyer.
See page 132-133 for examples
Warranty : any representation made by the seller of the
thing with respect to its character, quality, or ownership, by
which he induces the buyer to purchase the same on
relying said representation
Kinds of warranty
Seller is liable for his express warranties and for the
implied warranties of title, absence of hidden defects,
fitness or merchantability, description and sample
Effect of express warranty
Express warranty : any affirmation of fact or any
promise by the seller relating to the thing, the natural
tendency of which is to induce the buyer to purchase the
thing, and the buyer thus induced to purchase the same
NOTE:
Warranty is part of a contract of sale
Immaterial whether the seller did not know
that it was false or true
No intent is necessary to make the seller
liable for his warranty
Effect of expression of opinion
Does not import warranty unless the seller is an
expert and the opinion was relied upon by the
buyer
ARTICLE 1547. In a contract of sale, unless a contrary
intention appears, there is:
(1) An implied warranty on the part of the seller
that he has a right to sell the thing at the time when the
ownership is to pass, and that the buyer shall from that
time have and enjoy the legal and peaceful possession
of the thing;
(2) An implied warranty that the thing shall be free
from any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.
This article shall not, however, be held to render
liable a sheriff, auctioneer, mortgagee, pledgee, or
other person professing to sell by virtue of authority in
fact or law, for the sale of a thing in which a third
person has a legal or equitable interest.
Implied warranty: the law derives by implication or
interference from the nature of the transaction or the
relative situation or circumstances of the parties,
irrespective of any intention of the seller to create it.
Implied warranties in sale
a. As to sellers title: seller guarantees that he has a
right to sell the thing sold and to transfer
ownership to the buyer who shall not be disturbed
on his legal and peaceful possession thereof
b. Against
hidden
defects
or
unknown
encumbrances: seller guarantees that the thing

12

c.

sold is free from any hidden faults or defects or


any charge or encumbrances not declared or
known to the buyer
Fitness or merchantability: 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, merchantable quality

When implied warranty not applicable


a. As is and where is sale (adopted from
dispositions of army surplus property) : means
nothing more than that the vendor makes no
warranty as to the quality or workable condition of
the goods and that the vendee takes them in the
conditions in which they are found and from the
place where they are located; does not extend to
liens and encumbrances unknown to the vendee
and could not be disclosed by a physical
examination of the goods sold.
b. Sale of secondhand articles
c. Sale by virtue of authority in fact or law: does not
apply to sheriff, auctioneer, mortgagee, pledgee,
or other person professing to sell
SUBSECTION 1 Warranty in Case of Eviction
ARTICLE 1548. Eviction shall take place whenever by a
final judgment based on a right prior to the sale or an act
imputable to the vendor, the vendee is deprived of the
whole or of a part of the thing purchased.
The vendor shall answer for the eviction even
though nothing has been said in the contract on the subject.
The contracting parties, however, may increase,
diminish, or suppress this legal obligation of the vendor.
(1475a)
See page 137 for examples
Eviction: the judicial process whereby vendee is deprived
of the whole or part of the thing purchased by virtue of a
final judgment based on a right prior to sale or an act
imputable to the vendor.
Essential elements of eviction:
a. Vendee is deprived in whole or in part of the thing
purchased
b. He is so deprived by virtue of a final judgment
c. Judgment is based on a right prior to the sale or
an act imputable to the vendor
d. Vendor was summoned in the suit for eviction at
the instance of the vendee
e. There is no waiver on the part of the vendee
Note: Absence of any of these requisites, a breach of
warranty against eviction under Article 1547 cannot be
declared.
Warranty against eviction refers to trespass in law
Trespass in fact does not give rise to the
application of the doctrine of the eviction
There is a mere act of trespass when the
trespasser claims no right whatever. The vendor is

not liable therefor. In such case, the vendee has a


direct action against trespasser in the same way
as the lessee has such right
The disturbance referred to in the case of eviction
is a disturbance in law which requires that a
person go to the courts of justice claiming the
thing sold, or part thereof, and giving reasons. If
final judgment is rendered depriving the vendee of
the thing sold or any part thereof, the doctrine of
eviction becomes applicable.

ARTICLE 1549. The vendee need not appeal from the


decision in order that the vendor may become liable for
eviction.
With a judgment becoming final whatever
be the cause of finality, the requirement of
the law is deemed satisfied.
ARTICLE 1550. When adverse possession had been
commenced before the sale but the prescriptive period is
completed after the transfer, the vendor shall not be liable
for eviction.
See page 139 for examples
By prescription, one acquires ownership and other real
rights through the lapse of time in the manner and under the
conditions prescribed by law. In the same way, rights and
actions are lost by prescription.
1. Completed before sale
The vendee may lose the thing purchased
to a third person who has acquired title
thereto by prescription
When prescription has commenced to run
against the vendor and was already
completed before the sale, the vendee can
enforce the warranty against eviction
In this case, the deprivation is based on a
right prior to the sale and an act imputable
to the vendor
2. Completed after sale
Even if prescription has started before the
sale but has reached the limit prescribed
by law after the sale, the vendor is not
liable for eviction
Reason: Vendee could easily interrupt the
running of the prescriptive period by
bringing necessary action
Note: If the property sold, is land
registered under Torrens system
(ownership of land is not subject to
prescription) then Art 1550 will have no
application.
ARTICLE 1551. If the property is sold for nonpayment of
taxes due and not made known to the vendee before the
sale, the vendor is liable for eviction.
Note: It is required that at the time of sale, the nonpayment
of taxes was not known to the vendee.

13
ARTICLE 1552. The judgment debtor is also responsible for
eviction in judicial sales, unless it is otherwise decreed in
the judgment. (n)
Note:

Judgment debtor is responsible for eviction and


hidden defects, even in judicial sales, unless
otherwise decreed in judgment
Based on the general principle that a person may
not enrich himself at the expense of another
If the purchaser of real property sold on execution
be evicted therefrom because the judgment debtor
had no right to the property sold, the purchaser is
entitled to recover the price paid with interest.
If the sale was effected by the judgment creditor,
the latter should not be permitted to retain
proceeds of the sale, at the expense of the
purchaser.
ARTICLE 1553. Any stipulation exempting the vendor from
the obligation to answer for eviction shall be void, if he
acted in bad faith. (1476)
1. Effect of vendors bad faith consists of knowing
beforehand at the tome of sale of the presence of
the fact giving rise to eviction; if the vendor after
selling his property sold it again to another
purchaser, he cannot, even by stipulation be
exempt from warranty against eviction.
2. Effect of vendees bad faith proceeded with the
sale with the assumption of the risk of eviction and
therefore, is not entitled to warranty against eviction
nor to right to recover damages.
ARTICLE 1554. If the vendee has renounced the right to
warranty in case of eviction, and eviction should take place,
the vendor shall only pay the value which the thing sold had
at the time of the eviction. Should the vendee have made
the waiver with knowledge of the risks of eviction and
assumed its consequences, the vendor shall not be liable.
Two kinds of waiver:
1. Consciente waiver is voluntarily made by the
vendee without the knowledge and assumption of
the risks of eviction
2. Intencionada waiver is made by the vendee with
knowledge of the risk of eviction and assumption
of its consequences.
ARTICLE 1555. When the warranty has been agreed upon
or nothing has been stipulated on this point, in case eviction
occurs, the vendee shall have the right to demand of the
vendor:
(1) The return of the value which the thing sold had at the
time of the eviction, be it greater or less than the price of
the sale;
(2) The income or fruits, if he has been ordered to deliver
them to the party who won the suit against him;
(3) The costs of the suit which caused the eviction, and, in a
proper case, those of the suit brought against the vendor
for the warranty;
(4) The expenses of the contract, if the vendee has paid
them;

(5) The damages and interests, and ornamental expenses,


if the sale was made in bad faith.
Note:
The above article specify in detail the rights and
liabilities of the vendor and the vendee in the
event of eviction takes place when the warranty
has been agreed upon or nothing has been
stipulated, that is, in the absence of waiver of
eviction by the vendee.
ARTICLE 1556. Should the vendee lose, by reason of the
eviction, a part of the thing sold of such importance, in
relation to the whole, that he would not have bought it
without said part, he may demand the rescission of the
contract; but with the obligation to return the thing without
other encumbrances that those which it had when he
acquired it.
He may exercise this right of action, instead of
enforcing the vendor's liability for eviction.
The same rule shall be observed when two or
more things have been jointly sold for a lump sum, or for a
separate price for each of them, if it should clearly appear
that the vendee would not have purchased one without the
other.
See page 145 for example
Note:
This article contemplates of partial eviction while
Article 1554 treats of total eviction.
It states that if there is partial eviction, the vendee
has the option either to enforce the vendors
liability for eviction (Art 1555) or to demand
recession of the contract
In case the vendee is totally evicted from the thing
sold, he cannot avail the remedy of recession
because this remedy contemplates that the one
demanding it is able to return whatever he has
received under the contract.
The above rule is applicable:
1. When the vendee is deprived of a part of the
thing sold if such part is of such importance
to the whole that he would not have bought
the thing without said part
2. When two or more things are jointly sold
whether for a lump sum or for a separate
price for each, and the vendee would not
have purchased one without the other.
ARTICLE 1557. The warranty cannot be enforced until a
final judgment has been rendered, whereby the vendee
loses the thing acquired or a part thereof.
Essential elements for the enforcement of warranty in
case of eviction:
1. Deprivation in whole or in part of the thing sold
2. Existence of final judgment
ARTICLE 1558. The vendor shall not be obliged to make
good the proper warranty, unless he is summoned in the
suit for eviction at the instance of the vendee.
Another essential requisite before a vendor may
be legally liable for eviction is that he should be

14

summoned in the suit for eviction at the instance


of the vendee.
To give him an opportunity to show that the action
interposed against the vendee is unjust and to
defend his title that he has transferred
Absence of such summons, the vendor is not
bound his warranty.

ARTICLE 1559. The defendant vendee shall ask, within the


time fixed in the Rules of Court for answering the complaint,
that the vendor be made a co-defendant.
Notification required by this article refers to case
where the vendee is the defendant in a suit
instituted to deprive him of the thing purchased.
ARTICLE 1560. If the immovable sold should be
encumbered with any non-apparent burden or servitude,
not mentioned in the agreement, of such a nature that it
must be presumed that the vendee would not have
acquired it had he been aware thereof, he may ask for the
rescission of the contract, unless he should prefer the
appropriate indemnity. Neither right can be exercised if the
non-apparent burden or servitude is recorded in the
Registry of Property, unless there is an express warranty
that the thing is free from all burdens and encumbrances.
Within one year, to be computed from the
execution of the deed, the vendee may bring the action for
rescission, or sue for damages.
One year having elapsed, he may only bring an
action for damages within an equal period, to be counted
from the date on which he discovered the burden or
servitude. (1483a)
Note:
The vendee may still rescind the contract and ask
for indemnity, if the thing sold should be
encumbered with any non-apparent burden or
servitude not mentioned in the agreement of such
nature that the vendee would not have acquired it
had he been aware thereof.
Servitude/Easement: an encumbrance imposed
upon an immovable for the benefit of another
immovable belonging to a different owner.
Lack of knowledge on the part of the vendor is not
a defense. Contract can still be invalidated on the
ground of mistake.
Art 1560 cannot be exercised in the ff:
1. If the burden or servitude is apparent, that is,
made known and is continually kept in view
by external signs that reveal the use and
enjoyment of the same
2. If the non-apparent burden or servitude is
registered
3. If the vendee had knowledge of the
encumbrance whether it is registered or not.
Registration of the non-apparent burden or
servitude in the Registry of Property operates as a
constructive notice to the vendee. Hence, vendor is
relieved from liability unless there is an express
warranty that the immovable is free from any such
burden or encumbrance.

If burden is known to vendee, there is no warranty.


When action must be brought
a) Action for rescission or damages must be
brought 1 year from the execution of the
deed of sale.
b) If period has already elapsed, the vendee
may only bring an action for damages
within 1 year from the date if the discovery
of the non-apparent burden or servitude.

SUBSECTION 2
Warranty Against Hidden Defects of or Encumbrances
Upon the Thing Sold
ARTICLE 1561. The vendor shall be responsible for
warranty against the hidden defects which the thing sold
may have, should they render it unfit for the use for which it
is intended, or should they diminish its fitness for such use
to such an extent that, had the vendee been aware thereof,
he would not have acquired it or would have given a lower
price for it; but said vendor shall not be answerable for
patent defects or those which may be visible, or for those
which are not visible if the vendee is an expert who, by
reason of his trade or profession, should have known them.
See page 150 for example
Requisites for warranty against hidden defects:
a) Defect must be important or serious
b) Must be hidden
c) Must exist at the time of the sale
d) Vendee must give notice of the defect to the
vendor within reasonable time
e) Actions for rescission of the price must be brought
within the proper period- 6 months from the
delivery sold of the thing sold or within 40 days
from the date of the delivery in case of animals
f) Must be no waiver of warranty on the part of the
vendee
Note:

Defect is important if: it renders the thing sold unfit


for the use for which it is intended or if it
diminishes its fitness for such use to such an
extent that the vendee would not have acquired it
had he been aware thereof or would have given a
lower price for it
Defect is hidden or latent if it was not known and
could not have been known to the vendee.
Vendors liability for warranty cannot be enforced
although defect is hidden if vendee is an expert,
who by reason of his trade or profession should
have known it.

ARTICLE 1562. In a sale of goods, there is an implied


warranty or condition as to the quality or fitness of the
goods, as follows:
(1) Where the buyer, expressly or by implication,
makes known to the seller the particular purpose for which
the goods are acquired, and it appears that the buyer relies
on the seller's skill or judgment (whether he be the grower
or manufacturer or not), there is an implied warranty that
the goods shall be reasonably fit for such purpose;

15
(2) Where the goods are brought by description
from a seller who deals in goods of that description
(whether he be the grower or manufacturer or not), there is
an implied warranty that the goods shall be of merchantable
quality. (n)
Note:

Quality of goods includes their state or condition


Purpose of holding the seller on his implied
warranties is to promote high standard in business
and to discourage unfair dealings.
Implied warranty of fitness: a.) buyer expressly or
by implication, manifests to the seller the particular
purpose for which the goods are acquired and b.)
buyer relies upon the sellers skill or judgment
whether he be the grower or manufacturer of not
there is an implied warranty that the goods are
reasonably fit for such purpose
Implied warrant of merchantability: Where goods
are bought by description, the seller impliedly
warrants that the goods are merchantable quality.
Warranty of merchantability: a warranty that goods
are reasonably fit for the general purpose for
which they are sold
Warranty of fitness: warranty that the goods are
suitable for the special purpose of the buyer which
will not be satisfied by mere fitness for general
purposes.

ARTICLE 1563. In the case of contract of sale of a specified


article under its patent or other trade name, there is no
warranty as to its fitness for any particular purpose, unless
there is a stipulation to the contrary.
See page 152 for example
Note:
Under Art 1562(1) the buyer makes known to the
seller the particular purpose for which the goods
are desired. Article 1563 limits the application of
Article 1562
There is an implied warranty of fitness for a
particular purpose where the buyer relied upon the
sellers judgment rather than the patent or trade
name.
ARTICLE 1564. An implied warranty or condition as to the
quality or fitness for a particular purpose may be annexed
by the usage of trade.
A warranty as to the quality or fitness for a
particular purpose may be attached to a contract
containing no express provision in regard to
warranty, though in the absence of usage, no
warranty would be implied. The usage is relied on
for the purpose of showing the intention of the
parties.
If there is no usage, the parties would naturally
express their intention.
ARTICLE 1565. In the case of a contract of sale by sample,
if the seller is a dealer in goods of that kind, there is an
implied warranty that the goods shall be free from any

defect rendering them unmerchantable which would not be


apparent on reasonable examination of the sample.
Merchantability of goods sold by sample:
GR: All the buyer is entitled to, in case of a sale or
contract to sell by sample, is that the goods be like
the sample. So he has no right to have the goods
merchantable if the sample which he has
inspected is not.
Where the defect in the goods is such a character
that inspection will not reveal it, so in the case of a
sale by sample, if the sample is subject to a latent
defect, and the buyer reasonably relies in the
sellers skill or judgment, the buyer is entitled not
simply to goods like the sample, but to goods like
those which the sample seems to represent, that
is, merchantable goods of that kind and character.
ARTICLE 1566. The vendor is responsible to the vendee for
any hidden faults or defects in the thing sold, even though
he was not aware thereof.
This provision shall not apply if the contrary has
been stipulated, and the vendor was not aware of the
hidden faults or defects in the thing sold.
Note:

Ignorance of the vendor does not relieve him from


liability to the vendee for any hidden faults or
defects in the thing sold. In other words, good faith
cannot be availed of as a defense by the vendor
However, parties may provide otherwise in their
contract provided the vendor acted in good faith,
that is, he was unaware if the existence of the
hidden fault or defect.

ARTICLE 1567. In the cases of articles 1561, 1562, 1564,


1565 and 1566, the vendee may elect between withdrawing
from the contract and demanding a proportionate reduction
of the price, with damages in either case.
Vendee has the option either:
o To withdraw from the contract (known as
accion redhibitoria); or
o Demand proportionate reduction of the
price, with a right to damages in either
case (known as accion quanti minoris)
Same right is given to the vendee in the sale of
animals with redhibitory defects.
ARTICLE 1568. If the thing sold should be lost in
consequence of the hidden faults, and the vendor was
aware of them, he shall bear the loss, and shall be obliged
to return the price and refund the expenses of the contract,
with damages. If he was not aware of them, he shall only
return the price and interest thereon, and reimburse the
expenses of the contract which the vendee might have
paid.
a) Vendor is aware of the hidden defects vendee
has the right to recover: price paid, expenses of
the contract, and damages.

16
b) Vendor not aware of hidden defects shall be
obliged only to return: price, interest thereon, and
expenses of the contract if paid by the vendee.
Not liable for damages because he is not guilty of
bad faith.
ARTICLE 1569. If the thing sold had any hidden fault at the
time of the sale, and should thereafter be lost by a
fortuitous event or through the fault of the vendee, the latter
may demand of the vendor the price which he paid, less the
value which the thing had when it was lost.
If the vendor acted in bad faith, he shall pay
damages to the vendee.
See page 156 for examples
Note:
Under this article, the vendor is still made liable on
his warranty
Difference between the price paid for the thing and
the value at the time of the loss, represents the
damage suffered by its vendee and is at the same
time the amount to which the vendor enriched
himself at the expense of the vendee. If the
vendor acted in bad faith, shall also be liable for
damages.
ARTICLE 1570. The preceding articles of this Subsection
shall be applicable to judicial sales, except that the
judgment debtor shall not be liable for damages.
ARTICLE 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after six months, from
the delivery of the thing sold.
Action for recession of the contract or reduction of
the purchase price prescribes 6 months form the
date of delivery that means action shall be barred
unless brought within the said period.
ARTICLE 1572. If two or more animals are sold together,
whether for a lump sum or for a separate price for each of
them, the redhibitory defect of one shall only give rise to its
redhibition, and not that of the others; unless it should
appear that the vendee would not have purchased the
sound animal or animals without the defective one.
The latter case shall be presumed when a team,
yoke pair, or set is bought, even if a separate price has
been fixed for each one of the animals composing the
same.
See page 158 for example
ARTICLE 1573. The provisions of the preceding article with
respect to the sale of animals shall in like manner be
applicable to the sale of other things.
ARTICLE 1574. There is no warranty against hidden
defects of animals sold at fairs or at public auctions, or of
live stock sold as condemned.
ARTICLE 1575. The sale of animals suffering from
contagious diseases shall be void.
A contract of sale of animals shall also be void if
the use or service for which they are acquired has been

stated in the contract, and they are found to be unfit


therefor.
ARTICLE 1576. If the hidden defect of animals, even in
case a professional inspection has been made, should be
of such a nature that expert knowledge is not sufficient to
discover it, the defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad
faith should fail to discover or disclose it, he shall be liable
for damages. (1495)
Redhibitory vice or defect: a defect in the article
sold against which defect the seller is bound to
warrant
To be considered redhibitory, the defect must not
only be hidden. It must be of such nature that
expert that expert knowledge is not sufficient to
discover it.
However, if the veterinarian failed to discover it
through his ignorance, or failed to disclose it to the
vendee through bad faith, he shall be liable for
damages.
ARTICLE 1577. The redhibitory action, based on the faults
or defects of animals, must be brought within forty days
from the date of their delivery to the vendee.
This action can only be exercised with respect to
faults and defects which are determined by law or by local
customs.
ARTICLE 1578. If the animal should die within three days
after its purchase, the vendor shall be liable if the disease
which cause the death existed at the time of the contract.
Note:

If the animal sold is suffering form any disease at


the time of sale, the vendor is liable should it die of
said disease within 3 days from the date of the
sale (not date of delivery).
If death occurs after 3 days, he is not liable
If loss is caused by a fortuitous event or by the
fault of the vendee, and the animal has vices art
1567 should be applied.

ARTICLE 1579. If the sale be rescinded, the animal shall be


returned in the condition in which it was sold and delivered,
the vendee being answerable for any injury due to his
negligence, and not arising from the redhibitory fault or
defect.
Note:

If the vendee avails himself of the remedies


granted by article 1567, the vendee must return
the animal in condition in which it was sold and
delivered
In case of injury due to his negligence, the vendee
shall be responsible but this would be no obstacle
to the rescission of the contract due to redhibitory
defect or fault of the animal.

17

Under art 1556, the buyer may not ask for


rescission where he has created new
encumbrances upon the thing sold.

ARTICLE 1580. In the sale of animals with redhibitory


defects, the vendee shall also enjoy the right mentioned in
article 1567; but he must make use thereof within the same
period which has been fixed for the exercise of the
redhibitory action.
Note:

Vendee has the same right to bring at his option,


either redhibitory action or an action quanti
minoris.

The action must be brought within 40 days from


the date of the delivery of the animals to the
vendee.

ARTICLE 1581. The form of sale of large cattle shall be


governed by special laws.
Special law governing sale of large cattle is Act
No. 4117, now found in Sections 51 to 536 of the
Revised Administrative Code, as amended,
providing for the registration, branding,
conveyance and slaughter of large cattle
Sale must appear in a public document.