Professional Documents
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Law On Sales Reviewer
Law On Sales Reviewer
1|INTRODUCTION
SALES REVIEWER
INTRODUCTION
I.
Definition. [1458]
a. one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing; and
b. the other to pay therefor a price certain in money or its equivalent
II. Elements
a. Essential elements those without which, there can be no valid sale
(consent, object, price)
b. Natural elements inherent and are deemed to exist even in the absence
of contrary provision, save those in the contrary (warranties against
eviction and hidden defects)
c. Accidental elements dependent on the parties stipulation (e.g.
conditions, interest, penalty, time or place of payment)
III. Stages
a. Negotiationcovers the period from the time the prospective parties
indicate interest in the contract until it is perfected
b. Perfectionmeeting of the minds as to the object of contract and upon
the price
c. Consummationobject is delivered and the price is paid
IV. Characteristics [CBOC NP]
a. Consensualit is perfected at the moment there is a meeting of the minds
upon the thing, which is the object of the contract and the upon the price.
xxx [1475]
b. Bilateral
i. one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing and the other to
pay therefor a price certain in money or its equivalent [1458].
ii. as a consequence:
1. power rescind is implied in case one of the obligors should
not comply with what is incumbent upon him [1191]
2. neither party incurs in delay if the other does not comply
or is not ready to comply in proper manner what is
incumbent upon him [1169]
c. Onerousvaluable consideration is necessary for the contract to be valid
(price)
2|INTRODUCTION
SALES REVIEWER
SALES REVIEWER
3.
4.
5.
Agency to sell
1. Agent receives the goods as
goods of the principal who
retains ownership over them
2. Agent delivers the price which
in turn he got from his buyer
3. Agent can return the goods in
case he is unable to sell the
same to a third person
4. Agent makes no warranty, for
which he assumes personal
liability as long as he acts
within his authority and in the
name of the seller
5. Agent in dealing with the
thing received, must act
according to the instructions
of the principal
4.
Greater freedom in
determining the price
Buyer still has to pay the price
5.
Dacion en Pago
1. Pre-existing credit
2. Agent delivers the price which
in turn he got from his buyer
3. The debtors consideration is
the extinguishment of the
debt; the creditors
consideration is the
acquisition of the object
offered in lieu of the original
credit
4. Less freedom in determining
the price
5. The payment is received by
the debtor before the contract
is perfected
NOTE:
i. CivCode Definition. property is alienated to the creditor in
satisfaction of a debt in money [1245]
ii. is governed by the law on sales [1245]
4|INTRODUCTION
SALES REVIEWER
iii. there is a novation of the contract of one of loan into one of sale
[Baviera]
f.
2.
3.
Contract to Sell
1. Ownership is reserved in the
seller and will pass only to the
buyer upon full payment of
the price
2. Full payment is a positive
suspensive condition, the
failure of which is not a
breach but prevents the
obligation of the vendor to
convey title from having
binding force
3. Title remains in the vendor if
the vendee does not comply
with the condition precedent
of making payment at the
time specified in the contract
NOTE:
i. Absent a proviso in the contract that the title to the property is
reserved in the vendor until full payment of the purchase price or
a stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within the fixed
period, the transaction is an absolute contract of sale not a contract
to sell. [Dignos v CA]
ii. Other cases of contract to sell
1. where subject matter is indeterminate
2. sale of future goods
3. stipulation that deed of sale and corresponding certificate
of sale would be issued only after full payment
5|INTRODUCTION
SALES REVIEWER
OBJECTS OF SALE
1. Requisites [licit; not impossible; determinate or determinable; existing, future,
contingent]
a. Licit [1459]
i. it is licit if not
1. contrary to law, morals, good customs, public order, or
public policy
2. outside of the commerce of man
ii. sale is inexistent and void if the object is illicit [1409 (1,4)]
NOTE: The following are inexistent and void from the beginning:
1. those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy
4. those whose object is outside the commerce of man
b. Not impossible [1348]
NOTE: Impossible things or services cannot be the objects of contracts
c. Determinate or determinable
i. a thing is determinate when it is: [1460]
1. particularly designated or
2. physically segregated from the all others of the same class
ii. it is determinable if at the time the contract is entered into
1. the thing is capable of being made determinate
2. without the necessity of a new or further agreement
between the parties
iii. contracts where the intention of the parties relative to the
principal object cannot be ascertained are void [1409 (6)]
d. Existing, future, or contingent
i. existing goodsgoods owned or possessed by the seller at the
time of perfection
ii. future
1. things having a potential existence. goods, which though not
yet actually in existence, are certain to come into existence
as the natural increment or usual incident of something
already in existence (may be the object of a sale) [1461]
2. future goods. goods to be manufactured, raised or acquired
by the seller after the perfection of the contract (may be the
object of a sale) [1462]
6|OBJECT OF SALE
SALES REVIEWER
NOTE:
1. Future inheritance, except in cases expressly authorized
provided by law, cannot be the object of a sale [1347]
2. Sale of a vain hope is void [1461]
3. Emptio rei speratae v Emptio spei: if the the expected thing
in the first does not materialize, the sale is not effective. In
the second, it does not matter whether the thing
materialized or not; what is important is that the hope
validly existed.
iii. contingent existence of the thing is dependent on the happening
of condition
2. Particular kinds
a. Generic things
i. so long as intent of parties clear, it is valid. (it is sufficient that it is
particularly designated)
ii. rule under the civil code that it has to be physically segregated is
no longer followed. (Hence, Yu Tek v Gonzalez no longer sound
doctrine)
b. Undivided interest
i. The sole owner of a thing may sell an undivided interest therein
[1463]
ii. The sale of an undivided share in specific mass of fungible goods
results in making the buyer co-owner of the entire mass in
proportion to the amount bought by him, and if the mass contains
less than the amount bought, the seller is bound to make good the
deficiency from goods of the same kind and quality, unless a
contrary intent appears. [1464]
c. Things in litigation
i. Contracts which refer to thins under litigation, if they have been
entered into by the defendant without the knowledge and
approval of the litigants OR of competent judicial authority, are
rescissible [1381(4)]
ii. The property is said to be in litigation after the defendant has
received the service of summons
d. Things subject to a resolutory condition may be the object of a sale [1465]
7|OBJECT OF SALE
SALES REVIEWER
PRICE
I.
Definition. The sum stipulated as the equivalent of the thing sold and also every
incident taken into consideration for the fixing of the price, put to the debit of the
vendee and agreed to by him.
II. Requisites [certain at time of perfection; in money or its equivalent; real; true]
a. Certain The price is certain when it is
i. fixed by the agreement of the parties
NOTE: The fixing of price cannot be left to the discretion of one
of the contracting parties. However, if the price fixed by one of the
parties is accepted by the other, the sale is perfected [1473]
ii. certain with reference to another thing certain[1469]
iii. to be fixed by a third person [1469]
1. Effect when the price is fixed by the 3rd person designated
a. General Rule: It is binding upon the parties
b. Exceptions:
i. when the 3rd person acts in bad faith or by
mistake; in which case the courts may fix
the price
ii. when the third person disregards the
specific instructions or the procedure
marked out by the parties
2. Effect when the price is not fixed by the 3rd person
a. if the 3rd person refuses or cannot fix the price, the
contract shall become ineffective, unless the parties
subsequently agree upon the price
b. if the 3rd person is prevented from fixing the price
by the fault of the seller or buyer, the party not in
fault may obtain redress against the party in fault
(rescission or fulfillment of damages in either case)
iv. pegged at the price which the thing sold would have on definite
day, or a particular exchange or market, or a certain amount
above or below such price [1472]
NOTE: If the price cannot be determined, the sale is inefficacious; but if
the thing or part thereof has been delivered to and appropriated by the
buyer, he must pay a reasonable price therefore [1474]
8|PRICE
SALES REVIEWER
SALES REVIEWER
Preparatory
a. Option to buy or sell [accepted unilateral promise to buy or sell]
i. It is a contract granting a privilege in one person, for which he has
paid a consideration , which gives him the right o buy certain
merchandise at anytime within the agreed period at a fixed price.
ii. Rules re: consideration of option contracts [Sanchez v Rigos; 1324
& 1479(2)]
1. if the option is supported by consideration distinct from
the price, it is both a binding option contract and an offer
of a contract of sale
2. if the option is not supported by consideration distinct
from the price, it is not binding , but is a mere offer of a
contract of sale
NOTE: if, however, the offer is accepted [i.e. option is
exercised] before withdrawal, a contract of sale is perfected
iii. Remedies in case of breach
Option with
distinct
consideration
Option without
distinct
consideration
Withdrawal of offer
before acceptance
Damages for breach
of option contract
Withdrawal of offer
after acceptance
Specific performance
of contract of sale
ONLY IF there is an
abuse of right under
Art. 19, CC (no
damages for breach of
option contract)
Specific performance
of contract of sale
10 | F O R M A T I O N O F C O N T R A C T O F S A L E
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SALES REVIEWER
Option Money
1. Ownership is reserved to
the seller and is not to
pass until full payment
2. Money given as
consideration for option
3. The would-be buyer is
not required to buy
4. Applies to a sale not yet
perfected
12 | F O R M A T I O N O F C O N T R A C T O F S A L E
SALES REVIEWER
NOTE:
a. where necessaries are sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable price therefor
b. necessaries are those which are indispensable for his support, according
to the social position of the family
II. Exceptions
a. husband & wife
i. they cannot sell to each other [1490]
NOTE:
1. exceptions
a. when a separation of property was agreed upon in
the marriage settlement
b. when there has been a judicial separation of
property
2. rule also applies to common law spouses
3. prohibition can only be taken advantage by persons who
bear a relationship to the spouses or to the property that
such transfer interferes with their rights
4. the government is always an interested party to all matters
involving taxable transactions
ii. alienation or encumbrance of community or conjugal property [96,
124 FC]
1. authority of the court or written consent of the other
spouse is required; otherwise the sale is void
2. the transaction, however, shall be construed as a
continuing offer on the part of the consenting spouse and
the 3rd person, and may be perfected as a binding a
contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by
either or both offerors
b. 1491: the following persons cannot acquire by purchase, even at a public
or judicial auction, either in person or thru the mediation of another:
i. guardian with respect to the property of his ward
13 | C A P A C I T Y O F T H E P A R T I E S
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SALES REVIEWER
15 | C A P A C I T Y O F T H E P A R T I E S
SALES REVIEWER
NOTE:
i. a sufficient memorandum containing all the essential terms of the
contract will take the contract out of the scope of the statute of
frauds
ii. the statute of frauds applies only to executor contracts, not to
contracts either totally or partially performed
iii. failure to object to the presentation of oral evidence to prove the
agreement or acceptance of benefits under the agreement shall
render the agreement enforceable
iv. the statute of frauds does not apply where the verbal contract of
sale is adduced not for the purpose of enforcing the performance
thereof [Almirol v Monserrat]
b. sale of real property or any interest therein
i. it must appear in a public instrument [1358]
ii. this requirement is only for convenience and not for validity or
enforceability; it is not a requirement for validity [Dalion v CA]
iii. while a sale of a piece of land appearing in a private document is
binding between the parties, it cannot be considered binding on
3rd persons, if it Is not embodied in a public instrument and
recorded in the Registry of Property [Secuya v Vda de Selma]
c. sale of realty by an agentthe authority of the agent must be in writing;
otherwise the sale shall be void [1874]
16 | F O R M A L I T I E S O F T H E C O N T R A C T
SALES REVIEWER
17 | F O R M A L I T I E S O F T H E C O N T R A C T
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TRANSFER OF OWNERSHIP
I.
In general
a. ownership of the thing sold is transferred to the vendee upon actual or
constructive delivery thereof [1477], or in any manner signifying
agreement that possession is transferred from the vendor to the vendee
[1496]
b. a sale without delivery gives the purchaser no rights in said property,
except those of the creditor
18 |T R A N S F E R O F O W N E R S H I P
SALES REVIEWER
NOTE:
a. Exceptions to rule that buyer acquires no better title to the goods than the
seller had
i. the owner is precluded by his conduct from denying the sellers
authority to sell
ii. apparent owner, even if not true owner, enabled by any factors
act, recording laws, or any other provision of law
iii. contract of sale under statutory power of sale or under the order
of a competent court of competent jurisdiction
NOTE: It does not follow, however, that if the goods sold did not
belong to the judgment debtor or pledgor or mortgagor, as the
case may be, that the innocent purchaser at such sale acquired a
better title, foe he steps merely into the shows of the judgment
debtor, pledgor or mortgagor [Banzon v Cruz]
iv. purchases made in a merchants store, or in markets, in
accordance with the Code of Commerce and special laws
b. cf. vendors title merely voidable
i. if title has not been avoided at the time of the sale, vendor can
transfer a valid title to an innocent purchaser for value [1506]
ii. nevertheless, one who has lost any movable or has been unlawfully
deprived thereof may recover it from the person in possession of
the same; provided he reimburse the purchaser of the price paid
thereof if the latter purchased it in good faith at a public sale. [559]
III. Kinds of delivery
a. actual or real deliverythe thing shall be understood as delivered when
it is placed in the control and possession of the vendee [1497]
b. legal or constructive deliverydelivery is represented by signs or acts
indicative thereof
i. delivery by public instrument execution of the public
instrument is equivalent to the delivery of the thing, if from the
deed, the contrary does not appear or cannot be clearly inferred
[1498]
NOTE: gives only to a prima facie presumption of delivery
19 |T R A N S F E R O F O W N E R S H I P
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21 |T R A N S F E R O F O W N E R S H I P
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DOUBLE SALE
I.
22 |D O U B L E S A L E
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RISK OF LOSS
Loss occurs at the time of perfection of contract [1493]
a. if entire thing is lostcontract shall be without effect
b. if only lost in part
i. vendee may withdraw from the contract
ii. vendee may demand the remaining part and pay its price in
proportion to the total sum agreed upon
II. Loss occurs after perfection [1504]
a. General Rule
i. goods remain at the seller's risk until the ownership therein is
transferred to the buyer
ii. when the ownership therein is transferred to the buyer the goods
are at the buyer's risk whether actual delivery has been made or
not
b. Exceptions
i. when otherwise agreed upon
ii. where delivery of the goods has been made but the ownership in
the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract,
the goods are at the buyer's risk from the time of such delivery
iii. where actual delivery has been delayed through the fault of either
the buyer or seller the goods are at the risk of the party in fault.
c. Other rules to be followed [1189]
i. If the thing is lost without the fault of the seller, the obligation
shall be extinguished;
ii. If the thing is lost through the fault of the seller, he shall be
obliged to pay damages; it 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;
iii. When the thing deteriorates without the fault of the seller, the
impairment is to be borne by the creditor;
iv. If it deteriorates through the fault of the seller, the buyer may
choose between the rescission of the obligation and its fulfillment,
with indemnity for damages in either case;
v. If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the buyer;
vi. If it is improved at the expense of the seller, he shall have no other
right than that granted to the usufructuary.
I.
23 |R I S K O F L O S S
SALES REVIEWER
DOCUMENTS OF TITLE
I.
SALES REVIEWER
II.
III.
IV.
SALES REVIEWER
26 |D O C U M E N T S O F T I T L E
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II.
SALES REVIEWER
III.
Stoppage of goods. an unpaid seller has the right to stop goods in transit after he
has parted with the possession of them, in case of the insolvency of the buyer
[1526 (1)]
a. When are goods in transit [1531]
i. When are goods in transit
1. from the time when they are delivered to a carrier by
land, water, or air, or other bailee for the purpose of
transmission to the buyer, until the buyer, or his agent
in that behalf, takes delivery of them from such carrier
or other bailee;
2. if the goods are rejected by the buyer, and the carrier or
other bailee continues in possession of them, even if
the seller has refused to receive them back
ii. When are goods no longer in transit
1. if the buyer, or his agent in that behalf, obtains delivery
of the goods before their arrival at the appointed
destination;
2. if, after the arrival of the goods at the appointed
destination, the carrier or other bailee acknowledges to
the buyer or his agent that he holds the goods on his
behalf and continues in possession of them as bailee for
the buyer or his agent; and it is immaterial that further
destination for the goods may have been indicated by
the buyer;
3. if the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent in that
behalf.
iii. Delivery to ship, freight train, truck or plane chartered by the buyer.
is a question depending on the circumstances of the particular
case, whether they are in the possession of the carrier as such
or as agent of the buyer [1531]
iv. Rule in case of partial delivery. If part delivery of the goods has
been made to the buyer, or his agent in that behalf, the
remainder of the goods may be stopped in transitu, unless
such part delivery has been under such circumstances as to
show an agreement with the buyer to give up possession of
the whole of the goods.
b. Exercise of right of stoppage [1532]
i. How right is exercised
1. obtaining actual possession
2. giving notice of the claim
ii. To whom notice is given
1. to the person in actual possession if the goods
28 |R E M E D I E S O F U N P A I D S E L L E R
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IV.
V.
2. or to his principal
iii. Effect of the exercise of the right
1. carrier must redeliver the goods to, or according to the
directions of the seller
2. expenses of such deliver must be borne by the seller
3. exception: if a negotiable document of title has been
issued by the carrier or other bailee, he shall not be
obliged to deliver or justified in delivering the goods to
the seller unless such document is first surrendered for
cancellation
Resale. an unpaid seller has the right of resale [1526 (3); 1533]
a. When the right of resale exists
i. perishable goods. goods are of perishable nature
ii. express stipulation. seller expressly reserves the right of resale
in case the buyer should make default
iii. unreasonable default. buyer has been in default in the payment
of the price for an unreasonable time
b. Liability of seller/buyer in case of resale
i. seller shall not be liable to the original buyer upon the contract
of sale or for any profit made by such resale
ii. seller may recover from the buyer damages for ay loss
occasioned by the breach of the contract of sale
c. New buyer acquires a good title as against the original buyer
d. Notice requirement
i. it is not essential to the validity of the resale that notice of
intention to resell the goods be given by the seller to the
original buyer
ii. the giving or failure to give such notice shall be relevant in any
issue involving the question whether the buyer had been
default for an unreasonable time before the sale was made
e. How sale should be made
i. seller is bound to exercise reasonable care and judgment in
making the resale
ii. resale may either be by public or private sale
iii. seller cannot directly or indirectly buy the goods
Rescind. an unpaid seller has the right to rescind the transfer of title and to
resume the ownership in the goods. [1526(1); 1534]
a. When the right to rescind exists
i. express reservation. where the seller expressly reserved the right
to do so in case the buyer should make default
29 |R E M E D I E S O F U N P A I D S E L L E R
SALES REVIEWER
VI.
ii. unreasonable default. where the buyer has been in default in the
payment of the price for an unreasonable time
b. Liability of buyer/seller
i. seller shall not be liable to the buyer upon the contract of sale
ii. seller may recover from the buyer damages for any loss
occasioned by the breach of the contract
c. What should be done in order to rescind the transfer of title
i. notice to the buyer; or
ii. any overt act showing an intention to rescind.
Effect if buyer has already sold the goods [1535]
a. Generally, the unpaid sellers right of lien or stoppage in transitu
remains even if the buyer has sold or otherwise disposed of the goods
b. Exceptions
i. when the seller has given his consent thereto
ii. when the purchaser or the buyer is a purchaser for value in
good faith of a negotiable document of title
30 |R E M E D I E S O F U N P A I D S E L L E R
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i. buyer may reject all; he must not be burdened with the duty of
segregation, if he does not so desire
ii. buyer may accept the goods agreed upon and reject the rest
iii. if he gets all, he must pay for them at the contract rate
c. delivery by installments [1583]
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
installments, which are to be separately paid for, and the seller
makes defective deliveries in respect of one or more installments,
or the buyer neglects or refuses without just cause to take delivery
of or pay for one more installments, 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.
IV.
Sale of immovables
a. if sale is made with a statement of its area, at the rate of a certain price for
a unit
i. vendor shall be obliged to deliver to the vendee, if the latter
should demand it, all that may have been stated in the contract
[1539]
ii. should this not be possible or should any part of the immovable
be not of the quality specified in the contract, the vendee may
choose between [1539]
1. a proportional reduction of the price and
2. the rescission of the contract
iii. should there be a greater area or number in the immovable than
that stated in the contract [1540]
a. vendee may accept the area included in the
contract and reject the rest
b. he may accept the whole area, but he must pay for
the same at the contract rate
iv. 1539 and 1540 apply to judicial sales
b. If sale is made for a lump [1541]
i. there shall be no increase or decrease of the price, although there
greater or less area or number than that stated in the contract
ii. same rule applies when 2 or more immovable are sold for a
single price
33 |D E L I V E R Y O F T H E T H I N G S O L D
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34 |D E L I V E R Y O F T H E T H I N G S O L D
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PAYMENT OF PRICE
I.
II. liability for interest on the price [1589] vendee is liable for interest if
a. there is a stipulation requiring interests
b. if there is none, but
i. the thing delivered produces fruits or income; or
ii. the buyer incurs in default from the time of judicial or
extrajudicial demand for payment
III. suspension of payment [1590] vendee may suspend payment of
a. he is disturbed in the possession or ownership of the thing bought
b. he has a well-grounded fear that his possession or ownership would be
disturbed by a vindicatory action or foreclosure of mortgage
IV.
35 |P A Y M E N T O F P R I C E
SALES REVIEWER
WARRANTIES
I.
Definition
a. It is a statement of representation made by the seller contemporaneously
and as 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
b. May express or implied
i. Express any affirmation of fact or any promise by the seller
relating to the thing which induces the buyer to purchase the
same
ii. Implied that which the law derives 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
c. Distinguished from condition
i. a condition is an uncertain event or contingency fixed by the
parties, the existence or happening of which, is necessary to the
efficacy of the contract
ii. where a condition is not performed
1. the other party may either [1545]
a. refuse to proceed with the contract
b. proceed with the contract, waiving the
performance of the contract
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
iii. warranty v condition
Warranty
Goes into the performance of
such obligation and in fact may
constitute an obligation in itself
May form part of the obligation
or contract by provision of the
law without the parties having
agreed thereto
Whether express or implied
relates to the subject matter
itself or to the obligations of the
seller as to the subject matter of
the sale
36 |W A R R A N T I E S
Condition
Goes into the root of the
existence of the obligation
Must be stipulated by the
parties in order to form part of
an obligation
May attach itself either to the
obligation of the seller to
deliver possession and transfer
ownership over the subject
matter of the sale
SALES REVIEWER
III.
Breach of warranty
a. Remedies of vendee [1599]
i. Recoupment accept the goods and set up the sellers breach to
reduce or extinguish the price
ii. Accept the goods and maintain an action for damages for breach
of warranty
iii. Refuse to accept the goods and maintain an action for damages
for breach of warranty
iv. Rescind the contract by returning or offering the return of the
goods, and recover the price or any part thereof
b. When rescission not allowed[1599]
i. If the buyer accepted the goods without protest, knowing the
breach of warranty
ii. If the buyer fails to notify the seller within a reasonable time of his
election to rescind
iii. 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; except if the deterioration is due to the breach
of warranty
c. Rights and obligations of buyer in case of rescission [1599]
i. Buyer shall cease to be liable for the price, his only obligation
being to return the goods
ii. If he has paid the price or any part thereof, he may recover it from
the seller
iii. He has the right to hold the goods as bailee for the seller should
the latter refuse the return of the goods; AND
iv. He has a right to have a lien on the goods for any portion of the
price already paid which lien he may enforce as if he were an
unpaid seller
Implied Warranties
a. Implied Warranty of Title
i. Unless a contrary intention appears, there is an implied warranty
on the part of seller [1547]
1. that he has a right to sell the thing; and
2. that the buyer shall, from that time, have and enjoy the
legal and peaceful possession of the thing
ii. There is a violation of this warranty when [1548]
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In General
a. Remedies of the seller
i. Action for payment of the price [1595]
ii. Action for damages for non-acceptance of the goods [1596]
iii. Action for rescission [1597]
b. Remedies of the buyer
i. Action for specific performance [1598]
ii. Action for rescission, or damages for breach of warranty
Art. 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. (n)
Art. 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
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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.
(n)
Art. 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. (n)
Art. 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
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. (n)
Art. 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.
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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, 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 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. (n)
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When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of
possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or
ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee
for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order
of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if except for the form of the
bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller's property in the
goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the
contract.
Where goods are shipped, and by the bill of lading the goods are deliverable to order of the buyer or of his agent, but
possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the
possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading
together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of
lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added
right thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the
buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for
value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of
exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by
the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.