Law on Sales

I. INTRODUCTION A. Definition of sale Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (1445a) The definition in Art 1458 brings about the creation of two sets of obligations: for the seller, (1) to transfer ownership and (2) deliver possession of the subject matter; for the buyer: to pay the price. Obligations, as referred to in the Article, are obligations to give; thus it may be the subject of actions for specific performance. (Villanueva) B. Characteristics of a contract of sale 1. Nominate – it has a peculiar name and form as prescribed in the law 2. Consensual – it is founded upon and completed by mere consent of the contracting parties1 (See Article 1475) Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. (1450a) 3. Commutative – it is a contract in which each of the contracting parties gives a thing of value and receives an equivalent 4. Bilateral – it is a contract in which both the contracting parties are bound to fulfill the obligations reciprocally towards each other (i.e. the vendor becomes bound to deliver the thing sold and the vendee to pay the price for it) 6. Principal – it can stand on its own; unlike an accessory contract C. Kinds of a contract of sale 1. Absolute – where the sale is not subject to any condition whatsoever and where title passes to the buyer upon the delivery of the thing sold. 2. Conditional – where the sale contemplates a contingency and in general, where the contract is subject to certain conditions (usually the full payment of the purchase price). Conditions are attached to the contract; the title will only pass once the conditions have been fulfilled. D. Sale as distinguished from other contracts 1. sale vs. contract for a piece of work2 Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. (n) Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. (1588a) Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on
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5. Onerous – as opposed to gratuitous, because the thing is sold in consideration of a price and vice versa

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QUIJADA V. CA: Sale being a consensual contract, is perfected by mere consent, which is manifested the moment there is a meeting of the minds as to the offer and acceptance thereof on 3 elements: price, subject matter and terms of payment. Ownership by the seller on the thing sold at the time of perfection of the contract of sale is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered.

CELESTINO V. COLLECTOR: A factory which habitually makes sash, windows and doors, and sells the goods to the public is a manufacturer. The fact that the windows and doors are made by it only when customers place their orders and according to such form or combination as suit the fancy of the purchasers does not alter the nature of the establishment; COMMISSIONER V. ENGINEERING: The test of a contractor is that he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his work, and not as to the means by which it is accomplished.

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warranty of title and against hidden defects and the payment of price in a contract of sale. (n) Art. 1715. The contract shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contract fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractor's cost. (n) a) In a contract for work, labor or materials or for a piece of work, the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it; while in a contract of sale, the thing transferred is one which would have existed and been the subject of sale to some other person, even if the order had not been given. (De Leon) b) This follows the Massachusetts Rule: a contract for the delivery at a certain price of an article which the vendor, in the ordinary course of his business, manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale. But if the goods are to be manufactured specially for the customer and upon his special order and not for the general market, it is a contract for a piece of work. (Baviera) 2. sale vs. agency to buy and sell3 Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. (n) 3. sale vs. barter or exchange Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration
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exceeds the amount of the money or equivalent; otherwise, it is a sale. (1446a)

its

Art. 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the other's promise to give another thing. (1538a) Art. 1639. If one of the contracting parties, having received the thing promised him in barter, should prove that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in exchange, but he shall be entitled to damages. (1539a) Art. 1640. One who loses by eviction the thing received in barter may recover that which he gave in exchange with a right to damages, or he may only demand an indemnity for damages. However, he can only make use of the right to recover the thing which he has delivered while the same remains in the possession of the other party, and without prejudice to the rights acquired in good faith in the meantime by a third person. (1540a) Art. 1641. As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. (1541a) 4. sale vs. dacion en pago Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n) Dacion En Pago Presupposes a preexisting debt & extinguishes the debt Price is the value of the thing given Sale Obligations are created from the perfection of the contract Fixing of the price is more freely agreed upon (Manresa)

5. sale vs. donation Art. 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. Under Art 1471, when the price of the contract of sale is simulated, the sale may be void but the act may be shown to have been in reality a donation x x x On the other hand, a purported donation may have other considerations placed on the donee, thus it becomes critical to

QUIROGA V. PARSONS: In the contract in the instant case, what was essential, constituting its cause and subject matter, was that the plaintiff was to furnish the defendant with the beds which the latter might order, at the stipulated price, and that the defendant was to pay this price in the manner agreed upon. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on that of the defendant, to pay their price. These features exclude the legal conception of an agency or older to sell whereby the mandatory or agent receives the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it,

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determine what rule applies (law on sales or law on donations) (Villanueva) 6. summation: tests to determine the nature of the contract 4 Tests Sale = object: transfer of ownership Piece of Work = object: service (mental, physical labor) Extraordinary Depends on order Specific Clientele Not covered

Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in Article 290. (1457a) Art. 1490. The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation or property under Article 191. (1458a) Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. (6) Any others specially disqualified by law. (1459a) Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n) 1. absolute incapacity

1. Nature of business 2. Existence of thing 3. Market 4. Statute of frauds 4 Tests (but the ultimate test is: intention of the parties) 1. Risk of Loss 2. Payment 3. Exclusive Dealership 4. Return of unsold goods

Ordinary Does not General Covered

Sale

Agency to Sell

Borne by seller Buyer

Borne by principal, not agent Principal, not agent Remittance test Mandatory

None

Sale 1. Intention of parties 2. Value of thing vs. Value of money

Barter

Money > thing

Thing > Money

2 Tests 1. Debt 2. Stage of contract

Sale None Perfection

Dacion En Pago Pre-existing Extinguishment

II. PARTIES TO A CONTRACT OF SALE A. Capacity of parties Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles.

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(1458a) There is a potential circumvention of the policy of the law if sales between spouses are allowed if there was a judicial separation of property. which is the cornerstone of family law. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common properties.Those who have the legal capacity to give consent to contracts may validly enter into a contract of sale. unless specifically prohibited by law. the court shall decide whether or not: (1) The objection is proper. (165a) b) married persons between spouses) (as regards contracts Art. Every donation or grant of gratuitous advantage. FORTUN: …if transfers or conveyances between spouses were allowed during marriage. The contract is 4 CALIMLIM-CANULLAS V. (Villanueva) c) special disqualifications (see Articles 1491 and 1492 in the previous page) 1) It is immaterial that no damage is suffered by the owner. The latter may object only on valid. 87. 2. The husband and the wife cannot sell property to each other. The administration and enjoyment of the community property shall belong to both spouses jointly. (133a) Art. education. In the absence of such authority or consent. the disposition or encumbrance shall be void. and medical treatment. clothing. the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person. which must be availed of within five years from the date of the contract implementing such decision. (206a) Art. If the benefit accrued prior to the objection. the husband's decision shall prevail. except: (1) When a separation of property was agreed upon in the marriage settlements. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties. In case of disagreement." 4 . subject to recourse to the court by the wife for proper remedy. and moral grounds. It was also designed to prevent the exercise of undue influence by one spouse over the other. business or activity without the consent of the other. and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. 124. In case of disagreement. "the condition of those who incurred guilt would turn out to be better than those in legal union. that would destroy the system of conjugal partnership. direct or indirect. Either spouse may exercise any legitimate profession. However. between the spouses during the marriage shall be void. the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person. occupation. The prohibitions apply to a couple living as husband and wife without benefit of marriage. as well as to protect the institution of marriage. In the absence of such authority or consent. otherwise. the disposition or encumbrance shall be void. However. the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent. 96. 1490. and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. The foregoing provisions shall not prejudice the rights of creditors who acted in good faith. However. the husband's decision shall prevail. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. since undue influence is not completely erased by the separation of property. or (2) When there has been a judicial separation or property under Article 191. and (2) Benefit has occurred to the family prior to the objection or thereafter. relative incapacity a) married persons (as regards contracts with third parties) Art. which must be availed of within five years from the date of the contract implementing such decision. the other spouse may assume sole powers of administration. This prohibition also applies to common-law unions4. serious. subject to recourse to the court by the wife for proper remedy. The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. dwelling. Necessaries are those indispensable for sustenance. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In case of disagreement. the latter must pay a reasonable price therefore. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. when necessaries are sold and delivered to a minor or other incapacitated person. 73. (117a) Art. the other spouse may assume sole powers of administration. except moderate gifts which the spouses may give each other on the occasion of any family rejoicing.

This contract is. (n) Art. void under Art. Requisites of a valid subject matter 1. may be the object of a contract. may be the object of a contract. and to bring the latter and his principal together to consummate the transaction. such contract is valid under [Art. 1347. so that if the thing does not come into existence the contract is considered as not made ad there is no obligation to pay the price. do not come within the prohibition. 1461. nor to assignments of the property formerly in litigation when such assignment will take effect only after final judgment (compensation of lawyers payable on a contingent basis. after the agency is terminated. 2) Agents can not buy the property of their principalj without the consent of the latter. 1348. or goods to be 5 manufactured. Impossible things or services cannot be the object of contracts. however. and that consequently. RUBIAS V. 1491. Of course. it is what the Roman law designates as emptio rei speratae (purchase of an expected thing). 3) Although executors and administrators can not buy the property under their administration. must be existing. . BROKERS. The goods which form the subject of a contract of sale may be either existing goods. (1272) Art. No contract may be entered into upon future inheritance except in cases expressly authorized by law. in such case. (n) Art. Emptio spei – If the parties intend the contract to exist at all events. (2) an unpaid seller having a right of lien…(Art 133 par 5) (Baviera) III. (Tolentino) Art. They occupy a position of trust and confidence in relation to the property under their administration or jurisdiction. plaintiff's purchase of the property in litigation from his client was void and could produce no legal effect 5 . as their authority consists merely in looking for a buyer or seller.void as the law seeks to prevent said persons from being tempted to take advantage of their position. however. Consti).5 5) Examples of other persons especially disqualified by law are: (1) aliens purchasing private agricultural lands (Art XII. unless unconscionable). so that the buyer will have to pay the price even if the thing does not actually came into existence . All things which are not outside the commerce of men. paragraph (5) of the Civil Code. 1462. SUBJECT MATTER A. future. an executor may buy the hereditary rights of an heir to the estate under his administration. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. No contract may be entered into upon future inheritance except in cases expressly authorized by law. owned or possessed by the seller. raised. (1271a) Emption rei speratai – If the parties make the contract depend upon the existence of a thing. 1461. Things having a potential existence may be the object of the contract of sale. CC. including future things. good customs. the agent can buy the property of the principal. whose acquisition by the seller depends upon a contingency which may or may not happen. the prohibition does not apply to other properties of the client. BATILLER: the purchase by a lawyer of the property in litigation from his client is categorically prohibited by Art. which was formerly under his administration. 1347. public order or public policy may likewise be the object of a contract. including future things. can not get the share of the heir in the estate until after the administration is ended. it is called emtio spei (purchase of hope or expectancy”. The sale of a vain hope or expectancy is void. All things which are not outside the commerce of men. morals. Secs 3 & 7. 4) With regard to the lawyers. . in this Title called "future goods. All rights which are not intransmissible may also be the object of contracts. or contingent Art. 1461 (2). because the buyer." There may be a contract of sale of goods. or acquired by the seller after the perfection of the contract of sale. All services which are not contrary to law. All rights which are not intransmissible may also be the object of contracts.

or rare wild plants protected by law or of tubli or other poisonous plants or fruits. 1575. the creditor cannot demand a thing of superior quality. All services which are not contrary to law. particular kinds a) generic things Art. good customs. determinable7: a thing is determinate if it can be physically segregated. 1246. VALDEZ: pending crops which have potential existence may bethe subject matter of sale. gunpowder. (1494a) a) The sale of narcotics or dangerous drugs except upon prescription. good customs. morals. But the law allows an heir to sell his interests in an inheritance b) The object of the contract of sale must be licit. or any wild bird or mammal. 1459. 1976. All rights which are not intransmissible may also be the object of contracts. d) But public property when no longer intended for public use or service form part of the patrimonial property of the State and therefore can be leased or sold. The purpose of the obligation and other circumstances shall be taken into consideration. which subject matter is a determinate thing. 7 MELLIZA V. public order or public policy may likewise be the object of a contract. must be licit Art. c) Churches are also outside the commerce of man. c) Things subject to a resolutory condition may be the object of the contract of sale. the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. 1968 up to January 1. 1460. whose quality and circumstances have not been stated. and they are found to be unfit therefor. The sale of animals suffering from contagious diseases shall be void. It is determinable if it is capable of being determined via another agreement. Under Art. The requisite that a thing be determinate is satisfied if at the time the contract is entered into. SIBAL VS. public order or public policy may likewise be the object of a contract. explosives or blasting supplies. The following contracts are inexistent and void from the beginning: (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. All things which are not outside the commerce of men. 1409.(Article 1465) 2. (1271a) Art. future things and things in potential existence 6. A thing is determinate when it is particularly designated or physical segregated from all other of the same class. (n) a) Determinate v. ALONZO: The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15. 1461 of the New Civil Code. and determinate. the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties 6 . at the time the contract is entered into. (1271a) a) Law prohibits sale of future inheritance. particularly designated.All services which are not contrary to law. may be the object of a contract. including future things. morals. is fulfilled as long as. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. 3. dynamite. The rights to succession are transmitted from the moment of the death of the decedent so one cannot sell or promise to sell what he expects to inherit from a living person. CITY OF ILOILO: The requirement of the law that a sale must have for its object a determinate thing. No contract may be entered into upon future inheritance except in cases expressly authorized by law. When the obligation consists in the delivery of an indeterminate or generic thing. must be determinate Art. Neither can the debtor deliver a thing of inferior quality. things having a potential existence may be the object of the contract of sale. (1167a) Art. dynamited fish or other aquatic animals. PICHEL V. firearms or ammunitions are prohibited by law therefore are illicit. (n) Art. 1347. 4. Determinate has been expanded to cover generic things. meaning within the commerce of man. 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. 6 b) Properties belonging to the State or its political subdivision which are intended for public use or public service or for the development of natural wealth are outside the commerce of man. capable of being made determinate without need of another agreement.

provided it is possible to determine the same. In the case of fungible goods. SCHUBACK V. Art. Things subject to a resolutory condition may be the object of the contract of sale. 4) From the moment of the filing of such notice. and (2) they are capable of substitution b) future goods Art. if called upon to designate the article sold. There was no delivery under the contract. a promise of sale and not a sale. The object of every contract must be determinate as to its kind. the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods d) sale of things in litigation Art." He could only use this generic name for the thing sold." or warehouse receipt or order for the delivery of goods. (1273) IV. owned or possessed by the seller. in this Title called "future goods. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract. whose acquisition by the seller depends upon a contingency which may or may not happen. or acquired by the seller after the perfection of the contract of sale. "quedan. 7 . quantity of subject matter9 Art. dock warrant. CA: Although the quantity to be ordered was made determinate only on December 29. the plaintiff may record in the office of the Registrar of Deeds of the Province which the property is situated. 1349.Generic things could also become subject matters of a contract of sale provided (1) they have been physically segregated8 / particularly designated. raised. (Baviera and De Leon) e. rescission cannot take place when the things are legally in the possession of 3rd persons who did not act in bad faith (& without knowledge of defect) 3) In an action affecting the title or the right of possession of real property. We conclude that the contract in the case at bar was merely an executory agreement. quantity is immaterial in the perfection of a sales contract. show that as of December 24. or any other document used in the ordinary course of 9 8 YU TEK V. In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of the first and second classes. (n) Art. (n) 5. which from the facts disclosed. 3rd persons are charged with notice of the litigation & take the property subject to the outcome of the litigation. or goods to be manufactured. without the need of a new contract between the parties. 1465. things subject to a resolutory condition Art. weight or measure of the mass. it is clear that the defendant could only say that it was "sugar. a notice of the pendency of the action. The following contracts are rescissible: (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. Sale by a person not the owner Art. (2) Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. The goods which form the subject of a contract of sale may be either existing goods. What is of importance is the meeting of the minds as to the object and cause. 1) Sales of things under litigation entered into by defendants without the knowledge & approval of the litigants or of the court are rescissible. and though the number. 1981. these essential elements had already concurred. If the mass contains less than the number. By such a sale the buyer becomes owner in common of such a share of the mass as the number. 1463. weight or measure of the goods in the mass. weight or measure of the goods in the mass is undetermined. weight or measure bought bears to the number. In the preceding articles in this Title governing the sale of goods. though the seller purports to sell and the buyer to buy a definite number. The sole owner of a thing may sell an undivided interest therein." There may be a contract of sale of goods. 1981. 1636. 1462. (n) c) sale of undivided interest or share Art. 2) However. 1464. unless the context or subject matter otherwise requires: (1) "Document of title to goods" includes any bill of lading. there may be a sale of an undivided share of a specific mass. 1381. OBLIGATION OF THE SELLER TO TRANSFER OWNERSHIP A. Now. weight or measure bought. 1385. GONZALEZ: This court has consistently held that there is a perfected sale with regard to the "thing" whenever the article of sale has been physically segregated from all other articles.

"Specific goods" means goods identified and agreed upon at the time a contract of sale is made. under the contract. "Goods" includes all chattels personal but not things in action or money of legal tender in the Philippines. "Quality of goods" includes their state or condition. constitutes "value" where goods or documents of title are taken either in satisfaction thereof or as security therefor. whether for money or not. Estoppel (Art 1505) Even if the person who sold the thing was not the owner. or in fairs. it is now a well established principle that where the true owner of property. the buyer acquires no better title to the goods than the seller had. buyer may acquire a better title. LIZARRAGA: Bigelow on Estoppel says: ". the car in question was never delivered to the vendee by the vendor as to complete or consummate the transfer of ownership by virtue of the contract. the owner cannot obtain its return without reimbursing the price paid therefor. one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. "Order" relating to documents of title means an order by endorsement on the documents." (as cited in Hernaez vs. The possession of movable property acquired in good faith is equivalent to a title. 712 above contemplates that the act be coupled with the intent of delivering the thing. 1431. . or authorizing or purporting to authorize the possessor of the document to transfer or receive. goods represented by such document. the former. it is estopped to deny that the bank had a valid title to the quedans. Through estoppel an admission or representation is rendered conclusive upon the person making it. they will be protected. Hernaez) 8 . his conveyance is deemed valid & his title passes by operation of law to the buyer11 If the owner of the goods is precluded by his conduct from denying the seller’s authority to sell. JALBUENZA V. The term includes growing fruits or crops. Exceptions: 1. (n) Art. 559. and cannot be denied or disproved as against the person relying thereon. or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof. in accordance with the Code of Commerce and special laws. either by endorsement or by delivery. 2. shall affect: (1) The provisions of any factors' act. (2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction. General Rule: No one can transfer a better title than what he has over the property sold. Recording Laws. Art. although the seller had neither the title nor the authority to sell the goods. or markets. if he should subsequently acquire ownership thereof. Subject to the provisions of this Title. as the owner of or as having full power of disposition over the property. . as vendee. however. HSBC: Since plaintiff had voluntarily clothed the person who negotiated the quedans with all the attributes of ownership and upon which the bank relied. or. 11 SIY CONG BIEN V.business in the sale or transfer of goods. holds out another. If the possessor of a movable lost or which the owner has been unlawfully deprived. Torrens System – PD 1529 10 AZNAR V. be bound to take delivery of them. unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. recording laws. (n) Art. (3) Purchases made in a merchant's store. as proof of the possession or control of the goods. It should be recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos. Nothing in this Title. has acquired it in good faith at a public sale. YAPDIANGCO: In the case on hand. and who does not sell them under authority or with the consent of the owner. An antecedent or pre-existing claim. Only the owner of the goods or one authorized by the owner to sell can transfer title thereto to the buyer10. whether insolvency proceedings have been commenced or not. and innocent third parties are thus led into dealing with some [such] apparent owner. the same being in the latter's actual possession. for however short a time. (3) Goods are in a "deliverable state" within the meaning of this Title when they are in such a state that the buyer would. 1505. took possession of the subject matter thereof by stealing the same while it was in the custody of the latter's son. (464a) Art. where goods are sold by a person who is not the owner thereof. Nevertheless. (2) A person is insolvent within the meaning of this Title who either has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due. allows another to appear. with knowledge of his own right.

unless title was annulled. Sale by one having a voidable title Art. If the third person or persons acted in bad faith or by mistake. ad purchased the ring from another person would not bar the right of the owner to recover it once the identity and the owner’s deprivation are established. 559. having been unlawfully deprived of the diamond ring in question. the latter must be protected.g. law authorizing sale of patrimonial property to a specific person at auction) or of court to sell (judicial sale e. 1505 CC. BUSTAMANTE: It appearing that the ring in question was lost or was stolen from the place where the lawful owner deposited it. and without notice of the seller's defect of title. the latter acquired a valid title13. one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. But NCC relies on the general principle of law that one deals with an agent at his own risk. is valid even if the owner did not authorize or consent to the sale (Baviera). 14 INCHAUSTI V. was entitled to recover it from petitioner Consuelo S. If the possessor of a movable lost or which the owner has been unlawfully deprived. Guevara. (464a) 1. An antecedent or pre-existing claim. . market or fair12 Purpose of the exception: (1) to protect innocent purchasers who buy at merchant stores. Validity of sale under statutory power (legal sale – e. The possession of movable property acquired in good faith is equivalent to a title. the contract shall be inefficacious. in which case the owner cannot obtain its return without reimbursing the price. The only exception the law allows is when there is acquisition in good faith of the possessor at a public sale. except as it may indicate a defect in the consent. the party not in may have such remedies against the party in as are allowed the seller or the buyer. CA: Respondent Angelina D. or that the parties really intended a donation or some other act or contract. WON for money constitutes “value” where goods or document of titloe are taken in satisfaction thereof or as security therefore V. Yapdiangco). Where the seller of goods has a voidable title thereto. de Garcia who was found in possession of the same. PRICE14 Art 1469. Should such person or persons be unable or unwilling to fix it. 464 of the Civil Code. the case squarely falls under Art.g. So long as the goods are still in the possession of the 1st buyer. as the may be. VELASCO: The policy of the law has always been that. Where such third person or persons prevented from fixing the price or terms by of the seller or the buyer. (1447a) are fault fault fault case Art. Pahati. 3. the courts may fix the price. Art. (n) 13 12 SUN BROTHERS V. the owner cannot obtain its return without reimbursing the price paid therefor. for value. or by other execution or subject of foreclosure. 1506. even in good faith. 4. The rule appears to be a wise and necessary rule not only to facilitate commercial sales on movables but to give stabilityto business transactions. Purchase at a merchant’s store. market or fair (2) To facilitate commercial sales in movables (3) To give stability to business transactions B. Court orders The general principle that the vendor must be the owner or the one authorized by the owner to sell the goods in order to pass title over them to the buyer does not apply when the sale takes place by virtue of a power granted by law or by a court. But once it has been transferred to an innocent purchaser for value before the contract is annulled. 1470. unless the parties subsequently agree upon the price. invoked by the petitioners.” The mere fact that the possessor. the buyer acquires a good title to the goods. REBULLIDA V. which provides that the “one who has lost personal property or who has been unlawfully deprived of it may recover it from whoever is possessing it. has no application. but his title has not been avoided at the time of the sale. CENTENO: The transaction between Ramon Masiclat and his unknown seller took place on Miranda Street and not in the public market and this is . Nevertheless. has acquired it in good faith at a public sale. 2. (n) Art. 3. (Cruz v. writ of execution levying upon the debtor’s property at auction) 4. Hence. Thus a sale by the sheriff. CROMWELL: Price is 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 buyer and agreed to by him 9 . conclusive.None in the Phils. Gross inadequacy of price does not affect a contract of sale. Aznar v. . where the rights and interests of a vendor come into clash with that of an innocent buyer for value. MASICLAT V. provided he buys them in good faith. Seller can transfer a valid title to an innocent purchaser for value. they may still be recovered by the vendor in an action for annulment. DE GARCIA V.

the sale is void but the act may be shown to have been in reality a donation. must be in money or its equivalent Art. (n) Art. if the price fixed by one of the parties is accepted by the other. provided said amount be certain. 1471. the contract is inefficacious. However. A contract of sale is null & void and produces no effect whatsoever if the same is without cause or consideration or that the price which appears to have been paid has in fact never been paid. and other things shall also be considered certain. The fixing of the price can never be left to the discretion of one of the contracting parties. 1471. (1448) Art. but void ab initio. 1353) 4. 1470. 3. Although the cause is not stated in the contract. the sale is void. the sale is perfected. or in any other manner. 10 . 1354. or some other act or contract (1471) A. (n) Art. 1458. The statement of a false cause in contracts shall render them void. or when an amount is fixed above or below the price on such day. but the act may be shown to have been in reality a donation. (1276) Art. (1277) Art. except as it may indicate a defect in the consent. (1291a) 1. Rescission referred to in Nos. or that the parties really intended a donation or some other act or contract. disproportion between the stipulated price (in each deed) of P1. the Court finds both said deeds. or some other act or contract. the sale is void. if the latter suffer the lesion stated in the preceding number.00 plus unspecified and unquantilled services and the undisputably valuable real estate allegedly sold — worth at least P10. 1386. not merely voidable. The parties merely said there was a price and “created” their own price (no consideration but stated) 2. liquids. unless the debtor proves the contrary.500. 1353. CA: upon the consideration alone that the apparent gross. MAPALO: a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor. False Price – there is a true price but it was not written down or stipulated in the contract. and no other true and lawful cause having been shown. or in such exchange or market. when the price fixed is that which the thing sold would have on a definite day. Requisites of a valid price 1. (1296a) Art. If the price is simulated. (5) All other contracts specially declared by law to be subject to rescission. not to say enormous. but the act may be shown to have been in reality a donation. rescissible: The following contracts are (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. Where the price cannot be determined in accordance with the preceding articles. Gross inadequacy of price does not affect a contract of sale. it is presumed that it exists and is lawful. The statement of a false cause in contracts shall render them void if it should not be proven that were founded upon another cause which is true & lawful (1471. However. insofar as they purport to be sales. must be real Art. are noteriously low indicators of actual value — plainly and unquestionably demonstrates that they state a false and fictitious consideration. BAGNAS V. or in a particular exchange or market. By the contract of sale one of the contracting parties obligates himself to transfer 15 MAPALO V. If the price is simulated. Simulated Price15 – There was no price paid. (n) Art. 1473. grain. 1 and 2 of Article 1381 shall not take place with respect to contracts approved by the courts. 1381. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. If the price is simulated. if it should not be proved that they were founded upon another cause which is true and lawful. 2.Art. There was a consideration although it was not found in the contract (Real consideration not stated) 2. 1474. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. or some other act or contract. (n) 1. The existence of a contract is permanent & incurable. The price of securities. (2) Those agreed upon in representation of absentees. (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. (1449a) Art. 1472. it is well-known.00 going only by assessments for tax purposes which.

or in any other manner. A contract of sale may be absolute or conditional. PHIL. (1445a) Art. unless the parties subsequently agree upon the price. if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. or some other act or contract. 3. provided said amount be certain. 1474. (n) Art. This Court had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. see case). when the price fixed is that which the thing sold would have on a definite day. The price should be in money or its equivalent16 (e. the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer. The provision on the downpayment of P100. 2. grain. Should such person or persons be unable or unwilling to fix it. (1449a) price can never be of the contracting fixed by one of the other. DATION IN PAYMENT Presupposes a prior existing credit & extinguishes the obligation SALE Obligations created from perfection of contract are the the 3. otherwise. The fixing of the left to the discretion of one parties. (n) Art. it is a sale. 1469. 1458 of the new Civil Code provides that price . Gross inadequacy of price does not affect a contract of sale. If it was intended for a contract of sale. 1473.Property given to the creditor in satisfaction of a debt in money with the PRICE PAID IN ADVANCE is a sale. it could only refer to a sale on installment basis. 17 TOYOTA SHAW V. it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent. 1471. If such intention does not clearly appear. 11 . The document (in Exhibit “A”. Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer. 1468.000 made no specific reference to a sale of a vehicle. 1470. as the case may be. (1447a) Art. CA: Article 1458 of the Civil Code defines a contract of sale and Art. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. However. Fixing of the price is more or less arrived at with ample contractual freedom than the value of the thing given in dation. liquids. the transaction shall be characterized by the manifest intention of the parties. executed and signed by the petitioner's sales representative.the ownership and to deliver a determinate thing. Definiteness as to the price is an essential element of a binding agreement to sell personal property. RESOURCES: Although Art. and the other to pay therefor a price certain in money or its equivalent. as the VSP executed the following day confirmed. Must be certain or ascertainable at time of perfection17 16 REPUBLIC V. letters of credit & other negotiable instruments). is not a contract of sale. If the consideration of the contract consists partly in money. In order that the price may be considered certain. but the act may be shown to have been in reality a donation. But nothing was mentioned about the full purchase price and the manner the installments were to be paid. the contract shall be inefficacious. except as it may indicate a defect in the consent. If the third person or persons acted in bad faith or by mistake. or in such exchange or market. . (1446a) Art. and partly in another thing. the sale is 1. 1475 specifically provides when it is deemed perfected. the transaction might be barter or an innominate contract. it shall be sufficient that it be so with reference to another thing certain. 1472. (n) Art. the courts may fix the price. . The price of securities. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. if the price parties is accepted by the perfected. and other things shall also be considered certain. or that the determination thereof be left to the judgment of a special person or persons. (1448) Art.g. the contract is inefficacious. the sale is void. If the price is simulated. Where the price cannot be determined in accordance with the preceding articles. or in a particular exchange or market. is always paid in terms of money and the supposed payment being in kind it is no payment at all. Otherwise. This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price." yet the same article provides that the purchaser may pay "a price certain in money or its equivalent" which means that payment of the price need not be money. However. or that the parties really intended a donation or some other act or contract. or when an amount is fixed above or below the price on such day.

1355.. Indeed. NAVARRO V. such as to certain invoices then in existence and clearly identified by the agreement (MCCOLLOUGH V. then such acceptance did not produce a binding and enforceable contract of sale. when the price fixed is that which the thing sold would have on a definite day. 1473. the courts may fix the price. or when an amount is fixed above or below the price on such day. particular exchange market20 18 VELASCO V. as the case may be. rescissible: The following contracts are price can never be of the contracting fixed by one of the other. the courts may fix the price. c) by reference to definite day. this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. 1469. 1469. Except in cases specified by law. Manner of Payment must be agreed upon18 5. 12 . (2) Those agreed upon in representation of absentees. if the price parties is accepted by the perfected. in any of the following cases: 21 ERENETE V. The fact. or that the determination thereof be left to the judgment of a special person or persons. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. or in such exchange or market. it being sufficient for the latter purpose that the price be left to the judgment of a specified person. the contract shall be inefficacious. Inadequacy of cause in a contract does not of itself invalidate the contract. Should such person or persons be unable or unwilling to fix it.000 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties under Art. The contract shall be presumed to be an equitable mortgage. (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. (n) Art. 20 Price is certain at the point of perfection by reference to another thing certain. If the third person or persons acted in bad faith or by mistake. Gross inadequacy of price does not affect a contract of sale. unless there has been fraud. unless the parties subsequently agree upon the price. 1470. Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer. or that the parties really intended a donation or some other act or contract. 1602.4. lesion or inadequacy of cause shall not invalidate a contract. and other things shall also be considered certain. provided said amount be certain. CA: It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the respondent still had to meet and agree on how and when the down-payment and the installment payments were to be paid. therefore. In order that the price may be considered certain. 1472. Such being the situation. The fixing of the left to the discretion of one parties. How price is determined Art. There was no complete meeting of the minds 19 BARRETTO V. except as it may indicate a defect in the consent. (1449a) 6. (5) All other contracts specially declared by law to be subject to rescission. 1381. it cannot. BEZORE: That the consideration in the sale was "cheap" is not a ground for the infirmity of the sale. Inadequacy of price21 Art. AENLLE) or known factors or stipulated formula (MITSUI V. that the petitioners delivered to the respondent the sum of P10. SANTA MARINA: It is necessary to a perfected sale that the parties agree upon the thing sold and that the price be fixed. therefore. the sale is a) by a third person19 b) by the courts Art. (1291a) Art. be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. if the latter suffer the lesion stated in the preceding number. (1448) d) by reference to another thing certain e) never by one party Art. (1447a) Art. liquids. 1482 of the new Civil Code. MANILA) (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. or in a particular exchange or market. However. (n) Art. mistake or undue influence. grain. the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer. it shall be sufficient that it be so with reference to another thing certain. (3) If the third person or persons acted in bad faith or by mistake. The price of securities. SUGAR’S PRODUCERS: When the manner of payment of purchase price is discussed after acceptance.

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. in such a case. is presumed to have been entered into in the place where the offer was made. without them. BORMAHECO: It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. 2. (n) Art. Advertisements for bidders are simply invitations to make proposals. it should refer to the substance of the thing which is the object of the contract. a contract is formed. 1338. the acceptance must be plain and unconditional to have the effect of converting the offer to sell to a perfect contract. the offeree must comply with the conditions of the offer. (n) b) form of acceptance 1. Business advertisements/advertisements for bidders are mere invitations to make an offer.'” Thus. 'So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept-the offer. does not amount to a rejection of the offer and the tender of a counter-offer ZAYCO V SERRA: In an offer to sell.1) When the price of a sale with right to repurchase is unusually inadequate. intimidation. the offer lapsed even though the offeree later on was willing to accept the terms and conditions of the offer. A qualified acceptance constitutes a counter-offer. whether such request is granted or not. (1269) 2. A contract where consent is given through mistake. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. the parties may reciprocally demand performance. Where the acceptance was not in accordance with the terms and conditions of the offer. 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. Unless it appears otherwise. it was held that the vendor's change in a phrase of the offer to purchase. subject to the provisions of the law governing the form of contracts.To bind the offeror. 3. There is fraud when. option contract24 23 VILLONCO V. fruits. through insidious words or machinations of one of the contracting parties. (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. (1262a) Art. any money. and the advertiser is not bound to accept the highest or lowest bidder. (2) When the vendor remains in possession as lessee or otherwise. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his 22 The acceptance must be absolute23. Art. offer Art. or fraud is voidable. 1331. or to those conditions which have principally moved one or both parties to enter into the contract. (5) When the vendor binds himself to pay the taxes on the thing sold. 1325. (1265a) Art. (1450a) a) form of offer22 The offer must be certain. violence. VI. The contract. c) vices vitiating consent Art. 1326. A simple mistake of account shall give rise to its correction. undue influence. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. FORMATION OF THE CONTRACT OF SALE PREPARATORY STAGE 1. unless otherwise stated. for in that case it would not mean conformity with the offer. (4) When the purchaser retains for himself a part of the purchase price. 1319.The acceptance must be plain and unconditional. but mere invitations to make an offer. (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. unless the contrary appears. (n) knowledge. From that moment. The offer must be certain and the acceptance absolute. 1475. which change does not essentially change the terms of the offer. he would not have agreed to. 1330. the other is induced to enter into a contract which. It will not be so if it involves any new proposal. In order that mistake may invalidate consent. 13 . In any of the foregoing cases. (1266a) Art. which is what gives rise to the generation of the contract. business advertisements of things for sale are not definite offers.

a contract of sale has the force of law and they are expected to abide in good faith by their contractual commitments. the parties are bound not only to fulfillment of what has been expressly stipulated but also to all consequences which. the defendant promised to convey the land as soon as they become registered. and the mortgagor’s promise to sell is supported by the same consideration as that of the mortgage itself. it is nevertheless a valid and binding stipulation between the parties. bilateral promise to buy and sell (See Article 1479 supra) 1. may be in keeping with good faith. Both parties are bound by his promise. it cannot be an option contract.900 should the option be exercised. Rather. but a sale of the right to purchase. 2. the real mortgage itself). may be a good consideration for a promise made by another. from another person. but merely secures the privilege to buy. which gives him the right to buy during the certain period. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. each lot is the subject of a separate contract of sale. according to their nature. PRESTATION: a consideration25 separate and distinct from the purchase price for the option given It must be in writing. Although the consideration of P20. its consideration is likewise entirely different. CONSENT 4. (NOTE: The significance of this ruling is that it shows the wide range of “consideration” that can validly support an option contract.) 26 EQUATORIAL REALTY DEVELOPMENT. 4. right of first refusal26 24 DE LA CAVADA V DIAZ: An option contract is a privilege existing in one person. being different from the contract. sale by auction Art. It is not a sale of property. 3. In a bilateral promise. [NOTE that the prescription of written contracts is 4 years. aside from the consideration for the offer.g. PERFECTION STAGE28 1. which is distinct and from that which would support the sale. From this moment. although nothing has been paid or delivered27. including the manner of payment thereof 3. such was not an earnest money. the offer may be withdrawn at any time before acceptance by communicating such withdrawal. 25 SORIANO V BAUTISTA: An option to buy attached to a real estate mortgage is a valid stipulation. 1479. 1476. it is more akin to a right of first refusal. 1324.] 3. it was an option money. 14 . In the case of a sale by auction: (1) Where goods are put up for sale by auction in lots.Art. if he chooses. it is necessary that the thing be determinate and the price already fixed. usage and law. as something paid or promised. except when the option is founded upon a consideration. Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option. It gives the right to demand fulfillment of the contract but does not pass title or dominion over the property. Being consensual. An option contract is a privilege existing in one person for which he had paid a consideration. or an option right or accepted unilateral offer to sell a determinate object for a price certain. INC. (n) Elements of a valid option contract 1. an additional amount having been agreed upon to make up the entire price of P3. 2. Although it cannot be legally categorized as an option. SANCHEZ V RIGOS: (NOTE: The significance of this ruling is that it shows that the only importance of a consideration for an option is that the option cannot be withdrawn by the grantor during the stipulated period. if in accordance with the form required by law. may be entered into by the parties upon the consummation of the option. e. V MAYFAIR THEATER: In the present case.000 was referred to as earnest money. Only after could the owner validly offer to sell the property to a third person under the same terms as offered to the grantee 27 DE LA CAVADA V DIAZ: A promise made by one party. 28 FULE V CA: Contracts are perfected by mere consent. When the offerer has allowed the offeree a certain period to accept. The contract of option. no fixed price is stated in the contract of lease of the property in case of sale. PARAÑAQUE KINGS ENTERPRISES V CA: The basis of the right of first refusal must be the current offer to sell of the seller of offer to purchase of any prospective buyer. at any time within the agreed period at a fixed price LIMSON V CA: An option is not of itself a purchase. the offer will still be converted into a valid and binding contract. when deviation allowed The rule that “acceptance must be absolute” is not really absolute because certain deviations may be made in the acceptance. In this case. Even with such deviations. 2. (1451a) Art. An executory contract of sale the promise of one is the consideration for the promise of the other. in which no separate consideration is required as it is already included in the reciprocal obligations of the parties in the contract of lease. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.. The plaintiff promised to pay the defendant the price in accordance with the terms of their contract. for which he had paid a consideration and which gives him the right to buy certain merchandise or certain specified property. Therefore. SUBJECT MATTER: an option right or accepted unilateral offer to buy.

or some of them. 3. thereof. or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof. proof of perfection of the contract. unless the buyer accept and receive part of such goods and chattels. (3) The power to administer property. or partly in writing and partly by word of mouth. In the following cases an agreement hereafter made shall be unenforceable by action. 1403. or should prejudice a third person. 2. option money) Art. any bidder may retract his bid. (n) Art. or by his agent. sales of real property or of an interest therein a governed by Articles 1403. unless they are ratified: are 4. repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains. the buyer is bound to pay the balance OPTION MONEY (2) Those that do not comply with the Statute of Frauds as set forth in this number. earnest money (cf. to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. the wouldbe buyer is not bound to pay the balance. The following must appear in a public document: (1) Acts and contracts which have for their object the creation. 1482. 1319 at page 11) – where the offer was made FORMALITIES OF THE CONTRACT 1. 2. it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer. No. EARNEST MONEY (LIMSON V. of such things in Distinct consideration for an option contract Given when the sale is not yet perfected When given. illegal. modification or extinguishment of real rights over immovable property. 2. (3) A right to bid may be reserved expressly by or on behalf of the seller. and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. and 1405. Any sale contravening this rule may be treated as fraudulent by the buyer. (4) The cession of actions or rights proceeding from an act appearing in a public document. Until such announcement is made. and subscribed by the party charged. General rule: form not important Art. therefore.” goods cannot be withdrawn from the sale after the bid is made. chattels or things in action. 4. or may be inferred from the conduct of the parties. Contract is perfected when the auctioneer accepts the bid by the fall of the hammer or gavel or in any other customary manner. Exceptions a) Statute of Frauds Art. (4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller. evidence. or the evidences. Puffing/by-bidding – means employed by owner to increase the price of the bids. it shall be considered as part of the price and as proof of the perfection of the contract. (n) 1.(2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer. 3. be in writing. place of perfection (See Art. Subject to the provisions of the Statute of Frauds and of any other applicable statute. or in other customary manner. (d) An agreement for the sale of goods. may be given as a guarantee that the vendee would not back out. If auction is announced to be “without reserve. or by word of mouth. (1454a) Payment of earnest money – considered payment of part of the price. By taking part in the auction and offering bidding. The following contracts unenforceable. CA – FOOTNOTE 24) Part of the purchase price Given only when there is already a sale When given. the buyer voluntarily submitted to the terms and conditions of the auction sale announced in the notice. Whenever earnest money is given in a contract of sale. 1483. 1358. unless the same. of the agreement cannot be received without the writing. transmission. he may even forfeit it 15 . or any other power which has for its object an act appearing or which should appear in a public document. at a price not less than five hundred pesos. or some note or memorandum. (2) The cession. a contract of sale may be made in writing. unless otherwise provided by law or by stipulation.

Contracts infringing the Statute of Frauds. validity or enforceability as any other document or legal writing. Art. otherwise. are ratified by the failure to object to the presentation of oral evidence to prove the same. price. When there is a note or memorandum thereof in writing. saw it and recognized the signatures. 16 . (e) An agreement of the leasing for a longer period than one year. the authority of the agent shall be in writing.P. 529. 2. that requirement is met by an electronic document if the said electronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent reference. c) sale of large cattle Sec. the sale shall be void. Legal Recognition of Electronic documents. There exists a reliable assurance as to the integrity of the document 29 CITY LITE REALTY V CA: There was no perfected contract between F. the authority of the latter shall be in writing. otherwise. or by a person to whom the parties to the instrument had previously confessed the execution thereof. that requirement is met by an electronic document ifi. The electronic document has remained complete and unaltered. 1405. 1874 provides that when the sale of the piece of land or any interest therein is through an agent. appraisal and acceptance can only be made by F. apart from the addition of any endorsement and any authorized change. Holding’s president. terms of sale. but when a sale is made by auction and entry is made by the auctioneer in his sales book. (c) Where the law requires that a document be presented or retained in its original form.action or pay at the time some part of the purchase money.Electronic documents shall have the legal effect. (n) The agent’s authority to sell should be in writing. Art. requesting Metro Drug’s assistance in finding buyers. EXCEPTIONS TO STATUTE OF FRAUDS a. No transfer of large cattle shall be valid unless the same is registered and a certificate of transfer obtained as herein provided. Final evaluation. e) RA 8792 -. after its execution and delivery. storage and display. PURPOSE OF STATUTE: to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses. The electronic document is reliable in the light of the purpose for which it was generated and in the light of all relevant circumstances. 7. d) secondary evidence 1. Sales through electronic commerce b) sale of realty through an agent Art. and(a) Where the law requires a document to be in writing.P. or any person who was present and saw it executed and delivered. referred to in No. When there has been a failure to object to the presentation of evidence d. or whom. or any change which arises in the normal course of communication. void29. The absence of the authority to sell can be determined from the written memorandum issued by F. Holdings. Registration is made with the municipal treasurer.P. Due execution – may be proved by the testimony of the person who executed it. of the amount and kind of property sold. but large cattle under two years of age may be registered and branded gratis for the purpose of effecting a valid transfer are made at the same time. at the time of the sale. names of the purchasers and person on whose account the sale is made. or for the sale of real property or of an interest therein. the sale shall be void. due execution and subsequent loss of the original instrument must be proved. (b) Paragraph (a) applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the document not being presented or retained in its original from. When there has been partial consummation c. Holdings and City Lite. When a sale of a piece of land or any interest therein is through an agent. and ii. or by the acceptance of benefit under them. and subscribed by the party charged or his agent b. otherwise. 2 of Article 1403. the person before whom its execution was acknowledged. Revised Administrative Code. in that– i. 1874.Electronic Commerce (pertinent provisions provided infra) Act Sec. Before secondary evidence may be introduced of the terms of the sale. it is a sufficient memorandum.

electronic data messages and electronic signatures. with the intention of authenticating or approving in an electronic data message or electronic document. The Supreme Court may adopt such other authentication procedures. answers back or acknowledgement procedures. 8. shall be authenticated by demonstrating. device. character. Legal Recognition of Electronic Signatures. number or other symbol in electronic form representing the persons named in and attached to or logically associated with an electronic data message. the integrity of the information and communication system in which an electronic data message or electronic document is recorded or stored may be established in any legal proceeding – a. That document is capable of being displayed to the person to whom it is to be presented: Provided. or detecting error or alteration in the communication. b. or another entity is an information or communication system. an electronic document shall be the functional equivalent of a written document under existing laws.) By evidence that at all material times the information and communication system or other similar device was operating in a manner that did not affect the integrity of the electronic data message or electronic document. In the absence of evidence to the contrary. (a) The electronic signatures shall be authenticated by proof that a letter.from the time when it was first generated in its final from. Sec. or similar security devices. 11. except the rules relating to authentication and best evidence. existed under which(a) A method is used to identify the party sought to be bound and to indicate said party's access to the electronic document necessary for his consent or approval through the electronic signature. (c) It is necessary for the party sought to be bound. The person seeking to introduce an electronic data message or electronic document in any legal proceeding has the burden of proving its authenticity by evidence capable of supporting a finding that the electronic data message or electronic document is what the person claims it on be. For evidentiary purposes. and there are no other reasonable grounds to doubt the integrity of the information and communication system. including the use of electronic notarization systems as necessary and advisable. Sec. That no provision of this Act shall apply to vary any and all requirements of existing laws on formalities required in the execution of documents for their validity. were employed or adopted by such person. substantiating and validating a claimed identity of a user.An electronic signature on the electronic document shall be equivalent to the signature of a person on a written document if the signature is an electronic signature and proved by showing that a prescribed procedure. electronic document.) By showing that the electronic data message or electronic document was recorded or stored by a party to the 17 . not alterable by the parties interested in the electronic document. when applicable was adopted and employed for the purpose of verifying the originator of an electronic data message or electronic document. including any relevant agreement. encryptions. (b) Said method is reliable and appropriate for the purpose for which the electronic document was generated or communicated. using algorithms or codes. identifying words or numbers. as well as the certificate of authentication on printed or hard copies of the electronic documents or electronic data messages by electronic notaries. as follows. Authentication of Electronic Data Messages and Electronic Documents. or that the appropriate methodology or security procedures. which. and ii.. This Act does not modify any statutory any statutory rule relating to admissibility of electronic data massages or electronic documents. content or storage of an electronic document or electronic data message from a specific point. electronic documents. (b) The electronic data message or electronic document shall be authenticated by proof that an appropriate security procedure. when applicable. among other ways.Until the Supreme Court by appropriate rules shall have so provided. and (d) The other party is authorized and enable to verify the electronic signature and to make the decision to proceed with the transaction authenticated by the same. in the light of all circumstances. service providers and other duly recognized or appointed certification authorities. in or order to proceed further with the transaction to have executed or provided the electronic signature.

1503.b) sale on approval i. (1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction.proceedings who is adverse in interest to the party using it. but retains the goods without giving notice of rejection.) By showing that the electronic data message or electronic document was recorded or stored in the usual and ordinary course of business by a person who is not a party to the proceedings and who did not act under the control of the party using the record. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. or satisfaction Art. General rule Ownership of thing shall transfer to the vendee upon the ACTUAL or CONSTRUCTIVE DELIVERY of the thing sold30 OR: any manner signifying an agreement that possession is transferred from vendor to vendee (Art. or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. the seller may. When there is a contract of sale of specific goods. TRANSFER OF OWNERSHIP A. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. (n) When goods are delivered to the buyer on approval or on trial or on satisfaction. 2. Ownership passes on delivery but buyer may revest such ownership to the seller by returning or tendering goods within the time fixed or within a reasonable time As opposed to a Conditional Sale (where title passes upon full payment or satisfaction of condition passing of legal title). 1477. (n) Art. or other similar terms. or c. by the terms of the contract. the ownership passes to the buyer of delivery. 1496) a. if no time has been fixed. the ownership therein passes to the buyer: 30 KUENZIE V. 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. within a reasonable time. MACKE & CHANDLER: the ownership of personal property can not be transferred to the prejudice of third persons except by delivery of the property itself.a) sale on return i. on the expiration of such time. 1502. Manner of transfer Art. and that a sale without delivery gives the would-be purchaser no rights in said property except those of a creditor 18 . but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract. (2) If he does not signify his approval or acceptance to the seller. (n) 1. on the expiration of a reasonable time. Contract of sale constitutes a RIGHT to TRANSFER or ACQUISITION of OWNERSHIP Delivery is the method of accomplishing this right ii. When goods are delivered to the buyer "on sale or return" to give the buyer an option to return the goods instead of paying the price. in sale on return. i. b. 1478. What is a reasonable time is a question of fact. title passes on delivery a. a. VII. or. trial.c) executory sales Ownership of the thing shall not pass until the price is fully paid ii. and. then if a time has been fixed for the return of the goods. Title passes – in case of goods sent to the buyer on the hope that the latter will find them satisfactory and order that type of goods – when the goods are used or when they were retained beyond a reasonable time a. 1496. Exceptions a) sale on approval. if no time has been fixed. Seller may reserve the right of possession or ownership in the goods until certain conditions have been fulfilled b) express reservation Art. (n) c) implied reservation Art.

(1463a) Traditio Longa Manu – delivery takes place when the thing is placed in the sight of the purchaser so that he can take possession of it at pleasure iii) Traditio brevi manu BEAN V. if the thing sold cannot be transferred to the possession of the vendee at the time of the sale. and constitutes valid compliance by the seller of his obligations under the contract of sale. private respondents as sellers did not reserve unto themselves the ownership of the property until full payment of the unpaid balance of P225. interests and participation as to 1/2 portion pro indiviso of the two subject lots is a contract of sale for the following reasons: First. CESAR: As Matea Crispino admits. Civil Code) unless made so by the terms of the contract or by an understanding of the parties. Traditio Brevi Manu33 – delivery of movable property takes place when the vendee had the thing already in his possession before the sale took place. 1978 sale of rights. not in concept of lessees anymore but as owners now through symbolic delivery known as traditio brevi manu.000.00. CADWALLER: Actual manual delivery of an article sold is not essential to the passing of the title thereto (art 1450. 1498. As the contrary does not appear nor is to be inferred from the public instrument executed by the defendant. the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. the mere execution and delivery of the deed did not constitute a delivery of possession SPOUSES VELARDE V. they remained in possession. (1463a) i) delivery by public instrument32  When sale is made through a public instrument.. MASALLO V. when it is placed in the control and possession of the vendee. its execution was really a formal or symbolical delivery of the property sold and authorized the plaintiff to use the tile of ownership as proof that he was thenceforth the owner of the property. The parties to the contract may agree when and on what conditions the property in the subject of the contract was passed to the prospective owner 32 FLORENDO V. iv) Traditio Constitutum Possessorium 33 HEIRS OF PEDRO ESCANLAR V. or if the latter already had it in his possession for any other reason. 1497. 1499. (1462a) “Delivered” – when placed in the control and possession of the vendee. Kinds of delivery a) real delivery Art. petitioners were in possession of the subject property as lessees. When the sale is made through a public instrument. Upon sale to them of the rights. the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. 2nd paragraph. i. is that the execution of public instrument has the same legal effects as actual or physical delivery. according to the provisions of article 1462. that she did not have possession of the land when she executed and delivered her deed to plaintiff. there is no stipulation giving the sellers the right to unilaterally rescind the contract the moment the buyer fails to pay within the fixed period.e. FOZ: It is the material delivery of the property sold which the defendant must make in compliance with the contract. Under Article 1477 of the Civil Code. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties.3. 24 Prior to the sale. CA: The September 15. not as owner but as lessee. The thing sold shall be understood as delivered. if in said instrument the contrary does not appear or may be clearly inferred. if from the deed the contrary does not appear or cannot clearly be inferred. With regard to movable property. its material delivery could have been made GENERAL RULE: he who purchases through a public instrument should be deemed a “possessor in fact” and this presumption should give way before proof to the contrary A person must be in ACTUAL POSSESSION to be able to transfer CONSTRUCTIVE POSSESSION through public instrument ii) Traditio Longa Manu   Art. of the same code: When the sale should be made by means of a public instrument. the EXECUTION thereof shall be equivalent to delivery IF from the deed the contrary does not appear 31  o oper ates as formal/symbolic delivery o auth orizes buyer to use such document as proof of ownership Symbolic delivery may produce the effect of tradition if vendor have had such control over the thing sold that at the moment of the sale. however. its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. inasmuch as the formal delivery de jure was made. interests and participation as to the 1/2 portion pro indiviso. CA: The general rule. Second. borrower or depositary. it transfers ownership of the subject matter to the buyer. therefore.a) symbolic Art. conveyance of ownership without prejudice to the right of vendor to claim payment of the price31 b) constructive delivery b. the ownership of the thing sold is acquired by the vendee upon actual or constructive delivery thereof 19 .

the ownership would have passed to the buyer on shipment of the goods.o.“cost. Where goods are shipped. (n) Art. insurance. and continues in possession thereof as such tenant. if the seller fails to do so.o. When there is a contract of sale of specific goods. 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. and hence.Art. the legal possessor while the vendor is in material possession of the property in the name and representation of the vendee. 1523. by the same covenant. is deemed to be in possession thereof by the express will of the contracting parties.a. and by the bill of lading the goods are deliverable to order of the buyer or of his agent. the seller must give such notice to the buyer as may enable him to insure them during their transit. (n)  GENERAL RULE: Delivery of goods to carrier is considered delivery to the buyer. “f. insurance. the bill of lading. 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. or unless contrary intent appears in the contract of sale a. 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. 1503. Terms. – “free alongside” means that the seller bears the expenses of transportation until he delivers the iii. the seller thereby reserves the ownership in the goods. the second purchaser cannot acquire ownership as he bought the property from a mere tenant. i. . the purchaser who acquired the property through delivery or symbolic tradition. is in lawful possession of the leased property. through such constitutum possessorium agreement.o. and if he wrongfully retains the bill of lading he acquires no added right thereby.b. by virtue of a lease agreement with the vendee34. In a case which frequently occurs. if except for the form of the bill of lading. f. v) delivery to common carrier Art. with all the consequent effects of a deed of conveyance. or is indorsed in blank. one who purchases in good faith. or of the goods. without notice of the facts making the transfer wrongful. (n) • • In traditio constitutum possessorium.s. where the vendor. point. for the purpose of Unless otherwise agreed. who by that covenant becomes the lessor. provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein. but possession of the bill of lading is retained by the seller or his agent. and freight charges on the goods up to the place of destination f. its lawful owner. delivery of the goods to a carrier. There may also be tradition constitutum possessorium. whether named by the buyer or not.b. But. and that the vendor. freight” signifies that the price quoted includes the costs of the goods. the seller may. by means of a constitutum possessorium agreement converts himself into a tenant or lessee of the property that he sold. and. converted himself into the lessee and is in material possession of the leased property in the name and representation of the purchaser. or goods from the buyer will obtain the ownership in the goods. although the bill of exchange has not been honored.“free on board” means that the seller bears expenses of transportation up to the f. .s.f. where goods are sent by the seller to the buyer under circumstances in which the seller knows or ought to know that it is usual to insure. and therefore.b.”. on the same date on which the deed of sale is executed. the seller thereby reserves a right to the possession of the goods as against the buyer.”. the purchaser. the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer. Vendee became as lessor. BAUTISTA V SIOSON: Even if the vendor sells the property again to another. 20 . c. ii.i. 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 34 payment of the bill of exchange. title passed to the buyer at the point of shipment  EXCEPTION: Seller may reserve title by the form of the bill of lading with intent to remain the owner for all purposes and not merely for the sole purpose of securing payment. the goods shall be deemed to be at his risk during such transit.a. the vendor remains in possession of the property sold.f. Where goods are shipped. however. or to the buyer by the consignee named therein. reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. by the terms of the contract. for value.i. the seller is authorized or required to send the goods to the buyer. If. 1500. it must be recognized that. the buyer is bound to return the bill of lading if he does not honor the bill of exchange.” “f. “c. in pursuance of a contract of sale. Where.

then the buyer agrees to accept delivery at the point of shipment o Where the price is payable only upon arrival of the goods at the point of destination. Should it be immovable property. if it should be movable property. 1544. Double Sales Art. in the absence thereof. CARBONELL V CA: Jose Poncio sold his lot to Carbonell on 27 Jan 1955 and 4 days later sold the same property to Infante. (1473) If the same thing should have been sold by the owner to different buyers.goods alongside a vessel at a named post. 36 RIVERA V ONG: Ong Che has a better title to the property (over which he and Rivera had overlapping claims). then that is the place of delivery to the buyer vi) effect of form of bill of lading • Ownership is retained: The seller may consign the goods to himself or to his agent and thus prevent title from passing to the buyer until the latter pays the price Mere possession is retained: The seller may consign the goods to the order of the buyer on the latter’s agent but by retaining the bill of lading. A formal deed of sale was executed in favor of Infante. 1544 (2). If the same thing should have been sold to different vendees. if it should be movable property. 1544 (1). He was a purchaser of the articles in good faith. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. provided there is good faith. prior registration in good faith is pre-condition to a superior title. If the same thing should have been sold to different vendees. As there in inscription. the second buyer must not only show prior recording of his deed but must have acted in good faith. prior jure35 b) sale of movables36 Art. without knowledge of the existence of another alienation by the vendor to another  POSSESSOR IN GOOD FAITH: one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it o good faith is always presumed. the ownership shall pertain to the person who in good faith was first in the possession. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. Carbonell registered her adverse claim four days before the registration of the property by Infante. 21 . upon seeing Infante building a wall around the lot. burden of proof is on person alleging bad faith o good faith of second buyer must continue until his contract ripens into ownership by tradition or recording o as to Torrens title: it is enough that purchaser examines the latest certificate of title issued in the name of his vendor and he need not trace its origin to prior certificates of title d) Sale by virtue of execution or attachment 35 • 4. acquired possession by virtue of his purchase. the question as to who of the latter acquired ownership depends on the nature of the thing sold. and therefore has a better title than the first purchaser. and. he thereby prevents the buyer from obtaining the goods from the carrier until price is paid a) General Rule – Prior tempore. The deed of sale in favor of Infante was later registered and the latter was thereafter in possession of the lot. to the person who presents the oldest title. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. Should there be no inscription. Held: The second sale was not valid. c) sale of immovables Art. Should it be immovable property.  To be entitled to priority. Carbonell. registered an adverse claim on the property.  These terms may be used only in connection with fixing the price and will not be construed as fixing the place of delivery to the buyer  Best indication of the intention of parties as to the place of delivery is the manner and place of payment agreed upon by the parties o Where price is payable upon proof of shipment.

1. Recording of instruments relating to unregistered lands. to ascertain the rights of the judgment debtor over the property.] e) Unregistered land P. conveyance. before bidding. the file number and the date as well as the hour and minute when the document was received for recording as shown in the Primary Entry Book. and is preferred only over claims contracted subsequent to its recording (c) After recording on the Record Book. unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies. The recording of the deed and other instruments relating to unregistered lands shall be effected by any of annotation on the space provided therefor in the Registration Book. 1529. In case the Register of Deeds refuses its administration to record. and the latter may appeal the matter to the Commissioner of Land Registration in accordance with the provisions of Section 117 of this Decree. [Third persons are not required to go beyond the register and determine the condition of the property.   Registration requirement is understood to be without prejudice to third party with a better right37 Mere registration of sale in one’s favor does not give him any right over the land: o if the vendor was not the owner of the land o if the vendor has already parted with his ownership before such sale in favor of third party who had previously taken possession of the land. The Primary Entry Book shall contain. except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry. the Register of Deeds shall endorse among other things. on the face of the instrument. among other particulars. except as between the parties thereto. shall likewise be admissible to record under this section. attachment and levy. adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands.D. succession and prescription38  f) First in possession in good faith If neither vendee registered the sale in his favor or registration was done in bad faith.No deed. the nature of the document. Sec. (e) For the services to be rendered by the Register of Deeds under this section. . the entry number. said official shall advise the party in interest in writing of the ground or grounds for his refusal. (b) If.] 2. he shall collect the same amount of fees prescribed for similar services for the registration of deeds or instruments concerning registered lands. (a) The Register of Deeds for each province or city shall keep a Primary Entry Book and a Registration Book. the names of the parties. 3. with appropriate annotation. or other voluntary instrument affecting land not registered under the Torrens system shall be valid. notice of lis pendens. even though the prior sale was unrecorded A person having a “better right” would be one who had previously acquired ownership thereof through the modes of acquiring ownership under the Civil Code: tradition as a result of sale. hence. (d) Tax sale. GENERAL RULE: Article 1544 not applicable to execution sales because the purchaser at such sales is substituted to or acquires whatever rights. the date. CA: It is a well-known rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the face of the Torrens Certificate of Title and to dispense with the need to inquire further. mortgage. the vendee 37 NAAWAN RURAL BANK V. returning to the registrant or person in interest the duplicate of the instrument. 38 HANOPOL V PILAPIL: A better right which is unrecorded and which would prevail over a recorded sale is one which was gained independently of the sale. [It is the duty of the purchaser. EXCEPTION: Attachment or execution cannot prejudice prior unrecorded sales made by the judgment debtor. EXCEPTION TO THE EXCEPTION: Above rule does not apply to lands registered under Act 496 which provides that registration of instruments shall be the “operative act to convey and affect the land”. after the same shall have been entered in the Primary Entry Book. as title by prescription. hour and minute it was presented and received. if made in the form sufficient in law. title or interests the judgment debtor may have over the property as of the time of levy. 22 . certifying that he has recorded the instrument after reserving one copy thereof to be furnished the provincial or city assessor as required by existing law. 113. lease. prior unrecorded sale cannot prejudice execution sales if no third-party claim was presented before the execution sale took place. It shall be understood that any recording made under this section shall be without prejudice to a third party with a better right. the Register of Deeds shall forthwith record the instrument in the manner provided herein. donation. upon the original of the recorded instruments. it appears that it is sufficient in law.

The loss must have occurred before the contract was entered into. if the contrary does not appear in the deed. like a deed of sale or a receipt for the price. 2. 1504. the loss was borne by him 23 . The first vendee acquired ownership by delivery thru the execution of a public instrument. when the land was sold again to defendant. As the vendor failed to perfect his title. When loss occurs at the time of perfection Art. the thing which is the object of the contract has been entirely lost. 1494. provided that the title was in proper form. and the goods without the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character. 40 ROMAN V GRIMALT: The sale was not perfected as the buyer agreed to buy the vessel. If at the time the contract of sale is perfected. (n) An obligation to deliver a generic thing is not extinguished by loss because genus never perishes. When loss occurs after perfection but before delivery Art. except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer. the buyer may at his option treat the sale: (1) As avoided. if the first sale is evidenced in a public instrument. (n) a) If at the time the sale is perfected. (n) Art. it is borne by the seller. RISK OF LOSS OR DETERIORATION A. the contract shall be without any effect. If neither of the vendees registered their deeds of sale nor acquired possession of the land sold. has the better right. if the sale was divisible. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501. 2. 1496. but 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. the one who can present the oldest title provided there is good faith. QUIMSON V ROSETE: Possession includes not only material but also symbolic possession which is acquired through the execution of a public instrument. Hence. Thus. 1263. the thing had been lost entirely. But if the thing should have been lost in part only. (1460a) Art. in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his b) c) 39 SANCHEZ V RAMOS: Delivery may be actual or constructive. and as binding the buyer to pay the agreed price for the goods in which the ownership will pass. or (2) As valid in all of the existing goods or in so much thereof as have not deteriorated.who was first in possession in good faith acquired ownership of the land39 g) Oldest title 1. This is because ownership is still with him40. 1493. As the land was considered delivered by the execution of the public instrument. paying its price in proportion to the total sum agreed upon. the loss or destruction of anything of the same kind does not extinguish the obligation. unless the contrary can be clearly inferred therefrom VIII. When loss occurs before perfection When loss occurred before perfection. the contract shall be ineffective. and the possession of the latter was a mere detainer. without the knowledge of both parties. Public document is not included as there is delivery thru a public instrument. “Older title” means any document showing acquisition of the land in good faith. This is because there can be no contract without an object. or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. Where the parties purport a sale of specific goods. In an obligation to deliver a generic thing. the vendee may choose between withdrawing from the contract and demanding the remaining part. NOTE that the next 3 situations contemplate loss of specific things 1. the goods remain at the seller's risk until the ownership therein is transferred to the buyer. General rule Art. 3. Options of buyer when there is partial loss and a loss which results in substantial change in character O Withdraw from the contract O Buy the remainder at a proportionate price 3. Unless otherwise agreed. the vendor remained in possession by mere tolerance of the first vendee. there is delivery of the thing sold. the vendor did not transmit anything to him.

His obligation does not pertain to the delivery of the subject matter. he shall have no other right than that granted to the usufructuary. 1406. (n) Art. Second. goods represented by such document. loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor. 1636)44 41 SUN BROS. as proof of the possession or control of the goods. (n) When loss occurs after perfection but before delivery. with indemnity for damages in either case. TRUST CO. which is under the control and dominion of the vendee. 1538. This is because the stipulation “ownership shall only be transferred upon full payment” was agreed merely to secure the performance by the buyer of his obligation. DOCUMENTS OF TITLE Document of title – a document used in the ordinary course of business in the sale or transfer of goods. This is because the seller becomes merely a depositary. actually or constructively. in the contract. or goes out of commerce. the creditor may choose between the rescission of the obligation and its fulfillment. an obligor should be exempt from liability when the loss occurs in a fortuitous event. 2. 42 LAWYER’S COOP. 44 PHIL. the buyer suffers the loss. such that place of delivery was at the seller’s warehouse. deterioration or improvement of the thing before its delivery. it was agreed that loss or damage to the books after delivery to the buyer shall be borne by the buyer. Security title42 3. The reasons for its validity are: First. (4) If it deteriorates through the fault of the debtor. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. or by time. V TABORA: Despite the loss of the books in a fire. B. The risk of loss shall be borne by the owner. [but] (2) the loss or destruction of the property while in the possession of the buyer before payment. The buyer does not bear the risk of loss until the goods are delivered. the obligation shall be extinguished. EXCEPTIONS: 1. APPLIANCES V PEREZ: The law allows an agreement which stipulates that (1) where goods are sold and delivered to the buyer. Delay through the fault of the buyer or the seller43 – at the risk of the party at fault IX. the impairment is to be borne by the creditor. the policy of providing an incentive to care properly for the goods. 43 NORTH NEGROS SUGAR CO. In case of loss. This is because the rule is a combination of the common-law rule that the owner bears the risk of loss (res perit domino). the improvement shall inure to the benefit of the creditor. Art. this cannot be used by the buyer as a defense to exempt himself from paying. the absolute and unconditional nature of the vendee’s promise to pay for the goods. and the buyer may take the document of title as though he had actually taken possession and control over the goods described 24 . (5) If the thing is improved by its nature. 1189. but to the payment of the purchase price. or authorizing or purporting to authorize the possessor of the document to transfer or receive. the rules in Article 1189 shall be observed. While under the rule. The ability to pay in money or legal tender is never lost through a fortuitous event. the vendor has fully performed his contract and the vendee received what he bargained for. the seller bears the risk of loss. the title is to remain in the seller until full payment.obligations under the contract. and a public document is necessary for its registration in the Registry of Deeds. When a contract is enforceable under the Statute of Frauds. V CIA. in which case. Third. the parties may avail themselves of the right under Article 1357. V NATIONAL BANK: The purpose of documents of title is that the seller is allowed by fiction of law to deal with the goods described therein as though he had physically delivered them to the buyer. (1122) Art. (2) 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. When ownership is transferred GENERAL RULES: 1. Moreover. GEN DE TABACOS: If there was delay in accepting delivery but there was segregation of goods. (6) If it is improved at the expense of the debtor. the vendor being considered the debtor. the goods are at the buyer's risk from the time of such delivery. and the Roman law requiring delivery to transfer ownership. the following rules shall be observed in case of the improvement. (2) If the thing is lost through the fault of the debtor. or disappears in such a way that its existence is unknown or it cannot be recovered. it is understood that the thing is lost when it perishes. he shall be obliged to pay damages. the risk of loss would be borne by the buyer although he was not the owner yet. the buyer bears the risk of loss. (Art. Contrary stipulation41 2. either by endorsement or by delivery. (3) When the thing deteriorates without the fault of the debtor. does not relieve him from the obligation to pay the price. Ownership is transferred upon delivery.

" "non-negotiable. or (2) Where by the terms of the document the carrier. Such endorsement may be in blank. (n) Negotiable document of title – a document of title in which it is stated that the goods referred to therein will be delivered to the bearer. 1511. or to the order of any person named in such document is a negotiable document of title. or (2) By any person to whom the possession or custody of the document has been entrusted by the owner. Negotiable documents of title Art. A negotiable document of title may be negotiated by delivery: (1) Where by the terms of the document the carrier. warehouseman or other bailee to deliver the goods to bearer. A negotiable document of title may be negotiated: (1) By the owner therefor. A document of title in which it is stated that the goods referred to therein will be delivered to the bearer. But nothing in this Title contained shall be construed as limiting or defining the effect upon the obligations of the carrier. A person to whom a negotiable document of title has been duly negotiated acquires thereby: (1) Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value. 1513. If a document of title which contains an undertaking by a carrier. any holder may indorse the same to himself or to any specified person. to a specified person or order of a specified person or which contains words of like import. A document of title which is not in such form that it can be negotiated by delivery may be transferred by the holder by delivery to a purchaser or donee. or to the order of any person named in such document. (n) 1. (n) Art. (n) c) rights acquired by negotiation Art. (n) TERMS OF THE DOCUMENT  Goods are deliverable to bearer  Endorsed in blank by the person to whose order the goods were deliverable Goods are deliverable to the order of a specified person b) who may negotiate it HOW NEGOTIATED By delivery of the document to another By indorsement of such person Art. (n) Art. A non-negotiable document cannot be negotiated and the endorsement of such a document gives the transferee no additional right. or if at the time of such entrusting the document is in such form that it may be negotiated by delivery. it may be again negotiated by the endorsement of such person in blank. A negotiable document of title may be negotiated by the endorsement of the person to whose order the goods are by the terms of the document deliverable. to bearer or to another specified person. 1509. a) how negotiated Art. has placed upon it the words "not negotiable. 1512. warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer. 1507. if.The functions of documents of title are (1) Evidence of the possession or control of the goods described therein (2) Medium of transferring title and possession over the goods described therein without having to effect actual delivery thereof (Villanueva) Art. 1510. by the terms of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted. If indorsed to a specified person. and such person or a subsequent endorsee of the document has indorsed it in blank or to the bearer. Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document of title has been indorsed in blank or to bearer. to bearer or to a specified person. 1508. and therein 25 . such document may nevertheless be negotiated by the holder and is a negotiable document of title within the meaning of this Title. warehouseman. or other bailee issuing a document of title or placing thereon the words "not negotiable. warehouseman or other bailee issuing the same undertakes to deliver the goods to the order of a specified person." or the like. Subsequent negotiations may be made in like manner. and in such case the document shall thereafter be negotiated only by the endorsement of such endorsee." "nonnegotiable" or the like.

1516. 1518. (n) There is a conflict between Art. d) Unauthorized negotiation Art. 1512 and Art. or conversion. A person who for value negotiates or transfers a document of title by endorsement or delivery. theft. the common carrier will fulfill its obligation to the deliver the goods. 1518. or conversion. If goods are delivered to a bailee by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner and a negotiable document of title is issued for them they cannot thereafter. fraud. since he acquires the rights of the original consignee. 2. 1517. be attached by garnishment or otherwise or be levied under an execution unless the document be first surrendered to the bailee or its negotiation enjoined. 1519. the previous indorsers will fulfill their obligation. (3) That he has knowledge of no fact which would impair the validity or worth of the document. theft. its negotiation be enjoined. under Art. or by the fact that the owner of the document was deprived of the possession of the same by loss. (n) Art. accident. A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which cannot readily be attached or levied upon by ordinary legal process. duress. mistake. But he does not warrant that 1. rights of the original consignee Thus. (n) Art. 3. warrants: (1) That the document is genuine. the validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person making the negotiation. if the person to whom the document was negotiated or a person to whom the document was subsequently negotiated paid value therefor in good faith without notice of the breach of duty. mistake. including one who assigns for value a claim secured by a document of title unless a contrary intention appears. 1512. (2) That he has a legal right to negotiate or transfer it. UNLESS 1. (n) A person who negotiates a document of title warrants 1. while in possession of such bailee. and (4) That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose. 1520. f) creditor’s right against the goods Art. the document be first surrendered to the carrier. 1518 since under Art. duress or conversion. fraud. fraud. accident. his right to negotiate it. However. The endorsement of a document of title shall not make the endorser liable for any failure on the part of the bailee who issued the document or previous endorsers thereof to fulfill their respective obligations.(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him. impounded by the court. or 2. theft. or 2. a buyer of a document of title may acquire a better title than his vendor. only the owner of the document or one to whom possession of the document has been entrusted may negotiate it. or by the fact that the owner of the document was deprived of the possession of the same by loss. or 3. (n) Goods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon. mistake. and. all the warranties of a vendor of goods. Rationale for the rule: 26 . The validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person making the negotiation. (n) A person to whom a document has been negotiated acquires 1. whenever such warranties would have been implied if the contract of the parties had been to transfer without a document of title the goods represented thereby. (Baviera) e) implied warranties Art. rights of the vendor 2. accident. duress. The bailee shall in no case be compelled to deliver up the actual possession of the goods until the document is surrendered to him or impounded by the court. or loss. the genuineness and validity of the document.

or is directly responsible for the price. (4) A right to rescind the sale as likewise limited by this Title. the transferee acquires a right against the transferor to compel him to endorse the document unless a contrary intention appears. the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor. subject to the terms of any agreement with the transferor. such person also acquires the right to notify the bailee who issued the document of the transfer thereof. Where the ownership in the goods has not passed to the buyer. 1515. The negotiation shall take effect as of the time when the endorsement is actually made. (n) The law makes a distinction between “negotiation” [negotiable document of title] and “transfer” [nonnegotiable document of title]. the insolvency of the buyer. (n) a) Unpaid seller – if the whole price has not been paid or tendered. 2. in addition to his other remedies a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. If the document is non-negotiable. (n) b) rights acquired by transfer of document of title Art. Transfer – the assignment of rights of the consignee of a non-negotiable document of title to another – where an order document of title was sold or assigned. and the endorsement of the transferor is essential for negotiation. or any other person who is in the position of a seller. or for the law to allow attachment on the goods. and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document. and the condition on which it was received has been broken by reason of the dishonor of the instrument. or any other person who is in the position of a seller. Subject to the provisions of this Title. a right of stopping the goods in transitu after he has parted with the possession of them. has: (1) A lien on the goods or right to retain them for the price while he is in possession of them. (n) X. Prior to the notification to such bailee by the transferor or transferee of a non-negotiable document of title. as such. where the buyer may acquire a better title]. (3) A right of resale as limited by this Title. REMEDIES OF AN UNPAID SELLER Art 1526. hence it is not allowable for a carrier to deliver the goods without the surrender of the bill of lading to them. MEANING OF UNPAID SELLER Art 1524. or when the check received as conditional payment was dishonored by nonpayment or insolvency of the buyer. acquires thereby. the title to the goods. 1514. as against the transferor. the unpaid seller of goods. or by a notification to such bailee by the transferor or a subsequent purchaser from the transfer of a subsequent sale of the goods by the transferor. or a consignor or agent who has himself paid. the unpaid seller has. or the consignor or agent who had paid the price or is responsible for the price. REMEDIES OF AN UNPAID SELLER 27 . The seller of goods is deemed to be an unpaid seller within the meaning of this Title: (1) When the whole of the price has not been paid or tendered. b) seller – includes the agent of the seller to whom the bill of lading was endorsed.A negotiable document of title represents the goods. but not negotiated. (2) When a bill of exchange or other negotiable instrument has been received as conditional payment. without indorsement The transferee does not acquire a better title than his transferor [unlike in a negotiable document of title. In Articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of lading has been indorsed. A person to whom a document of title has been transferred. notwithstanding that the ownership in the goods may have passed to the buyer. Where a negotiable document of title is transferred for value by delivery. Non-negotiable documents of title a) how transferred Art. (2) In case of the insolvency of the buyer. or otherwise.

The unpaid seller of goods loses his lien thereon: (1) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the ownership in the goods or the right to the possession thereof. The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer. when the goods were delivered to the buyer. does not lose his lien by reason only that he has obtained judgment or decree for the price of the goods. unless he agreed to sell on credit.a) If ownership over the goods had not yet passed to the buyer: the seller. he may exercise his right of lien on the remainder. (n) Art 1531. but the term of credit has expired. d) It is not lost on the remainder of the goods when only partial delivery was made. or his agent in that behalf. and may still used the buyer for damages 1. Stoppage in Transitu Art 1530. Goods are no longer in transit meaning of the preceding article: within the Art 1527. when he waived his lien. (2) Where the goods have been sold on credit. (3) Where the buyer becomes insolvent. until the buyer. Lien a) The unpaid seller’s lien implies that he has a right to retain possession of the goods until payment or tender of the whole price. (3) By waiver thereof. and the carrier or other bailee continues in possession of them. or 3. unless such part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention. or other bailee for the purpose of transmission to the buyer. Subject to the provisions of this Title. c) Loss of lien: the unpaid seller losses his lien when: 1. As a consequence of his lien over the goods. e) Revival of lien: the unpaid seller’s lien is revived if the goods are returned by the buyer in wrongful repudiation of the contract. 2. he delivers the goods to the carrier or other bailee. The unpaid seller of goods. and he will then become entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession. the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases. without court order. having a lien thereon. unless such was intended to operate as symbolical delivery of the whole. namely: (1) Where the goods have been sold without any stipulation as to credit. or 2. he may resume possession of the goods at any time while they are in transit. water. (n) Art 1528. the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu. when the buyer of goods is or becomes insolvent. takes delivery of them from such carrier or other bailee. as owner. Goods are in transit within the meaning of the preceding article: (1) From the time when they are delivered to a carrier by land. could retain the goods or resell them to another. he may refuse to deliver them if the buyer becomes insolvent. The lien is not lost by the mere fact that the seller had already obtained judgment for the price. without prejudice to his liability for damages for any breach of contract committed by him. that is to say. the unpaid seller could resell the goods to another or resume ownership over them. or air. or if the term of the credit had expired and the price has not been paid. (2) If the goods are rejected by the buyer. (2) When the buyer or his agent lawfully obtains possession of the goods. even if the seller has refused to receive them back. consigning them to the buyer under a straight or non-negotiable bill of lading. b) If the unpaid seller agrees to sell on credit. Where an unpaid seller has made part delivery of the goods. (n) Art 1529. (n) 28 . b) If ownership had passed to the buyer but the goods are still in the possession of the seller or are in transit to the buyer: the unpaid seller could withhold delivery or stop the goods in transit should the buyer become insolvent. Subject to the provisions of this Title.

If. may rescind the transfer of title and resume the ownership in the goods. The seller is bound to exercise reasonable care and judgment in making a resale. (n) Art 1534. however. The seller shall not thereafter be liable to the buyer upon the contract of sale. a negotiable document of title representing the goods has been issued by the carrier or other bailee. or other bailee in possession of the goods. In the latter case the notice. Where the goods are of perishable nature. must be given at such time and under such circumstances that the principal. the buyer acquires a good title as against the original buyer. by the exercise of reasonable diligence. or according to the directions of. (n) Art 1535. an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods.(1) If the buyer. but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale. The unpaid seller may exercise his right of stoppage in transitu either by obtaining actual possession of the goods or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. An unpaid seller having the right of lien or having stopped the goods in transitu. (n) Art 1533. however. If the goods are delivered to a ship. When notice of stoppage in transitu is given by the seller to the carrier. whether they are in the possession of the carrier as such or as agent of the buyer. (2) If. as authorized in this article. and it is immaterial that further destination for the goods may have been indicated by the buyer. the remainder of the goods may be stopped in transitu. 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. Subject to the provisions of this Title. directly or indirectly buy the goods. obtains delivery of the goods before their arrival at the appointed destination. or his agent in that behalf. or other 29 . where he expressly reserved the right to do so in case the buyer should make default. may prevent a delivery to the buyer. truck. or his agent in that behalf. he must redeliver the goods to. Where a resale is made. He cannot. 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. It is not essential to the validity of resale that notice of an intention to resell the goods be given by the seller to the original buyer. but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the right of rescission was asserted. If part delivery of the goods has been made to the buyer. but may recover from the buyer damages for any loss occasioned by the breach of the contract. the seller. he shall not obliged to deliver or justified in delivering the goods to the seller unless such document is first surrendered for cancellation. The expenses of such delivery must be borne by the seller. (n) Art 1532. But where the right to resell is not based on the perishable nature of the goods or upon an express provision of the contract of sale. It is not essential to the validity of a resale that notice of the time and place of such resale should be given by the seller to the original buyer. (3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf. The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other overt act an intention to rescind. the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made. or airplane chartered by the buyer. Such notice may be given either to the person in actual possession of the goods or to his principal. It is not necessary that such overt act should be communicated to the buyer. the unpaid seller's right of lien or stoppage in transitu is not affected by any sale. freight train. to be effectual. it is a question depending on the circumstances of the particular case. and subject to this requirement may make a resale either by public or private sale. after the arrival of the goods at the appointed destination. or where the seller expressly reserves the right of resale in case the buyer should make default. or where the buyer has been in default in the payment of the price for an unreasonable time. or where the buyer has been in default in the payment of the price for an unreasonable time.

He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale. Right of Stoppage. as authorized in this article. it must be delivery to keep. of the seller's claim to a lien or right of stoppage in transitu. When notice of stoppage in transit is given to the carrier. there is constructive possession of the whole. To terminate the transit by delivery to a middleman. the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made. the seller’s right of stoppage will not be cut off as the transferee acquires no greater or added rights than his transferor. b) Goods are considered to be in transit from the time they are delivered to a carrier or other bailee by the seller for the purpose of transmission to the buyer. a negotiable document of title representing the goods has been issued by the carrier. or when the carrier. the latter shall not be obliged to deliver the goods unless such document is first surrendered for cancellation. a negotiable document of title has been issued for goods. no seller's lien or right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom such document has been negotiated. an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. Where the buyer has taken some portion of the whole mass which was then susceptible of possession. obtaining actual possession of the goods or 2. or where the buyer has been in default in the payment of the price for an unreasonable time. 3. f) Sale of goods in transit: the unpaid seller’s right of lien or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made unless the seller has assented thereto.) Where the document of title is a straight bill of lading. It is not essential to the validity of resale that notice of an intention to resell the goods be given by the seller to the original buyer. If. enters into a new contract with the buyer or his agent. however. unless the seller has assented thereto. (n) a) Old common law remedy which is an extension of the lien for the price and entitles the unpaid seller to resume possession of the goods while they are in transit before the goods come in possession of the vendee if the later is or becomes insolvent. the seller. the remainder of the goods may be stopped in transitu. The seller is bound to exercise reasonable care and judgment in making a resale. e) If there was partial delivery of the goods to the buyer. It is not essential to the validity of a resale that notice of the time and place of such resale should be given by the seller to the original buyer. the buyer acquires a good title as against the original buyer. 1) Where a negotiable document of title has been issued for the goods. He cannot. unless such part delivery has been made under such circumstances as to show an agreement with the buyer to give up possession of the whole. or according to the directions of. however. But where the right to resell is not based on the perishable nature of the goods or upon an express provision of the contract of sale. (n) 30 . but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. or where the seller expressly reserves the right of resale in case the buyer should make default. d) Goods are no longer in transit if the buyer or his agent obtained delivery of the goods even before they reached their ultimate destination.disposition of the goods which the buyer may have made. 2. until the buyer or his agent takes delivery of them from the carrier. by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Where the goods are of perishable nature. or when the goods arrived at the ultimate destination but the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent. or other bailee who issued such document. no seller’s lien or right of stoppage in transitu cannot defeat the rights of any purchaser for value in good faith to whom such document has been negotiated. Where a resale is made. not to transport. upon arrival of the goods at the ultimate destination. whether such negotiation be prior or subsequent to the notification to the carrier. and subject to this requirement may make a resale either by public or private sale. directly or indirectly buy the goods. c) Goods are still considered to be in transit even if they reached their ultimate destination when the buyer rejects them and they remain in the possession of the carrier. the latte must redeliver the goods to. If however. Resale Art 1533. How Exercised-The unpaid seller may exercise his right by 1.

having a right of lien or having stopped the goods in transitu. the buyer is liable for the difference. d) Damages recoverable: Whether the action is for damages or to recover loss from a resale. An unpaid seller having the right of lien or having stopped the goods in transitu. the term “rescind” is equivalent to return of the title over the undelivered goods to the seller and the right to recover damages for loss due to breach of contract. the purpose is to compensate the seller for loss for breach of contract. or where the buyer has been in default in payment of the price for an unreasonable time. The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested 45 by notice to the buyer or by some other overt act an intention to rescind. XI. It is not essential to the validity of a resale that previous notice of an intention to resell or notice of the time and place or resale be given to the original buyer. and manner of delivery Art. Apart from any such contract. PERFORMANCE OF THE CONTRACT A. but in case of a contract of sale of specific goods. time. Where the goods at the time of sale are in the possession of a third person. and if not his residence. Place. or usage of trade to the contrary. After rescinding the transfer of title. express or implied. the vendor. if the purchaser fails to take delivery and pay the price. is entitled to resell. the unpaid seller. The seller shall not thereafter be liable to the buyer upon the contract of sale. where he expressly reserved the right to do so in case the buyer should make default. It is not necessary that such overt act should be communicated to the buyer. may resell the goods and recover from the buyer damages for breach of contract. or where the buyer has been in default in the payment of the price for an unreasonable time. Rescission45 Art 1534. c) In case he sells them at a loss. e) Due diligence must be exercised to secure the highest price obtainable in the best available market. 4. without need of first rescinding the contract judicially. b) The resale may be in a public or private sale. the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges MERCHANTS REFRIGERATING CORP v TITMAN: A rescission of the contract would accomplish the following results: (1) termination of the original contract (2) return of the title to the undelivered portion of the goods to the seller (3) release of the buyer from his obligation to take and pay for the balance of the goods (4) the unpaid seller would be free to pursue its remedies on quantum meruit to recover what it had delivered to the buyer (Merchants Refrigerating Co. then that place is the place of delivery. but no time for sending them is fixed. which to the knowledge of the parties when the contract or the sale was made were in some other place. the seller may still recover damages from the buyer for breach of contract. (n) a) An unpaid seller having the right of lien or having stopped the goods in transitu may rescind the transfer of title and resume ownership in the goods where he expressly reserved the right to do so in case the buyer defaults. and if obliged to sell for less than the contract price. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract. Where by a contract of sale the seller is bound to send the goods to the buyer. The burden of showing it was exercised is on the vendor. the seller is bound to send them within a reasonable time. or where the seller expressly reserves the right of resale in case the buyer should default in payment. DELIVERY OF THE THING SOLD 1. between the parties. As used in Art. but may recover from the buyer damages for any loss occasioned by the breach of the contract. may rescind the transfer of title and resume the ownership in the goods.a) When the goods are of perishable nature. The transfer of title shall not be held to have been rescinded by the unpaid seller until he manifests by notice to the buyer or by some overt act an intention to rescind. The seller is entitled to any profit he may make out of the resale. he is entitled to recover the difference from the original buyer. but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the right of rescission was asserted. 1534. the place of delivery is the seller's place of business if he has one. but the seller cannot buy them directly or indirectly. Thus. v Benjamin Titman Corp) 31 . 1521. express or implied. or where the buyer has been in default for an unreasonable length of time.

When time is of essence46 Time is of the essence of the contract whenever the intention of the parties is clear that performance of its terms shall be accomplished exactly at the stipulated day or implied from the nature of the contract itself. Where by agreement. (n) Art. rules shall be observed: 1. xxx In reciprocal obligations. SMITH BELL v MATTI: In this case. 1169. What is a reasonable hour is a question of fact. SOLER v CHELSEY: Defendant cannot be compelled to accept delivery as he gave his consent to the contract. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the terms as provided in Article 1198. he is bound to send them within the time agreed upon. In case of sale of specific goods which. (1466) Art. (1100a) 6. or if no time was fixed. (1466) a) Generally. delay by the other begins. vendor is bound to deliver the thing sold its accessions and accessories in condition in which they were upon perfection of the contract. his residence. All of the fruits of the thing shall pertain to the vendee from the time of the perfection of the contract but he does not acquire a real right over it until they are delivered to him. at the time of the sale. If the sale involves a specific thing. the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. This assertion was an essential element of the contract. in consonance with the rule in reciprocal obligations. within a reasonable time. delivery could hence be made within a reasonable time. From the moment one of the parties fulfills his obligation. REPUBLIC V LITTON: Court ruled for plaintiff. the ff. payment and delivery of the thing sold are concurrent acts. there is NO delivery UNLESS and UNTIL such their person ACKNOWLEDGES to the buyer that the holds the goods on the latter’s behalf. DEMAND or TENDER of PAYMENT shall be made at a reasonable hour. time is not of the essence. The vendor shall not be bound to deliver the thing sold. 5. 32 . It was shown that the goods were intended for election purposes. the seller is bound to send the goods to the buyer. When the time of delivery is not fixed in the contract.to the buyer that he holds the goods on the buyer's behalf. 1536. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. REASONABLE TIME for delivery is determined by the circumstances attending the particular transaction 46 4. neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Absent stipulation to the contrary. 1198. the buyer should take delivery from such place. they were not yet shipped at the time. are known to the parties to be in ANOTHER PLACE. the seller had done all that could be expected when he placed the machinery at the disposal of the buyer on Apr 1919. Art. and the purchase order provided that the stipulated delivery period shall not be exceeded. gathering and preservation of the fruits. 8. or if no period for the payment has been fixed in the contract. 1524. Agreement of the parties determines whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer. 1524. the buyer should take delivery of the goods from the seller’s place of business if he has one. and if none. on the assurance of the plaintiff that the goods were “on the way” when as a matter of fact. (1467a) Art. Unless otherwise agreed. Where the goods at the time of the sale are in the possession of a THIRD PERSON. 2. or if no period for the payment has been fixed in the contract. the subject matter or the circumstances under which the contract is made When not bound to deliver Art. if the vendee has not paid him the price. The vendee has the obligation to pay the expenses incurred by the vendor in the production. if the vendee has not paid him the price. EXPENSES of placing the goods in a DELIVERABLE STATE shall be borne by the SELLER unless otherwise stipulated. the and the the 7. The vendor shall not be bound to deliver the thing sold. The debtor shall lose every right to make use of the period: 3.

(n) a) GENERAL RULE: the buyer is not bound to accept delivery of goods by installments. the buyer has used or disposed of the goods delivered before he knows that the seller is not going to perform his contract in full. unless he immediately gives new ones equally satisfactory. however. the buyer shall not be liable for more than the fair value to him of the goods so received. 1198 which provides that the vendee shall lose the benefit of the term when. and when through a fortuitous event they disappear. the buyer may accept the goods which are in accordance with the contract and reject the rest. If the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate. which are to be separately paid for. Delivery of wrong quantity The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the stipulated term in the following cases: 1. it depends in each case on the terms of the contract and the circumstances of the case. no longer holds. the buyer may reject the whole of the goods. the buyer of goods is not bound to accept delivery thereof by installments. 1583. or whether the breach is severable. unless he gives a guaranty or security. after the obligation has been contracted. the buyer may reject them. but if the buyer accepts or retains the goods so delivered. giving rise to a claim for compensation but not to a right to treat the whole contract as broken. the buyer may accept the goods included in the contract and reject the rest. In the preceding two paragraphs. (1129a) take delivery of or pay for one more installments. “Insolvency” under this article cannot be understood in the sense of a judicially declared insolvency or suspension of payments. When the guaranties or securities given were impaired through the vendee’s acts or were lost or destroyed through a fortuitous event. unless he gives a guaranty or security for the debt. If. Sale of Goods a. Delivery by installment Art. When the vendee becomes insolvent 2. When the vendee attempts to abscond NOTE: Art. in consideration of which the creditor agreed to the period. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell. he must pay for them at the contract rate. 1467 has been replaced by Art. (3) When by his own acts he has impaired said guaranties or securities after their establishment. because the debtor cannot give a security or guaranty in such case. or the buyer neglects or refuses without just cause to 33 . Unless otherwise agreed. (4) When the debtor violates any undertaking. he becomes insolvent. 2. unless he gives new equally satisfactory guaranties or securities 4. Where there is a contract of sale of goods to be delivered by stated installments. EXCEPTION: When otherwise stipulated b) In case of a contract that calls for the delivery of the goods at stated intervals which are to be paid for separately. if the subject matter is indivisible. (2) When he does not furnish to the creditor the guaranties or securities which he has promised.(1) When after the obligation has been contracted. knowing that the seller is not going to perform the contract in full. Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract. he becomes insolvent. (5) When the debtor attempts to abscond. The doctrine therefore in Visayan Distributors v Flores interpreting insolvency in Art 1467 old CC as something which must be judicially declared or something which involves suspension of payments. Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell. When the vendee violates any condition for which he was granted the term 5. 1522. When the vendee does not furnish the guaranties or securities he has promised 3. giving rise merely to a claim for damages b. Art. the terms of the contract and the circumstances surrounding the case would determine whether prompt payment or delivery is of the essence such that a delay or breach would entitle the aggrieved to treat the entire contract as broken OR to regard each breach as severable. SEVERABILITY depends on whether the breach is so material as to justify the aggrieved party in refusing to proceed further with the entire contract or so immaterial that the breach is severable. 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. and the seller makes defective deliveries in respect of one or more installments.

3. in which case. The same rule shall be applied when two or more immovables as sold for a single price. special stipulation or course of dealing to the contrary. there is a greater area or number in the immovable than that stated in the contract. Where the seller delivers the goods mixed with goods of a different description not included in the contract. at the rate of a certain price for a unit of measure or number. (1470a) Art. there shall be no increase or decrease of the price. and reject the rest. (NOTE: “fair value” means the price of the goods in the open market. The provisions of the two preceding articles shall apply to judicial sales. the vendor shall be obliged to deliver to the vendee.The provisions of this article are subject to any usage of trade. (n) a) GENERAL RULE: The buyer is not bound to accept delivery of a quantity of goods more or less than that agreed upon or to accept goods which are of a description different from that agreed upon. if the latter should demand it. The same shall be done. Sale of Immovables Art. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract. REMEDIES: price and the rescission of the contract. If the buyer has used or disposed of the goods before knowing the inability of the seller to deliver the rest. he shall suffer a reduction in the price. in the latter case.) 3. in the case of the preceding article. besides mentioning the boundaries. in this case. the buyer may accept the goods which are in accordance with the contract. In the sale of real estate. made for a lump sum and not at the rate of a certain sum for a unit of measure or number. the buyer may reject the whole. unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. the buyer may reject them. which is indispensable in every conveyance of real estate. all that may have been stated in the contract. 1539. in proportion to what is lacking in the area or number. shall only take place at the will of the vendee. the vendor shall be bound to deliver all that is included within said boundaries. EXCEPTION: There is usage of trade. Nevertheless. If he accepts the whole area. should he not be able to do so. but. 1540. the buyer is bound to pay for them at the contract rate. if any part of the immovable is not of the quality specified in the contract. in conformity with the following rules: If the sale of real estate should be made with a statement of its area. 1543. the buyer shall pay not more than the fair value of the goods. 34 . b) Delivery by the seller of only a part of an entire contract would itself be an indication that he might not intend to fully perform. if the vendee would not have bought the immovable had he known of its smaller area of inferior quality. the buyer may reject the excess. but if. PRESUMPTION: Buyer knows that the seller might intend to not fully perform. or course of dealing between the parties. (1471) Art. If.) 2. he may rescind the sale. although there be a greater or less area or number than that stated in the contract. in which case. counted from the day of delivery. when the inferior value of the thing sold exceeds one-tenth of the price agreed upon. and. knowing the inability of the seller to deliver the rest. (1469a) Art. absent any statement to the contrary. the vendee may choose between a proportional reduction of the a. the lack in the area be not less than one-tenth of that stated. Where the seller delivers a quantity less than that agreed upon. Where price is at certain rate per unit of measure The seller is bound to deliver the entire land sold in accordance with the terms of the contract. the vendee may accept the area included in the contract and reject the rest. (The law applies peculiarly to installment and divisible contracts. The rescission. provided that. even when it exceeds the area or number specified in the contract. If the buyer accepts or retains that goods delivered. (1472a) 1. unless the subject matter is indivisible. even when the area is the same. unless the subject matter is indivisible. The actions arising from Articles 1539 and 1542 shall prescribe in six months. If the quantity delivered is more than that agreed upon. its area or number should be designated in the contract. 1541. he must pay for the same at the contract rate. if said purchaser accepts a partial delivery on an entire contract. (n) Art. special agreement. should this be not possible. the buyer may reject the whole. 1542.

he is bound. (n) a) The buyer is deemed to have accepted the goods when: 1. the consent must have been obtained by mistake or fraud (contract may then be voidable. when the seller tenders delivery of goods to the buyer. and until the examination is completed or waived.) 4. 35 . upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid the price. after the lapse of a reasonable time.) Art. to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. 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." or otherwise. he intimates to the seller that the has accepted them 2.48 c) If the vendor fails to deliver all the land included within said boundaries. He may however waive this right by simply refusing to inspect the goods. or when. which he has not previously examined. Art. but the purchaser had previously investigated and inspected the condition of the land. the buyer is not entitled to examine the goods before the payment of the price. Where goods are delivered to the buyer. Rescission is proper. he retains the goods without intimating to the seller that he has rejected them. and he does any act in relation to them which is inconsistent with the ownership of the seller. the purchaser cannot later on allege that the vendor made false representation. 1585. taking them as they are or by any other similar act. such as making use of them as owner. 48 ROBLE v ARBASA: A vendee of land. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them. and had ample opportunity to do so. 1539.GENERAL RULE: The vendee has to option to demand a proportionate reduction of the price or rescission of the contract: if price is fixed at a certain rate per unit of measure and the area is delivered is less than that stated in the contract. when sold in gross or with the description "more or less" with reference to its area. 1542. The buyer would have not have bought the land had he known of the smaller area or inferior quantity. does not thereby ipso facto take all risk of quantity in the land. making alterations in the goods or subjecting it to the process of 47 AZARRAGA v GAY: Where the price was for a lump sum and the area which was stated in the contract to be 98 hectares. the area should also be stated in the contract. as in such a case. whether such terms are indicated by marking the goods with the words "collect on delivery. Sale for a lump sum47 Art. Manifestation of acceptance b. Exercise of acts of ownership over the goods is a manifestation of acceptance. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency. or when the goods have been delivered to him. the vendee shall have the option to demand a reduction in the price in proportion to the deficiency in the area stated in the contract or a rescission of the contract (Actions prescribe in six months from date of delivery. or even if the area is correct but part of the land is not of the quality stated in the contract EXCEPTION: Where the entire land is not of the quality stated in the contract. ASIAIN v JALANDONI: There was mutual mistake which was so material as would go into the essence of the contract. Inspections and Acceptance a. as where part of the land belongs to a third person. Right of inspection Art. b. see above. there shall be no increase or decrease in the price. 1584. after the lapse of a reasonable time. he retains the goods without intimating to the seller that he has rejected them. Unless otherwise agreed. 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 3. on request. whether the actual area delivered turned out to be greater or less than that stated in the contract. in the absence of agreement or usage of trade permitting such examination. a) If the sale of real property is for a lump sum. (n) The buyer is entitled to examine the goods to decide whether he will become the owner. in accordance with an order from or agreement with the buyer. see above. the vendor shall be bound to deliver all that is included within said boundaries and there shall be no increase or decrease in the price whether the area so delivered be greater or less than that stated in the contract. turned out to be only 60 hectares. Where goods are delivered to a carrier by the seller. he is under NO obligation to accept them. b) If besides mentioning the boundaries.

c. and he refuses to accept them. where goods are delivered to the buyer. 1589. in the following three cases: (1) Should it have been so stipulated. when the buyer's refusal to accept the goods is without just cause. after acceptance of the goods. the title thereto passes to him from the moment they are placed at his disposal. 1590. if the thing delivered produces fruits or income. or should he have reasonable grounds 36 . Liability for interest Art. Unless otherwise agreed. but not an assent that the goods fulfill the description and terms of the contract. b) Acceptance of delivery means an ASSENT to become OWNER of the goods on the part of the buyer. the seller shall not be liable therefor. Breach of warranty Art. but 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. (n) Art. (1500a) Art. PAYMENT OF PRICE 1. (n) Art.manufacture. except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer. 1582. 1586. The buyer shall owe interest on the price from the time the thing is delivered up to the time of payment if there is stipulation requiring interests. if. having the right so to do. but it is sufficient if he notifies the seller that he refuses to accept them. the buyer may RESCIND the contract by returning or offering to return the goods to the seller and recover the price which had been paid. sufficient that the buyer notifies the seller that he refuses to accept the goods. If there is no stipulation as specified in the first paragraph of article 1523. (1501a) B. 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. Refusal to accept . in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract. But. when the goods are delivered to the buyer and he has a right to refuse to accept them. Refusal to accept Art. (n) a) The purpose of the notice of breach of warranty is to PROTECT the seller against belated damage claims which would prevent the seller from making an adequate and proper investigation of his alleged liability. he need not return them. 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. (n) Art. he is not bound to return them to the seller. It is Art. 1582. or even if there is none. Suspension of Payment a) Unless otherwise agreed. and thereafter. (2) 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. the former becomes the depository of the rejected goods. the goods remain at the seller's risk until the ownership therein is transferred to the buyer. 1587. If he voluntarily constitutes himself a depositary thereof. to enable him to determine whether to accept or reject the goods. See above. If the time and place should not have been stipulated. 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. the goods are at the buyer's risk from the time of such delivery. (3) Should he be in default. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price. Should the vendee be disturbed in the possession or ownership of the thing acquired. he shall be liable as such. 1588. 1589. 1504. Unless otherwise agreed. EXCEPTION: Buyer’s right to make a test of goods. or if the buyer incurs in default from the time of judicial or extra-judicial demand for payment 1. e. b) However. but only if necessary. from the time of judicial or extrajudicial demand for the payment of the price. the payment must be made at the time and place of the delivery of the thing sold. (2) Should the thing sold and delivered produce fruits or income. where title already passed to the buyer and there was a breach of warranty. d. or ought to know of such breach. In the absence of express or implied agreement of the parties.

Sale of Real Property Within one year. 1560. This is understood to be without prejudice to the rights of third persons who have acquired the thing. The power to rescind obligations is implied in reciprocal ones. or sue for damages. by a vindicatory action or a foreclosure of mortgage. the court may not grant him a new term. with payment of damages in either the rescission claimed unless there is just cause authorizing the granting of a new period. unless there be just cause authorizing the fixing of a period. not mentioned in the agreement. in case one of the obligors should not comply with what is incumbent upon him. the buyer could still pay the price EVEN after the expiration of the period to pay. Neither right can be exercised if the non-apparent burden or servitude is recorded in the Registry of Property. to be computed from the execution of the deed. P. the cause is imputable to the vendor or his successor in interest. the vendee may bring the action for rescission. b) If the third person claims a servitude on the thing sold. (1560a) a. when the vendor brought an action against the buyer to collect the balance.49 2. Otherwise. the remedy of the buyer is to demand rescission of the contract or payment of the proper indemnity. unless he should prefer the appropriate indemnity. he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease. in case of default in payment. the vendee shall be bound to make the payment. In the sale of immovable property. A mere act of trespass shall not authorize the suspension of the payment of the price. (1483a) Art. even after he has chosen fulfillment. unless the latter gives security for the return of the price in a proper case. 1592. The court shall decree the rescission claimed. 1191. he may only bring an action for damages within an equal period. as in this case. If the immovable sold should be encumbered with any non-apparent burden or servitude. After the compromise. c) In order that the buyer may have a right to suspend payment. he may ask for the rescission of the contract. in accordance with Articles 1385 and 1388 and the Mortgage Law. unless there is an express warranty that the thing is free from all burdens and encumbrances. But such right ceased from the time a compromise was reached between the co-owners whereby the vendor agreed to give to the coowner two-thirds of whatever he could collect from the buyer. if the latter should become impossible.50 b.D. R. even if there is a stipulation providing for ipso jure rescission. The injured party may choose between the fulfillment and the rescission of the obligation. or it has been stipulated that. The lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased. before such stipulation could be given effect. After the demand. 6553. (1504a) Art. One year having elapsed. 23 and 24) 49 BARENG v CA: The vendee had a right to suspend payment from the time he was informed of the co-owner’s claim. as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act.A. There is a mere act of trespass when the third person claims no right whatever. the law requires the seller to demand the resolution of the contract from the buyer judicially or by a notarial act. even after the expiration of the period. of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof. He may also seek rescission. with the payment of damages in either case. and not through a mere threat or claim of a third person. a) Approved on 26 Aug 1972. notwithstanding any such contingency. 37 . 957 (Secs. (1502a) a) “disturbance” or threat of disturbance – must come through a vindicatory action or foreclosure of mortgage. 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. to be counted from the date on which he discovered the burden or servitude. it is absolutely necessary that the cause of disturbance or danger be based on a fact arising before the sale or if it arose after the sale. In absolute sales of real property.to fear such disturbance. said buyer owed interests on the amount from the time of the filing of the complaint. Effect of Non-payment Art. 1664. the vendee may pay. the Realty Installment Buyer Protection Act declared 50 DELA CRUZ v LEGAZPI: The injured party may choose between fulfillment and rescission of the obligation. (1124) Art. but the lessee shall have a direct action against the intruder.

If the other party has promised that the condition should happen or be performed. refuse to accept goods and maintain action for damages 4. he has a right to pay.. Layug is basically an action for annulment of contract. like a promise that the goods are of a certain kind and character or that certain state of facts would exist. VALARAO v CA: The Court held that the rescission of the contract and the forfeiture of the payments already made could not be effected as per the pertinent provision of the aforementioned law.835. c) In the same case. without additional interests. EXPRESS WARRANTIES a) Warranty – where one party promised that the contingency or some act fixed by the contract shall be performed. a kindred concept of rescission. deposits or options in the contract shall be included in the computation of the total number of installments made. accept goods + maintain an action for damages 2.00. the arrears within a grace period of one month for every year of installment payments made. sell or assign his rights. Section 3(a) of Maceda Law provided that a buyer “…who has paid at least two years of installments is entitled to pay. if the contract is cancelled. against onerous and oppressive conditions b) R.A. or return (or offer to return) goods + recover price paid 1.76 or P90. in an action for rescission (also often termed as resolution). Distinguished from condition Art 1545. unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act). f) In case of less than two years of installments were paid. if any. and only upon full payment of the cash surrender value to the buyer. which is hereby fixed at a rate of one month grace period for every year of installment payments made. Where the obligation of either party to a contract of sale is subject to any condition which is not performed. The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. to be evidenced in a notarial instrument.860. d) Actual cancellation shall not take place until after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act.035. in sale or financing of real estate on installment payments where the buyer has paid at least two years of installments. apartments. Hence. g) During the grace period or before the actual cancellation of the contract. Also. the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects.e. pay in advance any installment or the full unpaid balance of the price without interest XII. commercial buildings and lands sold under R. also. Not only is an action for reconveyance conceptually different from an action for rescission but that. 6552. update his account 3. The right to pay the arrears within the grace period could only be availed of by the buyer once in every five years of the life of the contract and its extensions. rescind + refuse to accept goods. and failure of which gives rise to an action for its breach. If the buyer fails to pay within the grace period. Additionally.76 more than the contract price of P224. WARRANTIES ACTIVE REALTY v DAROYA: In this case. including residential condominiums. the promise constitutes a warranty. equivalent to 50% of total payments and an additional 5% for every year after five years of the life of the contract and its extensions. Breach: the buyer may 1. to a third person 2. A. the seller may cancel the contract within 30 days from receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act.51 51 e) Down-payments. excluding industrial lots. 3844 as amended. the Court. respondent has already paid in four (4) years a total of P314.19 i. she had a total grace period of three months from 31 December 1990 OLYMPIA HOUSING v PANASIATIC TRAVEL: Unfortunately for petitioner. the grace period shall be not less than 60 days from the date the installment became due.A. the buyer shall have the right to: 1. such first mentioned party may 38 . without additional interest the unpaid installment due within the total grace period earned by him. since the private respondent was entitled to a one-month grace period for every year of installments paid. such party may refuse to proceed with the contract or he may waive performance of the condition. it would be incorrect to apply Layug c IAC to the instant case. if any. the records clearly show that the petitioner failed to comply with the mandatory twin requirements for a valid and effective cancellation under the law.that it is a public policy to protect buyers of realestate on installments. may authorize for a just cause the fixing of a period. the seller shall refund to the buyer the case surrender value of payments made. he failed to send a notarized notice of cancellation and refund the cash surrender value. instead of decreeing rescission. sec 2. provides that in case such buyer defaults in the payment of the succeeding installments. whereas the instant case before the Court is one for recovery of possession on the thesis of a prior rescission of the contract covering the property. accept goods + set up breach of warranty as a recoupment in diminution/ extinction of price 3.

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) Condition – an uncertain event or contingency fixed by parties, the existence or happening of which was necessary to the efficacy of the contract, and failure of which permits the injured party to treat the contract as at an end, but creates no right of action. Where a condition is not performed, the buyer may refuse to proceed with the contract, or accept the goods and waive performance of the condition.52 Distinctions according to Villanueva (Law on Sales , 2004) Condition Generally goes the root of existence of obligation Warranty Goes into the performance of such obligation, and in fact may constitute an obligation in itself May form part of obligation by contract or provision of law, without parties having agreed thereto Whether express or implied, relates to subject matter itself or to the obligations of the seller as to the subject matter of the sale

the seller made such affirmation or statement as an expert and it was relied upon by the buyer. (n) a) Warranty – an affirmation of fact or any promise by seller relating to the thing which has a natural tendency to induce the buyer to purchase the same, relying on such promise of affirmation b) Opinion/dealer’s talk – an affirmation of the value of the thing or any statement of the seller’s opinion shall not be construed as a warranty, unless the seller made such an affirmation as an expert and it was relied upon by the buyer Test: whether the vendor assumes to assert a fact of which the buyer is ignorant, in which case it is a warranty, or whether it is merely an expression of an opinion or judgment on the part of the seller on a matter of which the seller has no special knowledge and on which the buyer may be expected also to have an opinion or exercise his judgment.

into the the

Must be stipulated by the parties in order to form part of an obligation May attach itself either to obligation of seller to deliver possession or transfer ownership over subject matter of sale

“In good condition” v. “Excellent quality” – the first relates to the quantity, kind or condition of the goods sold, it is an affirmation of fact or promise, and not a mere expression of an opinion; the second is not an express warranty and the purchaser must rely on the implied warranty that the goods are merchantable; mere expression of an opinion53

3.
53

Distinguished representation54

from

false

2.
talk

Distinguished from opinion, dealer’s

Art 1546. Any affirmation of fact or any promise by the seller relating to the thing 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 purchase 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
52

SONGCO v SELLNER: Opinion or dealer’s talk is not warranty. Opinion or dealer’s talk is the usual or ordinary means used by sellers to get a high price and is understood as affording to buyers no ground for omitting to make inquiries. Caveat emptor. A man who relies on such an affirmation does so at his own peril and must take the consequences of his imprudence. What would make a misrepresentation void: (a) false representation is as to matters of fact substantially affecting buyer’s interest, and not as to matters of opinion, judgment, probability or expectation; (b) the party to the contract who has special/expert knowledge takes advantage of the ignorance of another to impose upon him the false representation. MOLES v IAC: Ordinarily, what does not appear on the face of the written instrument should be regarded as dealer's or trader's talk; conversely, what is specifically represented as true in said document, as in the instant case, cannot be considered as mere dealer's talk
54

ROMERO v CA, LIM v CA: distinguished condition imposed on perfection on the contract vs condition imposed on performance of obligation; failure to comply with 1st condition results in failure of contract, while failure to comply with 2nd only gives other party option to either refuse to proceed with the sale or to waive the condition as mandated under Art 1545.

PHIL. MANUFACTURING v. Go JUCCO: An intention to deceive or mislead the other party to his prejudice is an essential element of fraud. Concealment of facts does not necessarily amount to false representation, unless there was an active misstatement of fact or a partial statement of fact, such that withholding of that which is not stated makes

39

B. IMPLIED WARRANTIES55

1.

Implied warranty of title

Art 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith. (1476) Art 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. (1477) Art 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. (1478) Art 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. (1479a)

Art 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. (n) Art 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) Art 1549. The vendee need not appeal from the decision in order that the vendor may become liable for eviction. (n) Art 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. (n) Art 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. (n) Art 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment. (n) 56
that which is stated absolutely false.
55
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SANTIAGO LAND v CA: Although in voluntary sales or transaction, the vendor can be expected to defend his title because of his warranty to the vendees: no such obligation is owed by the owner whose land is sold at execution sale.

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Art 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee loses the thing acquired or a part thereof. (1480)

there is an implied warranty that the goods shall be of merchantable quality. (n) Art 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. (n) Art 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade. (n) Art 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. (n) Art 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. (1485) Art 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. (1486a) Art 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. (1487a) Art 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. (1488a) Art 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the judgment debtor shall not be liable for damages. (1489a)

Art 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. (1481a) Art 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. (1482a)

2.

Implied warranty against encumbrances or defects57

hidden

Art 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. (1484a)

Art 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; (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),
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MOLES v IAC : …we have to consider the rule on redhibitory defects contemplated in Article 1561 of the Civil Code. A redhibitory defect must be an imperfection or defect of such nature as to engender a certain degree of importance. An imperfection or defect of little consequence does not come within the category of being redhibitory. INVESTMENTS AND DEV’T INC. v CA: “Implied warranty against hidden faults or defects under Art 1547 of the Civil Code cover only those that make the object of the sale unfit for the use for which it was intended at the time of the sale, and that in the sale of agricultural land, the existing tenancy relationship pertaining thereto cannot be considered as hidden fault or defect.

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based on the faults or defects of animals. (1490) Warranties in sale of animals Art 1577. The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample. If the sale be rescinded. or if he fails to return or to offer to return the goods to the seller in substantially as Art 1562. Actions arising from the provisions of the preceding ten articles shall be barred after six months. (1497a) Art 1579. as follows: 42 . or if he fails to notify the seller within a reasonable time of the election to rescind. (n) Art 1565. If the animal should die within three days after its purchase. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade. must be brought within forty days from the date of their delivery to the vendee. return them or offer to return them to the seller and recover the price or any part thereof which has been paid. makes known to the seller the particular purpose for which the goods are acquired. (1499) Sale by sample or description Art 1481. the vendor shall be liable if the disease which cause the death existed at the time of the contract. and if the contract be by sample as well as description. there is an implied warranty that the goods shall be of merchantable quality. In a sale of goods. (1496a) Art 1578. (n) 3. the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample. The redhibitory action. Where there is a breach of warranty by the seller. and maintain an action against the seller for damages for the breach of warranty. no other remedy can thereafter be granted. if the seller is a dealer in goods of that kind. When the buyer has claimed and been granted a remedy in anyone of these ways. the vendee being answerable for any injury due to his negligence. (n) Art 1564. there is an implied warranty that the goods shall be reasonably fit for such purpose. 1599. expressly or by implication. from the delivery of the thing sold. (2) Accept or keep 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. (n) Art. there is no warranty as to its fitness for any particular purpose. unless there is a stipulation to the contrary. (n) Art 1563. it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description. he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest. the vendee shall also enjoy the right mentioned in article 1567. (1498) Art 1580. In the contract of sale of goods by description or by sample. and not arising from the redhibitory fault or defect. there is an implied warranty or condition as to the quality or fitness of the goods. at his election: (1) Accept or keep the goods and set up against the seller. 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. without prejudice to the provisions of the second paragraph of Article 1191. and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not). In the case of contract of sale of a specified article under its patent or other trade name. This action can only be exercised with respect to faults and defects which are determined by law or by local customs. (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). Where the goods have been delivered to the buyer. In the case of a contract of sale by sample. In the sale of animals with redhibitory defects. but he must make use thereof within the same period which has been fixed for the exercise of the redhibitory action. Implied warranty of quality (1) Where the buyer. the animal shall be returned in the condition in which it was sold and delivered. the buyer may.Art 1571. (3) Refuse to accept the goods. the breach of warranty by way of recoupment in diminution or extinction of the price.

such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. and (6) stipulate the period within which. Where the buyer is entitled to rescind the sale and elects to do so.Distributors and retailers covered by this Article shall keep a record of all purchases covered by a warranty or guarantee for such period of time corresponding to the lifetime of the product's respective warranties or guarantees. producer. . under its warranty. after notice of defect. . he shall cease to be liable for the price upon returning or offering to return the goods. (2) identify the party to whom the warranty is extended. its serial number. To this end. Nothing therein shall prevent the retailer from proceeding against the distributor or manufacturer. . the seller shall be liable to repay so much thereof as has been paid. (n) 4. (6) Contrary stipulations: null and void. stipulations or agreements contrary to the provisions of this Article shall be without legal effect. For this purpose. (1) Sales Report. If the immediate seller is the manufacturer's factory or showroom. . But if deterioration or injury of the goods is due to the breach or warranty. (2) Failure to make or send report. model of the product bought.Any seller or manufacturer who gives an express warranty shall: (1) set forth the terms of warranty in clear and readily understandable language and clearly identify himself as the warrantor. concurrently with the return of the goods. In such case.All covenants. or immediately after an offer to return the goods in exchange for repayment of the price. such loss. Where the buyer is entitled to rescind the sale and elects to do so. unless otherwise agreed upon. malfunction or failure to conform to the warranty. If the product was purchased from a distributor. producer. producer. the distributor shall likewise immediately honor the warranty. or importer shall be operative from the moment of sale. in the absence of special circumstances showing proximate damage of a greater amount. . the date of purchase. The warranty rights can be enforced by presentment of a claim. That the distributor who failed to comply with its obligation to send the sales reports shall be personally liable under the warranty. In the case of a retailer other than the distributor. Additional Provisions on Warranties. or importer liable. (5) In the case of breach of warranty of quality. (5) Record of purchases. in appropriate cases.operative from moment of sale.good condition as they were in at the time the ownership was transferred to the buyer. the retailer shall shoulder the expenses and costs necessary to honor the warranty. the warranty shall immediately be honored. Such registration is sufficient to hold the manufacturer. 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. producer. . the buyer shall thereafter be deemed to hold the goods as bailee for the seller.In addition to the Civil Code provisions on sale with warranties.All written warranties or guarantees issued by a manufacturer. or importer. RA 7394.All sales made by distributors of products covered by this Article shall be reported to the manufacturer. name and address of the buyer. the warrantor will perform any obligation under the warranty. 43 . The report shall contain. but subject to a lien to secure payment of any portion of the price which has been paid. (4) state what the warrantor will do in the event of a defect. (3) Retail. malfunction of failure to conform to the written warranty and at whose expense. the former shall take responsibility without cost to the buyer of presenting the warranty claim to the distributor in the consumer's behalf. and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526. however. The report made in accordance with this provision shall be equivalent to a warranty registration with the manufacturer. the purchaser needs only to present to the immediate seller either the warranty card of the official receipt along with the product to be serviced or returned to the immediate seller. No other documentary requirement shall be demanded from the purchaser. (b) Express warranty . Additional warranties consumer products in sale of Art.The retailer shall be subsidiarily liable under the warranty in case of failure of both the manufacturer and distributor to honor the warranty. If the price or any part thereof has already been paid. (4) Enforcement of warranty or guarantee. if the seller refuses to accept an offer of the buyer to return the goods. or importer of the product sold within thirty (30) days from date of purchase. the following provisions shall govern the sale of consumer products with warranty: (a) Terms of express warranty. or importer shall relieve the latter of its liability under the warranty: Provided. . (3) state the products or parts covered. among others. . 68. (5) state what the consumer must do to avail of the rights which accrue to the warranty. the manufacturer shall be obligated to make good the warranty at the expense of the distributor.Failure of the distributor to make the report or send them the form required by the manufacturer. producer.

the seller may maintain an action against him for the price of the goods. If the implied warranty on merchantability accompanies an express warranty. Although the ownership in the goods has not passed. The thirty-day period. cancel and contract and recover from the seller so much of the purchase price as has been paid. Where. (2) In case of breach of implied warranty. the consumer may elect to have the goods repaired or its purchase price refunded by the warrantor. malfunction or failure to conform to a written warranty was caused by damage due to unreasonable use thereof. may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. may be extended by conditions which are beyond the control of the warrantor or his representative. xxx Where the goods have been delivered to the buyer. such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale.The seller and the consumer may stipulate the period within which the express warranty shall be enforceable. . where after reasonable number of attempts to remedy the defect or malfunction. BUYER’S WARRANTY WAIVER IN CASE OF BREACH OF 44 . if they cannot readily be resold for a reasonable price. however. and if the provisions of article 1596. Art. the product continues to have the defect or to malfunction. as the case may be. under a contract of sale. C. (e) Duration of warranty. malfunction or failure to conform to such written warranty. irrespective of delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such price. Where the buyer wrongfully neglects or refuses to accept and pay for the goods. – (1) In case of breach of express warranty. the seller may maintain an action against him for damages for nonacceptance.(c) Designation of warranties. he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest. the seller may maintain an action for the price although the ownership in the goods has not passed. are not applicable. The warrantor will not be required to perform the above duties if he can show that the defect. 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. the price is payable on a certain day. including damages. fourth paragraph. Where. (n) Action for damages Art 1596. . and. But if deterioration or injury of the goods is due to the breach or warranty. BREACH OF CONTRACTS A.For the warrantor of a consumer product to meet the minimum standards for warranty. 1599. or (2) "Limited warranty" if the written warranty does not meet such minimum requirements. both will be of equal duration. or reject the goods. under a contract of sale. the seller may offer to deliver the goods to the buyer. 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. (2) permit the consumer to elect whether to ask for a refund or replacement without charge of such product or part. . In case the refund of the purchase price is elected. the consumer may retain in the goods and recover damages. (f) Breach of warranties. Thereafter the seller may treat the goods as the buyer's and may maintain an action for the price. the warranty work must be made to conform to the express warranty within thirty (30) days by either the warrantor or his representative. the amount directly attributable to the use of the consumer prior to the discovery of the non-conformity shall be deducted. (d) Minimum standards for warranties.A written warranty shall clearly and conspicuously designate such warranty as: (1) "Full warranty" if the written warranty meets the minimum requirements set forth in paragraph (d). In case the repair of the product in whole or in part is elected. if the buyer refuses to receive them. SALE OF GOODS 1. Any other implied warranty shall endure not less than sixty (60) days nor more than one (1) year following the sale of new consumer products. he shall: (1) remedy such consumer product within a reasonable time and without charge in case of a defect. 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. xxx XII. or if he fails to notify the seller within a reasonable time of the election to rescind. Remedies of the Seller Action for the price Art 1595.

The profit the seller would have made if the contract or the sale had been fully performed shall be considered in awarding the damages. (5) In the case of breach of warranty of quality. he shall cease to be liable for the price upon returning or offering to return the goods. (n) 2. then at the time of the refusal to accept. The judgment or decree may be unconditional. 45 . such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. but subject to a lien to secure payment of any portion of the price which has been paid. Where there is a breach of warranty by the seller. and the buyer has repudiated the contract of sale. 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. in the absence of special circumstances showing proximate damage of a different amount. or upon such terms and conditions as to damages. If. in the absence of special circumstances showing proximate damage of a greater amount. (n) 3. the buyer may. a court may. or has manifested his inability to perform his obligations thereunder. as the court may deem just. (3) Refuse to accept the goods. 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.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. the buyer repudiates the contract or notifies the seller to proceed no further therewith. Where the seller has broken a contract to deliver specific or ascertained goods. (n) (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty. or has committed a breach thereof. the buyer shall thereafter be deemed to hold the goods as bailee for the seller. 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. he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest. Where the goods have been delivered to the buyer. concurrently with the return of the goods. without giving the seller the option of retaining the goods on payment of damages. the breach of warranty by way of recoupment in diminution or extinction of the price. Breach of warranty Art. 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. Where there is an available market for the goods in question. But if deterioration or injury of the goods is due to the breach or warranty. no other remedy can thereafter be granted. on the application of the buyer. and maintain an action against the seller for damages for the breach of warranty. the buyer shall be liable to the seller for labor performed or expenses made before receiving notice of the buyer's repudiation or countermand. Where the buyer is entitled to rescind the sale and elects to do so. or immediately after an offer to return the goods in exchange for repayment of the price. return them or offer to return them to the seller and recover the price or any part thereof which has been paid. direct that the contract shall be performed specifically. Where the goods have not been delivered to the buyer. or if he fails to notify the seller within a reasonable time of the election to rescind. and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526. without prejudice to the provisions of the second paragraph of Article 1191. Remedies of the Buyer 1. payment of the price and otherwise. the measure of damages is. such loss. Where the buyer is entitled to rescind the sale and elects to do so. at his election: (1) Accept or keep the goods and set up against the seller. When the buyer has claimed and been granted a remedy in anyone of these ways. the seller shall be liable to repay so much thereof as has been paid. if no time was fixed for acceptance. If the price or any part thereof has already been paid. Rescission Art 1597. or. Specific performance Art 1598. (n) 2. the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received. 1599. if the seller refuses to accept an offer of the buyer to return the goods.

SALE OF IMMOVABLES AND THINGS OTHER THAN GOODS Art 1191. and B. and maintain an action against the seller for damages for the breach of warranty. at his election: (1) Accept or keep the goods and set up against the seller. unless there be just cause authorizing the fixing of a period. Actions arising from the provisions of the preceding ten articles shall be barred after six months. (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received. consequently. he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest. such loss. When the buyer has claimed and been granted a remedy in anyone of these ways. without prejudice to the provisions of the second paragraph of Article 1191. from the delivery of the thing sold. Rescission creates the obligation to return the things which were the object of the contract. in the absence of special circumstances showing proximate damage of a greater amount. the buyer may. or immediately after an offer to return the goods in exchange for repayment of the price. This is understood to be without prejudice to the rights of third persons who have acquired the thing. Where the buyer is entitled to rescind the sale and elects to do so. (n) Art. But if deterioration or injury of the goods is due to the breach or warranty. If it cannot be determined which of the parties first violated the contract. Rescission with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526. indemnity for damages may be demanded from the person causing the loss.Art 1571. return them or offer to return them to the seller and recover the price or any part thereof which has been paid. the breach of warranty by way of recoupment in diminution or extinction of the price. Where there is a breach of warranty by the seller. in accordance with Articles 1385 and 1388 and the Mortgage Law. In this case. (1295) 46 . such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. If the price or any part thereof has already been paid. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. (1124) Art. The injured party may choose between the fulfillment and the rescission of the obligation. 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. (1490) 3. in case one of the obligors should not comply with what is incumbent upon him. 1599. together with their fruits. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. and the price with its interest. 1192. the buyer shall thereafter be deemed to hold the goods as bailee for the seller. Where the goods have been delivered to the buyer. if the latter should become impossible. The power to rescind obligations is implied in reciprocal ones. even after he has chosen fulfillment. if the seller refuses to accept an offer of the buyer to return the goods. the same shall be deemed extinguished. The court shall decree the rescission claimed. concurrently with the return of the goods. the seller shall be liable to repay so much thereof as has been paid. no other remedy can thereafter be granted. (n) Art 1385. 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. In case both parties have committed a breach of the obligation. or if he fails to notify the seller within a reasonable time of the election to rescind. He may also seek rescission. Where the buyer is entitled to rescind the sale and elects to do so. (3) Refuse to accept the goods. (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty. but subject to a lien to secure payment of any portion of the price which has been paid. and each shall bear his own damages. (5) In the case of breach of warranty of quality. the liability of the first infractor shall be equitably tempered by the courts. with the payment of damages in either case. he shall cease to be liable for the price upon returning or offering to return the goods.

He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale. a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. In choosing to sue on the note. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy. Accordingly. Should such ground not exist. NORTHERN MOTORS v SAPINOSO: What Art 1484 (3) prohibits is “further action against the purchaser to recover any unpaid balance of the price. (n) Art 1533. there can be no further recovery of the deficiency. But where the right to resell is not based on the perishable nature of the goods or upon an express provision of the contract of sale. it was not thereby limited to the proceeds of the sale. It had the right to select among the three remedies established in Art 1484. In a contract of sale of personal property the price of which is payable in installments. only one installment was unpaid. if one has been constituted. he may immediately sue for the rescission of the sale. for it requires nonpayment of two or more installments in order that its provisions may be invoked. when the assignee forecloses on the mortgage. Where a resale is made.” and although this Court has construed the word “action” to mean “any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy.250 of Sapinoso was a voluntary act on his part and did not result from a “further action” instituted by Northern Motors.” there is no occasion at this stage to apply the restrictive provision of the said article because there has not yet been a foreclosure sale resulting in a deficiency.Art 1591. and the seller-mortgagee is deemed to have renounced any right thereto. 47 . CRUZ v FILIPINAS INVESTMENTS: The vendor of personal property sold on installment basis is precluded. (1503) Art 1485. The payment of the sum of P1. of the mortgaged good. FILINVEST v CA: The remedies IN 1484 are alternative and not cumulative. still the law does not apply. (3) Foreclose the chattel mortgage on the thing sold. It is not essential to the validity of resale that notice of an intention to resell the goods be given by the seller to the original buyer. Any agreement to the contrary shall be void. should the vendee's failure to pay cover two or more installments. In the case referred to in two preceding articles. In this case. he shall have no further action against the purchaser to recover any unpaid balance of the price. should the vendee's failure to pay cover two or more installments. Should the vendor have reasonable grounds to fear the loss of immovable property sold and its price. as authorized in this article. SALE OF MOVABLES ON INSTALLMENT58 Art 1484. the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made. but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. should the vendee fail to pay. 59 TAJANLANGIT v SOUTHERN MOTORS: It is true that there was a chattel mortgage on the goods sold. from having a recourse against the additional security put up by a third party to guarantee the purchaser’s performance of his obligation. (2) Cancel the sale. NONATO v IAC: The corporation is barred from exacting payment from Nonato of the balance of the price of the vehicle when it had already repossessed it. when the lessor has deprived the lessee of the possession or enjoyment of the thing. the exercise of one bars the exercise of the others. LEVY v GERVACIO: CC Art 1454 is aimed at sales where the price is payable in several installments. or where the seller expressly reserves the right of resale in case the buyer should make default. the BORBON v SERVICE-WIDE SPECIALIST: latter is likewise bound by the same law. or where the buyer has been in default in the payment of the price for an unreasonable time. the buyer acquires a good title as against the original buyer. and even if it can be so considered. In this case. but Southern Motors elected to sue the note exclusively – to exact fulfillment of the obligation to pay. an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. on execution. after foreclosing the chattel mortgage on the thing sold. Where the goods are of perishable nature. A cash payment (in sales with two installments) cannot be considered as a payment in installments. When the seller assigns his credit to another person. (1454A-a)59 58 Art 1486. (1454-A-a) C. the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation. Hence. the provisions of Article 1191 shall be observed.

the vendee may pay. Since McLaughlin refused to accept the tender of payment. even after the expiration of the period. the grace period is effective without further need of demand either calling for the payment of the obligation or for honoring the right. (n) When the seller assigns his credit to another person. He cannot. Should the notice requirement in Sec 23 be construed as required to be given before a buyer desists from further paying. Non-Forfeiture of Payments. with the payment of damages in either case. the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. RA 6552 “Maceda Law”: Sale of Residential Realty on Installment61 4. If the buyer fails to pay the installments due at the expiration of the grace period. with interest thereon at the legal rate. PD 957. and subject to this requirement may make a resale either by public or private sale. However. This is understood to be without prejudice to the rights of third persons who have acquired the thing. the court may not grant him a new term. In the sale of immovable property. which is well within the 30day period. SALE OF IMMOVABLES ON INSTALLMENT 1. Rescission on Sale on Residential Realty on Installment Non- Art 1191. the latter may likewise avail of the remedies under Art 1484 (assuming case is one of sale of movables on installment). After the demand. such as failure to deliver titles to buyers or titles free from liens and encumbrances. the seller may cancel the contract after thirty days from receipt by the buyer of the notice of the cancellation or the demand for rescission of the contract by a notarial act. it was incumbent upon Flores to deposit the amount in court. if the latter should become impossible. as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act.It is not essential to the validity of a resale that notice of the time and place of such resale should be given by the seller to the original buyer. The court shall decree the rescission claimed. Sec 24. The injured party may choose between the fulfillment and the rescission of the obligation. Section 23 & 2460 PD 957. He may also seek rescission. after due notice to the owner or developer. the intent of the law to protect subdivision lot buyers will tend to be defeated. and when unconditionally conferred. (1503) 2. Flores did not follow tender of payment with consignation. it should be construed as a right. 6552 3. Should such ground not exist. unless there be just cause authorizing the fixing of a period. (1124) Art 1592. BRICKTOWN DEV’T v TIERRA: When a grace period is provided for in the contract of sale. Niu Kim Duan. Should the vendor have reasonable grounds to fear the loss of immovable property sold and its price.” Flores tendered the manager’s check after 17 days. even after he has chosen fulfillment. MCLAUGHLIN v CA: Sec 4 of RA 6552 provides: “In case where less than two years of installments were paid. Sec 23. desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. in case one of the obligors should not comply with what is incumbent upon him. – No installment payment made by a buyer in a subdivision or condominium project for a lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer. 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. at his option. (1504a) 61 Art 1591. a stipulation in the contract that the installments paid shall not be returned to the vendee is valid insofar as the same may not be unconscionable under the circumstances (Villanueva citing Delta Motor v. 48 . – The rights of the buyer in the event of his failure to pay the installments due for reasons other than failure of the owner or developer to develop the project shall be governed by Republic Act No. If the remedy chosen is rescission. not an obligation of the debtor. 213 SCRA 259) D. Anticipatory breach delinquency interests. be reimbursed the total amount paid including amortization interests but excluding 60 CASA FILIPINAS REALTY v OP: PD 957 to stem the tide of “fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators. directly or indirectly buy the goods. Failure to pay installments. The seller is bound to exercise reasonable care and judgment in making a resale. Such buyer may. he may immediately sue for the rescission of the sale. PD 957. however. The power to rescind obligations is implied in reciprocal ones. the provisions of Article 1191 shall be observed. in accordance with Articles 1385 and 1388 and the Mortgage Law.

” shall be considered as “interest. with the obligation of returning the price of the sale the expenses of the contract. Distinguished from option to buy64 62 VILLARICA v CA: The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument. 1600. it is necessary that the right be reserved in the same contract 63 CLARAVALL v CA: The urgent necessity for money of apparent vendor. in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate. the the are an 64 ADIARTE v TUMANENG: An agreement to repurchase becomes an option to buy when entered into after the time to redeem stipulated had already expired. the necessary and useful expenses made on the thing. or dispose of them. the vendor may still exercise the right within 30 days from the time the judgment becomes final.” 2) Where the agreement is upheld as a pacto de retro sale. and by conventional or legal redemption.62 Distinguished from equitable mortgage Equitable mortgage – one which. 1602 is present. and contains nothing impossible or contrary to law Badges of an equitable mortgage63 Art. Reason for the rule: To curtail the practice of creditors in making their agreement of mortgage appear in the form of a sale with pacto de retro. because then the vendee a retro became the absolute owner of the thing sold. and other payments made by reason of the sale. A contract shall be construed as an equitable mortgage when any of the circumstance in Art. although lacking in some formality or other requisites demanded by a statute. The creditor cannot appropriate the things given by way of pledge or mortgage. 1231. fulfillment of a resolutory condition. (2) When the vendor remains in possession as lessee or otherwise. are governed elsewhere in this Code. Other causes of extinguishment of obligations. Obligations are extinguished: (1) By payment or performance: (2) By the loss of the thing due: (3) By the condonation or remission of the debt. the inadequacy of the consideration for supposed sale. and prescription. (4) By the confusion or merger of the rights of creditor and debtor. TORRES v CA: For a sale to be one a retro. fruits. CONVENTIONAL REDEMPTION Conventional redemption – the vendor reserves the right to repurchase the thing sold. (6) By novation. any money. (4) When the purchaser retains for himself a part of the purchase price. 1602. (5) When the vendor binds himself to pay the taxes on the thing sold. the creditors can do away with foreclosure proceedings] Remedy: reformation of the instrument [must be brought within 10 years] 1) If the agreement is construed to be an equitable mortgage. any money or other benefit received as “rents. EXTINGUISHMENT OF THE SALE Art. Sales are extinguished by the same causes as all other obligations.XIV. in order to circumvent the prohibition of pactum commissorium in pledge and mortgage (Art. rescission. Any stipulation to the contrary is null and void) [because in making it appear a pacto de retro sale. (1506) Art. (1156a) A. (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. or other benefit to be received by the vendees as rent or otherwise shall be considered as interest which shall be subject to the usury laws. and the subsequent grant of the right to repurchase is 49 . 2208. but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. by those stated in the preceding articles of this Title. The contract shall be presumed to be an equitable mortgage. nevertheless reveals the intention of the parties to charge real property as a security for debt. such as annulment. (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. In any of the foregoing case. and the extension of the period of redemption circumstances which are indicative that the contract is equitable mortgage. (5) By compensation.

shall last four years from the date of the contract. The stipulation is void and against public policy. 66 TAYAO v DULAY: Although the stipulation as to the period may be unclear or void. Exercise of the right to redeem66 a) A vendor must manifest his right to redeem in writing. in the absence of an express agreement. not the 4-year period. and the necessary and useful expenses made on the thing by the vendee. Thus. cannot exist unless reserved at the time of the perfection of the main contract of sale Need not have separate consideration in order to be valid and effective May not be beyond the 10 year period Requires tender of payment of amount required by law. Should there be an agreement. but must pay for the useful improvements introduced by the vendee a retro. the right may be exercised by filing a suit against him and consigning the amount in court. the expenses of the contract and other legitimate payments made by the vendee by reason of such sale. EXCEPTION: when there is a suspensive condition. In a sale with a right to repurchase. the period cannot exceed ten years. (1508a) GENERAL RULE: Period starts running at the date of the execution of the contract.Right of redemption Not a separate contract. b) It is only when the vendee flatly refused that tender of payment is not necessary. The right referred to in Article 1601. the latter may retain possession of the thing until reimbursement is made. (1512) Art. but merely part of a main contract of sale. 1606. whereby the parties undertook by express agreement to secure to the vendors a right to repurchase in the month of March of any year after the date of the contract. GARGOLLO v DUERO: The vendor a retro is not given the option to require the vendee a retro to remove the useful improvement. Consignation of the redemption price in court is not necessary to preserve the right. as long as it does not exceed 10 years. until after they have exhausted the property of the vendor. upon when no period agreed period: 4 years from the date of the contract 5. The creditors of the vendor cannot make use of the right of redemption against the vendee. the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 498. Reason for limitation: A pacto de retro is a suspension of title and it is against public interest to permit such uncertainty to continue for a long time. Redemption price – includes the amount of the sale. 65 BANDONG v Austria : The provisions of the contract. 275 SCRA 267) a. CA. 50 . 1610. However. 1611. it is the 10-year period that applies. 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. may compel the vendor to redeem Must have a consideration separate and distinct from purchase price May be beyond the 10 year period May be exercised by notice Art. otherwise. were valid and binding upon the parties for a period of ten years from the date of the contract but wholly without force and effect thereafter. This must be accompanied with an actual or simultaneous tender of payment of the redemption price. including consignment thereof if tender cannot be made effectively Period of redemption Option to buy Principal contract and may be created independent of another contract The period is binding and it may also be extended. In the absence of the vendee a retro. 4. by whom exercised Art. a period of redemption was agreed upon. BALUYOT v VENEGAS: The object of the sale cannot be repurchased during the first 10 years. The exercise of redemption is not limited only to the total redemption price enumerated in Art 1616 of the CC. It includes other stipulations which may have been agreed upon (Villanueva citing Solid Homes v. when 65 period agreed upon a new agreement. since said legal provision is not restrictive nor exclusive.

jointly and in the same contract. the latter can be compelled to redeem the whole property. and in accordance with the custom of the place where the land is situated. should sell an undivided immovable with a right of repurchase.the whole property. b. c) When the co-owners of an indivisible immovable. even if in the second contract no mention should have been made of the right to repurchase. b) The vendor a retro is entitled to the return of the thing with damages for the use and occupation if the same. after the vendor has been duly heard. counted from the anniversary of the date of the sale. 1617. the vendee may demand of all the vendors or co-heirs that they come to an agreement upon the purchase of the whole thing sold. sold their interests absolutely to the same person who previously bought the share of a co-owner subject to a right of redemption.Vendor 2. (1519a) Art. b) If several persons. (1514) Art. If several persons. they shall be prorated between the redemptioner and the vendee. but he shall respect the leases which the latter may have executed in good faith. Should there have been no fruits at the time of the sale and some exist at the time of redemption. and should they fail to do so. whether the thing be undivided. The vendor may bring his action against every possessor whose right is derived from the vendee. His heirs or assigns 3. 1606. (1513) Art. 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. 1607. (1510) From whom to redeem 1. visible or growing fruits. (n) Art. (1517) Art. 1612. 1613. The same rule shall apply if the person who sold an immovable alone has left several heirs. if no indemnity was paid by the purchaser when the sale was executed. The same rule shall apply if the person who sold an immovable alone has left several heirs. or it has been partitioned among them. none of them may exercise this right for more than his respective share. Vendee a retro 2. 1615. effect of non-redemption Art. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee. His heirs or assigns 3. x x x However. should sell an undivided immovable with a right of repurchase. If at the time of the execution of the sale there should be on the land. But if the inheritance has been divided. in which case each of the latter may only redeem the part which he may have acquired. the vendee cannot be compelled to consent to a partial redemption. In the case of the preceding article. if the latter wishes to make use of the right of redemption. there shall be no reimbursement for or prorating of those existing at the time of redemption. the action for redemption cannot be brought against each of them except for his own share. jointly and in the same contract. His agent b) The creditors of the vendor cannot make use of the right of redemption against the vendee. none of them may exercise this right for more than his respective share. without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. (1520) a) The vendor can eject a lessee only after the expiration of the period of lease or of the period for redemption. 1608. until after they have exhausted the property of the vendor. (1515) a) Who may redeem 1. and the thing sold has been awarded to one of the heirs. the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on 51 . d. In case of real property. giving the latter the part corresponding to the time he possessed the land in the last year. the action for redemption may be instituted against him for the whole. from whom to redeem Art. effect of redemption Art. If the vendee should leave several heirs. His agent c. 1618. in order to end the co-ownership.

or by the vendor. 1620. It is not one of prescription.. 2. unless the grantee does not own any rural land. This finding fails to take into account that the period of legal redemption is not a prescriptive period. ravines. When they somehow heard rumors about it. the redemptioner shall pay only a reasonable one. The right of redemption of co-owners excludes that of adjoining owners. the owner of the adjoining land of smaller area shall be preferred. 681 HERMOSO v CA : It was error for the respondent court to rule that the right of the petitioner to redeem the alienated share had long proscribed. unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.. (1524a)68 Laches seems to be a special exception to notice rule under Art 1623. For sometime after the sale. (1522a) a) When the right may be exercised: when a share of a co-owner is sold to a third person. IAC) 1. Rural lands Art.e.67 a) The ownership of the vendee becomes absolute and irrevocable by operation of law. the petitioners were ignorant about its execution. notwithstanding a stipulation in the contract for payment of damages.the basis that the contract was a true sale with right to repurchase. The deed of sale shall not be recorded in the Registry of Property. drains. If he honestly believed that the transaction was an equitable mortgage. the one who first requested the redemption. Should two or more co-owners desire to exercise the right of redemption. who is a stranger. or by any other transaction whereby ownership is transmitted by onerous title. Redemption among co-owners Art. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them. (Villanueva citing Alonzo v. they had to take one step after another to find out if the information was true. (1523a) a) When the right may be exercised: when a piece of rural land not exceeding 1 ha. upon the same terms and conditions stipulated in the contract. Parenthetically. Redemption among adjoining owners The law distinguishes between rural and urban lands. a. This right is not applicable to adjacent lands which are separated by brooks. so long as the reasons for a written notice are present. as the case may be. the said article applies and he can still repurchase the property within thirty days from finality of the judgment declaring the transaction as a sale with pacto de retro. respondent in this case. they may only do so in proportion to the share they may respectively have in the thing owned in common. B. in the place of one who acquires a thing by purchase or dation in payment. roads and other apparent servitudes for the benefit of other estates. While the law requires that the notice must be in writing. The distinction is based on the character of the community or vicinity in which it is found. is alienated. it does not state any particular form thereof. It is a condition precedent to the exercise of the right of redemption. and should both lands have the same area. is 67 ABILLA v GABONSENG: The applicability of Article 1606 rests on the bona fide intent of the vendor a retro. This is to encourage the maximum development and utilization of lands. When period of legal redemption begins Art. it matters not what the vendee intended the transaction to be. b) Thrust of the law: to reduce the number of co-owners until the community is done away with. 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. 1621. If two or more adjoining owners desire to exercise the right of redemption at the same time. the area of which does not exceed one hectare. they may only do so in proportion to the share they may respectively have in the thing owned in common. 1623. c) When the right is not available 1) Where the share of the co-owner is sold to another co-owner 2) Where the share of a co-owner was merely mortgaged d) Should two or more co-owners desire to exercise the right. are sold to a third person. 52 . b) The vendee is not entitled to recover damages by virtue of non-redemption. i. It is a period set by law to restrict the right of the person exercising the right of legal redemption. The owners of adjoining lands shall also have the right of redemption when a piece of rural land. LEGAL REDEMPTION Legal redemption – right to be subrogated. If the price of the alienation is grossly excessive. The records of the case show that the sale of the brothers’ share was deliberately hidden from the petitioners.

the owner of any adjoining land has a right of pre-emption at a reasonable price. 119. to a creditor in payment of his credit. from passing into the hands of a person other than the adjacent owners who can make use of the alienated property for the development of their own lands 2. the debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor. c) When the right is not available: When the urban land is transferred under an “exchange” of properties [because there is no resale]70 69 d) When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption. 70 Article 1622 is not applicable to a lessee trying to buy the land he is leasing. when proper. having been bought merely for speculation. ravines. c) When the right is not available [because the assignee has a valid interest in the right or property assigned] 1. When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption. Every conveyance of land acquired under a free patent or homestead. his widow or legal heirs within 5 years from the date of conveyance. legal heirs ORTEGA v ORCINE The term “urban” in Art. 1622. 1635) Redemption of homestead CA 141. MARTINEZ: 53 . shall be subject to repurchase by the applicant. 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. also at a reasonable price. the owner of the adjoining land shall have a right of redemption. Urban lands69 Art. When the assignment of a credit was made before any litigation 2) Assignments made to a co-heir or coowner of the credit. the applicant 2. having been bought merely for speculation. to consolidate scattered small agricultural lands under one ownership c) When the right is not available o Adjacent lands which are separated by brooks. to prevent the rural land not exceeding 1 ha. and the interest on the price from the day on which the same was paid. If the re-sale has been perfected. is about to be resold b) Thrust of the law: to discourage speculation in real estate and aggravate the housing problem. (1535) a) When the right may be exercised: when a credit or other incorporeal right in litigation is sold. 1622 does not necessarily refer to the nature of the land itself but to the character of the community or vicinity in which it is found. roads and other apparent servitudes for the benefit of other estates [because owners cannot be said to be adjoining owners anymore] d) If two or more adjoining owners desire to exercise the right of redemption at the same time. A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered. 1634. the one who first requested the redemption. the judicial costs incurred by him. the owner whose intended use of the land in question appears best justified shall be preferred. to the possessor of a tenement or land which is subject to the assigned credit. SEN PO EK MARKETING v. is about to be re-sold. (Art. When a credit or other incorporeal right in litigation is sold. (n) a) When the right may be exercised: when 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. drains. and should both lands have the same area. Sec. the owner whose intended use of the land in question appears best justified shall be preferred. Assignment of a chose in action Art. The debtor may exercise his right within thirty days from the date the assignee demands payment from him. b.alienated [unless the grantee does not own any rural land] b) Thrust of the law 1. b) Thrust of the law: to discourage speculation in lawsuits which would make the courts an instrument for profit. a) Who may redeem 1. the owner of the adjoining land of smaller area shall be preferred. his widow 3.

any person having a lien on the property Period of redemption: within 1 year from the date of the sale Redemption in judicial foreclosure of mortgages RA 8791 (The General Banking of Law of 2000). 215. and all the costs and expenses incurred by the bank or institution from the sale and custody of said property less the income derived therefrom. together with interest thereon and the costs of sale. In the event of foreclosure. Sec. shall make a return of his proceedings and the forfeiture which shall be spread upon the records of his office. However. Sec. . upon registration with his office of any such declaration of forfeiture. creditor having a lien by virtue of an attachment Period of redemption: within 1 year from the date of registration of the certificate of sale Redemption mortgages in extrajudicial foreclosure of Act No. of any mortgage on real estate which is security for any loan or other credit accommodation granted. judicial creditor/judgment creditor of the debtor 4. the delinquent taxpayer 2. the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right within one year after the sale of the real estate. Sec. It shall be the duty of the Register of Deeds concerned. Sec. with interest thereon at rate specified in the mortgage. the forfeiture shall become absolute. Foreclosure of Real Estate Mortgage. his successors. In extrajudicial foreclosure of mortgage. or on some part thereof. whether judicially or extra-judicially. subsequent to the lien under which the property was sold. Who may redeem real property so sold. by the following persons: (a) The judgment obligor. the debtor. 3135. judgment or mortgage on the property sold. Rule 39. the Internal Revenue Officer conducting the sale shall declare the property forfeited to the Government in satisfaction of the claim in question and within two (2) days thereafter. anyone for him Period of redemption: within 1 year from the date of sale Redemption by a judgment debtor Rules of Civil Procedure. the taxpayer. 47. or his successor in interest in the whole or any part of the property. 6. the judgment obligor 2. a) Who may redeem 1.in-interest 3. penalties and costs. Any petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding. or any one for him may redeem said property by paying to the Commissioner or the latter's Revenue Collection Officer the full amount of the taxes and penalties. 27.In case there is no bidder for real property exposed for sale as herein above provided or if the highest bid is for an amount insufficient to pay the taxes. to transfer the title of the property forfeited to the Government without the necessity of an order from a competent court.b) Period of redemption: within 5 years from the date of conveyance Redemption in tax sales NIRC of 1997. his successors-in-interest. Forfeiture to Government for Want of Bidder. [This provision is taken from Baviera only– not sure if this is the exact wording of the law. or any junior encumbrancer may redeem the property within 1 year from the date of the sale.] a) Who may redeem 1. Within one (1) year from the date of such forfeiture. the debtor 2. but if the property be not thus redeemed. his successors-in-interest 3. (b) A creditor having a lien by virtue of an attachment. may be redeemed in the manner hereinafter provided. or any part thereof sold separately. Such redeeming creditor is termed a redemptioner. Real property sold as provided in the last preceding section. 54 . Who may redeem 1. the purchaser at the auction sale concerned whether in a judicial or extra-judicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. any judicial or judgment creditor of said debtor. to redeem the property by paying the amount due under the mortgage deed.

a) Who may redeem: the lessee who has no knowledge of the sale to a third person b) Period of redemption: within 2 years from the registration the sale c) Conditions for redemption: the entire landholding sold must be redeemed d) where there are two or more agricultural lessees. and prescribing penalties for the violation of the provisions thereof. the registration of the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3) months after foreclosure. then to the president. or assignor. but not after. provisions. wares. and in that case. or its agent or representative any part of the purchase price thereof. or. and shall have priority over any other right of legal redemption. merchandise. as the case may be). or assignor. mortgagor. GENERAL RULE: No right to redeem is granted to the debtor-mortgagor when there has been judicial foreclosure of real estate mortgage. Statement of creditors. the provisions of this section shall not apply. of the fixtures and equipment used in and about the business of the vendor. mortgage. mortgagor. however. then to a member thereof. in bulk. by me being first duly sworn. or substantially all. if such vendee or mortgagee be a partnership firm. The creditor should be protected in his rights against the debtor. deposes and states that the foregoing statement contains the names of all of the creditors of ________________ (vendor. transfer. sworn to substantially as hereinafter provided. secretary or manager of said corporation. vice-president. mortgage or assignment of goods. 2. — It shall be the duty of every person who shall sell. Sec. transfer. or of all.-In case the landholding is sold to a third person without the knowledge of the agricultural lessee. Provided. wares. before receiving from the vendee. seeks to protect such creditor against insolvent and fraudulent vendors 55 . together with the amount of indebtedness due or owing. — Any sale. mortgagee. mortgage or assignment of a stock of goods. mortgagee. mortgagee. or his. The right of redemption under this Section may be exercised within two years from the registration of the sale. provisions or materials in bulk. ____________ issued at ___________ on the day of _____________ who. or agent be a corporation. shall have the right to redeem the property in accordance with this provision until. which statement shall be verified by an oath to the following effect: PHILIPPINE ISLANDS PROVINCE OR CITY OF _________________} Before me. transferor. then. or assign any stock of goods. treasurer. in the exercise of its police power. That if such vendor. BULK SALES LAW71 ACT NO. the undersigned authority. for cash or on credit. mortgagor. transferor. Lessee’s Right of Redemption. or assignor. memorandum. produces and delivers a written waiver of the provisions of this Act from his creditors as shown by verified statements. 3. or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor. the latter shall have the right to redeem the same at a reasonable price and consideration. transferor or assignor. transfer. a written statement." Sec.Notwithstanding Act 3135. mortgage or assignment of all. This Act shall be known as "The Bulk Sales Law. merchandise. That the entire landholding sold must be redeemed: Provided. transferor. in contemplation of this Act: Provided. whichever is earlier. or to become due or owing by said vendor or mortgagor to each of said creditors. of the business or trade theretofore conducted by the vendor. Sale and transfer in bulk. or other evidence therefor. shall be deemed to be a sale and transfer in bulk. or any promissory note. That where there are two or more agricultural lessees. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their expiration. Legal right to redeem under the Agrarian Reform Code RA 3844. transfer. Sec. EXCEPTION: When the mortgagee is a bank or a banking institution. personally appeared __________________ (vendor. mortgagor. further. or if the vendee. 12. of the names and addresses of all creditors to whom said vendor or mortgagor may be indebted. or agent. The State. or mortgagor) together with their LIWANAG v MENGHRAJ: The constitutional right to dispose freely of one’s property is not absolute. upon his oath. to deliver to such vendee. 3952. juridical persons whose property is being sold pursuant to an extrajudicial foreclosure. An act to regulate the sale. or substantially all. wares. each shall be entitled to said right of redemption only to the extent of the area actually cultivated by him. or sale. 71 Sec 1. each shall be entitled to said right of redemption only to the extent of the area actually cultivated by him XV. merchandise. provisions or materials. mortgagor. bearing cedula No. agent or representative.

in bulk. as provided for in section three hereof. and which shall become due and owing by _____________ (vendor or mortgagor) to such creditors. mortgage or assignment of all. or assignor. in contemplation of this 56 . with the approval of the Department Head. Any person violating any provision of this Act shall. merchandise. wares. assignees in insolvency. with the correct amount due and to become due to each of them. the cost price to the vendor. merchandise. upon conviction thereof. Inventory. Sec. wares. acting under judicial process. and that there are no creditors holding claims due or which shall become due. which shall not include the names of all such creditors. 4. to prescribe and adopt from time to time such rules and regulations as may be deemed necessary for the proper and efficient enforcement of the provisions of this Act. — It shall be the duty of every vendor. mortgagor. merchandise. mortgagor. of the price. — Whenever any person shall sell. and shall receive any part of the purchase price. mortgagor or assignor of each article to be included in the sale. transfer or mortgage. and that the amount set opposite each of said respective names. or assignor. RA 3952 Sec. who is hereby empowered. provisions or materials. or any sale. mortgage or assignment of a stock of goods. transferor. as shown upon such sworn statement. transfer or execution of a mortgage upon any stock of goods. The provisions of this Act shall be administered by the Director of the Bureau of Commerce and Industry. mortgage. Any vendor. or of all. wares. in bulk. This Act shall take effect on its approval. transfer. transferor. personally or by registered mail. Sec. or substantially all. merchandise. transferor. provisions or materials. for or on account of goods. 11. The sworn statement containing the names and addresses of all creditors of the vendor or mortgagor provided for in section three of this Act. is the amount now due and owing. mortgagor. mortgagor. Fraudulent and void sale. 7. firm or corporation. transferor. merchandise. or shall contain any false or untrue statement. or fined in sum not exceeding five thousand pesos. provisions or materials are a part. provisions or materials purchased upon credit or on account of money borrowed. transferor. merchandise. so far as is possible with the exercise of reasonable diligence. shall be deemed to be a sale and transfer in bulk. Sec. for cash or on credit. provisions or materials. or both such imprisonment and fine. or substantially all. or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor. Any sale. mortgagor or assignor of any stock of goods. shall be deemed to have violated the provisions of this Act. A. at _____________. transferor or assignor. to transfer title to the same without consideration or for a nominal consideration only. transferor.addresses. at least ten days before the sale. 19____. who shall knowingly or willfully make. mortgage. wares. merchandise. to make a full detailed inventory thereof and to preserve the same showing the quantity and. of the business or trade theretofore conducted by the vendor. be punished by imprisonment not less than six months. the sworn statement provided for in section three hereof. or deliver or cause to be made or delivered. and without applying the purchase or mortgage money of the said property to the pro rata payment of the bona fide claim or claims of the creditors of the vendor or mortgagor. or any person acting for. mortgagor. 5. or assignor. in bulk. as owner of any stock of goods. Sec. 6. to carry on the business of which said goods. in the discretion of the court. merchandise. 9. shall be registered in the Bureau of Commerce. a statement. 2. wares. he shall be deemed to have violated this Act. transfer or mortgage shall be fraudulent and void. 12. other than as set forth in said statement. 8. wares. Nothing in this Act contained shall apply to executors. receivers. and notify every creditor whose name and address is set forth in the verified statement of the vendor. For the registration of each such sworn statement a fee of five pesos shall be charged to the vendor or mortgagor of the stock of goods. administrators. or other evidence of indebtedness for said purchase price or advance upon mortgage. transfer. without having first delivered to the vendee or mortgagee or to his or its agent or representative. Sec. mortgagor. provisions or materials. Sec. ______________________ Subscribed and sworn to before me this __________ day of _________. or assign any stock of goods. transferor. or any promissory note. transfer or mortgage. or assignment. or assignor. terms conditions of the sale. transfer. 10. wares. or public officers. or assignor. Sec. at least ten days before transferring possession thereof. nor more than five years. in bulk. It shall be unlawful for any person. provisions. in bulk. wares. of the fixtures and equipment used in and about the business of the vendor. or on behalf of any such vendor. provisions or materials. Sec. Sec. and any such sale. transfer.

that the restaurant is incidental to the hotel business. Definition. transferor or assignor produces and delivers a written waiver of the provisions of this Act from his creditors as shown by verified statements. transfer. 3. of the fixtures and equipment used in and about the business of the vendor. or substantially all. or substantially all. EFFECTS OF NON-COMPLIANCE a) If the purchase or mortgage money is not applied pro-rata to the payment of the bona fide claims of the creditors of the vendor/mortgagor. processor. mortgage or assignment of all. create more jobs. however." Sec. transfer. of the business or trade theretofore conducted by the vendor. COMPLIANCE REQUIREMENT a) delivery of the list of creditors to the vendee or mortgagee before receiving the consideration b) application of the consideration to the pro-rata payment of the claims of creditors appearing in the list c) preparation of a full. but kept up and replenished from time to time (with the extension of credit comes the presupposition of continuance in the business of merchandising) Types of transactions covered 1. The law also penalizes any transfer of title in bulk. without consideration or for a nominal consideration only PENALTY: 6 months – 5 years imprisonment. promoting and welcoming productive investments that will bring down prices for the Filipino consumer. transfer. laborer. relying on the fact that their stock of merchandise was not to be sold in bulk. merchandise.000. to the general public the products manufactured. transfer.It is the policy of the State to promote consumer welfare in attracting.As used in this Act: (1) "Retail Trade" shall mean any act. 72 PEOPLE v WONG: The object of the sale in this case is not covered by the provision alleged to have been infringed. fine of < P5. and in that case. detailed inventory of the goods sold or mortgaged d) notification to creditors at least 10 days before delivery C. promote tourism. Sec. and 2.Act: Provided. Wong’s business was a foundry shop that manufactures iron works and processes or casts metalsMerchandise – something that is sold everday and is constantly going out of the store and being replaced by other goods. repealing for the purpose RA 1180. higher quality if goods. stimulate economic growth and enable Philippine goods and services to become globally competitive through the liberalization of the retail trade sector. Pursuant to this policy.00). the Philippine retail industry is hereby liberalized to encourage Filipino and foreign investors to forge an efficient and competitive retail trade sector in the interest of empowering the Filipino consumer through lower prices. that if such vendor. any sale. (c) Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital: Provided. Sec. 2. etc. wares. any sale. 3. Stock – common use when applied to goods in a mercantile house refers to those which are kept for sale B. and for other purposes. An act liberalizing the retail trade business. penalty imposable to the debtor XVI. 57 . or both. (b) Sales by a farmer or agriculturist selling the products of his farm. . the provisions of this section shall not apply.000. etc. provisions or materials otherwise than in the ordinary course of trade and the regular prosecution of the business 72 b) The law penalizes any intentional omission of the names of the creditors in the required list. . . a) Thrust of the law: to protect persons who extended credit to merchants. or mortgage shall be fraudulent and void. occupation or calling of habitually selling direct to the general public merchandise. RETAIL TRADE LIBERALIZATION ACT RA 8762. mortgagor. Declaration of Policy. as amended. or worker. with the correct amount due or to become due. but the restriction of this law shall not apply to the following: (a) Sales by a manufacturer. or any false or untrue statement therein. processed or produced by him if his capital does not exceed One Hundred Thousand Pesos (P100. 1.This Act shall be known as the "Retail Trade Liberalization Act of 2000. mortgage or assignment of all. assist small manufacturers. commodities or goods for consumption. then. better services and wider choices. Title. any sale. mortgage or assignment of a stock of goods. the sale.

Luxury goods shall include. Failure retail stores shall secure a certification from the Bangko Sentral ng Pilipinas (BSP) and the DTI. (c) Five (5)-year track record in retailing. . .000.500.A natural-born citizen of the Philippines who has lost his Philippine citizenship but who resides in the Philippines shall be granted the same rights as Filipino citizens for purposes of this Act. upon registration with the Securities and Exchange Commission (SEC) and the Department of Trade and Industry (DTI) or in case of foreign-owned single proprietorships.000. and 58 .000.Enterprises with a paid-up capital of the equivalent in Philippine Pesos of Seven Million Five Hundred Thousand US Dollars (US$7. Category C . subject to the following categories: Category A .00) shall be reserved exclusively for Filipino citizens and corporations wholly-owned by Filipino citizens.Enterprises with paid-up capital of the equivalent in Philippine Pesos of less than Two Million Five Hundred Thousand US Dollars (US$2.000.000. Foreign Investors Acquiring Shares of Stock of Local Retailers. 6.(d) Sales which are limited only to products manufactured.000. 8.500.000. processed or assembled by a manufacturer through a single outlet.Foreign-owned partnerships.Enterprises with a minimum paid-up capital of the equivalent in Philippine Pesos of Two Million Five Hundred Thousand US Dollars (US$2. Sec. products such as: jewelry.000. 4.000. engage or invest in the retail trade business.00) per store may be wholly-owned by foreigners. Category D . however. leisure and sporting goods.00) may purchase only up to a minimum of sixty percent (60%) of the equity thereof within the first two (2) years from the effectivity of this Act and thereafter. wearing apparel.All retail trade enterprises under Categories B and C in which foreign ownership exceeds eighty percent (80%) of equity shall offer a minimum of thirty percent (30%) of their equity to the public through any stock exchange in the Philippines within eight (8) years from their start of operations. Sec. associations and corporations formed and organized under the laws of the Philippines may. Qualifications of Foreign Retailers. and Fifty Million US Dollars (US$50. . Category B .000. The actual use in Philippine operations of the inwardly remitted minimum capital requirements shall be monitored by the SEC.00). (b) Five (5) retailing branches or franchises in operation anywhere around the world unless such retailers has at least one (1) store capitalized at a minimum of Twenty-Five Million US Dollars (US$25. Sec. they may acquire the remaining percentage consistent with the allowable foreign participation as herein provided. The foreign investor shall be required to maintain in the Philippines. Sec.00).00) net worth in its parent corporation for Categories B and C. electronics and other personal effects. (2) "High-end or luxury goods" shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the highest income groups. irrespective of capitalization. which will verify or confirm inward remittance of the minimum required capital investment. Unless the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines. with the DTI. . Treatment of Natural-Born Citizen Who Has Lost His Philippine Citizenship. 5. the full amount of the prescribed minimum capital. Public Offering of Shares of Stock.500. .00) or more maybe wholly owned by foreigners: Provided.00) net worth in its parent corporation for Category D. but are not limited to.Enterprises specializing in high-end or luxury products with a paid up capital of the equivalent in Philippine Pesos of Two Hundred Fifty Thousand US Dollars (US$250.000. branded or designer clothing and footwear. Sec. Foreign Equity Participation.500. 7.No foreign retailer shall be allowed to engage in retail trade in the Philippines unless all the following qualifications are met: (a) A minimum of Two Hundred Million US Dollars (US$200.00) may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to not more than (60%) of total equity.Foreign Investors acquiring shares from existing retail stores whether or not publicly listed whose net worth is in excess of the peso equivalent of Two Million Five Hundred Thousand US Dollars (US$2.000. that in no case shall the investments for establishing a store in Categories B and C be less than the equivalent in Philippine Pesos of Eight Hundred Thirty Thousand US Dollars (US$830.

(d) Only nationals from. in coordination with the SEC. . Implementing Agency.000. directors. at least thirty percent (30%) of the aggregate cost of the stock inventory of foreign retailers falling under Categories B and C and ten percent (10%) for Category D. Prohibited Activities of Qualified Foreign Retailers. is hereby repealed.00) but not more Twenty Million Pesos (P20.Republic Act No. . Sec. rules and regulations or parts thereof inconsistent with this Act are repealed or modified accordingly.If any provision of this Act shall be held unconstitutional. 15. Sec. commodities or goods for consumption EXCEPT: 1.The monitoring and regulation of foreign sole proprietorships. establish retail stores in the Philippines.000. The DTI. Republic Act No. before they are allowed to conduct business in the Philippines. 9. shall be made in the Philippines. the penalty shall be imposed upon its partners. 13. sales by a farmer or agriculturist of the products of his farm 3. The Retail Trade Law read in connection with the Anti-Dummy Act seeks a complete ban on aliens. Penalty Clause. or judicial entities formed or incorporated in. The DTI shall keep a record of qualified foreign retailers who may. 3018.000. . subject to the provisions of this Act. he shall be deported immediately after service of sentence. managers and other officers responsible for the violation. than In the case of associations. and all other laws. SCOPE AND TRADE73 DEFINITION OF RETAIL Retail Trade – any act. restaurants and sari-sari stores and such other similar retailing activities: Provided. the use of sales representatives.000 pesos 2. Promotional of Locally Manufactured Products. the other provisions not otherwise affected thereby shall remain in force and effect. partnerships or corporations. . A. as amended. 12.000. occupation or calling of habitually selling direct to the general public merchandise. sales by a manufacturer. If the Filipino offender is a public officer or employee. The Inter-Agency Committee on Tariff and Related Matters of the National Economic Development Authority (NEDA) Board shall formulate and regularly update a list of foreign retailers of high-end or luxury goods and render an annual report on the same to Congress. Effectivity. 14. 11.For ten (10) years after the effectivity of this Act. he shall. Rules and Regulations. associations or corporations allowed to engage in retail trade shall be the responsibility of the DTI. Sec. executive orders. Sec. processed or assembled by the manufacturer in a single outlet irrespective of capitalization a) “General public” : activities of seller must be such that the target clientele are not only a particular person or group of persons. 73 KING v HERNAEZ : There is no distinction between control and non-control positions with respect to employment of aliens. shall formulate and issue the implementing rules and regulations necessary to implement this Act within ninety (90) days after its approval. that a detailed list of prohibited activities shall hereafter be formulated by the DTI. processor. sales limited only to products manufactured.Qualified foreign retailers shall not be allowed to engage in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or carts. countries which allow the entry of Filipino retailers. in addition to the penalty prescribed herein. . . 10. This shall include resolution of conflicts. as amended. If the offender is not a citizen of the Philippines. 59 . the NEDA and the BSP. door-to-door selling. Sec. upon compliance with law. Separability Clause. Sec. president.This Act shall take effect fifteen (15) days after its approval and publication in at least two (2) newspapers of general circulation in the Philippines.Any person who shall be found guilty of violation of any provision of this Act shall be punished by imprisonment of not less than six (6) years and one (1) day but not more than eight (8) years. laborer or worker of products made by him if his capital is less than or equal to 100. suffer dismissal and permanent disqualification from public office. shall be allowed to engage in retail trade in the Philippines.00). Sec. The DTI is hereby authorized to pre-qualify all foreign retailers. partnerships. 1180. . It shall ensure that the parent retail trading company of the foreign investor complies with the qualifications on capitalization and track record prescribed in this section. Repealing Clause. and a fine of not less than One Million Pesos (P1.

2 Sec. however. franchise. 1. exploit or enjoy a right. it shall be unlawful to falsely simulate the existence of such minimum stock 60 . for the purpose of evading said provision. whether as an officer. Simulation of minimum capital stock — In all cases in which a constitutional or legal provision requires that. An act to punish acts of evasion of the laws on the nationalization of certain rights. corporation. 12) F. or in any other way. employee or laborer therein with or without remuneration except technical personnel whose employment may be specifically authorized by the Secretary of Justice. franchise. CA 108 (Anti-Dummy Act). corporation or association shall. transfers or conveys said right. or in any manner permits or allows any person. or association which. shall be punished by imprisonment for not less than five nor more than fifteen years. which is enjoyed or acquired in violation of the provisions hereof but in no case less than P5000. RIGHTS OF FILIPINOS FORMER NATURAL-BORN Natural-born Filipinos who have lost their citizenship but who reside in the Philippines shall be given the same rights as Filipino citizens with respect to this law. a right. franchise or privilege. 5) RETAIL TRADE HOW ALIENS MAY INVEST IN RETAIL TRADE IN THE PHILIPPINES (Sec. franchise or privilege enjoyed or acquired in violation of the provisions hereof but in no case less than five thousand pesos: Provided. any citizen of the Philippines or of any other specific country who allows his name or citizenship to be used for the purpose of evading such provision. Unlawful use. and by a fine of not less than the value of the right franchise or privilege. The fact that the citizen of the Philippines or of any specific country charged with a violation of this Act had. CATEGORIES OF ENTERPRISES (Sec. 2. E. property or business. in order that a corporation or association may exercise or enjoy a right. managers or persons in charge of corporations. exploitation or enjoyment thereof by a person. assists or abets in the planning consummation or perpetration of any of the acts herein above enumerated shall be punished by imprisonment for not less than five nor more than fifteen years and by a fine of not less than the value of the right. D. Penalty — In all cases in which any constitutional or legal provisions requires Philippine or any other specific citizenship as a requisite for the exercise or enjoyment of a right. franchise or privilege. or existing laws to acquire. to intervene in the management. privilege. privilege. or the provisions of the existing laws. the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines or of any other specific country.b) SEC Opinion No. operation of pharmacy by a hospital) within the purview of the Act (Villanueva) B. franchise. The president or managers and directors or trustees of corporations or associations convicted of a violation of this section shall be punished by imprisonment of not less than five nor more than fifteen years. franchise. administration or control thereof.g. having in its name or under its control. 2-A. and the property or business enjoyed or acquired in violation of C. corporation or association not possessing the requisites prescribed by a the Constitution or the laws of the Philippines. and any alien or foreigner profiting thereby. series of 2003: Engaging in the selling of merchandise as an incident to the primary purpose of a corporation does not constitute retail trade (e. That the president. franchises or privileges. 11. privilege. operation. Exploitation or enjoyment — Any person. associations or partnerships violating the provisions of this section shall be criminally liable in lieu thereof: Provided. and any person who knowingly aids. 8) RULES ON FOREIGN RETAILERS IN THE PHILIPPINES PENALTY CLAUSE (Sec.. credit or other assets the value of which shall at least be equivalent to said holdings.1 Sec. corporation or association not otherwise qualified under the Constitution. or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens. enjoyed or acquired in violation of the provisions hereof but in no case less than P5000. not less than a certain per centum of its capital must be owned by citizens of the Philippines or of any other specific country. no real or personal property. further. at the time of the acquisition of his holdings in the corporations or associations referred to in section two of this Act. permits or allows the use. and by a fine not less than the value of the right. in addition to the penalty imposed herein. That any person. or capital as owned by such citizens. property or business to a person. use. shall be evidence of a violation of this Act. the exercise and enjoyment of which are expressly reserved by the Constitution or existing laws to citizens of the Philippines or of any other specific country. property or business. Sec. not possessing the qualifications required by the Constitution. forfeit such right. privilege. or leases. franchise or privilege.

Sec. If the informer is a dummy. upon proper court proceedings. who shall voluntarily take the initiative of reporting to the proper authorities any violation of the provisions of this Act and assist in the prosecution.5 Sec. privilege. shall be cause for the dismissal of such public official. October 30. he shall be entitled to the reward hereof in the sum equivalent to twenty-five per centum of the fine actually paid to or received by the Government. shall constitute a prima facie evidence of violation of the provisions of Section 2-A hereof. possession or control by a Filipino citizen having a common-law relationship with an alien of a right. 3. resulting in the conviction of any person or corporation profiting thereby or involved therein. Reward to informer. 4 Sec. The exercise. 1936. 2-C.the provisions of this Act: And provided. be dissolved. That the election of aliens as members of the board of directors or governing body of corporations or associations engaging in partially nationalized activities shall be allowed in proportion to their allowable participation or share in the capital of such entities. 6 Sec. 3-A. Any violation of the provisions of this Act by the spouse of any public official. — In case of conviction under the provisions of this Act. if both live together. 2-B. the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines. and shall be exempted from the penal liabilities provided for in this Act. finally. This Act shall take effect upon its approval. 61 . Approved. Any corporation or association violating any of the provisions of this Act shall. 4.3 Sec. property or business. twentyfive per centum of any fine imposed shall accrue to the benefit of the informer who furnishes to the Government original information leading to said conviction and who shall be ascertained and named in the judgment of the court.

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