CH. 1 – CONTRACT OF SALE V. CONTRACT OF SALE – One of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. A contract of sale may be absolute or conditional. Contract of Sale Absolute Real obligation – obligation to give Title passes to the buyer upon delivery Contract to Sell Conditional Personal obligation – obligation to do Ownership is reserved in the seller and will pass to the buyer only upon full payment of the price Full payment is a positive suspensive condition, the failure of which is not a breach but prevents the obligation of the vendor to convey title to arise remedies available: 1. resolution 2. damages DISTINGUISHED FROM OTHER CONTRACTS Donation Sale Gratuitous or onerous Onerous Formal contract Consensual contract Governed by law on Governed by law on sale donation

Non-payment of the price is a negative resolutory condition

Barter Sale Consideration: giving of a Consideration: giving of thing money as payment Governed by law on sales: species of the genus sales If consideration consists party in money and partly by thing – look at manifest intention; If intention is not clear: If intention is not clear: value of thing is more value of thing is equal than amount of money – or less than amount of barter money – sale Contract for piece of work Goods are to be manufactured specially for a customer and upon special order and not for the general market Sale Contract for delivery of an article which the vendor in the ordinary course of business manufactures or procures for general market (whether on hand or not) Essence is object

remedies available: 1. specific performance 2. rescission 3. damages I.

ELEMENTS OF A CONTRACT OF SALE 1. Consent 2. Determinate subject matter 3. Price certain in money or its equivalent STAGES IN LIFE OF CONTRACT OF SALE 1. Negotiation 2. Perfection 3. Consummation


III. OBLIGATIONS CREATED - 2 sets of real obligations to give QuickTime™ and a
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CHARACTERISTICS OF CONTRACT OF SALE: 1. Nominate 2. Principal 3. Consensual 4. Bilateral 5. Reciprocal 6. Onerous 7. Commutative 8. Title and not a mode

Essence is service Jurisprudence: 1. Timing test under art 1467: whether the thing transferred would have never existed but for the order 2. Habituality test if manufacturer engages in activity with need to employ extraordinary skills and equipment (Celestino v CIR) 3. Nature of the object test each product’s nature of execution differs from the others; products are

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Civil Law Summer Reviewer
not ordinary products of manufacturer (EEI v CIR) Agency to Sell Agent not obliged to pay for price, merely obliged to deliver price received from buyer. Principal remains owner even if object delivered to agent Agent assumes no risk/liability as long as within the authority given May be revoked unilaterally because fiduciary and even if revoked w/o ground Agent not allowed to profit Personal Contract; Rescission is not available Dation in Payment Pre-existing credit Obligations are extinguished Debtor’s consideration: extinguishment of the debt Creditor’s consideration: acquisition of the object offered in lieu of the original credit Less freedom in determining the price Payment is received by the debtor before the contract is perfected Sale Buyer pays for price of object Buyer becomes owner of thing; in agency Seller warrants Not unilaterally revocable NOTE: GENERAL RULE - All persons who are authorized in this Code to obligate themselves may enter into a contract of sale I. MINORS, INSANE AND DEMENTED PERSONS, AND DEAF-MUTES 1. Contracts are voidable, subject to annulment or ratification 2. Also includes: - State of drunkenness - Hypnotic spell - Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefore

Seller receives profit Real Contract

II. SPOUSES - A spouse may, without the consent of the other spouse, enter into sales transactions in the regular pursuit of their profession, vocation, or trade 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. NOTE: Prohibition likewise applies to common-law spouses III. OTHERS - TRUST RELATIONSHIPS 1. Art. 1491 Two groups of parties prohibited from acquiring by purchase certain properties: a. Guardian/Agent/Executors and Administrators i. Direct or indirect ii. May be ratified since only private wrong is involved b. Public Officers and employees/Officers of the Court i. Cannot be ratified since public wrong is involved ii. Requisites for the prohibition to apply to attorneys: 1. existence of attorney client relationship; 2. property is the subject matter in litigation;

Sale No pre-existing credit Obligations are created Consideration of seller: price Consideration of buyer: acquisition of the object

Greater freedom in determining the price Buyer still has to pay the price

Lease Sale Use of thing is for a Obligation to absolutely specified period only with transfer ownership of an obligation to return thing QuickTime™ and a TIFF decompressor Consideration is rent ar(Uncompressed) this picture. Consideration is price e needed to see Lessor need not be Seller needs to be owner owner of thing to transfer ownership NOTE: Lease with option to buy: really a contract of sale but designated as lease in name only; it is a sale by installments CH. 2 - PARTIES TO A CONTRACT OF SALE

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REQUISITES: 1. if it does not. at the very least. there is no contract Uncertainty is with regard to the quantity and quality of the thing and not the existence of the thing Object is a future thing sale of the hope itself Sale is effective even if the thing does not come into existence. consideration for a valid contract of sale can be the price and other valuable consideration.existing. Legal Status of Contract 1. ascertainable: i. determinable: 1. In money or its equivalent a. service Emptio rei speratae Sale of an expected thing Emptio spei Sale of a mere hope or expectancy that the thing will come to existence. there is every intention on the buyer to pay the price. Voidable (civil code) – agent. VALID if with consent CH. are needed to seof a new further contract 2.PRICE I. Licit i. III. thing is capable of being made determinate 2. Things a. determinate: particularly designated or physically segregated from all others of the same class ii. when at the perfection of the contract of sale. certain: expressed and agreed in terms of specific pesos and/or centavos b. by reference to another thing certain Page 132 of 297 . unless it is a vain hope The uncertainty is with regard to the existence of the thing Object is a present thing which is the hope or expectancy NOTE: Quantity of subject matter is not essential for perfection.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 3. The prohibitions in the two preceding articles are applicable to sales in legal redemption. 3 . without QuickTime™ and a the necessity TIFF (Uncompressed) decompressor e this picture. particular exchange or market iv. Certain or ascertainable a. must determine nature and quality of subject matter NOTE: Seller need not be the owner of the subject matter at the time of perfection: sufficient that he is the owner at the time of delivery. “Possible” . a true contract of sale must have price as part of its consideration 3.SUBJECT MATTER OF SALE 1. 1492. exception: foreclosure sale CH. by reference to a definite day. that the thing will exist. compromises and renunciations. whether the subject matter is of a type and nature that exists or could be made to exist to allow the seller reasonable certainty of being able to comply with his obligations b. if illicit. by the courts – in cases where the third person fixes the price in bad faith or by mistake iii. Void (case law) – guardian/ executor/public officers / officers of the court 2. REQUISITES: 1. and every expectation on the part of the seller to receive such price as the value of the subject matter he obligates himself to deliver 2. contract is void c. future. not outside the commerce of man ii. 4 . and contingent i. Real a. except: a. while in litigation (from filing of complaint to final judgment) NOTE: Exception to the prohibition against attorneys: contingent fee arrangement where the amount of legal fees is based on a value of property involved in litigation Art. Rights – must be transmissible. Determinate or determinable i. future inheritance b. by third persons ii. Sale is subject to the condition.

nominate c.FORMATION OF A CONTRACT OF SALE I. needs to be proven 2. However. The act may be shown to have been in reality a donation. offer floated with a period without acceptance. (2)When it shows that the parties really intended a donation or some other act or contract. characteristics of Option Contract: a. or some other act or contract 2. but never by one party to the contract 4. place and person original offer is destroyed. EFFECT OF GROSS INADEQUACY OF PRICE NOTE: Mere inadequacy of the price does not affect the validity of the sale. right to withdraw must not be arbitrary otherwise. may be withdrawn at will by offeror Page 133 of 297 . III. not the contract of sale by itself. 20. 2. there is a new offer. no presumption of consideration.offer is floated. to buy a certain object within an agreed period 1. 21 of Civil Code extinguished by happening/nonhappening of condition continues to be valid depending upon circumstances of time. the contract is inefficacious. principal. If there is a real price but what is stated in the contract is not the one intended to be paid (only relatively simulated): the contract of sale is valid but subject to reformation Art. offer is floated prior to acceptance.a contract granting an exclusive right in one person. 3. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. Policitacion/Negotiation Stage . if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefore. EFFECT WHERE PRICE IS SIMULATED 1. meeting of the minds.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 v.parties perform their QuickTime™ and a TIFF (Uncompressed) decompressor respective undertakings this picture. offer floated without period/without condition 5. Policitacion 1. separate and distinc b. Consummation . Banco Filipino Savings and Mortgage Bank) II. liable to damage under Art 19. the time when parties indicate their interest but no concurrence of offer and acceptance. or in any other manner. 3 STAGES IN LIFE OF A CONTRACT OF SALE 1. OPTION CONTRACT . except (1) When there is fraud. CH. offer accepted absolutely III. 1474. offer is floated and there is counter-offer 6. mistake. unilateral – versus contract of sale which is bilateral San Miguel Philippines v Cojuangco consideration in an option contract may be anything of value. onerous e. If not and neither party had any intention whatsoever that the amount will be paid (absolutely simulated): the sale is void 3. extinguished when period has ended and maybe withdrawn at will by offeror. RULES: 1. how exercised: notice of acceptance should be communicated to offeror without actual payment as long as there is delivery of payment in consummation stage II. commutative f. are needed to see 2. acceptance is floated but they do not meet. Jurisprudence: Manner of payment must be agreed upon (Marnelego v. or undue influence indicative of a defect in consent is present. Where the price cannot be determined in accordance with the preceding articles. 5 . offer is floated 7. Perfection . can not go back to original offer no authority of offeror to modify offer proceed to perfected stage 3.concurrence of all requisites. but can be attached to other principal contracts d. unlike in sale where it must be price certain in money 3. offer floated w/ condition 4. for which he has paid a separate consideration.

damages but not to specific performance because this is not an obligation to give b. with separate consideration i. v Mayfair Theater.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 4.offer is still valid. 6 . New concept: can not be forfeited – part of purchase price. Equatorial realty Dev’t Inc. lease). Old concept: subject to forfeiture when BUYER backs out 5. option contract is valid ii. RIGHT OF FIRST REFUSAL: 1. NEW RULE: Right of first refusal recognized Option Contract Principal contract. offeror can not withdraw offer until after expiry period iii. When parties are face to face – when there is absolute acceptance of an offer that is certain 2. consensual contract Exception: When the sale is subject to a suspensive condition I. must be restored 6. without separate consideration i.] 3. creates a promise to enter into a contract of sale and it has no separate consideration. Money given as part of purchase price 2. Seller has the right to bid at the auction provided such right was reserved and notice was given to that effect EARNEST MONEY 1. Recognizes recovery of damage based on abuse of rights doctrine CH. Acceptance is the proof that contract of sale exists 3. Sales of separate lots by auction are separate contracts of sale 2. Qualification: if old concept is stipulated – VALID 7. RFR becomes one of the considerations in the contract. principal contract (e. not subject to specific performance because there is no contractual relationship here and it is not an obligation to give (not a real contract) 2. New doctrine: may be subject to specific performance. When thru correspondence or telegram – when the offeror receives or had knowledge of the acceptance 3. OLD RULE . When the sale is subject to a suspensive condition – from the moment the condition is fulfilled NOTES: Qualified acceptance: mere counter-offer which needs to be absolutely accepted to give rise to perfected contract of sale Business ads are mere invitations to make an offer except when it appears to be otherwise II. ubject to rescission.PERFECTION OF SALE GENERAL RULE: A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Sale is perfected by the fall of the hammer 3. REQUIREMENTS: 1. OPTION MONEY Page 134 of 297 . the right of first refusal is only subject to specific QuickTime™ and a performance insofar as it(Uncompressed) decompressor TIFF is attached to a valid written are needed to see this picture. RULES GOVERNING AUCTION SALES: 1. stands on its own Needs separate consideration Subject matter and price must be valid Not conditional Not subject to specific performance Right of First Refusal Accessory. Effect of new doctrine: turned the world of policitacion upside down because while valid option contract is not subject to specific performance. SITUATIONS IN AN OPTION CONTRACT: a. but option contract is void and not subject to rescission. can not stand on its own Does not need separate consideration There must be subject matter but price not important Conditional Subject to specific performance 4.g. Presumption of perfection of contract of sale and such earnest money as part of purchase price is disputable EARNEST MONEY IV. right of first refusal which does not even have a separate consideration may be subject to specific performance III. Nothing in law prevents parties from treating earnest money differently 4. damages ii.

at a price not less than P500. Legal or Constructive. 69 Phil. Power to sell a piece of land granted to an agent – otherwise VOID Sale of large cattle. Actual or real. a contract of sale may be made in writing. it is necessary that the vendor have such control over the thing sold that. But to be effective.can take several forms and may be any manner signifying an agreement that the possession is transferred from the vendor to the vendee. If particular form is required under the statute of frauds: i. CA 195 SCRA 694 The act of delivery must be coupled with the intention of delivering the thing and putting the buyer under control Addison vs. perfected by mere consent as to price and subject matter b. Nature of diligence required: diligence of a good father of the family unless other requirement is stipulated Consequence: Seller will be guilty of breach if thing is lost through his fault I. a. exception by specific provision of law. 1483. and A sale of real property or of an interest therein. to transfer the ownership. III. Ling. b. buyer is bound to pay the balance agent (contains essential terms of the contract) 2. vs. 38 Phil. may be oral or written. or things in action. must also be registered with Municipal treasurer – otherwise VOID Sale of land by non-Christian if not approved by Governor– VOID When form is important for enforceability (STATUTE OF FRAUDS Article 1403 (2)) A sale agreement which by its terms is not to be performed within a year from the making QuickTime™ and a thereof. Subject to the provisions of the Statute of Frauds and of any other applicable statute. Delivery of the Thing . c. Reason: purposes of convenience only and not for validity and enforceability. When there is a note or memorandum in writing and subscribed to by party or his Page 135 of 297 . or by word of mouth. Different kinds of delivery: 1. cause of action is granted to sue and compel other party to execute the document When form is important for validity. to deliver a determinate thing PNB vs. (n) FORM OF SALES I. Art. valid and binding between parties but not binding to 3rd persons c. II. c. or may be inferred from the conduct of the parties. TIFF (Uncompressed) decompressor are needed sale of goods. Form not important in validity of sale a. or partly in writing and partly by word of mouth. When there has been failure to object to presentation of evidence (oral) 4. IV. EXCEPTIONS TO COVERAGE OF STATUTE IN SALES CONTRACTS: 1. a. b. When there has been partial performance/execution (seller delivers with intent to transfer title/receives price) 3. 7 . its material delivery could have been made II.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 Money given as distinct consideration for an option contract Applies to a sale not perfected Not required to buy Part of the purchase price Given only when there is already a sale When given. and 2.00. Inc. marks the consummation of the contract of sale Norkis Distributor.Transfer ownership (tradicion) covers a twin obligations of the seller which are: 1. chattels An agreement for the to see this picture. Sale being consensual.when thing sold is placed in the control and possession of the buyer 2. 404 The execution of a public instrument is equivalent to delivery. at the moment of sale. Felix. When sales are effected through electronic commerce CH. 611 Delivery of the thing together with the payment of the price.CONSUMMATION STAGE/PERFORMANCE STAGE NOTE: Stage where parties both comply with their obligation.

3 of Art. MOVABLES a. Subject matter should be within control of seller. Cruz. seller continues to hold physical possession no longer in the concept of an owner but as a lessee or any other form of possession other than in the concept of owner. When at the time of execution of instrument. 1503 1. When accepts with knowledge that seller is not going to perform Page 136 of 297 . Constitutum possessarium − When at the time of the perfection of the contract of sale. delivery to carrier by placing goods on vessel is delivery to buyer − Destination – when goods reach the port even if not disembarked yet from the vessel.FREE ON BOARD . is stipulation execution does not produce effect of delivery 2. FAS – FREE ALONG SIDE . 1543. Such capacity should subsist for a reasonable time after execution of instrument (reasonable time depends on circumstances of persons. the would be buyer was already in possession of the would be subject matter of sale (ex: as lessee) 3. 1542. delivery to the carrier is delivery to the buyer.General Rule: Where the seller is authorized or required to send the goods to the buyer. INSURANCE. CIF – COST. 1541. FOB . seller had possession of the subject matter in the concept of owner and pursuant to the contract. Exceptions: a contrary intention appears or implied reservation of ownership under pars.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 III. 1540. there is already delivery to the buyer (twin effects deemed fulfilled) 2.Right to fruits and accessions/accessories accrue from time sale is perfected but no real right over it until it is delivered Delivery Through Carrier .2. 10 Sept. 1539. Different forms of Constructive Delivery Constructive delivery has same legal effect as actual or physical delivery 4. subject matter was not subject to control of the seller 3. buyer has the option to reject or accept it. made by: a. places and things) Ten Forty Realty vs. delivery to carrier is delivery to buyer. when SELLER points to the property without need of actually delivering 2. Tradition by operation of law V. Placing titles of ownership in the hands of the buyer b. 1. there is already delivery to buyer. delivery of thing plus accessories and accessions in the condition in which they were upon the perfection of the contract including the fruits b. Traditio Longa Manu − Delivery of thing by mere agreement. When the seller delivers to the buyer a quantity of goods LESS than he contracted to sell. Quasi-tradition − Delivery of rights. COMPLETENESS OF DELIVERY 1. See Arts.When goods delivered alongside the ship. 2003 Gives rise only to a prima facie presumption of delivery which is destroyed when actual delivery is not effected because of a legal impediment 1. When there are needed to see this picture. Symbolic delivery − As to movables – ex: delivery of the keys to a car 4. he should have capacity to deliver at the time of execution of public instrument when he wants to effect actual delivery VII. 1522. a. Delivery of Fruits and Accessions/ Accessories . FREIGHT − When buyer pays for services of carrier – VI. to contrary.Shipment – when goods are delivered at ship at point of shipment. there is delivery to the buyer 3. Allowing buyer to make use of rights 6. credits or incorporeal property. WHEN EXECUTION OF PUBLIC INSTRUMENT DOES NOT PRODUCE THE EFFECTS OF DELIVERY and a QuickTime™ TIFF (Uncompressed) decompressor 1. IV. carrier is agent of the buyer − When buyer pays seller the price – from moment the vessel is at port of destination. 5. Traditio Brevi Manu − Before contract of sale.

Accept delivery of thing sold a. rate at certain price. When accepts and consumes before knowledge that buyer will not perform contract in full. sale or return NOTE: Who Bears Expenses of Delivery? Seller X. If Greater in area: . When seller delivers to the buyer a quantity of goods LARGER than he contracted to sell the buyer has the following options: i. adjusted TIME AND PLACE OF DELIVERY Follow stipulation in contact.rescission . He intimates to seller that he has accepted Page 137 of 297 .proportional reduction of price – LACK IN AREA SHLD NOT BE LESS THAN 1/10 OF AREA AGREED UPON iii. 5. interest to be paid also from default 2. if none specified – at the time and place of delivery goods. If payment of interest is stipulated – must pay. If Less in area: . sale on acceptance/approval 3. 4. Buyer is obligated to pay price according to terms agreed upon regarding time. deliver all that may have been stated in the contract if impossible. buyer has 2 options: i.needed to see thiswhole accept picture. reject goods entirely – if indivisible will not be accordingly VIII. If the sale should be made with statement of its area. are at contract rate . MIXED with goods of a different description not included in the contract.General Rule: The ownership of the thing sold shall be transferred to the buyer upon the actual or constructive delivery thereof. Pay the price a. 2. accept the whole – pay price stipulated iii. EFFECTS OF DELIVERY . IMMOVABLES a. Except when the contrary is stipulated such in the cases of: 1. 2. liable only for fair value of goods delivered c. there is acceptance when: i. When buyer defaults – constitutes breach: subject to specific performance/rescission and damages. remedies of buyer: ii. 1. or Seller’s place of business or his residence Specific goods – place where the thing is At reasonable hour IX. or Follow usage in trade. Where to accept: at time and place stipulated in the contract. 3. Description – goods must correspond with description or sample 3. SALE BY DESCRIPTION/SAMPLE Sample – goods must correspond with sample shown 2. Sold for lump sum When price per unit not indicated If area delivered is either greater or lesser – price XI. if amount of interest not mentioned – apply legal rate c. place and amount b.Not applicable to judicial sales iv. accept per contract and reject the rest ii. he must pay at price stipulated b.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 contract in full. eject whole if subject matter is indivisible d. contract to sell 2.accept per stipulation and reject the rest QuickTime™ and a TIFF (Uncompressed) decompressor area – pay . OBLIGATIONS OF BUYER 1. accept good w/c are in accordance with contract and reject the rest ii. Effect if there is no compliance: RESCISSION may be availed of by the buyer 1. When the seller delivers to the buyer the goods he contracted to sell. Sold per unit or number i.

II. in the absence thereof. and cancellation. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. the ownership shall pertain to the person who in good faith was first in the possession. if it should be movable property. to the person who presents the oldest title. TIFF (Uncompressed) decompressor are needed to see this picture. potior jure or simply “he who is first in time is preferred in right” should apply. and 4. 1544. REQUISITES FOR DOUBLE SALES TO EXIST: (VOCS) 1. and. POSSESSION  Both actual or constructive REGISTRATION: any entry made in the books of the registry. one who has paid price before notice that another has claim or interest III. Goods must be delivered in full. PRIORITY IN RIGHT When does it apply: when not all requisites embodied in 1544 concur. Owner is first to posses in good faith 2. the priniciple of prior tempore. Two or more sales transactions must pertain to the same object or subject matter. provided there is good faith. 17. Retains without intimating to seller that he has rejected ii. LIS PENDENS – notice that subject matter is in litigation IV.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 When delivered and does any act inconsistent with ownership of seller iii. 2005] If not all the elements are present for Art. If the same thing should have been sold to different vendees. MOVABLE a. shall be considered as depositary. does not discharge seller from liability in case of breach of warranties (unless no notice or failure to give it within reasonable time) When buyer has a right to refuse goods. Should there be no inscription. ADVERSE CLAIM – notice that somebody is claiming better right V. except when stipulated b. and even marginal notes. VI. Undisputably. I. absent contrary express stipulation. (1473) DOUBLEQuickTime™ and a SALE General Rule: FIRST IN TIME. Acceptance of goods in general. When not examined by buyer – not accepted until examined or at least had reasonable time to examine 4. registered under Torrens system 1544 applies Page 138 of 297 5. 2. including both registration in its ordinary and strict sense. he is a purchaser in good faith because at the time he bought the real property. Two or more buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests. No inscription and no possession in good faith – Person who presents oldest title in good faith d. Good Faith . . First to register in good faith b. unless there is stipulation to the contrary 3. 1544 to aply. RULES ACCORDING TO 1544: 1. Two or more sales transactions must constitute valid sales. Sale of Goods on installment a. No inscription. annotation. first to possess in good faith c. Should it be immovable property. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. CA [Jan. no need to return. there was still no sale to as a second vendee. Consolidated Rural Bank (Cagayan Valley_ who buys property without notice that another person has a right or interest in such property. IMMOVABLE a. Art. It is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights. Two or more buyers must each have bought from the very same seller. 1. 3.

deliver to bearer (negotiation by mere delivery) b. Not creation of law but by merchants to allow them to deal with merchandise without having to physically carry them around 2. CONDITION 1. Obligation of bailee – bailee is immediately bound to the document Warranties on Negotiation 1. limiting words does not destroy negotiability ii. but must have acted in good faith. not registered under the Torrens system 1544 still applies Jurisprudence if 2nd sale is a judicial sale (by way of levy on execution). he has knowledge of no fact which would impair the validity or worth of the document 4. i. et al.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 2. Documents of title serve two (2) functions: QuickTime™ and a TIFF (Uncompressed) decompressor are needed to see this picture. theft. he has legal right to negotiate or transfer it 3. PRIORITY IN RIGHT Gabriel v. medium by which seller is able to transfer possession of goods 3. Important Considerations 1. buyer merely steps into the shoes of the judgment debtor. NON-NEGOTIABLE EFFECTS OF UNAUTHORIZED NEGOTIATION The validity of the negotiation of a negotiable document is not impaired by the fact that negotiation was done in breach of duty or that the owner of the document was deprived of the same by loss. Assignee takes document with defects of the assignor 3. the non-performance of such condition may be treated by the other party as breach of warranty. Effect of Non-Fulfillment of Condition The other party may a. accident. Mabanta. deliver to specific person or his order (negotiation by endorsement + delivery) i. NEGOTIABLE DOCUMENTS OF TITLE See Article 1636 1. he has right to transfer title to goods and goods are merchantable/fit Page 139 of 297 . Effect if buyer has already sold the goods General Rule: The unpaid seller’s right to lien or stoppage in transitu remains even if buyer has sold the goods Exception: o When the seller has given consent thereto. waiving the performance of the condition If the condition is in the nature of a promise that it should happen. mistake if the person to whom the document is delivered is in good faith and without notice of the said irregularities. NEGOTIABLE a. or to the order of any person named in such document 4. proceed with the contract. 2. If order instrument and no endorsement was made – equivalent to assignment 2. fraud. [2003] Good faith must concur with registration. Negotiation gives better right than assignment 2. or o When the buyer is a purchaser in good faith for value of a negotiable document of title. evidence of existence and possession of goods described therein ii. even if face of instrument says NONNEGOTIABLE. the document is genuine 2. Pertains to specific type of movables only : GOODS a. To be entitled to priority. it is still NEGOTIABLE. A document of title which states that the goods referred to therein will be delivered to the bearer. Outside of such situation – must apply to conflicting sales over the same unregistered parcel of land If sale 1 occurs when land is not yet registered and sale 2 is done when land is already registered – apply FIRST IN TIME. refuse to proceed with the contract b. Negotiable by delivery or indorsement TYPES 1. the second purchaser must not only establish prior recording of his deed.

to annul is valid. unless: b. Document is first surrendered c. Law on estoppel further bolsters it: title passes by operation of law to grantee when person who is not owner of the goods sold delivers it and later onQuickTime™ and title thereto acquires a TIFF (Uncompressed) decompressor e. no obligation on part of seller to transfer ownership d. Sale by owner – VALID b. Since are needed to see this picture. Subject matter is indivisible in nature or by intent. PERFECTION STAGE a. despite seller not being the owner or seller having no authority to sell II. 3. 1505. Reason why both sales are valid: ownership is necessary only at time when transfer title to goods. CONSUMMATION STAGE a. Owner by his conduct is precluded from denying seller’s authority (ESTOPPEL) 2. Sale by non-owner – VALID. NEGOTIABLE: a. III. 1506 I. RULES ON LEGAL EFFECTS OF SALE BY A NON-OWNER GENERAL RULE: Sale by non-owner. Before notification – can still be garnished 3. Can not be levied or garnished when documents are already with purchaser in good faith. buyer acquires no better title than seller had. EXCEPTIONS: 1. Contract of sale is valid because it has passed perfected stage. Valid sale – buyer acquires title of goods Page 140 of 297 . SALE BY NON-OWNER 1. What is void is the transfer of title/ ownership did not pass c. Notification is operative act to transfer title/possession of goods in favor assignee b. there is already a perfected contract 2. by law and equity. at perfection stage. Sale is made in a merchant’s store in accordance with code of commerce and special laws IV. Sale of a particular portion of a property is with consent of other co-owners. Sale is made under statutory power of sale or under order of a court of competent jurisdiction 4. Negotiation is enjoined ASSIGNMENT acquires title to goods against transferor acquires right to notify bailee so that he acquires obligation of bailee to hold goods for him NEGOTIATION transferor/holder acquires title to goods bailee has direct obligation to holder as if directly dealt with him b. Effect: buyer acquired no better right than transferor d. Co-owner sells 1 of 2 commonly-owned lands and does not turn over ½ of the proceeds. PERFECTION STAGE a. other co-owner. Sale of co-owner of whole property or definite portion GENERAL RULE: i. NON NEGOTIABLE: a. co-owner sells definite portion to partition – sale is void as to other coowner but valid as to his spiritual share if the buyer would have still bought such spiritual share had he known that the definite portion sold would not be acquired by him. Legal effect: CAVEAT EMPTOR – BUYER BEWARE e. 2. Document is pounded by court d. SALE BY SELLER WITH VOIDABLE TITLE 1. EXCEPTIONS TO THE RULE ON THE EFFECT OF SALE OF A DEFINITE PORTION OBY A COOWNER 1. has exclusive claim over remaining land. 1477.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 Rules of Levy/Garnishment of Goods Covered by Documents of Title 2. Contrary is provided for in recording laws (PD 1529) 3. c. co-owner sells whole property prior to partition – sale of property itself is void but valid as to his spiritual share ii. action improper. SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE See Articles 1475.

must seek remedy through courts EXCEPTION: − DOCTRINE OF SELF HELP − SPECIAL REMEDIES Requisites: 1. AFTER DELIVERY o Res perit domino o Delivery extinguishes ownership visa-vis the seller and creates a new one in favor of the buyer VII.only when unpaid seller has exercised possessory lien or stoppage in transitu can the seller proceed with his other special rights of resale or to rescind. possessory lien 2. Possessory Lien 1. buyer buys goods under following condition: o in good faith o for value o without notice of seller’s defect of title V. Res perit domino b. special right to rescind NOTE: Hierarchical Application . I. WHO BEARS RISK OF LOSS/ DETERIORATION/ FRUITS: 1. TITLE AS TO MOVABLE PROPERTIES GENERAL RULE: Possession is equivalent to title Requisites: Possession of movable and Good Faith EXCEPTIONS: Owner lost movable – owner can recover w/o reimbursing price Owner is unlawfully deprived – owner can recover w/o reimbursing price EXCEPTIONS TO THE EXCEPTIONS: − movable is bought at public sale – owner Seller cannot anymore comply with obligation so buyer cannot anymore be compelled 3. AFTER PERFECTION BUT BEFORE DELIVERY o Loss – confused state o Paras: BUYER o Tolentino: SELLER o Deterioration and fruits Buyer bears loss. 4. REMEDIES OF PARTIES FOR BREACH OF CONTRACT OF SALE See Articles 1594-1596. 1484-1486. Owner is seller so seller bears risk of QuickTime™ and a decompressor loss TIFF (Uncompressed) this picture. AT PERFECTION o Res perit domino o Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale . were fro the account of the buyer. Subject matter – goods 2. DETERIORATION. 1592 SUBJECT MATTER: MOVABLES (IN GENERAL) Remedies of Unpaid Seller GENERAL RULE: Any man may not take law in his own hands. 1. stoppage in transitu 3.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 o 2. VIII. 2. Valid sale – if title has not yet been avoided. Seller is unpaid – not completely paid or received negotiable instrument under a condition and condition has been breached by reason of dishonor 3. the risk of loss deterioration and the benefits of fruits and improvements. BEFORE PERFECTION a. special right of re-sale 4. Physical possession is with seller The following are the special remedies of unpaid seller 1. FRUITS and OTHER BENEFITS See Articles 1493 and 1494 Legal consequences from point of perfection are the same in both legal systems: upon perfection of an unconditional contract of sale involving specific or determinate subject matter. are needed to see 2. Seller not bound to deliver if buyer has not paid him the price Page 141 of 297 can only recover after reimbursing price − acquired in good faith and for value from auction LOSS. CONSUMMATION STAGE a.

notice to carrier is and a essential QuickTime™ TIFF (Uncompressed) decompressor are needed to see this picture. Cancel the sale if buyer fails to pay 2 or more installments. Before reaching destination. Reached point of destination 2. Right to retain. Action : Judicial and Extrajudicial Page 142 of 297 How is right exercised 1. Shown by seller that buyer is insolvent (failure to pay when debts become due ) why special? there are things which seller cannot do in ordinary sale: 1. loses lien when he parts with goods (still has stoppage in transitu) 5. 3. Goods are supposed to have been delivered to buyer but carrier refused 4. Notice by seller to buyer is not required. Foreclose on chattel mortgage if buyer fails to pay 2 or more installments Incidents: 1. From the time goods are delivered to carrier for purpose of transmission to buyer 2. Notice needed to be given by seller to buyer why special? – ownership of goods already with buyer but seller may still rescind. Exercisable only in following circumstances: a. may still exercise right on goods undelivered Instances when possessory lien lost: 1. no further action against buyer to recover any unpaid balance of the price 2. need to go to court to destroy transfer of ownership Remedies of Buyer When Seller fails to deliver. cannot be availed when seller does not have custody 3. ownership is with buyer but seller can sell goods 2. When is the law applicable? Sale on movables by installment o Sale on installment: payment by several partial payments in small amount 4. Stoppage In Transitu − Goods are in transit − Requisites when goods are in transit 1. Rationale of the law: Buyer is lulled into thinking that he could afford because of small amounts per installment and at the same time remedy abuse of commercial houses 5. buyer in default for unreasonable time 4. buyer obtains delivery of the goods 3. Obtain actual possession of goods 2.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 2. Nature of remedies: alternative and not cumulative 6. notice by seller to buyer not essential II. buyer becomes insolvent d. buyer may seek SPECIFIC PERFORMANCE WITHOUT GIVING SELLER OPTION TO RETAIN GOODS ON PAYMENT OF DAMAGES SALE OF MOVABLES ON INSTALLMENT Remedies of Unpaid Seller (1484) 1. goods sold without stipulation as to credit b. seller delivers goods to carrier for transmission to buyer without reserving ownership in goods or right to possess them 2. Special Right to Resell the Goods 1. Special Right to Rescind 1. Buyer is in default for unreasonable time 3. buyer or his agent lawfully obtains possession of goods 3. stipulated the right of resale in case buyer defaults in payment 3. Goods rejected by buyer and carrier continues to possess them When goods no longer in transit 1. If buyer chooses foreclosure. Coverage: sale and financing transaction and contracts of lease with option to purchase 7. ownership is destroyed even without court intervention but in ordinary sale. When part of goods delivered. 2. notice by seller to buyer not essential . waiver 4. title accorded to buyer is destroyed even without court intervention IV. goods are perishable 2. Exact fulfillment should the buyer fail to pay. Expressly stipulated 2. goods sold on credit but term of credit has expired c. III. Give notice of claim to carrier / bailee in possession thereof 3.

Deemed chosen when: o Notice of rescission is sent o Takes possession of subject matter of sale o Files action for rescission Barring effect on recovery of balance Foreclosure i. Pay without interest the balance within grace period of 1 month for every year of installment payment 2. If real estate developer fails to comply with obligation according to approved plan: .SUSPEND PAYMENT UNTIL SELLER COMPLIES . Coverage: REAL ESTATE – defined space vs. (Perverse BuyerMortgagor) IMMOVABLES (BY INSTALLMENT) Article 1592 – Applies only to contract of sale I. o IMMOVABLES (IN GENERAL) Remedies of Seller Anticipatory breach 1. recover also expenses incurred in attorneys fees. Purpose of law . Rescission . Maceda Law 1. CONDO – not defined space (w/ common areas) 3. can no longer choose other remedies Except: after choosing. suspend payment.Protect buyers in installments against oppressive conditions Notice needed .When chosen. If already chose specific performance. Excluded: a. etc. buyer entitled to 50% of what he has paid + if after 5 years of installments.cancelled. 2. Exception: mortgagor refuses to deliver property to effect foreclosure. Sale to tenants under agrarian laws Rights Granted to Buyers: o Buyer paid at least 2 years installment 1. Extent of barring effect: purchase price iii. Seller has reasonable grounds to fear loss of immovable sold and its price.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 o Specific Performance i. 5% for every year but not to exceed 90% of total payments made 4.But stipulation that installments paid are forfeited are valid if not unconscionable . When no payment . sue for RESCISSION 2. Industrial b.waiver thereof if oppressive Applies to contracts even before law was enacted − Stipulation to contrary is void Other rights: o Sell rights to another o Reinstate contract by updating during grace period and before actual cancellation o Deed of Sale to be done by notarial act Page 143 of 297 3. 2nd grace period of 30 days from notice of cancellation/demand for rescission buyer can still pay within the 30 day period with interest No payment after 30 day period. Grace to be exercised once every 5 years 3. Barring effect on recovery of balance ii.RESCIND . it has become impossible. 1st Grace period is 60 days from date installment became due 2. Commercial c. rescission may be pursued b. Non–payment of price. there is correlative obligation to restitute . In case of subdivision or condo projects. Remedies of Buyer 1. can cancel. sue for RESCISSION QuickTime™ and a TIFF (Uncompressed) decompressor are needed to see this picture. Cancellation to be effected 30 days from notice and upon payment of cash surrender value Buyer paid less than 2 years installment 1. applies to COS and CTS and Financing 2.

implied. warranty cannot be enforced until aforementioned requisites concur o REMEDY OF RESCISSION IN CONTRACTS COVERING IMMOVABLES See Articles 1191. mortgagee. warranty that seller has a right to sell o refers to consummation stage since in consummation stage.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 o To pay in advance any installment or the full balance of price anytime without interest Have full payment annotated in certificate of title 4. Cost of the suit 4. or title of the goods. when ownership is transferred. to demand rescission of contract. the non happening of which would not constitute a breach but extinguishes the obligation 2. Forfeiture of amounts valid being in nature of penal clause Contract of Sale – Rescission is Applicable Contract to Sell – Rescission not Applicable Non–payment of purchase price would automatically cancel even without further action for rescission Except: If subject matter is residential lots. Requisites of breach of warranty against eviction: . Expenses of the contract. and by which he promises or undertakes to insure that certain factsa are or shall be QuickTime™ and decompressor as he then representsTIFF (Uncompressed) this picture.seller has been summoned in the suit for eviction at the instance of buyer. burden to sue shifts to party who does not like rescission b. pledge 2. if party to the sales contract has promised that the condition should happen or be performed. quality. buyer purchases the subject matter relying thereon o o Page 144 of 297 . Condition 1. are needed to see Express Warranties ( requisites ): 1. by operation of law 1. having reference tot eh character. a. Income or fruits if he has been ordered to deliver the to the party who won the suit 3. when breached.buyer is evicted in whole or in part from the subject matter of sale . the non-performance of which may be treated by parties as breach II. warranty against eviction a. 1592 o o Nature: Judicial Extra judicial Rescission a. Maceda law applies. Warranties A statement or representation made by the seller contemporaneously and as a part of the contract of sale. auctioneer. and 5. natural tendency of affirmation or promise is to induce buyer to purchase subject matter 3.basis of eviction is a right prior to sale or an act imputable to vendor . it is enough that the aforementioned requisites are complied with b. it must be an affirmation of fact or any promise by seller relating to the subject matter of sale 2. Value of the thing at the time of eviction. or 2.there is a final judgement . whether they were intended or not. unless contrary provision appears in contract b. no appeal needed nor a need for buyer to resist eviction for right to accrue. However. 2. CONDITION and WARRANTIES See Articles 1545-1547 I. or made 3rd party defendant through 3rd party complaint brought by buyer Vendor’s liability shall consists of (Total Eviction)(VICED) 1. to enforce vendor’s liability for eviction (VICED). allowed if stipulated. Damages and interests if the sale was in bad faith Partial Eviction 1. seller is liable for damages Implied Warranties Deemed included in all contracts of sale whether parties are actually aware or not. court still has final say as to propriety of rescission c. buyer shall enjoy the legal and peaceful possession of the thing c. When a contract contains a condition. it is where ownership is transferred by tradition o not applicable to sheriff. law on rescission applies when there is substantial breach.

buyer shall answer for injury / loss due to his fault buyer may elect between withdrawing from sale and demanding proportionate reduction of price with damages in either case Specific Implied Warranties in the Sale of Goods Warranty as to fitness and quality. applies to judicial sale. subject matter may be movable or immovable 2. animals at fair or public auction no warranty against hidden defects e. sale of animals with contagious disease is void f. warranty against hidden defects o SELLER does not warrant patent defect. he would not have acquired it or would have given a lower price a. when breach of warranty exist: buyer may ask for rescission of indemnity d. seller is not liable b. seller is aware – seller should return price and refund expenses of contract with damages d. nature of hidden defect is such that it should render the subject matter unfit for the use of which it was intended or should diminish QuickTime™ and a TIFF (Uncompressed) decompressor its fitness to see this picture. warranty not applicable when non– apparent burden or servitude is recorded in the Registry of Property – unless there is express warranty that the thing is free from all burdens and encumbrances 4. sale of unfit animals void if use / service for which they are acquired has been stated in the contract and they are found to be unfit therefor o prescription of action:40 days from date of delivery to buyer o if sale is rescinded. sale of animals on teams (2 or more) when only one is defective. vendor not liable for eviction if adverse possession had been commenced before sale but prescriptive period is completed after transfer e. Rescission 2. Buyer makes known to seller the particular purpose for which goods are acquired and it appears that the buyer relied on the seller’s skill or judgment Page 145 of 297 .Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 c.seller should return price and interest and refund expenses ( no damages ) e. defects on animals a. only one is redhibited and not the others exception: when it appears buyer would not have purchased the team without the defective one apply to sale of other things d. requisites: 1. immovable sold is encumbered with non–apparent burden or servitude not mentioned in the agreement b. warranty against encumbrances (nonapparent) o Requisites: a. judgment debtor responsible for eviction unless otherwise decreed in judgment d. Rights of buyer when deprived of only part of the subject matter but would not have bought such part if not in relation for the whole: 1.defect shall be considered as REDHIBITORY b. animals to be returned in same condition when they were acquired. action to prescribe 6 months from delivery of subject matter 5. applicable to judicial sale except that judgment debtor not liable for damages g. buyer may elect between withdrawing from contract or demanding proportionate reduction of price with damages in either case f. nature of non–apparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof c. obligation of seller for breach depends on whether he has knowledge of such defect or not c. seller is not aware . are needed 3. even in the case of professional inspection but hidden defect is of such nature that expert knowledge is not sufficient to discover it . caveat emptor o Except when hidden 1. when defect is visible or even if not visible but buyer is an expert by reason of his trade or profession. had the buyer been aware. if vet fails to discover through ignorance or bad faith he is liable for damages c. Mutual restitution 3.

and fulfills other stipulations which may have been agreed upon 3. Refuse to accept goods and maintain action against seller for damages 4. If seller aware – waiver is in bad faith. b. if he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the transfer of ownership to him EXTINGUISHMENT See Arts. When rescission by buyer not allowed: 1. 1. rescission 9.wipes out warranty as to that specific risk but not as to eviction caused by other reasons. must be in the same contract Parties may increase or diminish implied warranty against eviction. prescription Conventional redemption 1. thus seller still liable Buyer’s Option in Case of Breach of Warranty II. annulment 8. d. buyer with knowledge of risk of eviction assumed its consequences and made a waiver – vendor not liable (applicable only to waiver of warranty against eviction) 4. Accept goods and set up breach of warranty by way of recoupment in diminution or extinction of the price. The right is exercised only be seller in whom right is recognized in the contract or by any person to whom right was transferred. but effect depends on good faith or bad faith on the part of the seller. if he fails to notify the seller within a reasonable time of his election to rescind 3. not extinguish contract itself. if the buyer accepted the goods knowing the breach of warranty WITHOUT protest 2. Grounds (same grounds whereby obligations in general are extinguished) 1. condonation or remission 4. Accept goods and maintain action against seller for damages 3. 1600 -1623 I.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 2. Goods are bought by description from seller who deals in goods of that description 3. Rescind contract of sale and refuse to receive goods/return them when already received. If seller not aware of hidden defects – loss of the thing due to such defect will not make seller liable 3. payment or performance 2. been ato see decompressor exempting stipulation are needed seller from hidden defects 2. no warranty unless there is a stipulation to the contrary 4. The right which the vendor reserves to himself to reacquire the property sold provided he returns to the vendee: a. c. confusion or merger of rights of creditor and debtor 5. novation 7. only applies to contract of sale 2. only extinguishes obligations pertaining to contract of sale. in case of sale of specified article under its patent or trade name. he necessary and useful expenses made on the thing sold e. buyer without knowledge of a particular risk. there is an implied warranty that the goods shall be free from defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample − Effects of Waiver o Waiver in Warranty against eviction - 1. the price of the sale. expenses of contract. Seller in bad faith and there is waiver against eviction – null and void 2. waiver to a specific case of eviction . loss of the subject matter 3. other legitimate payments. If there has TIFF (Uncompressed) this picture. 2. measure of damage: difference between value of goods at time of delivery and value they would have had if they had answered to the warranty Sale of Goods by sample If seller is a dealer in goods of that kind. made general renunciation of warranty – not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction) 3. Waiver against Hidden Defects and a QuickTime™ 1. Page 146 of 297 . fulfillment of a resolutory condition 10. compensation 6.

any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right: reimburse buyer of the price of the sale iii. owner of adjoining lot with smaller area shall be preferred QuickTime™ and a TIFF (Uncompressed) decompressor c. The right to be subrogated upon the same terms and conditions stipulated in the contract. 7. debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor plus judicial costs. arifneeded to see this picture. delinquent payer has 1 year from date of sale to redeem by paying to the revenue District Officer the amount of tax delinquencies. any or all of co-owners sells their shares to 3rd person ii. if two or more adjacent lot owners desire to exercise right to redeem. if 2 or more co-owners desire to exercise right of redemption. owner of adjoining land can redeem b. any of the heirs sell his hereditary rights to stranger before partition ii. 2 or more owners of adjoining lot desire to exercise right to redeem.1 year from date of registration of certificate of sale to redeem by paying purchaser at public auction with interest Redemption in extrajudicial foreclosure . adjoining owner has right to redeem unless grantee does not own a rural land b. 9.1 year from date of sale and registration Redemption in judicial foreclosure of mortgage . when piece of land is small and cannot be used for any practical purpose and bought merely for speculation.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 III. among co-heirs i. 4. 3. . where piece of rural land has an area not exceeding 1 hectare. they may only do so in proportion to the share they respectively have in thing owned in common c. 8. Legal redemption 1. Types of Legal Redemption: a. property is foreclosed b. legal heirs within 5 years from date of conveyance granted by law. in case of tax delinquency/failure to pay tax assessments. sale of credit in litigation i. Public Land Act c. among co-owners right to redeem is granted to debtor mortgagor except when mortgagee is bank of a banking institution 90 days after finality of judgment When Period of Redemption Begins to Run . Only applies to contracts of sale. interest ii. debtor may exercise right within 30 days from the date assignee demands payment from him d. Other Instances When Right of Legal Redemption is Granted a. two or more adjacent lit e owners desire to exercise right to redeem and both have same lot area. urban land a.Right of legal pre-emption of redemption Page 147 of 297 5. 2. any co-owner may exercise right of redemption by paying reasonable price of property to the buyer iii. Land acquired under free patent homestead subject to repurchase by wife. one who first requested shall be granted ii. owner whose intended use is best justified shall be preferred. co-heirs has 1 month from receipt of notice in writing b. and interest or purchase price. among adjoining owners i. need not be stipulated Redemption in tax sales a. Redemption of homesteads b. 6. Redemption by judgment debtor . rural land a. in the place of one who acquires the thing by (1) purchase OR (2) by dation in payment OR (3) by other transaction whereby ownership is transmitted by onerous title. when a credit or other incorporeal right in litigation is sold.

upon or after expiration of right to repurchase. There is no prescribed form for an offer to redeem to be properly effected. written notice is still required Except when actual knowledge is acquired by co-heirs living in same land with purchaser. Sps. form of words. b. another instrument extending the period of redemption or granting new period is executed buyer retains for himself a part of the purchase price seller binds himself to pay taxes on thing sold real intention of parties is to secure the payment of a debt or performance of other obligation d.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 shall be exercised within 30 days from notice by the seller 10. the General Rule is that actual knowledge notwithstanding. the sale shall be construed as an equitable mortgage. The real intention of parties is that the pretended purchase price is money loaned and to secure payment of the loan. or other requisites prescribed by law for a mortgage.Right to repurchase the thing sold granted to the vendor in a separate instrument from the deed of sale Equitable Mortgage V. Remedy available to vendor: ask for reformation of contract 4. 2003). NOTE: In case of doubt – in determining whether it is an equitable mortgage or a sale a retro. sale with pacto de retro is drawn up 5. 208 SCRA 496 One which lacks the proper formalities. Valencia. 19 Aug. al. Rationale behind provision on Equitable Mortgage: a. if it exceeded. but shows the intention of the parties to make the property subject QuickTime™ and a TIFF (Uncompressed) decompressor of the contract as security forsee this picture. price of sale with right to repurchase is unusually inadequate b. Circumvention of usury law b. Cachola vs. valid only for the first 10 years. deeds of sale are not to be recorded in Register of Deeds unless accompanied by affidavit of seller that he has given notice to all possible redemptioners c. language of the contract b. 1623 is mandatory for the right of redemption to commence (PSC vs. Period agreed upon – should not exceed 10 years. Rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan. f. a. 1623 does not prescribe any distinctive method for notifying the redemptioner IV. offer to redeem is enough. it can either be through a formal tender with consignation of the redemption price within the prescribed period. Thus. No period agreed upon – 4 years from date of contract b. NOTE: Written notice under Art. How exercised . Period of Redemption a. CA. Circumvention of prohibition against pactum commissorium – creditor cannot appropriate the things given by way of pledge or mortgage. CA. What is paramount is the availment of the fixed and definite period within which to exercise the right of legal redemption. c.tender of payment is not necessary. et. e. 1. or co-owner was middleman in sale to 3rd party. 2. and contains a debt are needed to nothing impossible contrary to law. Hence. 148 SCRA 507 – Art. seller remains in possession as lessee or otherwise Page 148 of 297 . conduct of parties – to reveal real intent 3. What to Look for in Determining Nature of Contract a. remedy here is foreclosure. A contract with right to repurchase is deemed to be an equitable mortgage if the following requisites concur (IPERTI): a. Etcuban vs. When period to redeem has expired and there has been a previous suit on the nature of the contract – seller still has 30 days from final judgment on the basis that contract was a sale with pacto de retro: d. Option to Purchase .

the price of the thing sold b. When rights of co-owners over an undivided thing is sold as regards to their own share – vendee retro cannot compel one to redeem the whole property 4. Seller a retro must first pay the following: a. . This refers to cases involving a transaction where one of the parties contests or denies that the true agreement is one of sale with the right to repurchase. under present art 1607: there must be judicial order before ownership of real property is consolidated in the buyer a retro How is Redemption Effected 1. 1624 – 1634 I. Magno Tender of payment is SUFFICIENT to compel redemption. Failure to pay useful and unnecessary expenses entitles vendee to retain land unless actual reimbursement is made In Case of Multi-Parties 1. at time of execution of the sale a retro there are visible or growing fruits – there shall be no pro-rating at time of redemption if no indemnity was paid by the vendee a retro b. f. When an undivided thing is sold by coowners / co-heirs. Arises before sale 2. NOTE: When period has expired and seller allowed the period of redemption to expire – seller is at fault for not having exercised his rights so should not be granted a new period Paez vs. Mere sending of notice without valid QuickTime™ and a TIFF (Uncompressed) decompressor tender is needed to see this picture. are insufficient f. vendee a retro may demand that they must come to an agreement first and may not be compelled to consent to a partial redemption 3. No rescission because no sale exists yet 3. ASSIGNMENT: The owner of a credit transfers to another his rights and actions in consideration of a price certain in money or its equivalent Page 149 of 297 VIII. Should one of the co-heirs/co-owners succeed in redeeming the property – such vendor a retro shall be considered as trustee with respect to the share of the other co-owners/co-heirs. necessary and useful expenses made on the thing sold d. jurisprudence before the NCC: buyer a retro automatically acquires full ownership 2. Valid tender of payment is sufficient e. what controls is the stipulation between parties as regards the fruits.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 e. but is not in itself a payment that relieves the vendor from his liability to pay the redemption price IX. vendors a retro may only exercise his right over his respective share. at time of execution sale a retro there be no fruits but there are fruits at time of redemption – pro-rated between vendor a retro and vendee a retro giving the vendee a retro a part corresponding to the time he possessed the land. may compel the vendor to redeem the whole thing 2. ASSIGNMENT See Arts . When an undivided thing is sold because co. not to cases where the transaction is conclusively a pacto de retro sale. PRE-EMPTION 1. and because of such belief he had not redeemed within the proper period. Fruits 1. not a pacto de retro transaction. expenses of the contract and other legitimate payments made by reason of the sale c. if none: a. Example: Where a buyer a retro honestly believed that he entered merely into an equitable mortgage. The action is directed against prospective seller REDEMPTION Arises after sale There can be rescission of the original sale Action is directed against buyer VI.owners cannot agree that it be allotted to one of them – vendee a retro VII. Effect when There is No Redemption Made 1.

Before Notice of the Assignment Warranties of the assignor of credit 1. Liable ALSO for (expenses of contract and other legitimate payments plus useful and necessary expenses) damages Assignment of Credit or Incorporeal Right in Litigation . debtor has consented to assignment – cannot set up 4. He warrants the existence and legality of credit . Payment to the original creditor is valid and debtor shall be released from his obligation After Notice a. What Makes Assignment Different From Species Sale? Technical term but basically a sale Sale of credits and other incorporeal things 1. Payment to the original creditor is not valid as against the assignee b. V. NO warranty as to the solvency of debtor unless it is expressly the stipulated OR unless insolvency was already existing and of public knowledge at the time of the assignment b. guaranty. assignment of rights made w/o knowledge of debtor – debtor may set up against assignee the compensation w/c would pertain to him against assignor of all credits prior to assignment and of later ones until he had knowledge of the assignment 3. There must be a pending litigation 3. preference) debtor can set up against the assignee all the defenses he could have set up against the assignor VI. even if he paid a price less than such value transfers all the accessory rights (e. III. Assignor in bad faith a. NO warranty against hidden defect N/A because intangibles has no physical existence 2. by execution of public instrument because intangibles cannot be physically transferred 3. This rule does not apply to negotiable documents and documents of title which are governed by special laws. Without necessity of delivering the QuickTime™ and a document (Uncompressed) decompressor TIFF evidencing the credit.g. compensation unless assignor was notified by debtor that he reserved his right to the compensation 5. 2. one who sells whole of certain rights for a lump sum. debtor has knowledge but no consent may still set up compensation of debts previous to assignment but not the subsequent ones. a. are needed to see this picture. transfers the right to collect the full value of the credit. Effect of payment of debtor after assignment of credit 1. . one who assigns inheritance right w/o enumerating rights shall be answerable for his character as an heir d. expenses of the contract and other legitimate payments made by reason of the assessment 2.there is warranty except when expressly sold as a doubtful account a. Assignor in good faith a. He may be made to pay again by the assignee 2. 3.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 1. shall be answerable for legitimacy of the whole in general but not for each of the various parts Breach of Warranty: Liabilities of the assignor of credit for violation of his warranties 1. There must be a sale or assignment of credit 2. Effects of Assignment 1. 2. price paid by him AND Page 150 of 297 VII. Liability is limited to price received.Requisites: 1. 4. warranty shall last for 1 year only c. Transfer of Ownership 1. lack of knowledge or consent of debtor not essential for validity but has legal effects 2. pledge. mortgage. VIII. IV. by tradition and not by perfection 2. II. The debtor must pay the assignee: a.

If it is made by an executor. It requires the vendor. debtor has a right to extinguish it by reimbursing the assignee for the price the buyer paid plus interest V. law would rather benefit the debtor of such credits rather than the one who merely speculates for profit. mortgage. 5) Duty of seller to perform the following when transaction is within the coverage of law 1. or assignment 1. . Purpose: stores. The remedy of the creditor is not against the goods but to prosecute the seller criminally Page 151 of 297 2. transferor. III. of all or substantially all of fixtures and equipments Should cover only merchants because creditors cannot get adequate security because goods are sold ordinarily in course of business VII. thus perfectly legal assignment to possessor of tenement or piece of land which is subject to the right in litigation assigned a. he will be protected in its purchase b. mortgagee. etc. of all or substantially all of business 3. the law does not favor co-ownership assignment to creditor in payment for his credit a. interest on the price from the date of payment 4. NOTE: When credit or incorporeal right in litigation is assigned or sold. If it refers to properties exempt from attachment or execution (ROC. Sec. of business 2. assignment of credit / incorporeal right to co-heir or co-owner. assignment is in the form of dacion en pago. 12) Protection accorded to creditors by Bulk Sales Law: 1. If the statement is fair upon its face and the buyer has no knowledge of its incorrectness and nothing to put him on inquiry about it. assignee in insolvency. delivery of sworn statement to buyer 3. purpose is to presumably preserve the tenement IV. and 4. (Sec. or assignor to deliver to the vendee. terms and conditions of the sale. at least 10 days before the sale. presumption is that the assignment is above suspicion. administrator. Rule 39. 3. or to his or its agent or representative a sworn written statement of names and addresses of all creditors to whom said vendor. transfer. mortgage. When sale or transfer in bulk? .Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 b. The right must be exercised by the debtor within 30 days from the date the assignee demands (judicially or extrejudicially) payment from him NOTE: Presumption: buyer’s purpose is speculation and. assignment to make a full detailed inventory showing the quantity and the cost of the price. transferor. mortgagor. Right to redeem by debtor not available in the following instances (not considered speculative 1. written advance disclosure to creditors Effects of False Statements in the Schedule of Creditors 1. receiver. etc. or public officer. When sale or transfer NOT covered by Bulk Sales Law: 1. It requires the vendor. If it is made by one who produces and delivers a written waiver of the provisions of the Bulk Sales Law from its creditors 3. acting under judicial process (Section 8). judicial costs incurred by him AND c. may have been indebted together with the amount due or to be due (Section 3) 2. BULK SALES LAW I. of goods otherQuickTime™in ordinary course than and a TIFF (Uncompressed) decompressor are needed to see this picture. Protect creditor of merchant II. mortgagor. transfer. Without knowledge of buyer a.Any sale. If the transfer is in the ordinary course of trade and the regular prosecution of the business of the vendor 2. IX. VI. apply the proceeds pro-rata to claims of creditors shown in verified statement 4. or assignor. make sworn statement of listing of creditors 2.

such as execution.Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 2. His status is that of a trustee or receiver for the benefit of the creditors of the seller. the property will be liable in his hands to creditors of the original vendor personally liable to the creditors for value of it. whether the omission was fraudulent or not. he is responsible for the disposition of the property Remedies available to creditors 1. employees or laborers. attachment. or by a proceeding in equity 2. As against creditors a. The sale is VOID as to such creditors. A sale not in compliance with the Bulk Sales Law is valid against all persons other than creditors 2. operation as officers. II. 4. The sale is valid only as between the vendor and the vendee but void against the creditors With names of certain creditors without notice are omitted from the list a. Not void Void VIII. unless the purchaser has sold or otherwise disposed of. Anti-Dummy Law I. With respect to an innocent purchaser for value from the original purchaser a. With knowledge or imputed knowledge of buyer a. The Bulk Sales Law does NOT in any way affect the validity of the transfer as between the intermediate parties thereto b. as such. Management. The proper remedy is one against the QuickTime™ and a TIFF (Uncompressed) decompressor goods to subject to see this picture. The vendee accepts it at his peril b. Page 152 of 297 . Effects of violation of Law on Transfer 1. or dealt with the property. However if the circumstances are such as to bind the subsequent purchaser with constructive notice that the sale to the vendor (original purchaser) was fraudulent. As between parties a. Penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved only for Filipinos. An IPV from the original purchaser is protected b. III. X. so as to become Void IX. payment of them to the are needed the debt. Includes Control or non-control positions. Effects of Non-Compliance Failure to Prepare and deliver sworn listing of creditors Apply proceeds prorata to listed creditors Make advance written disclosure of transactions to creditors Register sworn statement with DTI Include or omit names of creditors and correct amount due in the statement Sale for no consideration On Transaction Fraudulent and void Fraudulent and void Not void On Seller Criminal Liability Criminal Liability No Criminal Liability No Criminal Liability Criminal Liability Criminal Liability 3. An ordinary action against the purchaser to obtain money judgment will NOT lie. garnishment. A purchaser in violation of the law acquires no right in the property purchased as against the creditors of the seller b.

Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 QuickTime™ and a TIFF (Uncompressed) decompressor are needed to see this picture. Page 153 of 297 .

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