You are on page 1of 61

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.
(144a!
"he definition in Art 14# brings about the creation of
two sets of obligations$ for the seller, (1! to transfer
ownership and (%! deliver possession of the sub&ect
matter' for the buyer$ to pay the price. (bligations,
as referred to in the Article, are obligations to give'
thus it may be the sub&ect of actions for specific
performance. (Villanueva)
B. )haracteristics of a contract of sale
1. Nominate * it has a peculiar name and form as
prescribed in the law
%. Consensual * it is founded upon and completed
by mere consent of the contracting parties
1
(See
Article 1475)
Art. 1475. "he contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the ob&ect of the contract and upon the price.
+rom that moment, the parties may reciprocally
demand performance, sub&ect to the provisions of the
law governing the form of contracts. (14,a!
-. 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!
1
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.
. Onerous * as opposed to gratuitous, because
the thing is sold in consideration of a price and
vice versa
.. Princial * it can stand on its own' unli/e an
accessory contract
). 0inds of a contract of sale
1. A!solute * where the sale is not sub&ect to
any condition whatsoever and where title passes
to the buyer upon the delivery of the thing sold.
%. Con"itional * where the sale contemplates a
contingency and in general, where the contract is
sub&ect to certain conditions (usually the full
payment of the purchase price!. )onditions are
attached to the contract' the title will only pass
once the conditions have been fulfilled.
D. 1ale as distinguished from other contracts
1. sale vs. contract #or a iece o# $or%
&
Art. 14'7. 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 mar/et, 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 mar/et, it is a
contract for a piece of wor/. (n!
Art. 171(. By the contract for a piece of wor/
the contractor binds himself to e2ecute a piece of
wor/ for the employer, in consideration of a
certain price or compensation. "he contractor
may either employ only his labor or s/ill, or also
furnish the material. (1##a!
Art. 1714. 3f the contractor agrees to produce
the wor/ from material furnished by him, he
shall deliver the thing produced to the employer
and transfer dominion over the thing. "his
contract shall be governed by the following
articles as well as by the pertinent provisions on
2
CELESTINO V. COLLECTOR: factory which habitually
ma!es sash, windows and doors, and sells the goods to the
public is a manufacturer. "he 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: "he 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 wor!, and not as to the
means by which it is accomplished.
1
Law on Sales
warranty of title and against hidden defects and the
payment of price in a contract of sale. (n!
Art. 1715. "he contract shall e2ecute the wor/ 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. 1hould the
wor/ be not of such quality, the employer may
require that the contractor remove the defect or
e2ecute another wor/. 3f the contract fails or refuses
to comply with this obligation, the employer may
have the defect removed or another wor/ e2ecuted,
at the contractor4s cost. (n!
a! 3n a contract for wor/, labor or materials or for a
piece of wor/, the thing transferred is one not in
e2istence and which never would have e2isted 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 e2isted and been the sub&ect of sale to
some other person, even if the order had not been
given. (De Leon)
b! "his follows the 5assachusetts 6ule$ 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 mar/et,
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 mar/et, it is a
contract for a piece of wor/. (Baviera)
&. sale vs. a)enc* to !u* an" sell
(
Art. 14''. 3n 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!
(. sale vs. !arter or e+c,an)e
Art. 14'8. 3f the consideration of the contract
consists partly in money, and partly in another thing,
the transaction shall be characteri7ed by the manifest
intention of the parties. 3f 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
3
QUIROGA V. PARSONS: $n 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.
"hese are precisely the essential features of a contract of
purchase and sale. "here was the obligation on the part of the
plaintiff to supply the beds, and, on that of the defendant, to pay
their price. "hese features e%clude 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,
e2ceeds the amount of the money or its
equivalent' otherwise, it is a sale. (144.a!
Art. 1'(8. By the contract of barter or e2change
one of the parties binds himself to give one thing
in consideration of the other4s promise to give
another thing. (1-#a!
Art. 1'(-. 3f 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 e2change, but he
shall be entitled to damages. (1-8a!
Art. 1'4.. (ne who loses by eviction the thing
received in barter may recover that which he
gave in e2change with a right to damages, or he
may only demand an indemnity for damages.
9owever, he can only ma/e 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 pre&udice to the rights
acquired in good faith in the meantime by a third
person. (14,a!
Art. 1'41. As to all matters not specifically
provided for in this "itle, barter shall be
governed by the provisions of the preceding "itle
relating to sales. (141a!
4. sale vs. "acion en a)o
Art. 1&45. 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 /n Pa)o 0ale
:resupposes a
pree2isting debt ;
e2tinguishes the debt
(bligations are
created from the
perfection of the
contract
:rice is the value of the
thing given
+i2ing of the price is
more freely agreed
upon
(Manresa)
5. sale vs. "onation
Art. 7&5. Donation is an act of liberality
whereby a person disposes gratuitously of a
thing or right in favor of another, who accepts it.
<nder Art 14=1, 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 2 2 2 (n the other hand, a purported
donation may have other considerations placed
on the donee, thus it becomes critical to
2
determine what rule applies (law on sales or law on
donations! (Villanueva)
'. summation1 tests to "etermine t,e nature o#
t,e contract
4 Tests 0ale 2 o!3ect1
trans#er o#
o$ners,i
Piece o#
4or% 2
o!3ect1
service
5mental6
,*sical
la!or7
1. >ature of
business
(rdinary ?2tra@
ordinary
%. ?2istence
of thing
Does not Depends on
order
-. 5ar/et Aeneral 1pecific
)lientele
4. 1tatute of
frauds
)overed >ot covered
4 Tests 5!ut
t,e ultimate
test is1
intention o#
t,e arties7
0ale A)enc* to 0ell
1. 6is/ of Boss Borne by
seller
Borne by
principal, not
agent
%. :ayment Buyer :rincipal, not
agent
-. ?2clusive
Dealership
6emittance test
4. 6eturn of
unsold goods
>one 5andatory
0ale Barter
1. 3ntention of
parties
%. Calue of
thing vs. Calue
of money
5oney D
thing
"hing D
5oney
& Tests 0ale Dacion /n Pa)o
1. Debt >one :re@e2isting
%. 1tage of
contract
:erfection ?2tinguishment
II. PARTI/0 TO A CONTRACT O8 0A9/
A. )apacity of parties
Art. 148-. All persons who are authori7ed in this
)ode to obligate themselves, may enter into a
contract of sale, saving the modifications contained in
the following articles.
Ehere necessaries are those sold and delivered
to a minor or other person without capacity to
act, he must pay a reasonable price therefor.
>ecessaries are those referred to in Article %8,.
(14=a!
Art. 14-.. "he husband and the wife cannot
sell property to each other, e2cept$
(1! Ehen a separation of property was agreed
upon in the marriage settlements' or
(%! Ehen there has been a &udicial separation or
property under Article 181. (14#a!
Art. 14-1. "he following persons cannot acquire
by purchase, even at a public or &udicial auction,
either in person or through the mediation of
another$
(1! "he guardian, the property of the person or
persons who may be under his guardianship'
(%! Agents, the property whose administration or
sale may have been entrusted to them, unless
the consent of the principal has been given'
(-! ?2ecutors and administrators, the property of
the estate under administration'
(4! :ublic officers and employees, the property
of the 1tate 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 &udges and government e2perts
who, in any manner whatsoever, ta/e part in the
sale'
(! Fustices, &udges, prosecuting attorneys,
cler/s of superior and inferior courts, and other
officers and employees connected with the
administration of &ustice, the property and rights
in litigation or levied upon an e2ecution before
the court within whose &urisdiction or territory
they e2ercise 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 ob&ect of any litigation in which they may
ta/e part by virtue of their profession.
(.! Any others specially disqualified by law.
(148a!
Art. 14-&. "he prohibitions in the two preceding
articles are applicable to sales in legal
redemption, compromises and renunciations. (n!
1. a!solute incaacit*
3
"hose who have the legal capacity to give consent to
contracts may validly enter into a contract of sale,
unless specifically prohibited by law. 9owever, when
necessaries are sold and delivered to a minor or other
incapacitated person, the latter must pay a
reasonable price therefore. >ecessaries are those
indispensable for sustenance, clothing, dwelling,
education, and medical treatment.
&. relative incaacit*
a) married persons (as regards contracts wit tird
parties)
Art. 7(. ?ither spouse may e2ercise any legitimate
profession, occupation, business or activity without
the consent of the other. "he latter may ob&ect only
on valid, serious, and moral grounds.
3n case of disagreement, the court shall decide
whether or not$
(1! "he ob&ection is proper' and
(%! Benefit has occurred to the family prior to the
ob&ection or thereafter. 3f the benefit accrued prior to
the ob&ection, the resulting obligation shall be
enforced against the separate property of the spouse
who has not obtained consent.
"he foregoing provisions shall not pre&udice the rights
of creditors who acted in good faith. (11=a!

Art. -'. "he administration and en&oyment of the
community property shall belong to both spouses
&ointly. 3n case of disagreement, the husband4s
decision shall prevail, sub&ect to recourse to the court
by the wife for proper remedy, which must be availed
of within five years from the date of the contract
implementing such decision.
3n the event that one spouse is incapacitated or
otherwise unable to participate in the administration
of the common properties, the other spouse may
assume sole powers of administration. "hese powers
do not include disposition or encumbrance without
authority of the court or the written consent of the
other spouse. 3n the absence of such authority or
consent, the disposition or encumbrance shall be
void. 9owever, the transaction shall be construed as
a continuing offer on the part of the consenting
spouse and the third person, and may be perfected as
a binding contract upon the acceptance by the other
spouse or authori7ation by the court before the offer
is withdrawn by either or both offerors. (%,.a!
Art. 1&4. "he administration and en&oyment of the
con&ugal partnership shall belong to both spouses
&ointly. 3n case of disagreement, the husband4s
decision shall prevail, sub&ect to recourse to the court
by the wife for proper remedy, which must be availed
of within five years from the date of the contract
implementing such decision.
3n the event that one spouse is incapacitated or
otherwise unable to participate in the
administration of the con&ugal properties, the
other spouse may assume sole powers of
administration. "hese powers do not include
disposition or encumbrance without authority of
the court or the written consent of the other
spouse. 3n the absence of such authority or
consent, the disposition or encumbrance shall be
void. 9owever, the transaction shall be
construed as a continuing offer on the part of the
consenting spouse and the third person, and
may be perfected as a binding contract upon the
acceptance by the other spouse or authori7ation
by the court before the offer is withdrawn by
either or both offerors. (1.a!
!) married persons (as regards contracts
!etween spouses)
Art. 87. ?very donation or grant of gratuitous
advantage, direct or indirect, between the
spouses during the marriage shall be void,
e2cept moderate gifts which the spouses may
give each other on the occasion of any family
re&oicing. "he prohibition shall also apply to
persons living together as husband and wife
without a valid marriage. (1--a!

Art. 14-.. "he husband and the wife cannot sell
property to each other, e2cept$
(1! Ehen a separation of property was agreed
upon in the marriage settlements' or
(%! Ehen there has been a &udicial separation or
property under Article 181. (14#a!
"here is a potential circumvention of the policy
of the law if sales between spouses are allowed if
there was a &udicial separation of property, since
undue influence is not completely erased by the
separation of property. "his prohibition also
applies to common@law unions
4
. (Villanueva)
c) special dis"uali#ications (see Articles 1481 and
148% in the previous page!
1! 3t is immaterial that no damage is
suffered by the owner. "he contract is
4
CALIMLIM-CANULLAS V. FORTUN: &if transfers or
conveyances between spouses were allowed during
marriage, that would destroy the system of conjugal
partnership. $t was also designed to prevent the e%ercise of
undue influence by one spouse over the other, as well as to
protect the institution of marriage, which is the cornerstone
of family law. "he prohibitions apply to a couple living as
husband and wife without benefit of marriage, otherwise,
'the condition of those who incurred guilt would turn out to
be better than those in legal union.'
4
void as the law see/s to prevent said persons
from being tempted to ta/e advantage of
their position. "hey occupy a position of
trust and confidence in relation to the
property under their administration or
&urisdiction.
%! Agents can not buy the property of their
principal& without the consent of the latter.
B6(0?61, however, do not come within the
prohibition, as their authority consists merely
in loo/ing for a buyer or seller, and to bring
the latter and his principal together to
consummate the transaction. (f course,
after the agency is terminated, the agent can
buy the property of the principal, which was
formerly under his administration.
-! Although e2ecutors and administrators can
not buy the property under their
administration, an e2ecutor may buy the
hereditary rights of an heir to the estate
under his administration, because the buyer,
in such case, can not get the share of the
heir in the estate until after the
administration is ended.

4! Eith regard to the lawyers, the prohibition
does not apply to other properties of the
client, nor to assignments of the property
formerly in litigation when such assignment
will ta/e effect only after final &udgment
(compensation of lawyers payable on a
contingent basis, unless unconscionable!.

! ?2amples of other persons especially


disqualified by law are$ (1! aliens purchasing
private agricultural lands (Art G33, 1ecs - ;
=, )onsti!' (%! an unpaid seller having a right
of lienH(Art 1-- par ! (Baviera)
III. 0UB:/CT ;ATT/R
A. 6equisites of a valid sub&ect matter
1. must !e e+istin)6 #uture6 or contin)ent
Art. 1(48. 3mpossible things or services cannot be
the ob&ect of contracts. (1%=%!
Art. 14'&. "he goods which form the sub&ect of a
contract of sale may be either e2isting goods, owned
or possessed by the seller, or goods to be
5
RUBIAS V. BATILLER: the purchase by a lawyer of the
property in litigation from his client is categorically prohibited by
rt. ()*(, paragraph +,- of the .ivil .ode, and that consequently,
plaintiff/s purchase of the property in litigation from his client was
void and could produce no legal effect
manufactured, raised, or acquired by the seller
after the perfection of the contract of sale, in this
"itle called Ifuture goods.I
"here may be a contract of sale of goods, whose
acquisition by the seller depends upon a
contingency which may or may not happen. (n!
Art. 1(47. All things which are not outside the
commerce of men, including future things, may
be the ob&ect of a contract. All rights which are
not intransmissible may also be the ob&ect of
contracts.
>o contract may be entered into upon future
inheritance e2cept in cases e2pressly authori7ed
by law.
All services which are not contrary to law,
morals, good customs, public order or public
policy may li/ewise be the ob&ect of a contract.
(1%=1a!
?mption rei speratai * 3f the parties ma/e the
contract depend upon the e2istence of a thing,
so that if the thing does not come into e2istence
the contract is considered as not made ad there
is no obligation to pay the price, such contract is
valid under JArt. 14.1 (%!, ))' it is what the
6oman law designates as emptio rei speratae
(purchase of an e2pected thing!.

?mptio spei * 3f the parties intend the contract
to e2ist at all events, so that the buyer will have
to pay the price even if the thing does not
actually came into e2istence . . . it is called
emtio spei (purchase of hope or e2pectancyK.
"his contract is, however, void under Art. 14.1.
($olentino)
Art. 14'1. "hings having a potential e2istence
may be the ob&ect of the contract of sale.
"he efficacy of the sale of a mere hope or
e2pectancy is deemed sub&ect to the condition
that the thing will come into e2istence.
"he sale of a vain hope or e2pectancy is void.
(n!
Art. 1(47. All things which are not outside the
commerce of men, including future things, may
be the ob&ect of a contract. All rights which are
not intransmissible may also be the ob&ect of
contracts.
>o contract may be entered into upon future
inheritance e2cept in cases e2pressly authori7ed
by law.
5
All services which are not contrary to law, morals,
good customs, public order or public policy may
li/ewise be the ob&ect of a contract. (1%=1a!
a! Baw prohibits sale of future inheritance. "he rights
to succession are transmitted from the moment of the
death of the decedent so one cannot sell or promise
to sell what he e2pects to inherit from a living person.
But the law allows an heir to sell his interests in an
inheritance
b! "he ob&ect of the contract of sale must be licit,
meaning within the commerce of man, and
determinate. Determinate has been e2panded to
cover generic things, future things and things in
potential e2istence
.
.
c! "hings sub&ect to a resolutory condition may be the
ob&ect of the contract of sale.(Article 14.!
&. must !e licit
Art. 1(47. All things which are not outside the
commerce of men, including future things, may be
the ob&ect of a contract. All rights which are not
intransmissible may also be the ob&ect of contracts.
>o contract may be entered into upon future
inheritance e2cept in cases e2pressly authori7ed by
law.
All services which are not contrary to law, morals,
good customs, public order or public policy may
li/ewise be the ob&ect of a contract. (1%=1a!
Art. 145-. "he thing must be licit and the vendor
must have a right to transfer the ownership thereof at
the time it is delivered. (n!
Art. 1575. "he sale of animals suffering from
contagious diseases shall be void.
A contract of sale of animals shall also be void if the
use or service for which they are acquired has been
stated in the contract, and they are found to be unfit
therefor. (1484a!
a! "he sale of narcotics or dangerous drugs e2cept
upon prescription, or any wild bird or mammal, or
rare wild plants protected by law or of tubli or other
poisonous plants or fruits, dynamited fish or other
aquatic animals, gunpowder, dynamite, e2plosives or
blasting supplies, firearms or ammunitions are
prohibited by law therefore are illicit.
6
PICHEL V. ALONO: "he subject matter of the contract of sale
in question are the fruits of the coconut trees on the land during
the years from September (,, (*01 up to 2anuary (, (*30, which
subject matter is a determinate thing. 4nder rt. ()0( of the 5ew
.ivil .ode, things having a potential e%istence may be the object
of the contract of sale#
SIBAL VS. VALDE: pending crops which have potential
e%istence may bethe subject matter of sale.
b! :roperties belonging to the 1tate 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.
c! )hurches are also outside the commerce of
man.
d! But public property when no longer intended
for public use or service form part of the
patrimonial property of the 1tate and therefore
can be leased or sold.
(. must !e "eterminate
Art. 14'.. A thing is determinate when it is
particularly designated or physical segregated
from all other of the same class.
"he requisite that a thing be determinate is
satisfied if at the time the contract is entered
into, the thing is capable of being made
determinate without the necessity of a new or
further agreement between the parties. (n!
a! Determinate v. determinable
=
$ a thing is
determinate if it can be physically segregated,
particularly designated' capable of being made
determinate without need of another agreement.
3t is determinable if it is capable of being
determined via another agreement.
4. articular %in"s
a) generic tings
Art. 1&4'. Ehen the obligation consists in the
delivery of an indeterminate or generic thing,
whose quality and circumstances have not been
stated, the creditor cannot demand a thing of
superior quality. >either can the debtor deliver a
thing of inferior quality. "he purpose of the
obligation and other circumstances shall be
ta/en into consideration. (11.=a!
Art. 14.-. "he following contracts are ine2istent
and void from the beginning$

(.! "hose where the intention of the parties
relative to the principal ob&ect of the contract
cannot be ascertained'
7
MELLIA V. CIT! OF ILOILO: "he requirement of the law
that a sale must have for its object a determinate thing, is
fulfilled as long as, at the time the contract is entered into,
the object of the sale is capable of being made determinate
without the necessity of a new or further agreement
between the parties
6
Aeneric things could also become sub&ect matters of a
contract of sale provided (1! they have been
physically segregated
#
L particularly designated, and
(%! they are capable of substitution
!) #uture goods
Art. 14'&. "he goods which form the sub&ect of a
contract of sale may be either e2isting goods, owned
or possessed by the seller, or goods to be
manufactured, raised, or acquired by the seller after
the perfection of the contract of sale, in this "itle
called Ifuture goods.I
"here may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency
which may or may not happen. (n!
c) sale o# undivided interest or sare
Art. 14'(. "he sole owner of a thing may sell an
undivided interest therein. (n!
Art. 14'4. 3n the case of fungible goods, there may
be a sale of an undivided share of a specific mass,
though the seller purports to sell and the buyer to
buy a definite number, weight or measure of the
goods in the mass, and though the number, weight or
measure of the goods in the mass is undetermined.
By such a sale the buyer becomes owner in common
of such a share of the mass as the number, weight or
measure bought bears to the number, weight or
measure of the mass. 3f the mass contains less than
the number, weight or measure bought, the buyer
becomes the owner of the whole mass and the seller
is bound to ma/e good the deficiency from goods
d) sale o# tings in litigation
Art. 1(81. "he following contracts are rescissible$
(4! "hose which refer to things under litigation if they
have been entered into by the defendant without the
/nowledge and approval of the litigants or of
competent &udicial authority'
Art. 1(85. (%! >either shall rescission ta/e place
when the things which are the ob&ect of the contract
are legally in the possession of third persons who did
not act in bad faith.
8
!U TE" V. GONALE: "his 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. $n the case at bar the underta!ing of the defendant was
to sell to the plaintiff 066 piculs of sugar of the first and second
classes. "here was no delivery under the contract. 5ow, if called
upon to designate the article sold, it is clear that the defendant
could only say that it was 'sugar.' 7e could only use this generic
name for the thing sold. We conclude that the contract in the case
at bar was merely an e%ecutory agreement# a promise of sale and
not a sale.
1! 1ales of things under litigation entered
into by defendants without the /nowledge ;
approval of the litigants or of the court are
rescissible.
2) 9owever, rescission cannot ta/e place
when the things are legally in the possession
of -
rd
persons who did not act in bad faith (;
without /nowledge of defect!
-! 3n an action affecting the title or the
right of possession of real property, the
plaintiff may record in the office of the
6egistrar of Deeds of the :rovince which the
property is situated, a notice of the pendency
of the action.
4) +rom the moment of the filing of such
notice, -
rd
persons are charged with notice of
the litigation ; ta/e the property sub&ect to
the outcome of the litigation. (Baviera and De
Leon)
e% tings su!&ect to a resolutor' condition
Art. 14'5. "hings sub&ect to a resolutory
condition may be the ob&ect of the contract of
sale. (n!
5. <uantit* o# su!3ect matter
-
Art. 1(4-. "he ob&ect of every contract must be
determinate as to its /ind. "he fact that the
quantity is not determinate shall not be an
obstacle to the e2istence of the contract,
provided it is possible to determine the same,
without the need of a new contract between the
parties. (1%=-!
I=. OB9I>ATION O8 T?/ 0/99/R TO
TRAN08/R O4N/R0?IP
A. 1ale by a person not the owner
Art. 1'('. 3n the preceding articles in this "itle
governing the sale of goods, unless the conte2t
or sub&ect matter otherwise requires$
(1! IDocument of title to goodsI includes any bill
of lading, doc/ warrant, Iquedan,I or warehouse
receipt or order for the delivery of goods, or any
other document used in the ordinary course of
9
SCHUBAC" V. CA: lthough the quantity to be ordered
was made determinate only on 8ecember 9*, (*1(,
quantity is immaterial in the perfection of a sales contract.
What is of importance is the meeting of the minds as to the
object and cause, which from the facts disclosed, show that
as of 8ecember 9), (*1(, these essential elements had
already concurred.
7
business in the sale or transfer of goods, as proof of
the possession or control of the goods, or authori7ing
or purporting to authori7e the possessor of the
document to transfer or receive, either by
endorsement or by delivery, goods represented by
such document.
IAoodsI includes all chattels personal but not things
in action or money of legal tender in the :hilippines.
"he term includes growing fruits or crops.
I(rderI relating to documents of title means an order
by endorsement on the documents.
IMuality of goodsI includes their state or condition.
I1pecific goodsI means goods identified and agreed
upon at the time a contract of sale is made.
An antecedent or pre@e2isting claim, whether for
money or not, constitutes IvalueI where goods or
documents of title are ta/en either in satisfaction
thereof or as security therefor.
(%! A person is insolvent within the meaning of this
"itle who either has ceased to pay his debts in the
ordinary course of business or cannot pay his debts
as they become due, whether insolvency proceedings
have been commenced or not.
(-! Aoods are in a Ideliverable stateI within the
meaning of this "itle when they are in such a state
that the buyer would, under the contract, be bound to
ta/e delivery of them. (n!
Art. 55-. "he possession of movable property
acquired in good faith is equivalent to a title.
>evertheless, one who has lost any movable or has
been unlawfully deprived thereof may recover it from
the person in possession of the same.
3f the possessor of a movable lost or which the owner
has been unlawfully deprived, has acquired it in good
faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
(4.4a!
Art. 15.5. 1ub&ect to the provisions of this "itle,
where goods are sold by a person who is not the
owner thereof, and who does not sell them under
authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct
precluded from denying the seller4s authority to sell.
>othing in this "itle, however, shall affect$
(1! "he provisions of any factors4 act, recording laws,
or any other provision of law enabling the apparent
owner of goods to dispose of them as if he were the
true owner thereof'
(%! "he validity of any contract of sale under
statutory power of sale or under the order of a
court of competent &urisdiction'
(-! :urchases made in a merchant4s store, or in
fairs, or mar/ets, in accordance with the )ode of
)ommerce and special laws. (n!
Art. 14(1. "hrough estoppel an admission or
representation is rendered conclusive upon the
person ma/ing it, and cannot be denied or
disproved as against the person relying thereon.
(eneral )ule*
>o one can transfer a better title than what he
has over the property sold. (nly the owner of
the goods or one authori7ed by the owner to sell
can transfer title thereto to the buyer
1,
.
+,ceptions*
1. /stoel 5Art 15.57
?ven if the person who sold the thing was not
the owner, if he should subsequently acquire
ownership thereof, his conveyance is deemed
valid ; his title passes by operation of law to the
buyer
11
3f the owner of the goods is precluded by his
conduct from denying the sellerNs authority to
sell, buyer may acquire a better title, although
the seller had neither the title nor the authority
to sell the goods.
&. Recor"in) 9a$s@ Torrens 0*stem A PD
15&-
10
ANAR V. !APDIANGCO: $n the case on hand, 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. $t should be recalled
that while there was indeed a contract of sale between
:icente ;arella and "eodoro Santos, the former, as
vendee, too! possession of the subject matter thereof by
stealing the same while it was in the custody of the latter/s
son. rt. 3(9 above contemplates that the act be coupled
with the intent of delivering the thing.
11
SI! CONG BIEN V. HSBC: Since plaintiff had voluntarily
clothed the person who negotiated the quedans with all the
attributes of ownership and upon which the ban! relied, it is
estopped to deny that the ban! had a valid title to the
quedans#
JALBUENA V. LIARRAGA: <igelow on =stoppel says:
'. . . it is now a well established principle that where the true
owner of property, for however short a time, holds out
another, or, with !nowledge of his own right, allows another
to appear, as the owner of or as having full power of
disposition over the property, the same being in the latter/s
actual possession, and innocent third parties are thus led
into dealing with some >such? apparent owner, they will be
protected.' +as cited in 7ernae@ vs. 7ernae@-
8
>one in the :hils. But >)) relies on the general
principle of law that one deals with an agent at his
own ris/.
(. Court or"ers
"he general principle that the vendor must be the
owner or the one authori7ed by the owner to sell the
goods in order to pass title over them to the buyer
does not apply when the sale ta/es place by virtue of
a power granted by law or by a court. "hus a sale by
the sheriff, or by other e2ecution or sub&ect of
foreclosure, is valid even if the owner did not
authori7e or consent to the sale (Baviera).
Calidity of sale under statutory power (legal sale *
e.g. law authori7ing sale of patrimonial property to a
specific person at auction! or of court to sell (&udicial
sale e.g. writ of e2ecution levying upon the debtorNs
property at auction!
4. Purc,ase at a merc,antBs store6 mar%et or
#air
1&
:urpose of the e2ception$ (1! to protect innocent
purchasers who buy at merchant stores, mar/et or
fair (%! "o facilitate commercial sales in movables (-!
"o give stability to business transactions
B. 1ale by one having a voidable title
Art. 15.'. Ehere the seller of goods has a voidable
title thereto, but his title has not been avoided at the
time of the sale, the buyer acquires a good title to the
goods, provided he buys them in good faith, for
value, and without notice of the seller4s defect of title.
(n!
Art. 55-. "he possession of movable property
acquired in good faith is equivalent to a title.
>evertheless, one who has lost any movable or has
been unlawfully deprived thereof may recover it from
the person in possession of the same.
3f the possessor of a movable lost or which the owner
has been unlawfully deprived, has acquired it in good
faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
(4.4a!
12
SUN BROTHERS V. VELASCO: "he policy of the law has
always been that, where the rights and interests of a vendor
come into clash with that of an innocent buyer for value, the latter
must be protected. "he rule
appears to be a wise and necessary rule not only to facilitate
commercial sales on movables but to give stabilityto business
transactions.
MASICLAT V. CENTENO: "he transaction between Aamon
;asiclat and his un!nown seller too! place on ;iranda Street
and not in the public mar!et and this is . . . conclusive. 7ence,
rt. (,6, .., invo!ed by the petitioners, has no application.
1. 1eller can transfer a valid title to an
innocent purchaser for value, unless title was
annulled.
%. 1o long as the goods are still in the
possession of the 1st buyer, they may still be
recovered by the vendor in an action for
annulment.
3. But once it has been transferred to an
innocent purchaser for value before the
contract is annulled, the latter acquired a
valid title
1-
.
4. An antecedent or pre@e2isting claim,
E(> for money constitutes OvalueK where
goods or document of titloe are ta/en in
satisfaction thereof or as security therefore
=. PRIC/
14

Art 14'-. 1hould such person or persons be
unable or unwilling to fi2 it, the contract shall be
inefficacious, unless the parties subsequently
agree upon the price.
3f the third person or persons acted in bad faith or
by mista/e, the courts may fi2 the price.
Ehere such third person or persons are
prevented from fi2ing the price or terms by fault
of the seller or the buyer, the party not in fault
may have such remedies against the party in fault
as are allowed the seller or the buyer, as the case
may be. (144=a!
Art. 147.. Aross inadequacy of price does not
affect a contract of sale, e2cept as it may indicate
a defect in the consent, or that the parties really
intended a donation or some other act or
contract. (n!
13
DE GARCIA V. CA: Aespondent ngelina 8. Buevara,
having been unlawfully deprived of the diamond ring in
question, was entitled to recover it from petitioner .onsuelo
S. de Barcia who was found in possession of the same.
"he only e%ception the law allows is when there is
acquisition in good faith of the possessor at a public sale, in
which case the owner cannot obtain its return without
reimbursing the price. +.ru@ v. Cahati# @nar v.
Dapdiangco-#
REBULLIDA V. BUSTAMANTE: $t appearing that the ring
in question was lost or was stolen from the place where the
lawful owner deposited it, the case squarely falls under rt.
)0) of the .ivil .ode, which provides that the Eone who has
lost personal property or who has been unlawfully deprived
of it may recover it from whoever is possessing it.F "he
mere fact that the possessor, even in good faith, ad
purchased the ring from another person would not bar the
right of the owner to recover it once the identity and the
ownerGs deprivation are established.
14
INCHAUSTI V. CROM#ELL: Crice is the sum stipulated
as the equivalent of the thing sold and also every incident
ta!en into consideration for the fi%ing of the price put to the
debit of the buyer and agreed to by him
9
Art. 1471. 3f the price is simulated, the sale is void,
but the act may be shown to have been in reality a
donation, or some other act or contract. (n!
Art. 147&. "he price of securities, grain, liquids, and
other things shall also be considered certain, when the
price fi2ed is that which the thing sold would have on
a definite day, or in a particular e2change or mar/et,
or when an amount is fi2ed above or below the price
on such day, or in such e2change or mar/et, provided
said amount be certain. (144#!
Art. 147(. "he fi2ing of the price can never be left to
the discretion of one of the contracting parties.
9owever, if the price fi2ed by one of the parties is
accepted by the other, the sale is perfected. (1448a!
Art. 1474. Ehere the price cannot be determined in
accordance with the preceding articles, or in any other
manner, the contract is inefficacious. 9owever, if the
thing or any part thereof has been delivered to and
appropriated by the buyer he must pay a reasonable
price therefor. Ehat is a reasonable price is a question
of fact dependent on the circumstances of each
particular case. (n!
1. 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.
%. "he e2istence of a contract is permanent ;
incurable.
-. "he 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 (14=1, 1--!
4. 3f the price is simulated, the sale is void but the act
may be shown to have been in reality a donation, or
some other act or contract (14=1!
A. 6equisites of a valid price
1. must !e real
Art. 1471. 3f the price is simulated, the sale is void,
but the act may be shown to have been in reality a
donation, or some other act or contract. (n!
Art. 1(8'. 6escission referred to in >os. 1 and % of
Article 1-#1 shall not ta/e place with respect to
contracts approved by the courts. (1%8.a!
Art. 1(5(. "he statement of a false cause in
contracts shall render them void, if it should not be
proved that they were founded upon another cause
which is true and lawful. (1%=.!
Art. 1(54. Although the cause is not stated in the
contract, it is presumed that it e2ists and is lawful,
unless the debtor proves the contrary. (1%==!
Art. 147.. Aross inadequacy of price does not
affect a contract of sale, e2cept as it may
indicate a defect in the consent, or that the
parties really intended a donation or some other
act or contract. (n!
Art. 1(81. "he following contracts are
rescissible$
(1! "hose 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 ob&ect thereof'
(%! "hose agreed upon in representation of
absentees, if the latter suffer the lesion stated in
the preceding number'
(-! "hose underta/en in fraud of creditors when
the latter cannot in any other manner collect the
claims due them'
(4! "hose which refer to things under litigation if
they have been entered into by the defendant
without the /nowledge and approval of the
litigants or of competent &udicial authority'
(! All other contracts specially declared by law
to be sub&ect to rescission. (1%81a!
1. +alse :rice * there is a true price but it was
not written down or stipulated in the contract.
"here was a consideration although it was not
found in the contract (6eal consideration not
stated!
2. 1imulated :rice
1
* "here was no price paid.
"he parties merely said there was a price and
OcreatedK their own price (no consideration
but stated!
&. must !e in mone* or its e<uivalent
Art. 1458. By the contract of sale one of the
contracting parties obligates himself to transfer
15
MAPALO V. 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#
BAGNAS V. CA: upon the consideration alone that the
apparent gross, not to say enormous, disproportion
between the stipulated price +in each deed- of C(.66 plus
unspecified and unquantilled services and the undisputably
valuable real estate allegedly sold H worth at least
C(6,,66.66 going only by assessments for ta% purposes
which, it is wellI!nown, are noteriously low indicators of
actual value H plainly and unquestionably demonstrates
that they state a false and fictitious consideration, and no
other true and lawful cause having been shown, the .ourt
finds both said deeds, insofar as they purport to be sales,
not merely voidable, but void ab initio.
10
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.
(144a!
Art. 14'8. 3f the consideration of the contract
consists partly in money, and partly in another thing,
the transaction shall be characteri7ed by the manifest
intention of the parties. 3f 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
e2ceeds the amount of the money or its equivalent'
otherwise, it is a sale. (144.a!
1. "he price should be in money or its
equivalent
1.
(e.g. letters of credit ; other
negotiable instruments!. (therwise, the
transaction might be barter or an innominate
contract.
%.:roperty given to the creditor in satisfaction of a
debt in money with the :63)? :A3D 3> ADCA>)? is
a sale.
DA"3(> 3> :AP5?>" 1AB?
:resupposes a prior
e2isting credit ;
e2tinguishes the
obligation
(bligations are
created from the
perfection of the
contract
-. +i2ing of the price is more or less arrived at with
ample
contractual freedom than the value of the thing
given in
dation.
(. ;ust !e certain or ascertaina!le at time o#
er#ection
17
16
REPUBLIC V. PHIL. RESOURCES: lthough rt. (),1 of the
new .ivil .ode provides that price . . . is always paid in terms of
money and the supposed payment being in !ind it is no payment
at all,' 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.
17
TO!OTA SHA# V. CA: rticle (),1 of the .ivil .ode defines
a contract of sale and rt. ()3, specifically provides when it is
deemed perfected. "he document +in =%hibit EF, see case-,
e%ecuted and signed by the petitioner/s sales representative, is
not a contract of sale. 5o obligation on the part of "oyota 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. "he provision on the downpayment
of C(66,666 made no specific reference to a sale of a vehicle. $f it
was intended for a contract of sale, it could only refer to a sale on
installment basis, as the :SC e%ecuted the following day
confirmed. <ut nothing was mentioned about the full purchase
price and the manner the installments were to be paid. "his .ourt
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. "his 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
Art. 1474. Ehere the price cannot be
determined in accordance with the preceding
articles, or in any other manner, the contract is
inefficacious. 9owever, if the thing or any part
thereof has been delivered to and appropriated
by the buyer he must pay a reasonable price
therefor. Ehat is a reasonable price is a question
of fact dependent on the circumstances of each
particular case. (n!
Art. 14'-. 3n order that the price may be
considered certain, it shall be sufficient that it be
so with reference to another thing certain, or
that the determination thereof be left to the
&udgment of a special person or persons.
1hould such person or persons be unable or
unwilling to fi2 it, the contract shall be
inefficacious, unless the parties subsequently
agree upon the price.
3f the third person or persons acted in bad faith
or by mista/e, the courts may fi2 the price.
Ehere such third person or persons are
prevented from fi2ing the price or terms by fault
of the seller or the buyer, the party not in fault
may have such remedies against the party in
fault as are allowed the seller or the buyer, as
the case may be. (144=a!
Art. 147.. Aross inadequacy of price does not
affect a contract of sale, e2cept as it may
indicate a defect in the consent, or that the
parties really intended a donation or some other
act or contract. (n!
Art. 1471. 3f the price is simulated, the sale is
void, but the act may be shown to have been in
reality a donation, or some other act or contract.
(n!
Art. 147&. "he price of securities, grain, liquids,
and other things shall also be considered certain,
when the price fi2ed is that which the thing sold
would have on a definite day, or in a particular
e2change or mar/et, or when an amount is fi2ed
above or below the price on such day, or in such
e2change or mar/et, provided said amount be
certain. (144#!
Art. 147(. "he fi2ing of the price can never be
left to the discretion of one of the contracting
parties. 9owever, if the price fi2ed by one of the
parties is accepted by the other, the sale is
perfected. (1448a!
failure to agree on the price. 8efiniteness as to the price is
an essential element of a binding agreement to sell
personal property.
11
4. ;anner o# Pa*ment must !e a)ree" uon
18
5. ?o$ rice is "etermine"
Art. 14'-. 3n order that the price may be considered
certain, it shall be sufficient that it be so with
reference to another thing certain, or that the
determination thereof be left to the &udgment of a
special person or persons.
1hould such person or persons be unable or unwilling
to fi2 it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
3f the third person or persons acted in bad faith or by
mista/e, the courts may fi2 the price.
Ehere such third person or persons are prevented
from fi2ing the price or terms by fault of the seller or
the buyer, the party not in fault may have such
remedies against the party in fault as are allowed the
seller or the buyer, as the case may be. (144=a!
a) !' a tird person
1-
!) !' te courts
Art. 14'-. (-! 3f the third person or persons acted in
bad faith or by mista/e, the courts may fi2 the price.
c) !' re#erence to de#inite da'. particular e,cange
mar/et
01

18
VELASCO V. CA: $t 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 downIpayment and the installment payments were to
be paid. Such being the situation, it cannot, therefore, be said
that a definite and firm sales agreement between the parties had
been perfected over the lot in question. $ndeed, this .ourt has
already ruled before that a definite agreement on the manner of
payment of the purchase price is an essential element in the
formation of a binding and enforceable contract of sale. "he fact,
therefore, that the petitioners delivered to the respondent the sum
of C(6,666 as part of the downIpayment that they had to pay
cannot be considered as sufficient proof of the perfection of any
purchase and sale agreement between the parties under rt.
()19 of the new .ivil .ode#
NAVARRO V. SUGAR$S PRODUCERS: When the manner of
payment of purchase price is discussed after acceptance,, then
such acceptance did not produce a binding and enforceable
contract of sale. "here was no complete meeting of the minds
19
BARRETTO V. SANTA MARINA: $t is necessary to a
perfected sale that the parties agree upon the thing sold and that
the price be fi%ed, it being sufficient for the latter purpose that the
price be left to the judgment of a specified person.
20
Crice is certain at the point of perfection by reference to
another thing certain, such as to certain invoices then in
e%istence and clearly identified by the agreement
+MCCOLLOUGH V. AENLLE- or !nown factors or stipulated
formula +MITSUI V. MANILA-
Art. 147&. "he price of securities, grain, liquids,
and other things shall also be considered certain,
when the price fi2ed is that which the thing sold
would have on a definite day, or in a particular
e2change or mar/et, or when an amount is fi2ed
above or below the price on such day, or in such
e2change or mar/et, provided said amount be
certain. (144#!
d) !' re#erence to anoter ting certain
e) never !' one part'
Art. 147(. "he fi2ing of the price can never be
left to the discretion of one of the contracting
parties. 9owever, if the price fi2ed by one of the
parties is accepted by the other, the sale is
perfected. (1448a!
'. Ina"e<uac* o# rice
&1
Art. 1(55. ?2cept in cases specified by law,
lesion or inadequacy of cause shall not invalidate
a contract, unless there has been fraud, mista/e
or undue influence. (n!
Art. 147.. Aross inadequacy of price does not
affect a contract of sale, e2cept as it may
indicate a defect in the consent, or that the
parties really intended a donation or some other
act or contract. (n!
Art. 1(81. "he following contracts are
rescissible$
(1! "hose 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 ob&ect thereof'
(%! "hose agreed upon in representation of
absentees, if the latter suffer the lesion stated in
the preceding number'
(-! "hose underta/en in fraud of creditors when
the latter cannot in any other manner collect the
claims due them'
(4! "hose which refer to things under litigation if
they have been entered into by the defendant
without the /nowledge and approval of the
litigants or of competent &udicial authority'
(! All other contracts specially declared by law
to be sub&ect to rescission. (1%81a!
Art. 1'.&. "he contract shall be presumed to be
an equitable mortgage, in any of the following
cases$
21
ERENETE V. BEORE: "hat the consideration in the
sale was 'cheap' is not a ground for the infirmity of the sale.
$nadequacy of cause in a contract does not of itself
invalidate the contract.
12
1! Ehen the price of a sale with right to repurchase is
unusually inadequate'
(%! Ehen the vendor remains in possession as lessee
or otherwise'
(-! Ehen upon or after the e2piration of the right to
repurchase another instrument e2tending the period
of redemption or granting a new period is e2ecuted'
(4! Ehen the purchaser retains for himself a part of
the purchase price'
(! Ehen the vendor binds himself to pay the ta2es
on the thing sold'
(.! 3n 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.
3n any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall
be sub&ect to the usury laws. (n!
=I. 8OR;ATION O8 T?/ CONTRACT O8 0A9/
:6?:A6A"(6P 1"AA?
1. o##er
Art. 1475. "he contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the ob&ect of the contract and upon the price.
+rom that moment, the parties may reciprocally
demand performance, sub&ect to the provisions of the
law governing the form of contracts. (14,a!
a) #orm o# o##er
00
"he offer must be certain. Business
advertisementsLadvertisements for bidders are mere
invitations to ma/e an offer, unless otherwise stated.
Art. 1(1-. )onsent is manifested by the meeting of
the offer and the acceptance upon the thing and the
cause which are to constitute the contract. "he offer
must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter@offer.
Acceptance made by letter or telegram does not bind
the offerer e2cept from the time it came to his
22
VILLONCO V. BORMAHECO: $t is true that an acceptance
may contain a request for certain changes in the terms of the
offer and yet be a binding acceptance. /So long as it is clear that
the meaning of the acceptance is positively and unequivocally to
acceptIthe offer, whether such request is granted or not, a
contract is formed./F "hus, it was held that the vendor/s change in
a phrase of the offer to purchase, which change does not
essentially change the terms of the offer, does not amount to a
rejection of the offer and the tender of a counterIoffer
/nowledge. "he contract, in such a case, is
presumed to have been entered into in the place
where the offer was made. (1%.%a!
Art. 1(&5. <nless it appears otherwise, business
advertisements of things for sale are not definite
offers, but mere invitations to ma/e an offer. (n!
Art. 1(&'. Advertisements for bidders are
simply invitations to ma/e proposals, and the
advertiser is not bound to accept the highest or
lowest bidder, unless the contrary appears. (n!
!) #orm o# acceptance
1. "he acceptance must be absolute
%-
.
%."he acceptance must be plain and
unconditional.
-."o bind the offeror, the offeree must comply
with the conditions of the offer. Ehere the
acceptance was not in accordance with the
terms and conditions of the offer, the offer
lapsed even though the offeree later on was
willing to accept the terms and conditions of
the offer.
c) vices vitiating consent
Art. 1((.. A contract where consent is given
through mista/e, violence, intimidation, undue
influence, or fraud is voidable. (1%.a!
Art. 1((1. 3n order that mista/e may invalidate
consent, it should refer to the substance of the
thing which is the ob&ect of the contract, or to
those conditions which have principally moved
one or both parties to enter into the contract.
5ista/e 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.
A simple mista/e of account shall give rise to its
correction. (1%..a!
Art. 1((8. "here is fraud when, through
insidious words or machinations of one of the
contracting parties, the other is induced to enter
into a contract which, without them, he would
not have agreed to. (1%.8!
&. otion contract
&4
23
A!CO V SERRA: $n an offer to sell, the acceptance
must be plain and unconditional to have the effect of
converting the offer to sell to a perfect contract. $t will not be
so if it involves any new proposal, for in that case it would
not mean conformity with the offer, which is what gives rise
to the generation of the contract.
13
Art. 147-. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price. (141a!
Art. 1(&4. Ehen the offerer has allowed the offeree
a certain period to accept, the offer may be
withdrawn at any time before acceptance by
communicating such withdrawal, e2cept when the
option is founded upon a consideration, as something
paid or promised. (n!
?lements of a valid option contract
1. )(>1?>"
2. 1<BF?)" 5A""?6$ an option right or
accepted unilateral offer to buy, or an option
right or accepted unilateral offer to sell a
determinate ob&ect for a price certain,
including the manner of payment thereof
3. :6?1"A"3(>$ a consideration
%
separate and distinct from the purchase price
for the option given
3t must be in writing. J>("? that the
prescription of written contracts is 4 years.Q
(. ri),t o# #irst re#usal
&'
24
DE LA CAVADA V DIA: n option contract is a privilege
e%isting in one person, for which he had paid a consideration and
which gives him the right to buy certain merchandise or certain
specified property, from another person, if he chooses, at any
time within the agreed period at a fi%ed price
LIMSON V CA: n option is not of itself a purchase, but merely
secures the privilege to buy. $t is not a sale of property, but a sale
of the right to purchase. $ts distinguishing characteristic is that it
imposes no binding obligation on the person holding the option,
aside from the consideration for the offer. lthough the
consideration of C96,666 was referred to as earnest money, such
was not an earnest money. Aather, it was an option money.
25
SORIANO V BAUTISTA: n option to buy attached to a real
estate mortgage is a valid stipulation, and the mortgagorGs
promise to sell is supported by the same consideration as that of
the mortgage itself, which is distinct and from that which would
support the sale, an additional amount having been agreed upon
to ma!e up the entire price of C3,*66 should the option be
e%ercised. +5O"=: "he significance of this ruling is that it shows
the wide range of EconsiderationF that can validly support an
option contract, e.g., the real mortgage itself-#
SANCHE V RIGOS: +5O"=: "he 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.-
26
EQUATORIAL REALT! DEVELOPMENT% INC. V MA!FAIR
THEATER: $n the present case, no fi%ed price is stated in the
contract of lease of the property in case of sale. "herefore, it
cannot be an option contract# it is more a!in to a right of first
refusal, in which no separate consideration is required as it is
already included in the reciprocal obligations of the parties in the
contract of lease. lthough it cannot be legally categori@ed as an
4. !ilateral romise to !u* an" sell (1ee
Article 14=8 supra!
1. Both parties are bound by his promise,
although nothing has been paid or
delivered
%=
.
%. An e2ecutory contract of sale the promise of
one is the consideration for the promise of
the other.
-. 3n a bilateral promise, it is necessary that
the thing be determinate and the price
already fi2ed.
4. 3t gives the right to demand fulfillment of the
contract but does not pass title or dominion
over the property.
:?6+?)"3(> 1"AA?
%#

1. $,en "eviation allo$e"
"he rule that Oacceptance must be absoluteK is
not really absolute because certain deviations
may be made in the acceptance. ?ven with such
deviations, the offer will still be converted into a
valid and binding contract.
&. sale !* auction
Art. 147'. 3n the case of a sale by auction$
(1! Ehere goods are put up for sale by auction
in lots, each lot is the sub&ect of a separate
contract of sale.
option, it is nevertheless a valid and binding stipulation
between the parties.
PARA&AQUE "INGS ENTERPRISES V CA: "he 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.
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 DIA: promise made by one party,
if in accordance with the form required by law, may be a
good consideration for a promise made by another. $n this
case, the defendant promised to convey the land as soon
as they become registered. "he plaintiff promised to pay
the defendant the price in accordance with the terms of
their contract. n option contract is a privilege e%isting in
one person for which he had paid a consideration, which
gives him the right to buy during the certain period. "he
contract of option, being different from the contract, may be
entered into by the parties upon the consummation of the
option, its consideration is li!ewise entirely different.
28
FULE V CA: .ontracts are perfected by mere consent.
Jrom this moment, the parties are bound not only to
fulfillment of what has been e%pressly stipulated but also to
all consequences which, according to their nature, may be
in !eeping with good faith, usage and law. <eing
consensual, a contract of sale has the force of law and they
are e%pected to abide in good faith by their contractual
commitments.
14
(%! A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer, or
in other customary manner. <ntil such announcement
is made, any bidder may retract his bid' and the
auctioneer may withdraw the goods from the sale
unless the auction has been announced to be without
reserve.
(-! A right to bid may be reserved e2pressly by or on
behalf of the seller, unless otherwise provided by law
or by stipulation.
(4! Ehere notice has not been given that a sale by
auction is sub&ect to a right to bid on behalf of the
seller, 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, to
employ or induce any person to bid at such sale on
behalf of the seller or /nowingly to ta/e any bid from
the seller or any person employed by him. Any sale
contravening this rule may be treated as fraudulent
by the buyer. (n!
1. )ontract is perfected when the auctioneer
accepts the bid by the fall of the hammer or
gavel or in any other customary manner.
%. 3f auction is announced to be Owithout
reserve,K goods cannot be withdrawn from
the sale after the bid is made.
-. By ta/ing part in the auction and offering
bidding, the buyer voluntarily submitted to
the terms and conditions of the auction sale
announced in the notice.
4. :uffingLby@bidding * means employed by
owner to increase the price of the bids'
illegal.
(. earnest mone* 5c#. otion mone*7
Art. 148&. Ehenever earnest money is given in a
contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract.
(144a!
:ayment of earnest money * considered payment of
part of the price' proof of perfection of the contract'
may be given as a guarantee that the vendee would
not bac/ out.
/ARN/0T ;ON/C
59I;0ON =. CA A
233$43$+ 047
OPTION ;ON/C
:art of the purchase
price
Distinct consideration
for an option contract
Aiven only when there
is already a sale
Aiven when the sale is
not yet perfected
Ehen given, the
!u'er is bound to pay
the balance
Ehen given, the would5
!e !u'er is not bound to
pay the balance' he may
even forfeit it
4. lace o# er#ection (1ee Art. 1-18 at page
11) A where the offer was made
+(65AB3"3?1 (+ "9? )(>"6A)"
1. >eneral rule1 #orm not imortant
Art. 148(. 1ub&ect to the provisions of the
1tatute of +rauds and of any other applicable
statute, a contract of sale may be made in
writing, or by word of mouth, or partly in writing
and partly by word of mouth, or may be inferred
from the conduct of the parties. (n!
Art. 1(58. "he following must appear in a public
document$
(1! Acts and contracts which have for their
ob&ect the creation, transmission, modification or
e2tinguishment of real rights over immovable
property' sales of real property or of an interest
therein a governed by Articles 14,-, >o. %, and
14,'
(%! "he cession, repudiation or renunciation of
hereditary rights or of those of the con&ugal
partnership of gains'
(-! "he power to administer property, or any
other power which has for its ob&ect an act
appearing or which should appear in a public
document, or should pre&udice a third person'
(4! "he cession of actions or rights proceeding
from an act appearing in a public document.
&. /+cetions
a) Statute o# 2rauds
Art. 14.(. "he following contracts are
unenforceable, unless they are ratified$
(%! "hose that do not comply with the 1tatute of
+rauds as set forth in this number. 3n the
following cases an agreement hereafter made
shall be unenforceable by action, unless the
same, or some note or memorandum, thereof,
be in writing, and subscribed by the party
charged, or by his agent' evidence, therefore, of
the agreement cannot be received without the
writing, or a secondary evidence of its contents$
(a! An agreement that by its terms is not to be
performed within a year from the ma/ing
thereof'
(d! An agreement for the sale of goods, chattels
or things in action, at a price not less than five
hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the
evidences, or some of them, of such things in
15
action or pay at the time some part of the purchase
money' but when a sale is made by auction and entry
is made by the auctioneer in his sales boo/, at the
time of the sale, of the amount and /ind of property
sold, terms of sale, price, names of the purchasers
and person on whose account the sale is made, it is a
sufficient memorandum'
(e! An agreement of the leasing for a longer period
than one year, or for the sale of real property or of an
interest therein'
Art. 14.5. )ontracts infringing the 1tatute of +rauds,
referred to in >o. % of Article 14,-, are ratified by the
failure to ob&ect to the presentation of oral evidence
to prove the same, or by the acceptance of benefit
under them.
:<6:(1? (+ 1"A"<"?$ to prevent fraud and per&ury
in the enforcement of obligations depending for their
evidence upon the unassisted memory of witnesses.
?G)?:"3(>1 "( 1"A"<"? (+ +6A<D1
a. Ehen there is a note or memorandum
thereof in writing, and subscribed by the
party charged or his agent
b. Ehen there has been partial consummation
c. Ehen there has been a failure to ob&ect to
the presentation of evidence
d. 1ales through electronic commerce
!) sale o# realt' troug an agent
Art. 1874. Ehen a sale of a piece of land or any
interest therein is through an agent, the authority of
the latter shall be in writing' otherwise, the sale shall
be void. (n!
"he agentNs authority to sell should be in writing'
otherwise, void
%8
.
c) sale o# large cattle
0ec. 5&-6 Revise" A"ministrative Co"e. >o
transfer of large cattle shall be valid unless the same
is registered and a certificate of transfer obtained as
herein provided' 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.
6egistration is made with the municipal treasurer.
29
CIT! LITE REALT! V CA: "here was no perfected contract
between J.C. 7oldings and .ity Kite. rt. (13) provides that
when the sale of the piece of land or any interest therein is
through an agent, the authority of the agent shall be in writing#
otherwise, the sale shall be void. "he absence of the authority to
sell can be determined from the written memorandum issued by
J.C. 7oldingGs president, requesting ;etro 8rugGs assistance in
finding buyers. Jinal evaluation, appraisal and acceptance can
only be made by J.C. 7oldings.
d) secondar' evidence
1. Before secondary evidence may be introduced
of the terms of the sale, due e2ecution and
subsequent loss of the original instrument must
be proved.
%. Due e,ecution * may be proved by the
testimony of the person who e2ecuted it, the
person before whom its e2ecution was
ac/nowledged, or any person who was present
and saw it e2ecuted and delivered, or whom,
after its e2ecution and delivery, saw it and
recogni7ed the signatures, or by a person to
whom the parties to the instrument had
previously confessed the e2ecution thereof.
e) )A 67-0 55 +lectronic 7ommerce Act
(pertinent provisions provided in#ra!
Sec. 7. Legal )ecognition o# +lectronic
documents@ ?lectronic documents shall have the
legal effect, validity or enforceability as any
other document or legal writing, and@
(a! Ehere the law requires a document
to be in writing, 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, in that*
i. "he electronic document has
remained complete and unaltered,
apart from the addition of any
endorsement and any authori7ed
change, or any change which arises
in the normal course of
communication, storage and
display' and
ii. "he electronic document is
reliable in the light of the purpose
for which it was generated and in
the light of all relevant
circumstances.
(b! :aragraph (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.
(c! Ehere the law requires that a
document be presented or retained in its
original form, that requirement is met by
an electronic document if@
i. "here e2ists a reliable assurance
as to the integrity of the document
16
from the time when it was first generated
in its final from' and
ii. "hat document is capable of being
displayed to the person to whom it is to
be presented$ :rovided, "hat no
provision of this Act shall apply to vary
any and all requirements of e2isting laws
on formalities required in the e2ecution
of documents for their validity.
+or evidentiary purposes, an electronic document
shall be the functional equivalent of a written
document under e2isting laws.
"his Act does not modify any statutory any statutory
rule relating to admissibility of electronic data
massages or electronic documents, e2cept the rules
relating to authentication and best evidence.
Sec. 8. Legal )ecognition o# +lectronic Signatures.@
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, not alterable by the parties interested in
the electronic document, e2isted under which@
(a! A method is used to identify the party
sought to be bound and to indicate said
party4s access to the electronic document
necessary for his consent or approval through
the electronic signature'
(b! 1aid method is reliable and appropriate
for the purpose for which the electronic
document was generated or communicated,
in the light of all circumstances, including any
relevant agreement'
(c! 3t is necessary for the party sought to be
bound, in or order to proceed further with the
transaction to have e2ecuted or provided the
electronic signature' and
(d! "he other party is authori7ed and enable
to verify the electronic signature and to ma/e
the decision to proceed with the transaction
authenticated by the same.
Sec. 11. Autentication o# +lectronic Data Messages
and +lectronic Documents%5 <ntil the 1upreme )ourt
by appropriate rules shall have so provided, electronic
documents, electronic data messages and electronic
signatures, shall be authenticated by demonstrating,
substantiating and validating a claimed identity of a
user, device, or another entity is an information or
communication system, among other ways, as
follows'
(a! "he electronic signatures shall be
authenticated by proof that a letter,
character, number or other symbol in
electronic form representing the persons
named in and attached to or logically
associated with an electronic data
message, electronic document, or that
the appropriate methodology or security
procedures, when applicable, were
employed or adopted by such person,
with the intention of authenticating or
approving in an electronic data message
or electronic document'
(b! "he electronic data message or
electronic document shall be
authenticated by proof that an
appropriate security procedure, when
applicable was adopted and employed
for the purpose of verifying the
originator of an electronic data message
or electronic document, or detecting
error or alteration in the communication,
content or storage of an electronic
document or electronic data message
from a specific point, which, using
algorithms or codes, identifying words or
numbers, encryptions, answers bac/ or
ac/nowledgement procedures, or similar
security devices.
"he 1upreme )ourt may adopt such other
authentication procedures, including the use of
electronic notari7ation systems as necessary and
advisable, as well as the certificate of
authentication on printed or hard copies of the
electronic documents or electronic data
messages by electronic notaries, service
providers and other duly recogni7ed or appointed
certification authorities.
"he person see/ing 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.
3n the absence of evidence to the contrary, 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.! 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, and
there are no other reasonable grounds
to doubt the integrity of the information
and communication system,
b.! By showing that the electronic data
message or electronic document was
recorded or stored by a party to the
17
proceedings who is adverse in interest to the
party using it' or
c.! 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.
=II. TRAN08/R O8 O4N/R0?IP
A. 5anner of transfer
Art. 1477. "he ownership of the thing sold shall be
transferred to the vendee upon the actual or
constructive delivery thereof. (n!
Art. 14-'. "he 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 148= to 1,1, or in any other manner
signifying an agreement that the possession is
transferred from the vendor to the vendee. (n!
1. >eneral rule
(wnership of thing shall transfer to the vendee upon
the A)"<AB or )(>1"6<)"3C? D?B3C?6P of the thing
sold
-,
(6$ any manner signifying an agreement that
possession is transferred from vendor to vendee (Art.
148.!
a. )ontract of sale constitutes a 63A9" to
"6A>1+?6 or A)M<313"3(> of (E>?6193:
b. Delivery is the method of accomplishing this
right
&. /+cetions
a) sale on approval. trial. or satis#action
Art. 15.&. Ehen goods are delivered to the buyer
Ion sale or returnI to give the buyer an option to
return the goods instead of paying the price, the
ownership passes to the buyer of delivery, but he
may revest the ownership in the seller by returning or
tendering the goods within the time fi2ed in the
contract, or, if no time has been fi2ed, within a
reasonable time. (n!
Ehen goods are delivered to the buyer on approval or
on trial or on satisfaction, or other similar terms, the
ownership therein passes to the buyer$
30
"UENIE V. MAC"E ' CHANDLER: the ownership of
personal property can not be transferred to the prejudice of third
persons e%cept by delivery of the property itself# and that a sale
without delivery gives the wouldIbe purchaser no rights in said
property e%cept those of a creditor
(1! Ehen he signifies his approval or acceptance
to the seller or does any other act adopting the
transaction'
(%! 3f he does not signify his approval or
acceptance to the seller, but retains the goods
without giving notice of re&ection, then if a time
has been fi2ed for the return of the goods, on
the e2piration of such time, and, if no time has
been fi2ed, on the e2piration of a reasonable
time. Ehat is a reasonable time is a question of
fact.
a%a) sale on return
i. (wnership passes on delivery but buyer
may revest such ownership to the seller
by returning or tendering goods within
the time fi2ed or within a reasonable
time
ii. As opposed to a )onditional 1ale (where
title passes upon full payment or
satisfaction of condition passing of legal
title!, in sale on return, title passes on
delivery
a%!) sale on approval
i. "itle 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.c! e2ecutory sales
i. (wnership of the thing shall not
pass until the price is fully paid
ii. 1eller may reserve the right of
possession or ownership in the goods
until certain conditions have been
fulfilled
!) e,press reservation
Art. 1478. "he parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price. (n!
c) implied reservation
Art. 15.(. Ehen there is a contract of sale of
specific goods, the seller may, by the terms of
the contract, reserve the right of possession or
ownership in the goods until certain conditions
have been fulfilled. "he 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.
18
(. Din"s o# "eliver*
a) real deliver'
Art. 14-7. "he thing sold shall be understood as
delivered, when it is placed in the control and
possession of the vendee. (14.%a!
ODeliveredK * when placed in the control and
possession of the vendee' conveyance of ownership
without pre&udice to the right of vendor to claim
payment of the price
-1
b! constructive delivery
b.a! symbolic
Art. 14-8. Ehen the sale is made through a public
instrument, the e2ecution thereof shall be equivalent
to the delivery of the thing which is the ob&ect of the
contract, if from the deed the contrary does not
appear or cannot clearly be inferred.
Eith regard to movable property, its delivery may
also be made by the delivery of the /eys of the place
or depository where it is stored or /ept. (14.-a!
i! delivery by public instrument
-%
Ehen sale is made
through a public instrument, the ?G?)<"3(>
thereof shall be equivalent to delivery 3+ from
the deed the contrary does not appear
31
BEAN V. CAD#ALLER: ctual manual delivery of an article
sold is not essential to the passing of the title thereto +art (),6,
.ivil .ode- unless made so by the terms of the contract or by an
understanding of the parties. "he 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. FO: $t is the material delivery of the property
sold which the defendant must ma!e in compliance with the
contract, inasmuch as the formal delivery de jure was made,
according to the provisions of article ()09, 9nd paragraph, of the
same code: When the sale should be made by means of a public
instrument, the e%ecution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if in said
instrument the contrary does not appear or may be clearly
inferred. s the contrary does not appear nor is to be inferred
from the public instrument e%ecuted by the defendant, its
e%ecution was really a formal or symbolical delivery of the
property sold and authori@ed the plaintiff to use the tile of
ownership as proof that he was thenceforth the owner of the
property#
MASALLO V. CESAR: s ;atea .rispino admits, however, that
she did not have possession of the land when she e%ecuted and
delivered her deed to plaintiff, the mere e%ecution and delivery of
the deed did not constitute a delivery of possession
SPOUSES VELARDE V. CA: "he general rule, therefore, is that
the e%ecution of public instrument has the same legal effects as
actual or physical delivery, i.e., it transfers ownership of the
subject matter to the buyer, and constitutes valid compliance by
the seller of his obligations under the contract of sale.
o oper
ates as formalLsymbolic delivery
o auth
ori7es buyer to use such document
as proof of ownership
1ymbolic delivery may produce the
effect of tradition if vendor have had
such control over the thing sold that at
the moment of the sale, its material
delivery could have been made
A?>?6AB 6<B?$ he who purchases
through a public instrument should be
deemed a Opossessor in factK and this
presumption should give way before
proof to the contrary
A person must be in A)"<AB
:(11?113(> to be able to transfer
)(>1"6<)"3C? :(11?113(> through
public instrument
ii! "raditio Bonga 5anu
Art. 14--. "he delivery of movable property
may li/ewise be made by the mere consent or
agreement of the contracting parties, if the thing
sold cannot be transferred to the possession of
the vendee at the time of the sale, or if the latter
already had it in his possession for any other
reason. (14.-a!
"raditio Bonga 5anu * delivery ta/es place when
the thing is placed in the sight of the purchaser
so that he can ta/e possession of it at pleasure
iii! "raditio brevi manu
"raditio Brevi 5anu
--
* delivery of movable
property ta/es place when the vendee had the
thing already in his possession before the sale
too/ place, not as owner but as lessee, borrower
or depositary.
iv! "raditio )onstitutum
:ossessorium
33
HEIRS OF PEDRO ESCANLAR V. CA: "he September
(,, (*31 sale of rights, interests and participation as to (L9
portion pro indiviso of the two subject lots is a contract of
sale for the following reasons: Jirst, private respondents as
sellers did not reserve unto themselves the ownership of
the property until full payment of the unpaid balance of
C99,,666.66. Second, there is no stipulation giving the
sellers the right to unilaterally rescind the contract the
moment the buyer fails to pay within the fi%ed period. 9)
Crior to the sale, petitioners were in possession of the
subject property as lessees. 4pon sale to them of the
rights, interests and participation as to the (L9 portion pro
indiviso, they remained in possession, not in concept of
lessees anymore but as owners now through symbolic
delivery !nown as traditio brevi manu. 4nder rticle ()33 of
the .ivil .ode, the ownership of the thing sold is acquired
by the vendee upon actual or constructive delivery thereof
19
Art. 15... "here may also be tradition constitutum
possessorium. (n!
3n traditio constitutum possessorium, the
vendor remains in possession of the property
sold, by virtue of a lease agreement with the
vendee
-4
.
Cendee became as lessor, the legal possessor
while the vendor is in material possession of
the property in the name and representation
of the vendee.
v! delivery to common carrier
Art. 15.(. Ehen there is a contract of sale of specific
goods, the seller may, by the terms of the contract,
reserve the right of possession or ownership in the
goods until certain conditions have been fulfilled. "he
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.
Ehere goods are shipped, and by the bill of lading the
goods are deliverable to the seller or his agent, or to
the order of the seller or of his agent, the seller
thereby reserves the ownership in the goods. But, if
e2cept for the form of the bill of lading, the ownership
would have passed to the buyer on shipment of the
goods, the seller4s 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.
Ehere goods are shipped, and by the bill of lading the
goods are deliverable to order of the buyer or of his
agent, but possession of the bill of lading is retained
by the seller or his agent, the seller thereby reserves
a right to the possession of the goods as against the
buyer.
Ehere the seller of goods draws on the buyer for the
price and transmits the bill of e2change and bill of
lading together to the buyer to secure acceptance or
34
BAUTISTA V SIOSON: =ven if the vendor sells the property
again to another, the second purchaser cannot acquire ownership
as he bought the property from a mere tenant. $n a case which
frequently occurs, where the vendor, on the same date on which
the deed of sale is e%ecuted, by means of a constitutum
possessorium agreement converts himself into a tenant or lessee
of the property that he sold, and continues in possession thereof
as such tenant, the purchaser who acquired the property through
delivery or symbolic tradition, with all the consequent effects of a
deed of conveyance, is deemed to be in possession thereof by
the e%press will of the contracting parties, and therefore, it must
be recogni@ed that, through such constitutum possessorium
agreement, the purchaser, who by that covenant becomes the
lessor, is in lawful possession of the leased property, and that the
vendor, by the same covenant, converted himself into the lessee
and is in material possession of the leased property in the name
and representation of the purchaser, its lawful owner.
payment of the bill of e2change, the buyer is
bound to return the bill of lading if he does not
honor the bill of e2change, and if he wrongfully
retains the bill of lading he acquires no added
right thereby. 3f, however, the bill of lading
provides that the goods are deliverable to the
buyer or to the order of the buyer, or is indorsed
in blan/, or to the buyer by the consignee named
therein, one who purchases in good faith, for
value, the bill of lading, or goods from the buyer
will obtain the ownership in the goods, although
the bill of e2change has not been honored,
provided that such purchaser has received
delivery of the bill of lading indorsed by the
consignee named therein, or of the goods,
without notice of the facts ma/ing the transfer
wrongful. (n!
Art. 15&(. Ehere, in pursuance of a contract of
sale, the seller is authori7ed or required to send
the goods to the buyer, delivery of the goods to
a carrier, whether named by the buyer or not,
for the purpose of
<nless otherwise agreed, where goods are sent
by the seller to the buyer under circumstances in
which the seller /nows or ought to /now that it is
usual to insure, the seller must give such notice
to the buyer as may enable him to insure them
during their transit, and, if the seller fails to do
so, the goods shall be deemed to be at his ris/
during such transit. (n!
>/N/RA9 RU9/1 Delivery of goods
to carrier is considered delivery to the
buyer, and hence, title passed to the
buyer at the point of shipment
/EC/PTION1 1eller 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, or unless
contrary intent appears in the contract
of sale
a. Terms6 F#.o.!.G@ Fc.i.#.G@
F#.a.s.G
i. f.o.b. @ Ofree on boardK means that
the seller bears e2penses of
transportation up to the #%o%!% point.
ii. c.i.f. @ Ocost, insurance, freightK
signifies that the price quoted
includes the costs of the goods,
insurance, and freight charges on
the goods up to the place of
destination
iii. f.a.s. * Ofree alongsideK means that
the seller bears the e2penses of
transportation until he delivers the
20
goods alongside a vessel at a named
post.
"hese terms may be
used only in connection with fi2ing the price
and will not be construed as fi2ing 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 Ehere
price is payable upon proof of shipment,
then the buyer agrees to accept delivery
at the point of shipment
o Ehere
the price is payable only upon arrival of
the goods at the point of destination,
then that is the place of delivery to the
buyer
vi! effect of form of bill of lading
(wnership is retained$ "he 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
5ere possession is retained$ "he seller may
consign the goods to the order of the buyer
on the latterNs agent but by retaining the bill
of lading, he thereby prevents the buyer from
obtaining the goods from the carrier until
price is paid
4. Dou!le 0ales
Art. 1544. 3f the same thing should have been sold
to different vendees, the ownership shall be
transferred to the person who may have first ta/en
possession thereof in good faith, if it should be
movable property.
1hould it be immovable property, the ownership shall
belong to the person acquiring it who in good faith
first recorded it in the 6egistry of :roperty.
1hould there be no inscription, the ownership shall
pertain to the person who in good faith was first in
the possession' and, in the absence thereof, to the
person who presents the oldest title, provided there is
good faith. (14=-!
3f the same thing should have been sold by the owner
to different buyers, the question as to who of the
latter acquired ownership depends on the nature of
the thing sold.
a) (eneral )ule 8 9rior tempore. prior &ure
:5
!) sale o# mova!les
:;
Art. 1544 517. 3f the same thing should have
been sold to different vendees, the ownership
shall be transferred to the person who may have
first ta/en possession thereof in good faith, if it
should be movable property.
c) sale o# immova!les
Art. 1544 5&7. 1hould it be immovable
property, the ownership shall belong to the
person acquiring it who in good faith first
recorded it in the 6egistry of :roperty.
"o be entitled to priority, the
second buyer must not only show prior
recording of his deed but must have
acted in good faith, without /nowledge
of the e2istence of another alienation by
the vendor to another
:(11?11(6 3> A((D +A3"9$
one who is not aware that there e2ists in
his title or mode of acquisition any flaw
which invalidates it
o good faith is always
presumed' 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 "orrens title$ it is
enough that purchaser e2amines 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 !' virtue o# e,ecution or attacment
35
CARBONELL V CA: 2ose Concio sold his lot to
.arbonell on 93 2an (*,, and ) days later sold the same
property to $nfante. formal deed of sale was e%ecuted in
favor of $nfante. .arbonell, upon seeing $nfante building a
wall around the lot, registered an adverse claim on the
property. "he deed of sale in favor of $nfante was later
registered and the latter was thereafter in possession of the
lot. Hel() "he second sale was not valid. s there in
inscription, prior registration in good faith is preIcondition to
a superior title. .arbonell registered her adverse claim four
days before the registration of the property by $nfante.
36
RIVERA V ONG: Ong .he has a better title to the
property +over which he and Aivera had overlapping
claims-. 7e was a purchaser of the articles in good faith,
acquired possession by virtue of his purchase, and
therefore has a better title than the first purchaser.
21
1. A?>?6AB 6<B?$ Article 144 not
applicable to e2ecution sales because the
purchaser at such sales is substituted to or
acquires whatever rights, title or interests the
&udgment debtor may have over the property as of
the time of levy. J3t is the duty of the purchaser,
before bidding, to ascertain the rights of the
&udgment debtor over the property.Q
2. ?G)?:"3(>$ Attachment or
e2ecution cannot pre&udice prior unrecorded sales
made by the &udgment debtor, and is preferred
only over claims contracted subsequent to its
recording
3. ?G)?:"3(> "( "9? ?G)?:"3(>$
Above rule does not apply to lands registered
under Act 48. which provides that registration of
instruments shall be the Ooperative act to convey
and affect the landK' hence, prior unrecorded sale
cannot pre&udice e2ecution sales i# no tird5part'
claim was presented !e#ore te e,ecution sale
too/ place. J"hird persons are not required to go
beyond the register and determine the condition
of the property.Q
e) <nregistered land
P.D. 15&-6 0ec. 11(. 6ecording of instruments
relating to unregistered lands. @ >o deed,
conveyance, mortgage, lease, or other voluntary
instrument affecting land not registered under the
"orrens system shall be valid, e2cept as between the
parties thereto, unless such instrument shall have
been recorded in the manner herein prescribed in the
office of the 6egister of Deeds for the province or city
where the land lies.
(a! "he 6egister of Deeds for each province or city
shall /eep a :rimary ?ntry Boo/ and a 6egistration
Boo/. "he :rimary ?ntry Boo/ shall contain, among
other particulars, the entry number, the names of the
parties, the nature of the document, the date, hour
and minute it was presented and received. "he
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
6egistration Boo/, after the same shall have been
entered in the :rimary ?ntry Boo/.
(b! 3f, on the face of the instrument, it appears that it
is sufficient in law, the 6egister of Deeds shall
forthwith record the instrument in the manner
provided herein. 3n case the 6egister of Deeds
refuses its administration to record, said official shall
advise the party in interest in writing of the ground or
grounds for his refusal, and the latter may appeal the
matter to the )ommissioner of Band 6egistration in
accordance with the provisions of 1ection 11= of this
Decree. 3t shall be understood that any recording
made under this section shall be without pre&udice to
a third party with a better right.
(c! After recording on the 6ecord Boo/, the
6egister of Deeds shall endorse among other
things, upon the original of the recorded
instruments, the file number and the date as well
as the hour and minute when the document was
received for recording as shown in the :rimary
?ntry Boo/, returning to the registrant or person
in interest the duplicate of the instrument, with
appropriate annotation, certifying that he has
recorded the instrument after reserving one copy
thereof to be furnished the provincial or city
assessor as required by e2isting law.
(d! "a2 sale, attachment and levy, notice of lis
pendens, adverse claim and other instruments in
the nature of involuntary dealings with respect to
unregistered lands, if made in the form sufficient
in law, shall li/ewise be admissible to record
under this section.
(e! +or the services to be rendered by the
6egister of Deeds under this section, he shall
collect the same amount of fees prescribed for
similar services for the registration of deeds or
instruments concerning registered lands.
6egistration requirement is understood to be
without pre&udice to third party with a better
right
-=
5ere registration of sale in oneNs 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 ta/en
possession of the land, even though the
prior sale was unrecorded
A person having a Obetter rightK would be one
who had previously acquired ownership
thereof through the modes of acquiring
ownership under the )ivil )ode$ tradition as a
result of sale, donation, succession and
prescription
-#
#) 2irst in possession in good #ait
3f neither vendee registered the sale in his favor
or registration was done in bad faith, the vendee
37
NAA#AN RURAL BAN" V. CA: $t is a wellI!nown rule
in this jurisdiction that persons dealing with registered land
have the legal right to rely on the face of the "orrens
.ertificate of "itle and to dispense with the need to inquire
further, e%cept when the party concerned has actual
!nowledge of facts and circumstances that would impel a
reasonably cautious man to ma!e such inquiry.
38
HANOPOL V PILAPIL: better right which is
unrecorded and which would prevail over a recorded sale is
one which was gained independently of the sale, as title by
prescription.
22
who was first in possession in good faith acquired
ownership of the land
-8
g) 3ldest title
1. 3f neither of the vendees registered
their deeds of sale nor acquired possession of the
land sold, the one who can present the oldest title
provided there is good faith, has the better right.
%. O(lder titleK means any document
showing acquisition of the land in good faith, li/e
a deed of sale or a receipt for the price'
-. :ublic document is not included as
there is delivery thru a public instrument, unless
the contrary can be clearly inferred therefrom
=III. RI0D O8 9O00 OR D/T/RIORATION
A. Aeneral rule
Art. 1&'(. 3n an obligation to deliver a generic thing,
the loss or destruction of anything of the same /ind
does not e2tinguish the obligation. (n!
An obligation to deliver a generic thing is not
e2tinguished by loss because genus never perishes.
>("? that the ne2t - situations contemplate loss of
specific things
1. 4,en loss occurs !e#ore er#ection
Ehen loss occurred before perfection, it is borne by
the seller. "his is because ownership is still with
him
4,
.
&. 4,en loss occurs at t,e time o# er#ection
Art. 14-(. 3f at the time the contract of sale is
perfected, the thing which is the ob&ect of the
contract has been entirely lost, the contract shall be
without any effect.
39
SANCHE V RAMOS: 8elivery may be actual or constructive.
"hus, if the first sale is evidenced in a public instrument, there is
delivery of the thing sold, if the contrary does not appear in the
deed.
QUIMSON V ROSETE: Cossession includes not only material but
also symbolic possession which is acquired through the
e%ecution of a public instrument. s the land was considered
delivered by the e%ecution of the public instrument, the vendor
remained in possession by mere tolerance of the first vendee.
7ence, when the land was sold again to defendant, the vendor
did not transmit anything to him, and the possession of the latter
was a mere detainer. "he first vendee acquired ownership by
delivery thru the e%ecution of a public instrument.
40
ROMAN V GRIMALT: "he sale was not perfected as the buyer
agreed to buy the vessel, provided that the title was in proper
form. s the vendor failed to perfect his title, the loss was borne
by him
But if the thing should have been lost in part
only, the vendee may choose between
withdrawing from the contract and demanding
the remaining part, paying its price in proportion
to the total sum agreed upon. (14.,a!
Art. 14-4. Ehere the parties purport a sale of
specific goods, and the goods without the
/nowledge 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, the buyer may at his option treat the
sale$
(1! As avoided' or
(%! As valid in all of the e2isting goods or in so
much thereof as have not deteriorated, and as
binding the buyer to pay the agreed price for the
goods in which the ownership will pass, if the
sale was divisible. (n!
a! 3f at the time the sale is perfected, the
thing had been lost entirely, the contract
shall be ineffective. "his is because
there can be no contract without an
ob&ect.
b! "he loss must have occurred before the
contract was entered into, without the
/nowledge of both parties.
c! (ptions of buyer when there is partial
loss and a loss which results in
substantial change in character
( Eithdraw from the contract
( Buy the remainder at a proportionate
price
(. 4,en loss occurs a#ter er#ection !ut
!e#ore "eliver*
Art. 14-'. "he 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 148= to 1,1, or in any other manner
signifying an agreement that the possession is
transferred from the vendor to the vendee. (n!
Art. 15.4. <nless otherwise agreed, the goods
remain at the seller4s ris/ until the ownership
therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the
goods are at the buyer4s ris/ whether actual
delivery has been made or not, e2cept that$
(1! Ehere delivery of the goods has been made
to the buyer or to a bailee for the buyer, 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
23
obligations under the contract, the goods are at the
buyer4s ris/ from the time of such delivery'
(%! Ehere actual delivery has been delayed through
the fault of either the buyer or seller the goods are at
the ris/ of the party in fault. (n!
Art. 14.'. Ehen a contract is enforceable under the
1tatute of +rauds, and a public document is necessary
for its registration in the 6egistry of Deeds, the
parties may avail themselves of the right under
Article 1-=.
Art. 118-. Ehen the conditions have been imposed
with the intention of suspending the efficacy of an
obligation to give, the following rules shall be
observed in case of the improvement, loss or
deterioration of the thing during the pendency of the
condition$
(1! 3f the thing is lost without the fault of the debtor,
the obligation shall be e2tinguished'
(%! 3f the thing is lost through the fault of the debtor,
he shall be obliged to pay damages' it is understood
that the thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its
e2istence is un/nown or it cannot be recovered'
(-! Ehen the thing deteriorates without the fault of
the debtor, the impairment is to be borne by the
creditor'
(4! 3f it deteriorates through the fault of the debtor,
the creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for
damages in either case'
(! 3f the thing is improved by its nature, or by time,
the improvement shall inure to the benefit of the
creditor'
(.! 3f it is improved at the e2pense of the debtor, he
shall have no other right than that granted to the
usufructuary. (11%%!
Art. 15(8. 3n case of loss, deterioration or
improvement of the thing before its delivery, the
rules in Article 11#8 shall be observed, the vendor
being considered the debtor. (n!
Ehen loss occurs after perfection but before delivery,
the seller bears the ris/ of loss. "he buyer does not
bear the ris/ of loss until the goods are delivered,
actually or constructively. "his is because the rule is a
combination of the common@law rule that the owner
bears the ris/ of loss (res perit domino!, and the
6oman law requiring delivery to transfer ownership.
B. Ehen ownership is transferred
A?>?6AB 6<B?1$
1. "he ris/ of loss shall be borne by the owner.
%. (wnership is transferred upon delivery.
?G)?:"3(>1$
1. )ontrary stipulation
41

%. 1ecurity title
4%
-. Delay through the fault of the buyer or the
seller
4-
* at the ris/ of the party at fault
IE. DOCU;/NT0 O8 TIT9/
Document of title * a document used in the
ordinary course of business in the sale or
transfer of goods, as proof of the possession or
control of the goods, or authori7ing or purporting
to authori7e the possessor of the document to
transfer or receive, either by endorsement or by
delivery, goods represented by such document.
(Art. 1.-.!
44
41
SUN BROS. APPLIANCES V PERE: "he law allows an
agreement which stipulates that +(- where goods are sold
and delivered to the buyer, the title is to remain in the seller
until full payment, >but? +9- the loss or destruction of the
property while in the possession of the buyer before
payment, does not relieve him from the obligation to pay the
price# in which case, the buyer suffers the loss. "he
reasons for its validity are: Jirst, the absolute and
unconditional nature of the vendeeGs promise to pay for the
goods. Second, the vendor has fully performed his contract
and the vendee received what he bargained for. "hird, the
policy of providing an incentive to care properly for the
goods, which is under the control and dominion of the
vendee.
42
LA#!ER$S COOP. V TABORA: 8espite the loss of the
boo!s in a fire, the ris! of loss would be borne by the buyer
although he was not the owner yet. "his is because the
stipulation Eownership shall only be transferred upon full
paymentF was agreed merely to secure the performance by
the buyer of his obligation. ;oreover, in the contract, it was
agreed that loss or damage to the boo!s after delivery to
the buyer shall be borne by the buyer.
While under the rule, an obligor should be e%empt from
liability when the loss occurs in a fortuitous event, this
cannot be used by the buyer as a defense to e%empt
himself from paying. 7is obligation does not pertain to the
delivery of the subject matter, but to the payment of the
purchase price. "he ability to pay in money or legal tender
is never lost through a fortuitous event.
43
NORTH NEGROS SUGAR CO. V CIA. GEN DE
TABACOS: $f there was delay in accepting delivery but
there was segregation of goods, such that place of delivery
was at the sellerGs warehouse, the buyer bears the ris! of
loss. "his is because the seller becomes merely a
depositary.
44
PHIL. TRUST CO. V NATIONAL BAN": "he purpose of
documents of title is that the seller is allowed by fiction of
law to deal with the goods described therein as though he
had physically delivered them to the buyer# and the buyer
may ta!e the document of title as though he had actually
ta!en possession and control over the goods described
24
"he functions of documents of title are (1! ?vidence
of the possession or control of the goods described
therein (%! 5edium of transferring title and
possession over the goods described therein without
having to effect actual delivery thereof (Villanueva)
Art. 1511. A document of title which is not in such
form that it can be negotiated by delivery may be
transferred by the holder by delivery to a purchaser
or donee. A non@negotiable document cannot be
negotiated and the endorsement of such a document
gives the transferee no additional right. (n!
1. Ne)otia!le "ocuments o# title
Art. 1,=. A document of title in which it is stated
that the goods referred to therein will be delivered to
the bearer, or to the order of any person named in
such document is a negotiable document of title. (n!
>egotiable document of title * a document of title in
which it is stated that the goods referred to therein
will be delivered to the bearer, or to the order of any
person named in such document.
a) ow negotiated
Art. 15.8. A negotiable document of title may be
negotiated by delivery$
(1! Ehere by the terms of the document the carrier,
warehouseman or other bailee issuing the same
underta/es to deliver the goods to the bearer' or
(%! Ehere by the terms of the document the carrier,
warehouseman or other bailee issuing the same
underta/es to deliver the goods to the order of a
specified person, and such person or a subsequent
endorsee of the document has indorsed it in blan/ or
to the bearer.
Ehere 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
blan/ or to bearer, any holder may indorse the same
to himself or to any specified person, and in such
case the document shall thereafter be negotiated only
by the endorsement of such endorsee. (n!
Art. 15.-. 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. 1uch endorsement may be in
blan/, to bearer or to a specified person. 3f indorsed
to a specified person, it may be again negotiated by
the endorsement of such person in blan/, to bearer or
to another specified person. 1ubsequent negotiations
may be made in li/e manner. (n!
therein
Art. 151.. 3f a document of title which contains
an underta/ing by a carrier, warehouseman or
other bailee to deliver the goods to bearer, to a
specified person or order of a specified person or
which contains words of li/e import, has placed
upon it the words Inot negotiable,I Inon@
negotiableI or the li/e, such document may
nevertheless be negotiated by the holder and is
a negotiable document of title within the
meaning of this "itle. But nothing in this "itle
contained shall be construed as limiting or
defining the effect upon the obligations of the
carrier, warehouseman, or other bailee issuing a
document of title or placing thereon the words
Inot negotiable,I Inon@negotiable,I or the li/e.
(n!
T/R;0 O8 T?/
DOCU;/NT
?O4
N/>OTIAT/D
Aoods are
deliverable to
bearer
?ndorsed in blan/
by the person to
whose order the
goods were
deliverable
By delivery of the
document to
another
Aoods are deliverable to the
order of a specified person
By indorsement of
such person
!) wo ma' negotiate it
Art. 151&. A negotiable document of title may
be negotiated$
(1! By the owner therefor' or
(%! By any person to whom the possession or
custody of the document has been entrusted by
the owner, if, by the terms of the document the
bailee issuing the document underta/es to
deliver the goods to the order of the person to
whom the possession or custody of the
document has been entrusted, or if at the time
of such entrusting the document is in such form
that it may be negotiated by delivery. (n!
c) rigts ac"uired !' negotiation
Art. 151(. A person to whom a negotiable
document of title has been duly negotiated
acquires thereby$
(1! 1uch 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' and
25
(%! "he 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. (n!
A person to whom a document has been negotiated
acquires
1. rights of the vendor
%. rights of the original consignee
"hus, a buyer of a document of title may acquire a
better title than his vendor, since he acquires the
rights of the original consignee.
d) <nautori=ed negotiation
Art. 1518. "he 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 ma/ing the negotiation, or by the
fact that the owner of the document was deprived of
the possession of the same by loss, theft, fraud,
accident, mista/e, duress, or conversion, 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, or loss, theft, fraud,
accident, mista/e, duress or conversion. (n!
"here is a conflict between Art. 11% and Art. 11#
since under Art. 11%, only the owner of the
document or one to whom possession of the
document has been entrusted may negotiate it.
9owever, under Art. 11#, 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 ma/ing the
negotiation, or by the fact that the owner of the
document was deprived of the possession of the same
by loss, theft, fraud, accident, mista/e, duress, or
conversion. (Baviera)
e) implied warranties
Art. 151'. A person who for value negotiates or
transfers a document of title by endorsement or
delivery, including one who assigns for value a claim
secured by a document of title unless a contrary
intention appears, warrants$
(1! "hat the document is genuine'
(%! "hat he has a legal right to negotiate or transfer
it'
(-! "hat he has /nowledge of no fact which would
impair the validity or worth of the document' and
(4! "hat he has a right to transfer the title to the
goods and that the goods are merchantable or fit for
a particular purpose, 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. (n!
Art. 1517. "he endorsement of a document of
title shall not ma/e 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. (n!
A person who negotiates a document of title
warrants
1. the genuineness and validity of the document'
%. his right to negotiate it' and,
-. all the warranties of a vendor of goods.
But he does not warrant that
1. the common carrier will fulfill its obligation to
the deliver the goods' or
%. the previous indorsers will fulfill their
obligation.
f! creditorNs right against the goods
Art. 151-. 3f 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, while in possession of such bailee, be
attached by garnishment or otherwise or be
levied under an e2ecution unless the document
be first surrendered to the bailee or its
negotiation en&oined. "he 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. (n!
Art. 15&.. A creditor whose debtor is the owner
of a negotiable document of title shall be entitled
to such aid from courts of appropriate
&urisdiction by in&unction 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. (n!
Aoods in the hands of the carrier covered by a
negotiable document cannot be attached or
levied upon, <>B?11
1. the document be first surrendered to the
carrier' or
%. impounded by the court' or
-. its negotiation be en&oined.
)ationale #or te rule*
26
A negotiable document of title represents the goods'
hence it is not allowable for a carrier to deliver the
goods without the surrender of the bill of lading to
them, or for the law to allow attachment on the
goods.
&. NonHne)otia!le "ocuments o# title
a) ow trans#erred
Art. 1514. A person to whom a document of title has
been transferred, but not negotiated, acquires
thereby, as against the transferor, the title to the
goods, sub&ect to the terms of any agreement with
the transferor.
3f the document is non@negotiable, such person also
acquires the right to notify the bailee who issued the
document of the transfer thereof, 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.
:rior to the notification to such bailee by the
transferor or transferee of a non@negotiable document
of title, 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 e2ecution
upon the goods by a creditor of the transferor, 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. (n!
!) rigts ac"uired !' trans#er o# document o# title
Art. 1515. Ehere a negotiable document of title is
transferred for value by delivery, and the
endorsement of the transferor is essential for
negotiation, the transferee acquires a right against
the transferor to compel him to endorse the
document unless a contrary intention appears. "he
negotiation shall ta/e effect as of the time when the
endorsement is actually made. (n!
"he law ma/es a distinction between OnegotiationK
>negotia!le document o# title? and OtransferK >non5
negotia!le document o# title?.
"ransfer * 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, without indorsement
"he transferee does not acquire a better title than his
transferor >unli/e in a negotia!le document o# title.
were te !u'er ma' ac"uire a !etter title?.
E. R/;/DI/0 O8 AN UNPAID 0/99/R
5?A>3>A (+ <>:A3D 1?BB?6
Art 15&4. "he seller o# )oo"s is deemed to be
an unpaid seller within the meaning of this "itle$
(1! Ehen the whole of the price has not been
paid or tendered'
(%! Ehen a bill of e2change or other negotiable
instrument has been received as conditional
payment, and the condition on which it was
received has been bro/en by reason of the
dishonor of the instrument, the insolvency of the
buyer, or otherwise.
3n Articles 1% to 1- the term IsellerI
includes an agent of the seller to whom the bill
of lading has been indorsed, or a consignor or
agent who has himself paid, or is directly
responsible for the price, or any other person
who is in the position of a seller. (n!
a! <npaid seller * if the whole price has not been
paid or tendered, or when the chec/ received as
conditional payment was dishonored by non@
payment or insolvency of the buyer.
b! seller * includes the agent of the seller to
whom the bill of lading was endorsed, or the
consignor or agent who had paid the price or is
responsible for the price, or any other person
who is in the position of a seller.
6?5?D3?1 (+ A> <>:A3D 1?BB?6
Art 1526. 1ub&ect to the provisions of this "itle,
notwithstanding that the ownership in the goods
may have passed to the buyer, the unpaid seller
of goods, as such, has$
(1! A lien on the goods or right to retain them
for the price while he is in possession of them'
(%! 3n case of the insolvency of the buyer, a right
of stopping the goods in transitu after he has
parted with the possession of them'
(-! A right of resale as limited by this "itle'
(4! A right to rescind the sale as li/ewise limited
by this "itle.
Ehere the ownership in the goods has not
passed to the buyer, the unpaid seller has, in
addition to his other remedies a right of
withholding delivery similar to and coe2tensive
with his rights of lien and stoppage in transitu
where the ownership has passed to the buyer.
(n!
27
a! @# ownersip over te goods ad not 'et passed to
te !u'er* the seller, as owner, could retain the
goods or resell them to another, without pre&udice to
his liability for damages for any breach of contract
committed by him.
b! @# ownersip ad passed to te !u'er !ut te
goods are still in te possession o# te seller or are in
transit to te !u'er* the unpaid seller could withhold
delivery or stop the goods in transit should the buyer
become insolvent. As a consequence of his lien over
the goods, the unpaid seller could resell the goods to
another or resume ownership over them, without
court order, and may still used the buyer for damages
1. 9ien
Art 1527. 1ub&ect to the provisions of this "itle, 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, namely$
(1! Ehere the goods have been sold without any
stipulation as to credit'
(%! Ehere the goods have been sold on credit, but
the term of credit has e2pired'
(-! Ehere the buyer becomes insolvent.
"he seller may e2ercise his right of lien
notwithstanding that he is in possession of the goods
as agent or bailee for the buyer. (n!
Art 1528. Ehere an unpaid seller has made part
delivery of the goods, he may e2ercise his right of
lien on the remainder, unless such part delivery has
been made under such circumstances as to show an
intent to waive the lien or right of retention. (n!
Art 1529. "he unpaid seller of goods loses his lien
thereon$
(1! Ehen 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'
(%! Ehen the buyer or his agent lawfully obtains
possession of the goods'
(-! By waiver thereof.
"he unpaid seller of goods, having a lien thereon,
does not lose his lien by reason only that he has
obtained &udgment or decree for the price of the
goods. (n!
a! "he unpaid sellerNs lien implies that he has a
right to retain possession of the goods until
payment or tender of the whole price, unless he
agreed to sell on credit.
b! 3f the unpaid seller agrees to sell on credit, he
may refuse to deliver them if the buyer becomes
insolvent, or if the term of the credit had e2pired
and the price has not been paid.
c! Loss o# lien* the unpaid seller losses his lien
when$
1. he delivers the goods to the carrier or other
bailee, consigning them to the buyer under a
straight or non@negotiable bill of lading, or
%. when the goods were delivered to the buyer,
or
-. when he waived his lien.
d! 3t is not lost on the remainder of the goods
when only partial delivery was made, unless
such was intended to operate as symbolical
delivery of the whole. "he lien is not lost by the
mere fact that the seller had already obtained
&udgment for the price.
e! )evival o# lien* the unpaid sellerNs lien is
revived if the goods are returned by the buyer in
wrongful repudiation of the contract.
&. 0toa)e in Transitu
Art 1530. 1ub&ect to the provisions of this "itle,
when the buyer of goods is or becomes
insolvent, the unpaid seller who has parted with
the possession of the goods has the right of
stopping them in transitu, that is to say, he may
resume possession of the goods at any time
while they are in transit, 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. (n!
Art 1531. Aoods are in transit within the
meaning of the preceding article$
(1! +rom the time when they are delivered to a
carrier by land, water, or air, or other bailee for
the purpose of transmission to the buyer, until
the buyer, or his agent in that behalf, ta/es
delivery of them from such carrier or other
bailee'
(%! 3f the goods are re&ected by the buyer, and
the carrier or other bailee continues in
possession of them, even if the seller has
refused to receive them bac/.
Aoods are no longer in transit within the
meaning of the preceding article$
28
(1! 3f the buyer, or his agent in that behalf, obtains
delivery of the goods before their arrival at the
appointed destination'
(%! 3f, after the arrival of the goods at the appointed
destination, the carrier or other bailee ac/nowledges
to the buyer or his agent that he holds the goods on
his behalf and continues in possession of them as
bailee for the buyer or his agent' and it is immaterial
that further destination for the goods may have been
indicated by the buyer'
(-! 3f the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent in that
behalf.
3f the goods are delivered to a ship, freight train,
truc/, or airplane chartered by the buyer, it is a
question depending on the circumstances of the
particular case, whether they are in the possession of
the carrier as such or as agent of the buyer.
3f part delivery of the goods has been made to the
buyer, or his agent in that behalf, the remainder of
the goods may be stopped in transitu, unless such
part delivery has been under such circumstances as
to show an agreement with the buyer to give up
possession of the whole of the goods. (n!
Art 1532. "he unpaid seller may e2ercise 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. 1uch notice may be given
either to the person in actual possession of the goods
or to his principal. 3n the latter case the notice, to be
effectual, must be given at such time and under such
circumstances that the principal, by the e2ercise of
reasonable diligence, may prevent a delivery to the
buyer.
Ehen notice of stoppage in transitu is given by the
seller to the carrier, or other bailee in possession of
the goods, he must redeliver the goods to, or
according to the directions of, the seller. "he
e2penses of such delivery must be borne by the
seller. 3f, however, a negotiable document of title
representing the goods has been issued by the carrier
or other bailee, he shall not obliged to deliver or
&ustified in delivering the goods to the seller unless
such document is first surrendered for cancellation.
(n!
Art 1533. Ehere the goods are of perishable nature,
or where the seller e2pressly reserves the right of
resale in case the buyer should ma/e default, or
where the buyer has been in default in the payment
of the price for an unreasonable time, an unpaid
seller having a right of lien or having stopped the
goods in transitu may resell the goods. 9e shall not
thereafter be liable to the original buyer upon the
contract of sale or for any profit made by such
resale, but may recover from the buyer damages
for any loss occasioned by the breach of the
contract of sale.
Ehere a resale is made, as authori7ed in this
article, the buyer acquires a good title as against
the original buyer.
3t 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
where the right to resell is not based on the
perishable nature of the goods or upon an
e2press provision of the contract of sale, 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.
3t 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.
"he seller is bound to e2ercise reasonable care
and &udgment in ma/ing a resale, and sub&ect to
this requirement may ma/e a resale either by
public or private sale. 9e cannot, however,
directly or indirectly buy the goods. (n!
Art 1534. An unpaid seller having the right of
lien or having stopped the goods in transitu, may
rescind the transfer of title and resume the
ownership in the goods, where he e2pressly
reserved the right to do so in case the buyer
should ma/e default, or where the buyer has
been in default in the payment of the price for an
unreasonable time. "he seller shall not thereafter
be liable to the buyer upon the contract of sale,
but may recover from the buyer damages for
any loss occasioned by the breach of the
contract.
"he 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. 3t is not
necessary that such overt act should be
communicated to the 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. (n!
Art 1535. 1ub&ect to the provisions of this "itle,
the unpaid seller4s right of lien or stoppage in
transitu is not affected by any sale, or other
29
disposition of the goods which the buyer may have
made, unless the seller has assented thereto.
3f, however, a negotiable document of title has been
issued for goods, no seller4s 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, whether such negotiation be prior or
subsequent to the notification to the carrier, or other
bailee who issued such document, of the seller4s claim
to a lien or right of stoppage in transitu. (n!
a! (ld common law remedy which is an e2tension 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.
b! Aoods 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,
until the buyer or his agent ta/es delivery of them
from the carrier. "o terminate the transit by delivery
to a middleman, it must be delivery to /eep. not to
transport.
c! Aoods are still considered to be in transit even if
they reached their ultimate destination when the
buyer re&ects them and they remain in the possession
of the carrier.
d! Aoods are no longer in transit if the buyer or his
agent obtained delivery of the goods even before they
reached their ultimate destination, 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 when the carrier, upon
arrival of the goods at the ultimate destination,
enters into a new contract with the buyer or his
agent.
e! 3f there was partial delivery of the goods to the
buyer, the remainder of the goods may be stopped in
transitu, 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.
Ehere the buyer has ta/en some portion of the whole
mass which was then susceptible of possession, there
is constructive possession of the whole.
f! Sale o# goods in transit* the unpaid sellerNs 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.
1! Ehere a negotiable document of title has been
issued for the goods, no sellerNs 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.
%.! Ehere the document of title is a straight bill
of lading, the sellerNs right of stoppage will not
be cut off as the transferee acquires no greater
or added rights than his transferor.
6ight of 1toppage' 9ow ?2ercised@"he unpaid
seller may e2ercise his right by
1. 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.
Ehen notice of stoppage in transit is given to
the carrier, the latte must redeliver the goods to,
or according to the directions of, the seller. 3f
however, a negotiable document of title
representing the goods has been issued by the
carrier, the latter shall not be obliged to deliver
the goods unless such document is first
surrendered for cancellation.
(. Resale
Art 1533. Ehere the goods are of perishable
nature, or where the seller e2pressly reserves
the right of resale in case the buyer should ma/e
default, or where the buyer has been in default
in the payment of the price for an unreasonable
time, an unpaid seller having a right of lien or
having stopped the goods in transitu may resell
the goods. 9e shall not thereafter be liable to the
original buyer upon the contract of sale or for
any profit made by such resale, but may recover
from the buyer damages for any loss occasioned
by the breach of the contract of sale.
Ehere a resale is made, as authori7ed in this
article, the buyer acquires a good title as against
the original buyer.
3t 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
where the right to resell is not based on the
perishable nature of the goods or upon an
e2press provision of the contract of sale, 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.
3t 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.
"he seller is bound to e2ercise reasonable care
and &udgment in ma/ing a resale, and sub&ect to
this requirement may ma/e a resale either by
public or private sale. 9e cannot, however,
directly or indirectly buy the goods. (n!
30
a! Ehen the goods are of perishable nature, or where
the seller e2pressly reserves the right of resale in
case the buyer should default in payment, or where
the buyer has been in default for an unreasonable
length of time, the unpaid seller, having a right of lien
or having stopped the goods in transitu, may resell
the goods and recover from the buyer damages for
breach of contract.
b! "he resale may be in a public or private sale, but
the seller cannot buy them directly or indirectly. "he
seller is entitled to any profit he may ma/e out of the
resale.
c! 3n case he sells them at a loss, he is entitled to
recover the difference from the original buyer. 3t 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.
d! Damages recovera!le* Ehether the action is for
damages or to recover loss from a resale, the
purpose is to compensate the seller for loss for
breach of contract. "hus, if the purchaser fails to
ta/e delivery and pay the price, the vendor, without
need of first rescinding the contract &udicially, is
entitled to resell, and if obliged to sell for less than
the contract price, the buyer is liable for the
difference.
e! Due diligence must be e2ercised to secure the
highest price obtainable in the best available mar/et.
"he burden of showing it was e2ercised is on the
vendor.
4. Rescission
45
Art 1534. An unpaid seller having the right of lien or
having stopped the goods in transitu, may rescind the
transfer of title and resume the ownership in the
goods, where he e2pressly reserved the right to do so
in case the buyer should ma/e default, or where the
buyer has been in default in the payment of the price
for an unreasonable time. "he seller shall not
thereafter be liable to the buyer upon the contract of
sale, but may recover from the buyer damages for
any loss occasioned by the breach of the contract.
"he transfer of title shall not be held to have been
rescinded by an unpaid seller until he has manifested
45
MERCHANTS REFRIGERATING CORP * TITMAN:
rescission of the contract would accomplish the following results:
+(- termination of the original contract
+9- return of the title to the undelivered portion of the goods
to the seller
+3- release of the buyer from his obligation to ta!e and pay
for the balance of the goods
+)- 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. v Benjamin Titman
Corp-

by notice to the buyer or by some other overt
act an intention to rescind. 3t is not necessary
that such overt act should be communicated to
the 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. (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 e2pressly reserved the right to
do so in case the buyer defaults, or where the
buyer has been in default in payment of the price
for an unreasonable time. $e trans#er o# title
sall not !e eld to ave !een rescinded !' te
unpaid seller until e mani#ests !' notice to te
!u'er or !' some overt act an intention to
rescind% After rescinding the transfer of title, the
seller may still recover damages from the buyer
for breach of contract.
As used in Art. 1-4, the term OrescindK 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.
EI. P/R8OR;ANC/ O8 T?/ CONTRACT
A. D?B3C?6P (+ "9? "93>A 1(BD
1. Place6 time6 an" manner o# "eliver*
Art. 1521. Ehether it is for the buyer to ta/e
possession of the goods or of the seller to send
them to the buyer is a question depending in
each case on the contract, e2press or implied,
between the parties. Apart from any such
contract, e2press or implied, or usage of trade to
the contrary, the place of delivery is the seller4s
place of business if he has one, and if not his
residence' but in case of a contract of sale of
specific goods, which to the /nowledge of the
parties when the contract or the sale was made
were in some other place, then that place is the
place of delivery.
Ehere by a contract of sale the seller is bound to
send the goods to the buyer, but no time for
sending them is fi2ed, the seller is bound to send
them within a reasonable time.
Ehere the goods at the time of sale are in the
possession of a third person, the seller has not
fulfilled his obligation to deliver to the buyer
unless and until such third person ac/nowledges
31
to the buyer that he holds the goods on the buyer4s
behalf.
Demand or tender of delivery may be treated as
ineffectual unless made at a reasonable hour. Ehat is
a reasonable hour is a question of fact.
<nless otherwise agreed, the e2penses of and
incidental to putting the goods into a deliverable state
must be borne by the seller. (n!
Art. 1169. ,,, 3n reciprocal obligations, 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. +rom the moment one of the
parties fulfills his obligation, delay by the other
begins. (11,,a!
Art. 1524. "he vendor shall not be bound to deliver
the thing sold, if the vendee has not paid him the
price, or if no period for the payment has been fi2ed
in the contract. (14..!
a! Aenerally, payment and delivery of the thing sold
are concurrent acts, in consonance with the rule in
reciprocal obligations. Agreement of the parties
determines whether it is for the buyer to ta/e
possession of the goods or for the seller to send them
to the buyer. Absent stipulation to the contrary, the
ff. rules shall be observed$
1. the buyer should ta/e delivery of the goods from
the sellerNs place of business if he has one, and if
none, his residence.
%. 3n case of sale of specific goods which, at the
time of the sale, are /nown to the parties to be in
A>("9?6 :BA)?, the buyer should ta/e delivery
from such place.
3. D?5A>D or "?>D?6 of :AP5?>" shall be made
at a reasona!le our. Ehere by agreement, the
seller is bound to send the goods to the buyer, he
is bound to send them within the time agreed
upon, or if no time was fi2ed, within a reasonable
time. 6?A1(>ABB? "35? for delivery is
determined by the circumstances attending the
particular transaction
4. Ehere the goods at te time o# te sale are in
the possession of a "936D :?61(>, there is >(
delivery <>B?11 and <>"3B such their person
A)0>(EB?DA?1 to the buyer that the holds the
goods on the latterNs behalf.
. ?G:?>1?1 of placing the goods in a
D?B3C?6ABB? 1"A"? shall be borne by the
1?BB?6 unless otherwise stipulated.
.. 3f the sale involves a specific thing, the
vendor is bound to deliver the thing sold and
its accessions and accessories in the
condition in which they were upon the
perfection of the contract.
=. 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.
#. "he vendee has the obligation to pay the
e2penses incurred by the vendor in the
production, gathering and preservation of
the fruits.
Ehen time is of essence
4.

"ime is of the essence of the contract whenever
the intention of the parties is clear that
performance of its terms shall be accomplished
e2actly at the stipulated day or implied from the
nature of the contract itself, the sub&ect matter
or the circumstances under which the contract is
made
Ehen not bound to deliver
Art. 1524. "he vendor shall not be bound to
deliver the thing sold, if the vendee has not paid
him the price, or if no period for the payment
has been fi2ed in the contract. (14..!
Art. 1536. "he vendor is not bound to deliver
the thing sold in case the vendee should lose the
right to ma/e use of the terms as provided in
Article 118#. (14.=a!
Art. 1198. "he debtor shall lose every right to
ma/e use of the period$
46
S;$"7 <=KK v ;""$: $n this case, the seller had done
all that could be e%pected when he placed the machinery at
the disposal of the buyer on pr (*(*. When the time of
delivery is not fi%ed in the contract, +,-e ,s no+ o. +/e
essen0e1 delivery could hence be made within a
reasonable time.
SOK=A v .7=KS=D: 8efendant cannot be compelled to
accept delivery as he gave his consent to the contract, on
the assurance of the plaintiff that the goods were Eon the
wayF when as a matter of fact, they were not yet shipped at
the time. "his assertion was an essential element of the
contract.
A=C4<K$. : K$""O5: .ourt ruled for plaintiff. $t was
shown that the goods were intended for election purposes,
and the purchase order provided that the stipulated delivery
period shall not be e%ceeded.
32
(1! Ehen after the obligation has been contracted, he
becomes insolvent, unless he gives a guaranty or
security for the debt'
(%! Ehen he does not furnish to the creditor the
guaranties or securities which he has promised'
(-! Ehen by his own acts he has impaired said
guaranties or securities after their establishment, and
when through a fortuitous event they disappear,
unless he immediately gives new ones equally
satisfactory'
(4! Ehen the debtor violates any underta/ing, in
consideration of which the creditor agreed to the
period'
(! Ehen the debtor attempts to abscond. (11%8a!
"he vendor is not bound to deliver the thing sold in
case the vendee should lose the right to ma/e use of
the stipulated term in the following cases$
1. Ehen the vendee becomes insolvent
%. Ehen the vendee does not furnish the
guaranties or securities he has promised
-. Ehen the guaranties or securities given were
impaired through the vendeeNs acts or were lost
or destroyed through a fortuitous event, unless
he gives new equally satisfactory guaranties or
securities
4. Ehen the vendee violates any condition for
which he was granted the term
. Ehen the vendee attempts to abscond
>("?$ Art. 14.= has been replaced by Art. 118#
which provides that the vendee shall lose the benefit
of the term when, after the obligation has been
contracted, he becomes insolvent, unless he gives a
guaranty or security. FInsolvenc*G un"er t,is
article cannot !e un"erstoo" in t,e sense o# a
3u"iciall* "eclare" insolvenc* or susension o#
a*ments6 !ecause t,e "e!tor cannot )ive a
securit* or )uarant* in suc, case. "he doctrine
therefore in Cisayan Distributors v +lores interpreting
insolvency in Art 14.= old )) as something which
must be &udicially declared or something which
involves suspension of payments, no longer holds.
&. 0ale o# >oo"s
a. Delivery by installment
Art% 1583% <nless otherwise agreed, the buyer of
goods is not bound to accept delivery thereof by
installments.
Ehere there is a contract of sale of goods to be
delivered by stated installments, which are to be
separately paid for, and the seller ma/es defective
deliveries in respect of one or more installments, or
the buyer neglects or refuses without &ust cause to
ta/e delivery of or pay for one more
installments, it depends in each case on the
terms of the contract and the circumstances of
the case, whether the breach of contract is so
material as to &ustify the in&ured party in refusing
to proceed further and suing for damages for
breach of the entire contract, or whether the
breach is severable, giving rise to a claim for
compensation but not to a right to treat the
whole contract as bro/en. (n!
a! A?>?6AB 6<B?$ the buyer is not bound to
accept delivery of goods by installments.
?G)?:"3(>$ Ehen otherwise stipulated
b! 3n case of a contract that calls for the delivery
of the goods at stated intervals which are to be
paid for separately, 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 bro/en (6 to regard each
breach as severable. 1?C?6AB3B3"P depends on
whether the breach is so material as to &ustify
the aggrieved party in refusing to proceed
further with the entire contract or so immaterial
that the breach is severa!le, giving rise merely
to a claim for damages
b. Delivery of wrong quantity
Art. 1522. Ehere the seller delivers to the
buyer a quantity of goods less than he
contracted to sell, the buyer may re&ect them,
but if the buyer accepts or retains the goods so
delivered, /nowing that the seller is not going to
perform the contract in full, he must pay for
them at the contract rate. 3f, however, the buyer
has used or disposed of the goods delivered
before he /nows that the seller is not going to
perform his contract in full, the buyer shall not
be liable for more than the fair value to him of
the goods so received.
Ehere the seller delivers to the buyer a quantity
of goods larger than he contracted to sell, the
buyer may accept the goods included in the
contract and re&ect the rest. 3f the buyer accepts
the whole of the goods so delivered he must pay
for them at the contract rate.
Ehere the seller delivers to the buyer the goods
he contracted to sell mi2ed with goods of a
different description not included in the contract,
the buyer may accept the goods which are in
accordance with the contract and re&ect the rest.
3n the preceding two paragraphs, if the sub&ect
matter is indivisible, the buyer may re&ect the
whole of the goods.
33
"he provisions of this article are sub&ect to any usage
of trade, special agreement, or course of dealing
between the parties. (n!
a! A?>?6AB 6<B?$ "he 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.
?G)?:"3(>$ "here is usage of trade, special
stipulation or course of dealing to the contrary.
6?5?D3?1$
1. Ehere the seller delivers a
quantity less than that agreed upon, the
buyer may re&ect them. 3f the buyer accepts
or retains that goods delivered, /nowing the
inability of the seller to deliver the rest, the
buyer is bound to pay for them at the
contract rate. 3f the buyer has used or
disposed of the goods before /nowing the
inability of the seller to deliver the rest, the
buyer shall pay not more than the fair value
of the goods. (>("?$ Ofair valueK means the
price of the goods in the open mar/et.!
2. 3f the quantity delivered is
more than that agreed upon, the buyer may
re&ect the e2cess, unless the sub&ect matter
is indivisi!le, in which case, the buyer may
re&ect the whole.
-. Ehere the seller delivers
the goods mi2ed with goods of a different
description not included in the contract, the
buyer may accept the goods which are in
accordance with the contract, and re&ect the
rest, unless the sub&ect matter is indivisible,
in which case, the buyer may re&ect the
whole.
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. :6?1<5:"3(>$ Buyer
/nows that the seller might intend to not fully
perform, if said purchaser accepts a partial delivery
on an entire contract, absent any statement to the
contrary. ("he law applies peculiarly to installment
and divisible contracts.!
(. 0ale o# Immova!les
Art. 1539. "he obligation to deliver the thing sold
includes that of placing in the control of the vendee
all that is mentioned in the contract, in conformity
with the following rules$
3f the sale of real estate should be made with a
statement of its area, at the rate of a certain price for
a unit of measure or number, the vendor shall be
obliged to deliver to the vendee, if the latter should
demand it, all that may have been stated in the
contract' but, should this be not possible, the vendee
may choose between a proportional reduction of the
price and the rescission of the contract, provided
that, in the latter case, the lac/ in the area be
not less than one@tenth of that stated.
"he same shall be done, even when the area is
the same, if any part of the immovable is not of
the quality specified in the contract.
"he rescission, in this case, shall only ta/e place
at the will of the vendee, when the inferior value
of the thing sold e2ceeds one@tenth of the price
agreed upon.
>evertheless, if the vendee would not have
bought the immovable had he /nown of its
smaller area of inferior quality, he may rescind
the sale. (14.8a!
Art. 1540. 3f, in the case of the preceding
article, there is a greater area or number in the
immovable than that stated in the contract, the
vendee may accept the area included in the
contract and re&ect the rest. 3f he accepts the
whole area, he must pay for the same at the
contract rate. (14=,a!
Art. 1541. "he provisions of the two preceding
articles shall apply to &udicial sales. (n!
Art. 1542. 3n 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, there shall be
no increase or decrease of the price, although
there be a greater or less area or number than
that stated in the contract.
"he same rule shall be applied when two or more
immovables as sold for a single price' but if,
besides mentioning the boundaries, which is
indispensable in every conveyance of real estate,
its area or number should be designated in the
contract, the vendor shall be bound to deliver all
that is included within said boundaries, even
when it e2ceeds the area or number specified in
the contract' and, should he not be able to do
so, he shall suffer a reduction in the price, in
proportion to what is lac/ing in the area or
number, unless the contract is rescinded because
the vendee does not accede to the failure to
deliver what has been stipulated. (14=1!
Art. 1543. "he actions arising from Articles
1-8 and 14% shall prescribe in si2 months,
counted from the day of delivery. (14=%a!
a. Ehere price is at certain rate per unit of
measure

"he seller is bound to deliver the entire land sold
in accordance with the terms of the contract.
34
A?>?6AB 6<B?$ T,e ven"ee ,as to otion to
"eman" a roortionate re"uction o# t,e rice
or rescission o# t,e contract1 if price is fi2ed at a
certain rate per unit of measure and the area is
delivered is less than that stated in the contract, or
even if the area is correct but part of the land is not
of the quality stated in the contract
?G)?:"3(>$ Ehere the entire land is not of the
quality stated in the contract, as in such a case, the
consent must have been obtained by mista/e or fraud
(contract may then be voidable.!
Art. 15(-. see a!ove.
b. 1ale for a lump sum
4=

Art. 154&. see a!ove.
a! 3f the sale of real property is for a lump sum, there
shall be no increase or decrease in the price, whether
the actual area delivered turned out to be greater or
less than that stated in the contract.
b! 3f besides mentioning the boundaries, the area
should also be stated in the contract, 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.
4#
c! 3f the vendor fails to deliver all the land included
within said boundaries, as where part of the land
belongs to a third person, t,e ven"ee s,all ,ave
t,e otion to "eman" a re"uction in t,e rice in
roortion to t,e "e#icienc* in t,e area state" in
t,e contract or a rescission o# t,e contract
(Actions prescribe in si2 months from date of
delivery.!
4. Insections an" Accetance
a. 6ight of inspection
47
MAAB v BD: Where the price was for a lump sum and
the area which was stated in the contract to be *1 hectares,
turned out to be only 06 hectares, but the purchaser had
previously investigated and inspected the condition of the land,
and had ample opportunity to do so, the purchaser cannot later
on allege that the vendor made false representation.
S$$5 v 2K58O5$: "here was mutual mista!e which was so
material as would go into the essence of the contract. Aescission
is proper. "he buyer would have not have bought the land had he
!nown of the smaller area or inferior quantity.
48
AO<K= v A<S: vendee of land, when sold in gross or
with the description 'more or less' with reference to its area, does
not thereby ipso facto ta!e all ris! of quantity in the land. "he use
of 'more or less' or similar words in designating quantity covers
only a reasonable e%cess or deficiency.
Art. 1584. Ehere goods are delivered to the
buyer, which he has not previously e2amined, he
is not deemed to have accepted them unless and
until he has had a reasonable opportunity of
e2amining them for the purpose of ascertaining
whether they are in conformity with the contract
if there is no stipulation to the contrary.
<nless otherwise agreed, when the seller tenders
delivery of goods to the buyer, he is bound, on
request, to afford the buyer a reasonable
opportunity of e2amining the goods for the
purpose of ascertaining whether they are in
conformity with the contract.
Ehere goods are delivered to a carrier by the
seller, in accordance with an order from or
agreement with the buyer, upon the terms that
the goods shall not be delivered by the carrier to
the buyer until he has paid the price, whether
such terms are indicated by mar/ing the goods
with the words Icollect on delivery,I or
otherwise, the buyer is not entitled to e2amine
the goods before the payment of the price, in the
absence of agreement or usage of trade
permitting such e2amination. (n!
"he buyer is entitled to e2amine the goods to
decide whether he will become the owner, and
until the e2amination is completed or waived, he
is under >( obligation to accept them. 9e may
however waive this right by simply refusing to
inspect the goods, ta/ing them as they are or
by any other similar act.
b. 5anifestation of acceptance
Art. 1585. "he buyer is deemed to have
accepted the goods when he intimates to the
seller that he has accepted them, or when the
goods have been delivered to him, and he does
any act in relation to them which is inconsistent
with the ownership of the seller, or when, after
the lapse of a reasonable time, he retains the
goods without intimating to the seller that he has
re&ected them. (n!
a! "he buyer is deemed to have accepted the
goods when$
1. he intimates to the seller that the has
accepted them
%. 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
-. after the lapse of a reasonable time, he
retains the goods without intimating to the
seller that he has re&ected them.
?2ercise of acts of ownership over the goods is a
manifestation of acceptance, such as ma/ing use
of them as owner, ma/ing alterations in the
goods or sub&ecting it to the process of
35
manufacture. ?G)?:"3(>$ BuyerNs right to ma/e a
test of goods, !ut onl* i# necessar*6 to enable him
to determine whether to accept or re&ect the goods.
c. Breach of warranty
Art. 1586. 3n the absence of e2press or implied
agreement of the parties, acceptance of the goods by
the buyer shall not discharge the seller from liability
in damages or other legal remedy for breach of any
promise or warranty in the contract of sale. But, if,
after acceptance of the goods, the buyer fails to give
notice to the seller of the breach in any promise of
warranty within a reasonable time after the buyer
/nows, or ought to /now of such breach, the seller
shall not be liable therefor. (n!
a! "he purpose of the notice of breach of warranty is
to :6("?)" the seller against belated damage claims
which would prevent the seller from ma/ing an
adequate and proper investigation of his alleged
liability.
b! Acceptance of delivery means an A11?>" to
become (E>?6 of the goods on the part of the
buyer, but not an assent tat te goods #ul#ill te
description and terms o# te contract%
d. 6efusal to accept
Art. 1587. <nless otherwise agreed, where goods are
delivered to the buyer, and he refuses to accept
them, having the right so to do, he is not bound to
return them to the seller, but it is sufficient if he
notifies the seller that he refuses to accept them. 3f
he voluntarily constitutes himself a depositary
thereof, he shall be liable as such. (n!
Art. 1588. 3f there is no stipulation as specified in
the first paragraph of article 1%-, when the buyer4s
refusal to accept the goods is without &ust cause, the
title thereto passes to him from the moment they are
placed at his disposal. (n!
Art. 1589. "he vendee shall owe interest for the
period between the delivery of the thing and the
payment of the price, in the following three cases$
(1! 1hould it have been so stipulated'
(%! 1hould the thing sold and delivered produce fruits
or income'
(-! 1hould he be in default, from the time of &udicial
or e2tra&udicial demand for the payment of the price.
(1,1a!
a! <nless otherwise agreed, when the goods are
delivered to the buyer and e as a rigt to re#use to
accept them, ,e nee" not return t,em. 3t is
sufficient that the buyer notifies the seller that
he refuses to accept the goods, and thereafter,
the former becomes the depository of the
re&ected goods.
b! 9owever, where title already passed to the
buyer and there was a breach of warranty, the
buyer may 6?1)3>D the contract by returning or
offering to return the goods to the seller and
recover the price which had been paid.
,
e. 6efusal to accept
Art. 1582. "he vendee is bound to accept
delivery and to pay the price of the thing sold at
the time and place stipulated in the contract.
3f the time and place should not have been
stipulated, the payment must be made at the
time and place of the delivery of the thing sold.
(1,,a!
Art. 1504. <nless otherwise agreed, the goods
remain at the seller4s ris/ until the ownership
therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the
goods are at the buyer4s ris/ whether actual
delivery has been made or not, e2cept that$
(1! Ehere delivery of the goods has been made
to the buyer or to a bailee for the buyer, 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, the goods are at
the buyer4s ris/ from the time of such delivery'
(%! Ehere actual delivery has been delayed
through the fault of either the buyer or seller the
goods are at the ris/ of the party in fault. (n!
B. :AP5?>" (+ :63)?
1. 9ia!ilit* #or interest
Art. 158&6 158-. 0ee a!ove.
"he 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, or even if there is none, if the thing
delivered produces fruits or income, or if the
buyer incurs in default from the time of &udicial
or e2tra@&udicial demand for payment
1. 1uspension of :ayment
Art. 1590. 1hould the vendee be disturbed in
the possession or ownership of the thing
acquired, or should he have reasonable grounds
36
to fear such disturbance, by a vindicatory action or a
foreclosure of mortgage, he may suspend the
payment of the price until the vendor has caused the
disturbance or danger to cease, unless the latter
gives security for the return of the price in a proper
case, or it has been stipulated that, notwithstanding
any such contingency, the vendee shall be bound to
ma/e the payment. A mere act of trespass shall not
authori7e the suspension of the payment of the price.
(1,%a!
a! OdisturbanceK or threat of disturbance * must come
through a vindicatory action or foreclosure of
mortgage, and not through a mere threat or claim of
a third person.
b! 3f the third person claims a servitude on the thing
sold, the remedy of the buyer is to demand rescission
of the contract or payment of the proper indemnity.
c! 3n order that the buyer may have a right to
suspend payment, it is absolutely necessary that the
cause of disturbance or danger !e !ased on a #act
arising !e#ore te sale or i# it arose a#ter te sale. te
cause is imputa!le to te vendor or is successor in
interest%
4-
%. 1ale of 6eal :roperty
Art. 1592. 3n the sale of immovable property, even
though it may have been stipulated that upon failure
to pay the price at the time agreed upon the
rescission of the contract shall of right ta/e place, the
vendee may pay, even after the e2piration of the
period, as long as no demand for rescission of the
contract has been made upon him either &udicially or
by a notarial act. After the demand, the court may
not grant him a new term. (1,4a!
Art. 1560. 3f the immovable sold should be
encumbered with any non@apparent burden or
servitude, not mentioned in the agreement, of such a
nature that it must be presumed that the vendee
would not have acquired it had he been aware
thereof, he may as/ for the rescission of the contract,
unless he should prefer the appropriate indemnity.
>either right can be e2ercised if the non@apparent
burden or servitude is recorded in the 6egistry of
:roperty, unless there is an e2press warranty that the
thing is free from all burdens and encumbrances.
49
BARENG * CA: "he vendee had a right to suspend payment
from the time he was informed of the coIownerGs claim. <ut such
right ceased from the time a compromise was reached between
the coIowners whereby the vendor agreed to give to the coI
owner twoIthirds of whatever he could collect from the buyer.
fter the compromise, when the vendor brought an action against
the buyer to collect the balance, said buyer owed interests on the
amount from the time of the filing of the complaint.
Eithin one year, to be computed from the
e2ecution of the deed, the vendee may bring the
action for rescission, or sue for damages.
(ne year having elapsed, he may only bring an
action for damages within an equal period, to be
counted from the date on which he discovered
the burden or servitude. (14#-a!
Art. 1664. "he 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' but
the lessee shall have a direct action against the
intruder.
"here is a mere act of trespass when the third
person claims no right whatever. (1.,a!
a% +##ect o# 4on5pa'ment
Art. 1191. "he power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
"he in&ured party may choose between the
fulfillment and the rescission of the obligation,
with the payment of damages in either case. 9e
may also see/ rescission, even after he has
chosen fulfillment, if the latter should become
impossible.
"he court shall decree the rescission claimed,
unless there be &ust cause authori7ing the fi2ing
of a period.
"his is understood to be without pre&udice to the
rights of third persons who have acquired the
thing, in accordance with Articles 1-# and 1-##
and the 5ortgage Baw. (11%4!
3n absolute sales of real property, even i# tere
is a stipulation providing #or ipso &ure rescission,
in case of default in payment, the law requires
the seller to demand the resolution of the
contract from the buyer &udicially or by a notarial
act, before such stipulation could be given effect.
(therwise, the buyer could still pay the price
?C?> after the e2piration of the period to pay.
,
!% )%A% ;55:A 9%D% -57 (Secs% 0: and 04)
a! Approved on %. Aug 18=%, the Realt*
Installment Bu*er Protection Act declared
50
DELA CRU * LEGAPI: "he injured party may choose
between fulfillment and rescission of the obligation, with
payment of damages in either the rescission claimed unless
there is just cause authori@ing the granting of a new period,
as in this case.
37
that it is a public policy to protect buyers of real@
estate on installments, including residential
condominiums, apartments, e2cluding industrial lots,
commercial buildings and lands sold under 6.A. -#44
as amended, against onerous and oppressive
conditions
b! R.A. '55&6 sec &6 in sale or financing of real
estate on installment payments where the buyer has
paid at least two years of installments, provides that
in case such buyer defaults in the payment of the
succeeding installments, he has a right to pay,
without additional interests, the arrears $it,in a
)race erio" o# one mont, #or ever* *ear o#
installment a*ments ma"e@
c! 3n the same case, if the contract is cancelled, the
seller shall refund to the buyer the case surrender
value of payments made, equivalent to ,R of total
payments and an additional R for every year after
five years of the life of the contract and its
e2tensions, if any.
d! Actual cancellation shall not ta/e place until after
-, days from receipt by the buyer of the notice of
cancellation or demand for rescission by a notarial
act, and only upon full payment of the cash surrender
value to the buyer.
1
51
ACTIVE REALT! * DARO!A: $n this case, 2es3on(en+ /as
al2ea(4 3a,( ,n .o52 678 4ea2s a +o+al o. P9:7%;<=.>< o2
P?=%;9@.>< -o2e +/an +/e 0on+2a0+ 32,0e o. PAA7%=9@.==. lso,
the records clearly show that the petitioner failed to comply with
the -an(a+o24 +w,n 2eB5,2e-en+s for a valid and effective
cancellation under the law,
(*
i.e., he failed to send a notari@ed
notice of cancellation and refund the cash surrender value.
VALARAO * CA: "he .ourt 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. Section 3+a- of ;aceda Kaw provided that a
buyer E&who has paid at least two years of installments is
entitled to pay, without additional interest the unpaid installment
due within the +o+al C2a0e 3e2,o( ea2ne( D4 /,-, which is
hereby fi%ed at a rate of one -on+/ C2a0e 3e2,o( .o2 e*e24 4ea2
o. ,ns+all-en+ 3a4-en+s -a(e. 7ence, since the private
respondent was entitled to a oneImonth grace period for every
year of installments paid, she had a total grace period of three
months from 3( 8ecember (**6
OL!MPIA HOUSING * PANASIATIC TRAVEL: 4nfortunately for
petitioner, it would be incorrect to apply Layug c IAC to the
instant case. Layug is basically an action for annulment of
contract, a !indred concept of rescission, whereas the instant
case before the .ourt is one for recovery of possession on the
thesis of a prior rescission of the contract covering the property.
5ot only is an action for reconveyance conceptually different from
an action for rescission but that, also, the effects that flow from an
affirmative judgment in either case would be materially dissimilar
in various respects. "he judicial resolution of a contract gives rise
to mutual restitution which is not necessarily the situation that can
arise in an action for reconveyance. dditionally, in an action for
rescission +also often termed as resolution-, unli!e in an action for
reconveyance predicated on an e%trajudicial rescission
+rescission by notarial act-, the .ourt, instead of decreeing
rescission, may authori@e for a just cause the fi%ing of a period.
e! Down@payments, deposits or options in the
contract shall be included in the computation of
the total number of installments made. "he 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
e2tensions, if any.
f! 3n case of less than two years of installments
were paid, the grace period shall be not less than
., days from the date the installment became
due. 3f the buyer fails to pay within the grace
period, the seller may cancel the contract within
-, days from receipt by the buyer of the notice
of cancellation or demand for rescission of the
contract by a notarial act.
g! During the grace period or before the actual
cancellation of the contract, the buyer shall have
the right to$
1. sell or assign his rights, to be evidenced
in a notarial instrument, to a third person
%. update his account
-. pay in advance any installment or the full
unpaid balance of the price without interest

EII. 4ARRANTI/0
A. ?G:6?11 EA66A>"3?1
a! Earranty A where one party promised that
the contingency or some act fi2ed by the
contract shall be performed, li/e a promise that
the goods are of a certain /ind and character or
that certain state of facts would e2ist, the
promise constitutes a warranty, and failure of
which gives rise to an action for its breach.
Breach$ the buyer may
1. accept goods S maintain an
action for damages
%. accept goods S set up
breach of warranty as a recoupment in
diminutionL e2tinction of price
-. refuse to accept goods and
maintain action for damages
4. rescind S refuse to accept
goods' or return (or offer to return!
goods S recover price paid
1. Distin)uis,e" #rom con"ition
Art 1545. Ehere the obligation of either party
to a contract of sale is sub&ect to any condition
which is not performed, such party may refuse to
proceed with the contract or he may waive
performance of the condition. 3f the other party
has promised that the condition should happen
or be performed, such first mentioned party may
38
also treat the nonperformance of the condition as a
breach of warranty.
Ehere 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 e2pressly 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!
)ondition * an uncertain event or contingency fi2ed
by parties, the e2istence or happening of which was
necessary to the efficacy of the contract, and failure
of which permits the in&ured party to treat the
contract as at an end, but creates no right of action.
Ehere a condition is not performed, the buyer may
refuse to proceed with the contract, or accept the
goods and waive performance of the condition.
%
Distinctions according to Cillanueva (Baw on 1ales ,
%,,4!
Con"ition 4arrant*
Aenerally goes into
the root of the
e2istence of the
obligation
Aoes into the
performance of such
obligation, and in fact
may constitute an
obligation in itself
5ust be stipulated by
the parties in order to
form part of an
obligation
5ay form part of
obligation by contract or
provision of law, without
parties having agreed
thereto
5ay attach itself
either to obligation of
seller to deliver
possession or transfer
ownership over
sub&ect matter of sale
Ehether e2press or
implied, relates to
sub&ect matter itself or
to the obligations of the
seller as to the sub&ect
matter of the sale
2. Distin)uis,e" #rom oinion6 "ealerBs
tal%
Art 154;% Any affirmation of fact or any promise by
the seller relating to the thing is an e2press 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. >o
affirmation of the value of the thing, nor any
statement purporting to be a statement of the seller4s
opinion only, shall be construed as a warranty, unless
52
ROMERO * CA% LIM * CA: distinguished condition imposed on
perfection on the contract vs condition imposed on performance
of obligation# failure to comply with (
st
condition results in failure
of contract, while failure to comply with 9
nd
only gives other party
option to either refuse to proceed with the sale or to waive the
condition as mandated under rt (,),.
the seller made such affirmation or statement as
an e2pert and it was relied upon by the buyer.
(n!
a! Earranty * 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! (pinionLdealerNs tal/ * an affirmation of the
value of the thing or any statement of the
sellerNs opinion shall not be construed as a
warranty, unless the seller made such an
affirmation as an e2pert and it was relied upon
by the buyer
"est$ 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
e2pression of an opinion or &udgment on the part
of the seller on a matter of which the seller has
no special /nowledge and on which the buyer
may be e2pected also to have an opinion or
e2ercise his &udgment.
O3n good conditionK v. O?2cellent qualityK
* the first relates to the quantity, /ind or
condition of the goods sold, it is an
affirmation of fact or promise, and not a
mere e2pression of an opinion' the second is
not an e2press warranty and the purchaser
must rely on the implied warranty that the
goods are merchantable' mere e2pression of
an opinion
-
3. Distin)uis,e" #rom #alse
reresentation
54

53
SONGCO * SELLNER: Opinion or dealerGs tal! is no+
warranty. Opinion or dealerGs tal! 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 ma!e
inquiries. .aveat emptor. man who relies on such an
affirmation does so at his own peril and must ta!e the
consequences of his imprudence.
What would ma!e a misrepresentation void: +a- false
representation is as to matters of fact substantially affecting
buyerGs interest, and no+ as to matters of opinion, judgment,
probability or e%pectation# +b- the party to the contract who
has specialLe%pert !nowledge ta!es advantage of the
ignorance of another to impose upon him the false
representation.
MOLES * IAC: Ordinarily, what does not appear on the
face of the written instrument should be regarded as
dealer/s or trader/s tal!# conversely, what is specifically
represented as true in said document, as in the instant
case, cannot be considered as mere dealer/s tal!
54
PHIL. MANUFACTURING *. Go JUCCO: n intention to
deceive or mislead the other party to his prejudice is an
essential element of fraud. .oncealment 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 ma!es
39
B. 35:B3?D EA66A>"3?1


1. Imlie" $arrant* o# title
Art 1547. 3n a contract of sale, unless a contrary
intention appears, there is$
(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 en&oy the legal and peaceful
possession of the thing'
(%! An implied warranty that the thing shall be free
from any hidden faults or defects, or any charge or
encumbrance not declared or /nown to the buyer.
"his 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. ?viction shall ta/e place whenever by a
final &udgment 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.
"he vendor shall answer for the eviction even though
nothing has been said in the contract on the sub&ect.
"he contracting parties, however, may increase,
diminish, or suppress this legal obligation of the
vendor. (14=a!
Art 1549. "he vendee need not appeal from the
decision in order that the vendor may become liable
for eviction. (n!
Art 1550. Ehen 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. 3f the property is sold for nonpayment of
ta2es due and not made /nown to the vendee before
the sale, the vendor is liable for eviction. (n!

Art 1552. "he &udgment debtor is also responsible
for eviction in &udicial sales, unless it is otherwise
decreed in the &udgment. (n!
.
that which is stated absolutely false.
55
56
SANTIAGO LAND * CA: lthough in voluntary sales or
transaction, the vendor can be e%pected to defend his title
because of his warranty to the vendees: no such obligation is
owed by the owner whose land is sold at e%ecution sale.
Art 1553. Any stipulation e2empting the vendor
from the obligation to answer for eviction shall
be void, if he acted in bad faith. (14=.!
Art 1554. 3f the vendee has renounced the right
to warranty in case of eviction, and eviction
should ta/e place, the vendor shall only pay the
value which the thing sold had at the time of the
eviction. 1hould the vendee have made the
waiver with /nowledge of the ris/s of eviction
and assumed its consequences, the vendor shall
not be liable. (14==!
Art 1555. Ehen 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! "he 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'
(%! "he income or fruits, if he has been ordered
to deliver them to the party who won the suit
against him'
(-! "he 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! "he e2penses of the contract, if the vendee
has paid them'
(! "he damages and interests, and ornamental
e2penses, if the sale was made in bad faith.
(14=#!
Art 1556. 1hould 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.
9e may e2ercise this right of action, instead of
enforcing the vendor4s liability for eviction.
"he same rule shall be observed when two or
more things have been &ointly 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.
(14=8a!
40
Art 1557. "he warranty cannot be enforced until a
final &udgment has been rendered, whereby the
vendee loses the thing acquired or a part thereof.
(14#,!
Art 1558. "he vendor shall not be obliged to ma/e
good the proper warranty, unless he is summoned in
the suit for eviction at the instance of the vendee.
(14#1a!
Art 1559. "he defendant vendee shall as/, within the
time fi2ed in the 6ules of )ourt for answering the
complaint, that the vendor be made a co@defendant.
(14#%a!
2. Imlie" $arrant* a)ainst ,i""en
encum!rances or "e#ects
57

Art 1561. "he 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 e2tent 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 e2pert who,
by reason of his trade or profession, should have
/nown them. (14#4a!
Art 1562. 3n a sale of goods, there is an implied
warranty or condition as to the quality or fitness of
the goods, as follows$
(1! Ehere the buyer, e2pressly or by implication,
ma/es /nown to the seller the particular purpose for
which the goods are acquired, and it appears that the
buyer relies on the seller4s s/ill or &udgment (whether
he be the grower or manufacturer or not!, there is an
implied warranty that the goods shall be reasonably
fit for such purpose'
(%! Ehere 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!,
57
MOLES * IAC : &we have to consider the rule on redhibitory
defects contemplated in rticle (,0( of the .ivil .ode.
redhibitory defect must be an imperfection or defect of such
nature as to engender a certain degree of importance. n
imperfection or defect of little consequence does not come within
the category of being redhibitory.
INVESTMENTS AND DEV$T INC. * CA: E$mplied warranty
against hidden faults or defects under rt (,)3 of the .ivil .ode
cover only those that ma!e 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 e%isting tenancy relationship
pertaining thereto cannot be considered as hidden fault or defect.
there is an implied warranty that the goods shall
be of merchantable quality. (n!
Art 1563. 3n 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 anne2ed by the usage of trade. (n!
Art 1565. 3n the case of a contract of sale by
sample, if the seller is a dealer in goods of that
/ind, there is an implied warranty that the goods
shall be free from any defect rendering them
unmerchantable which would not be apparent on
reasonable e2amination of the sample. (n!
Art 1566. "he vendor is responsible to the
vendee for any hidden faults or defects in the
thing sold, even though he was not aware
thereof.
"his 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.
(14#!
Art 1567. 3n the cases of Articles 1.1, 1.%,
1.4, 1. and 1.., the vendee may elect
between withdrawing from the contract and
demanding a proportionate reduction of the
price, with damages in either case. (14#.a!
Art 1568. 3f 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 e2penses of the contract, with
damages. 3f he was not aware of them, he shall
only return the price and interest thereon, and
reimburse the e2penses of the contract which
the vendee might have paid. (14#=a!
Art 1569. 3f 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.
3f the vendor acted in bad faith, he shall pay
damages to the vendee. (14##a!
Art 1570. "he preceding articles of this
1ubsection shall be applicable to &udicial sales,
e2cept that the &udgment debtor shall not be
liable for damages. (14#8a!
41
Art 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after si2
months, from the delivery of the thing sold. (148,!
Barranties in sale o# animals
Art 1577. "he redhibitory action, based on the faults
or defects of animals, must be brought within forty
days from the date of their delivery to the vendee.
"his action can only be e2ercised with respect to
faults and defects which are determined by law or by
local customs. (148.a!
Art 1578. 3f the animal should die within three days
after its purchase, the vendor shall be liable if the
disease which cause the death e2isted at the time of
the contract. (148=a!
Art 1579. 3f the sale be rescinded, the animal shall
be returned in the condition in which it was sold and
delivered, the vendee being answerable for any in&ury
due to his negligence, and not arising from the
redhibitory fault or defect. (148#!
Art 1580. 3n the sale of animals with redhibitory
defects, the vendee shall also en&oy the right
mentioned in article 1.=' but he must ma/e use
thereof within the same period which has been fi2ed
for the e2ercise of the redhibitory action. (1488!
Sale !' sample or description
Art 1481. 3n the contract of sale of goods by
description or by sample, the contract may be
rescinded if the bul/ of the goods delivered do not
correspond with the description or the sample, and if
the contract be by sample as well as description, it is
not sufficient that the bul/ of goods correspond with
the sample if they do not also correspond with the
description.
"he buyer shall have a reasonable opportunity of
comparing the bul/ with the description or the
sample. (n!
Art 1565. 3n the case of a contract of sale by
sample, if the seller is a dealer in goods of that /ind,
there is an implied warranty that the goods shall be
free from any defect rendering them unmerchantable
which would not be apparent on reasonable
e2amination of the sample. (n!
(. Imlie" $arrant* o# <ualit*
Art 1562. 3n a sale of goods, there is an implied
warranty or condition as to the quality or fitness of
the goods, as follows$
(1! Ehere the buyer, e2pressly or by implication,
ma/es /nown to the seller the particular purpose
for which the goods are acquired, and it appears
that the buyer relies on the seller4s s/ill or
&udgment (whether he be the grower or
manufacturer or not!, there is an implied
warranty that the goods shall be reasonably fit
for such purpose'
(%! Ehere the goods are brought by description
from a seller who deals in goods of that
description (whether he be the grower or
manufacturer or not!, there is an implied
warranty that the goods shall be of merchantable
quality. (n!
Art 1563. 3n 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 anne2ed by the usage of trade. (n!
Art. 1599. Ehere there is a breach of warranty
by the seller, the buyer may, at his election$
(1! Accept or /eep the goods and set up against
the seller, the breach of warranty by way of
recoupment in diminution or e2tinction of the
price'
(%! Accept or /eep the goods and maintain an
action against the seller for damages for the
breach of warranty'
(-! 6efuse to accept the goods, and maintain an
action against the seller for damages for the
breach of warranty'
(4! 6escind the contract of sale and refuse to
receive the goods or if the goods have already
been received, return them or offer to return
them to the seller and recover the price or any
part thereof which has been paid.

Ehen the buyer has claimed and been granted a
remedy in anyone of these ways, no other
remedy can thereafter be granted, without
pre&udice to the provisions of the second
paragraph of Article 1181.
Ehere the goods have been delivered to the
buyer, he cannot rescind the sale if he /new of
the breach of warranty when he accepted the
goods without protest, or if he fails to notify the
seller within a reasonable time of the election to
rescind, or if he fails to return or to offer to
return the goods to the seller in substantially as
42
good condition as they were in at the time the
ownership was transferred to the buyer. But if
deterioration or in&ury of the goods is due to the
breach or warranty, such deterioration or in&ury shall
not prevent the buyer from returning or offering to
return the goods to the seller and rescinding the sale.
Ehere the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the
price upon returning or offering to return the goods.
3f the price or any part thereof has already been paid,
the seller shall be liable to repay so much thereof as
has been paid, concurrently with the return of the
goods, or immediately after an offer to return the
goods in e2change for repayment of the price.
Ehere the buyer is entitled to rescind the sale and
elects to do so, if the seller refuses to accept an offer
of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee for
the seller, but sub&ect to a lien to secure payment of
any portion of the price which has been paid, and
with the remedies for the enforcement of such lien
allowed to an unpaid seller by Article 1%..
(! 3n the case of breach of warranty of quality, such
loss, in the absence of special circumstances showing
pro2imate damage of a greater amount, is the
difference between the value of the goods at the time
of delivery to the buyer and the value they would
have had if they had answered to the warranty. (n!
4. A""itional $arranties in sale o#
consumer ro"ucts
Art. 68, RA 7394. Additional 9rovisions on
Barranties% @ 3n addition to the )ivil )ode provisions
on sale with warranties, the following provisions shall
govern the sale of consumer products with warranty$

(a! $erms o# e,press warrant'. @ Any seller or
manufacturer who gives an e2press warranty shall$
(1! set forth the terms of warranty in clear and
readily understandable language and clearly identify
himself as the warrantor'
(%! identify the party to whom the warranty is
e2tended'
(-! state the products or parts covered'
(4! state what the warrantor will do in the event
of a defect, malfunction of failure to conform to the
written warranty and at whose e2pense'
(! state what the consumer must do to avail of
the rights which accrue to the warranty' and
(.! stipulate the period within which, after notice
of defect, malfunction or failure to conform to the
warranty, the warrantor will perform any obligation
under the warranty.
(b! +,press warrant' 5 operative #rom moment o#
sale% @ All written warranties or guarantees issued by
a manufacturer, producer, or importer shall be
operative from the moment of sale.
(1! Sales )eport% @ All sales made by
distributors of products covered by this Article
shall be reported to the manufacturer, producer,
or importer of the product sold within thirty (-,!
days from date of purchase, unless otherwise
agreed upon. "he report shall contain, among
others, the date of purchase, model of the
product bought, its serial number, name and
address of the buyer. "he report made in
accordance with this provision shall be
equivalent to a warranty registration with the
manufacturer, producer, or importer. 1uch
registration is sufficient to hold the
manufacturer, producer, or importer liable, in
appropriate cases, under its warranty.
(%! 2ailure to ma/e or send report% @ +ailure
of the distributor to ma/e the report or send
them the form required by the manufacturer,
producer, or importer shall relieve the latter of
its liability under the warranty$ 9rovided.
owever. "hat the distributor who failed to
comply with its obligation to send the sales
reports shall be personally liable under the
warranty. +or this purpose, the manufacturer
shall be obligated to ma/e good the warranty at
the e2pense of the distributor.
(-! )etail% @ "he retailer shall be subsidiarily
liable under the warranty in case of failure of
both the manufacturer and distributor to honor
the warranty. 3n such case, the retailer shall
shoulder the e2penses and costs necessary to
honor the warranty. >othing therein shall
prevent the retailer from proceeding against the
distributor or manufacturer.
(4! +n#orcement o# warrant' or guarantee% @
"he warranty rights can be enforced by
presentment of a claim. "o this end, 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. >o
other documentary requirement shall be
demanded from the purchaser. 3f the immediate
seller is the manufacturer4s factory or showroom,
the warranty shall immediately be honored. 3f
the product was purchased from a distributor,
the distributor shall li/ewise immediately honor
the warranty. 3n the case of a retailer other than
the distributor, the former shall ta/e
responsibility without cost to the buyer of
presenting the warranty claim to the distributor
in the consumer4s behalf.
(! )ecord o# purcases% @ Distributors and
retailers covered by this Article shall /eep a
record of all purchases covered by a warranty or
guarantee for such period of time corresponding
to the lifetime of the product4s respective
warranties or guarantees.
(.! 7ontrar' stipulations* null and void% @ All
covenants, stipulations or agreements contrary
to the provisions of this Article shall be without
legal effect.
43

(c! Designation of warranties. @ A written warranty
shall clearly and conspicuously designate such
warranty as$
(1! C2ull warrant'C if the written warranty meets
the minimum requirements set forth in paragraph
(d!' or
(%! CLimited warrant'C if the written warranty
does not meet such minimum requirements.
(d! Minimum standards #or warranties% @ +or the
warrantor of a consumer product to meet the
minimum standards for warranty, he shall$
(1! remedy such consumer product within a
reasonable time and without charge in case of a
defect, malfunction or failure to conform to such
written warranty'
(%! permit the consumer to elect whether to as/
for a refund or replacement without charge of such
product or part, as the case may be, where after
reasonable number of attempts to remedy the defect
or malfunction, the product continues to have the
defect or to malfunction.
"he warrantor will not be required to perform the
above duties if he can show that the defect,
malfunction or failure to conform to a written
warranty was caused by damage due to unreasonable
use thereof.
(e! Duration o# warrant'% @ "he seller and the
consumer may stipulate the period within which the
e2press warranty shall be enforceable. 3f the implied
warranty on merchantability accompanies an e2press
warranty, both will be of equal duration.
Any other implied warranty shall endure not less
than si2ty (.,! days nor more than one (1! year
following the sale of new consumer products.
(f! Breac o# warranties% *
(1! 3n case of breach of e2press warranty, the
consumer may elect to have the goods repaired or its
purchase price refunded by the warrantor. 3n case the
repair of the product in whole or in part is elected,
the warranty wor/ must be made to conform to the
e2press warranty within thirty (-,! days by either the
warrantor or his representative. "he thirty@day
period, however, may be e2tended by conditions
which are beyond the control of the warrantor or his
representative. 3n case the refund of the purchase
price is elected, the amount directly attributable to
the use of the consumer prior to the discovery of the
non@conformity shall be deducted.
(%! 3n case of breach of implied warranty, the
consumer may retain in the goods and recover
damages, or re&ect the goods, cancel and contract
and recover from the seller so much of the purchase
price as has been paid, including damages.
). B<P?6N1 EA3C?6 3> )A1? (+ B6?A)9 (+
EA66A>"P
Art. 1599. ,,, Ehere the goods have been
delivered to the buyer, he cannot rescind the
sale if he /new of the breach of warranty when
he accepted the goods without protest, or if he
fails to notify the seller within a reasonable time
of the election to rescind, or if he fails to return
or to offer to return the goods to the seller in
substantially as good condition as they were in
at the time the ownership was transferred to the
buyer. But if deterioration or in&ury of the goods
is due to the breach or warranty, such
deterioration or in&ury shall not prevent the
buyer from returning or offering to return the
goods to the seller and rescinding the sale. ,,,
EII. BR/AC? O8 CONTRACT0
A. 1AB? (+ A((D1
1. Reme"ies o# t,e 0eller
Action #or te price
Art 1595. Ehere, under a contract of sale, the
ownership of the goods has passed to the buyer
and he wrongfully neglects or refuses to pay for
the goods according to the terms of the contract
of sale, the seller may maintain an action against
him for the price of the goods.
Ehere, under a contract of sale, the price is
payable on a certain day, irrespective of delivery
or of transfer of title and the buyer wrongfully
neglects or refuses to pay such price, the seller
may maintain an action for the price although
the ownership in the goods has not passed. But
it shall be a defense to such an action that the
seller at any time before the &udgment in such
action has manifested an inability to perform the
contract of sale on his part or an intention not to
perform it.
Although the ownership in the goods has not
passed, if they cannot readily be resold for a
reasonable price, and if the provisions of article
18., fourth paragraph, are not applicable, the
seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them,
may notify the buyer that the goods are
thereafter held by the seller as bailee for the
buyer. "hereafter the seller may treat the goods
as the buyer4s and may maintain an action for
the price. (n!
Action #or damages
Art 1596. Ehere the buyer wrongfully neglects
or refuses to accept and pay for the goods, the
seller may maintain an action against him for
damages for nonacceptance.
44
"he measure of damages is the estimated loss
directly and naturally resulting in the ordinary course
of events from the buyer4s breach of contract.
Ehere there is an available mar/et for the goods in
question, the measure of damages is, in the absence
of special circumstances showing pro2imate damage
of a different amount, the difference between the
contract price and the mar/et or current price at the
time or times when the goods ought to have been
accepted, or, if no time was fi2ed for acceptance,
then at the time of the refusal to accept.
3f, while labor or e2pense of material amount is
necessary on the part of the seller to enable him to
fulfill his obligations under the contract of sale, the
buyer repudiates the contract or notifies the seller to
proceed no further therewith, the buyer shall be liable
to the seller for labor performed or e2penses made
before receiving notice of the buyer4s repudiation or
countermand. "he profit the seller would have made
if the contract or the sale had been fully performed
shall be considered in awarding the damages. (n!
3. )escission
Art 1597. Ehere the goods have not been delivered
to the buyer, and the buyer has repudiated the
contract of sale, or has manifested his inability to
perform his obligations thereunder, or has committed
a breach thereof, the seller may totally rescind the
contract of sale by giving notice of his election so to
do to the buyer. (n!
&. Reme"ies o# t,e Bu*er
1% Speci#ic per#ormance
Art 1598. Ehere the seller has bro/en a contract to
deliver specific or ascertained goods, a court may, on
the application of the buyer, direct that the contract
shall be performed specifically, without giving the
seller the option of retaining the goods on payment of
damages. "he &udgment or decree may be
unconditional, or upon such terms and conditions as
to damages, payment of the price and otherwise, as
the court may deem &ust. (n!
0% Breac o# warrant'
Art. 1599. Ehere there is a breach of warranty by
the seller, the buyer may, at his election$
(1! Accept or /eep the goods and set up against the
seller, the breach of warranty by way of recoupment
in diminution or e2tinction of the price'
(%! Accept or /eep the goods and maintain an
action against the seller for damages for the
breach of warranty'
(-! 6efuse to accept the goods, and maintain an
action against the seller for damages for the
breach of warranty'
(4! 6escind the contract of sale and refuse to
receive the goods or if the goods have already
been received, return them or offer to return
them to the seller and recover the price or any
part thereof which has been paid.

Ehen the buyer has claimed and been granted a
remedy in anyone of these ways, no other
remedy can thereafter be granted, without
pre&udice to the provisions of the second
paragraph of Article 1181.
Ehere the goods have been delivered to the
buyer, he cannot rescind the sale if he /new of
the breach of warranty when he accepted the
goods without protest, or if he fails to notify the
seller within a reasonable time of the election to
rescind, or if he fails to return or to offer to
return the goods to the seller in substantially as
good condition as they were in at the time the
ownership was transferred to the buyer. But if
deterioration or in&ury of the goods is due to the
breach or warranty, such deterioration or in&ury
shall not prevent the buyer from returning or
offering to return the goods to the seller and
rescinding the sale.
Ehere the buyer is entitled to rescind the sale
and elects to do so, he shall cease to be liable for
the price upon returning or offering to return the
goods. 3f the price or any part thereof has
already been paid, the seller shall be liable to
repay so much thereof as has been paid,
concurrently with the return of the goods, or
immediately after an offer to return the goods in
e2change for repayment of the price.
Ehere the buyer is entitled to rescind the sale
and elects to do so, if the seller refuses to accept
an offer of the buyer to return the goods, the
buyer shall thereafter be deemed to hold the
goods as bailee for the seller, but sub&ect to a
lien to secure payment of any portion of the
price which has been paid, and with the
remedies for the enforcement of such lien
allowed to an unpaid seller by Article 1%..
(! 3n the case of breach of warranty of quality,
such loss, in the absence of special
circumstances showing pro2imate damage of a
greater amount, is the difference between the
value of the goods at the time of delivery to the
buyer and the value they would have had if they
had answered to the warranty. (n!
45
Art 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after si2
months, from the delivery of the thing sold. (148,!
:% )escission
Art. 1599. Ehere there is a breach of warranty by
the seller, the buyer may, at his election$
(1! Accept or /eep the goods and set up against the
seller, the breach of warranty by way of recoupment
in diminution or e2tinction of the price'
(%! Accept or /eep the goods and maintain an action
against the seller for damages for the breach of
warranty'
(-! 6efuse to accept the goods, and maintain an
action against the seller for damages for the breach
of warranty'
(4! 6escind the contract of sale and refuse to receive
the goods or if the goods have already been received,
return them or offer to return them to the seller and
recover the price or any part thereof which has been
paid.

Ehen the buyer has claimed and been granted a
remedy in anyone of these ways, no other remedy
can thereafter be granted, without pre&udice to the
provisions of the second paragraph of Article 1181.
Ehere the goods have been delivered to the buyer,
he cannot rescind the sale if he /new of the breach of
warranty when he accepted the goods without
protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he
fails to return or to offer to return the goods to the
seller in substantially as good condition as they were
in at the time the ownership was transferred to the
buyer. But if deterioration or in&ury of the goods is
due to the breach or warranty, such deterioration or
in&ury shall not prevent the buyer from returning or
offering to return the goods to the seller and
rescinding the sale.
Ehere the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the
price upon returning or offering to return the goods.
3f the price or any part thereof has already been paid,
the seller shall be liable to repay so much thereof as
has been paid, concurrently with the return of the
goods, or immediately after an offer to return the
goods in e2change for repayment of the price.
Ehere the buyer is entitled to rescind the sale and
elects to do so, if the seller refuses to accept an offer
of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee for
the seller, but sub&ect to a lien to secure payment of
any portion of the price which has been paid, and
with the remedies for the enforcement of such
lien allowed to an unpaid seller by Article 1%..
(! 3n the case of breach of warranty of quality,
such loss, in the absence of special
circumstances showing pro2imate damage of a
greater amount, is the difference between the
value of the goods at the time of delivery to the
buyer and the value they would have had if they
had answered to the warranty. (n!
B. 1AB? (+ 355(CABB?1 A>D "93>A1 ("9?6
"9A> A((D1
Art 1191. "he power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
"he in&ured party may choose between the
fulfillment and the rescission of the obligation,
with the payment of damages in either case. 9e
may also see/ rescission, even after he has
chosen fulfillment, if the latter should become
impossible.
"he court shall decree the rescission claimed,
unless there be &ust cause authori7ing the fi2ing
of a period.
"his is understood to be without pre&udice to the
rights of third persons who have acquired the
thing, in accordance with Articles 1-# and 1-##
and the 5ortgage Baw. (11%4!
Art. 1192. 3n case both parties have committed
a breach of the obligation, the liability of the first
infractor shall be equitably tempered by the
courts. 3f it cannot be determined which of the
parties first violated the contract, the same shall
be deemed e2tinguished, and each shall bear his
own damages. (n!
Art 1385. 6escission creates the obligation to
return the things which were the ob&ect of the
contract, together with their fruits, and the price
with its interest' consequently, it can be carried
out only when he who demands rescission can
return whatever he may be obliged to restore.
>either shall rescission ta/e place when the
things which are the ob&ect of the contract are
legally in the possession of third persons who did
not act in bad faith.
3n this case, indemnity for damages may be
demanded from the person causing the loss.
(1%8!
46
Art 1591. 1hould the vendor have reasonable
grounds to fear the loss of immovable property sold
and its price, he may immediately sue for the
rescission of the sale.
1hould such ground not e2ist, the provisions of Article
1181 shall be observed. (1,-!
). 1AB? (+ 5(CABB?1 (> 3>1"ABB5?>"
#

Art 1484. 3n a contract of sale of personal property
the price of which is payable in installments, the
vendor may e2ercise any of the following remedies$
(1! ?2act fulfillment of the obligation, should the
vendee fail to pay'
(%! )ancel the sale, should the vendee4s failure to pay
cover two or more installments'
(-! +oreclose the chattel mortgage on the thing sold,
if one has been constituted, should the vendee4s
failure to pay cover two or more installments. 3n this
case, he shall have no further action against the
purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void. (144@
A@a!
8
58
LEV! * GERVACIO: .. rt (),) is aimed at sales where the
price is payable in several installments. cash payment +in sales
with two installments- cannot be considered as a payment in
installments, and even if it can be so considered, still the law
does not apply, for it requires nonpayment of two or more
installments in order that its provisions may be invo!ed. $n this
case, only one installment was unpaid.
59
TAJANLANGIT * SOUTHERN MOTORS: $t is true that there
was a chattel mortgage on the goods sold, but Southern ;otors
elected to sue the note e%clusively N +o eEa0+ .5l.,ll-en+ o. +/e
oDl,Ca+,on +o 3a4. $t had the right to select among the three
remedies established in rt ()1). $n choosing to sue on the note,
it was not thereby limited to the proceeds of the sale, on
e%ecution, of the mortgaged good.
FILINVEST * CA: "he remedies $5 ()1) are al+e2na+,*e and not
cumulative. 7ence, the e%ercise of one bars the e%ercise of the
others.
NONATO * IAC: "he corporation is barred from e%acting
payment from 5onato of the balance of the price of the vehicle
when it had already repossessed it.
CRU * FILIPINAS INVESTMENTS: "he vendor of personal
property sold on installment basis is precluded, after foreclosing
the chattel mortgage on the thing sold, from having a recourse
against the additional security put up by a third party to guarantee
the purchaserGs performance of his obligation.
NORTHERN MOTORS * SAPINOSO: What rt ()1) +3-
prohibits is Efurther action against the purchaser to recover any
unpaid balance of the price#F and although this .ourt has
construed the word EactionF to mean Eany judicial or e%trajudicial
proceeding by virtue of which the vendor may lawfully be enabled
to e%act recovery of the supposed unsatisfied balance of the
Art 1485. "he preceding article shall be applied
to contracts purporting to be leases of personal
property with option to buy, when the lessor has
deprived the lessee of the possession or
en&oyment of the thing. (144@A@a!
Art 1486. 3n the case referred to in two
preceding articles, 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. (n!
Art 1533. Ehere the goods are of perishable
nature, or where the seller e2pressly reserves
the right of resale in case the buyer should ma/e
default, or where the buyer has been in default
in the payment of the price for an unreasonable
time, an unpaid seller having a right of lien or
having stopped the goods in transitu may resell
the goods. 9e shall not thereafter be liable to the
original buyer upon the contract of sale or for
any profit made by such resale, but may recover
from the buyer damages for any loss occasioned
by the breach of the contract of sale.
Ehere a resale is made, as authori7ed in this
article, the buyer acquires a good title as against
the original buyer.
3t 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
where the right to resell is not based on the
perishable nature of the goods or upon an
e2press provision of the contract of sale, 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.
purchase price from the purchaser or his privy,F 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. "he payment of
the sum of C(,9,6 of Sapinoso was a voluntary act on his
part and did not result from a Efurther actionF instituted by
5orthern ;otors.
When the seller assigns his credit to another person, the
latter is li!ewise bound by the same law. ccordingly, when
the assignee forecloses on the mortgage, there can be no
further recovery of the deficiency,

and the sellerImortgagee
is deemed to have renounced any right thereto.

47
BORBON * SERVICE-#IDE SPECIALIST:
3t 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.
"he seller is bound to e2ercise reasonable care and
&udgment in ma/ing a resale, and sub&ect to this
requirement may ma/e a resale either by public or
private sale. 9e cannot, however, directly or indirectly
buy the goods. (n!
Ehen the seller assigns his credit to another person,
the latter may li/ewise avail of the remedies under
Art 14#4 (assuming case is one of sale of movables
on installment!. 3f the remedy chosen is rescission, 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 (Cillanueva citing Delta 5otor v. >iu
0im Duan, %1- 1)6A %8!
D. 1AB? (+ 355(CABB?1 (> 3>1"ABB5?>"
1. Anticiator* !reac,
Art 1591. 1hould the vendor have reasonable
grounds to fear the loss of immovable property sold
and its price, he may immediately sue for the
rescission of the sale.
1hould such ground not e2ist, the provisions of Article
1181 shall be observed. (1,-!
2. PD -576 0ection &( I &4
'.
PD 957, Sec 23. 4on52or#eiture o# 9a'ments% 8 >o
installment payment made by a buyer in a subdivision
or condominium pro&ect for a lot or unit he contracted
to buy shall be forfeited in favor of the owner or
developer when the buyer, after due notice to the
owner or developer, desists from further payment
due to the failure of the owner or developer to
develop the subdivision or condominium pro&ect
according to the approved plans and within the time
limit for complying with the same. 1uch buyer may,
at his option, be reimbursed the total amount paid
including amorti7ation interests but e2cluding
60
CASA FILIPINAS REALT! * OP: C8 *,3 to stem the tide of
Efraudulent manipulations perpetrated by unscrupulous
subdivision and condominium sellers and operators, such as
failure to deliver titles to buyers or titles free from liens and
encumbrances. Should the notice requirement in Sec 93 be
construed as required to be given before a buyer desists from
further paying, the intent of the law to protect subdivision lot
buyers will tend to be defeated.
BRIC"TO#N DEV$T * TIERRA: When a grace period is
provided for in the contract of sale, it should be construed as a
right, not an obligation of the debtor, and when unconditionally
conferred, the grace period is effective without further need of
demand either calling for the payment of the obligation or for
honoring the right.

delinquency interests, with interest thereon at
the legal rate.
PD 957, Sec 24. 2ailure to pa' installments% 8
"he 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 pro&ect shall be governed by 6epublic Act >o.
.%
3. RA '55& F;ace"a 9a$G1 0ale o#
Resi"ential Realt* on Installment
'1
4. Rescission on 0ale on NonH
Resi"ential Realt* on Installment
Art 1191. "he power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
"he in&ured party may choose between the
fulfillment and the rescission of the obligation,
with the payment of damages in either case. 9e
may also see/ rescission, even after he has
chosen fulfillment, if the latter should become
impossible.
"he court shall decree the rescission claimed,
unless there be &ust cause authori7ing the fi2ing
of a period.
"his is understood to be without pre&udice to the
rights of third persons who have acquired the
thing, in accordance with Articles 1-# and 1-##
and the 5ortgage Baw. (11%4!
Art 1592. 3n the sale of immovable property,
even though it may have been stipulated that
upon failure to pay the price at the time agreed
upon the rescission of the contract shall of right
ta/e place, the vendee may pay, even after the
e2piration of the period, as long as no demand
for rescission of the contract has been made
upon him either &udicially or by a notarial act.
After the demand, the court may not grant him
a new term. (1,4a!
61
MCLAUGHLIN * CA: Sec ) of A 0,,9 provides: E$n
case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less
than si%ty days from the date the installment became due.
$f the buyer fails to pay the installments due at the
e%piration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the
notice of the cancellation or the demand for rescission of
the contract by a notarial act.F Jlores tendered the
managerGs chec! after (3 days, which is well within the 36I
day period. 7owever, Jlores did not follow tender of
payment with consignation. Since ;cKaughlin refused to
accept the tender of payment, it was incumbent upon Jlores
to deposit the amount in court.
48
EI=. /ETIN>UI0?;/NT O8 T?/ 0A9/
Art. 1600. 1ales are e2tinguished by the same
causes as all other obligations, by those stated in the
preceding articles of this "itle, and by conventional or
legal redemption. (1,.!
Art. 1231. (bligations are e2tinguished$
(1! By payment or performance$
(%! By the loss of the thing due$
(-! By the condonation or remission of the debt'
(4! By the confusion or merger of the rights of
creditor and debtor'
(! By compensation'
(.! By novation.
(ther causes of e2tinguishment of obligations, such
as annulment, rescission, fulfillment of a resolutory
condition, and prescription, are governed elsewhere
in this )ode. (11.a!
A. )(>C?>"3(>AB 6?D?5:"3(>
)onventional redemption A the vendor reserves the
right to repurchase the thing sold, with the obligation
of returning the price of the sale the e2penses of the
contract, the necessary and useful e2penses made on
the thing, and other payments made by reason of the
sale.
.%
Distinguished from equitable mortgage
?quitable mortgage * one which, although lac/ing in
some formality or other requisites demanded by a
statute, nevertheless reveals the intention of the
parties to charge real property as a security for
debt, and contains nothing impossible or contrary
to law
Badges of an equitable mortgage
.-

Art. 1602. "he contract shall be presumed to be an
equitable mortgage, in any of the following cases$
62
VILLARICA * CA: "he right of repurchase is not a right granted
the vendor by the vendee in a subsequent instrument, but is a
right reserved by the vendor in the same instrument of sale as
one of the stipulations of the contract.
TORRES * CA: Jor a sale to be one a retro, it is necessary that
the right be reserved in the same contract
63
CLARAVALL * CA: "he urgent necessity for money of the
apparent vendor, the inadequacy of the consideration for the
supposed sale, and the e%tension of the period of redemption are
circumstances which are indicative that the contract is an
equitable mortgage.
(1! Ehen the price of a sale with right to
repurchase is unusually inadequate'
(%! Ehen the vendor remains in possession as
lessee or otherwise'
(-! Ehen upon or after the e2piration of the
right to repurchase another instrument
e2tending the period of redemption or granting a
new period is e2ecuted'
(4! Ehen the purchaser retains for himself a part
of the purchase price'
(! Ehen the vendor binds himself to pay the
ta2es on the thing sold'
(.! 3n 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. 3n any of the foregoing case, any
money, fruits, or other benefit to be received by
the vendees as rent or otherwise shall be
considered as interest which shall be sub&ect to
the usury laws.
A contract shall be construed as an equitable
mortgage when any of the circumstance in Art.
1.,% is present.
6eason for the rule$ "o curtail the practice of
creditors in ma/ing their agreement of mortgage
appear in the form of a sale with pacto de retro,
in order to circumvent the prohibition of pactum
commissorium in pledge and mortgage (Art.
2208. "he creditor cannot appropriate the things
given by way of pledge or mortgage, or dispose
of them. Any stipulation to the contrary is null
and void! >!ecause in ma/ing it appear a pacto
de retro sale. te creditors can do awa' wit
#oreclosure proceedings?
6emedy$ reformation of the instrument Jmust be
brought within 1, yearsQ
1! 3f the agreement is construed to be an
equitable mortgage, any money or other
benefit received as Orents,K shall be
considered as Ointerest.K
%! Ehere the agreement is upheld as a
pacto de retro sale, the vendor may still
e2ercise the right within -, days from the
time the &udgment becomes final.
Distinguished from option to buy
.4

64
ADIARTE * TUMANENG: n agreement to repurchase
becomes an option to buy when entered into after the time
to redeem stipulated had already e%pired, because then the
vendee a retro became the absolute owner of the thing
sold, and the subsequent grant of the right to repurchase is
49
Right of rede!tio" #!tio" to b$%
>ot a separate
contract, but merely
part of a main contract
of sale' cannot e2ist
unless reserved at the
time of the perfection
of the main contract of
sale
:rincipal contract and
may be created
independent of another
contract
>eed not have
separate consideration
in order to be valid and
effective
5ust have a
consideration separate
and distinct from
purchase price
5ay not be beyond the
1, year period
5ay be beyond the 1,
year period
6equires tender of
payment of amount
required by law,
including consignment
thereof if tender
cannot be made
effectively
5ay be e2ercised by
notice
:eriod of redemption
Art. 1606. "he right referred to in Article 1.,1, in
the absence of an e2press agreement, shall last four
years from the date of the contract.
1hould there be an agreement, the period cannot
e2ceed ten years.
9owever, the vendor may still e2ercise the right to
repurchase within thirty days from the time final
&udgment was rendered in a civil action on the basis
that the contract was a true sale with right to
repurchase. (1,#a!
A?>?6AB 6<B?$ :eriod starts running at the date of
the e2ecution of the contract.
?G)?:"3(>$ when there is a suspensive condition.
4% wen no period agreed
upon
period$ 4 years from the date of the contract
5. wen period agreed
upon
;5
a new agreement.
65
TA!AO * DULA!: lthough the stipulation as to the period
may be unclear or void, a period of redemption was agreed upon.
"hus, it is the (6Iyear period that applies, not the )Iyear period.
BALU!OT * VENEGAS: "he object of the sale cannot be
repurchased during the first (6 years.
"he stipulation is void and against public policy.
"he period is binding and it may also be
e2tended, as long as it does not e2ceed 1,
years. 6eason 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.
?2ercise of the right to redeem
..

a! A vendor must manifest his right to redeem in
writing. "his must be accompanied with an
actual or simultaneous tender of payment of the
redemption price.
)edemption price * includes the amount of
the sale, the e2penses of the contract and
other legitimate payments made by the
vendee by reason of such sale, and the
necessary and useful e2penses made on the
thing by the vendee.
b! 3t is only when the vendee flatly refused that
tender of payment is not necessary.
)onsignation of the redemption price in court is
not necessary to preserve the right. 3n the
absence of the vendee a retro, the right may be
e2ercised by filing a suit against him and
consigning the amount in court.
"he e2ercise of redemption is not limited only to
the total redemption price enumerated in Art
1.1. of the )), since said legal provision is not
restrictive nor e2clusive. 3t includes other
stipulations which may have been agreed upon
(Villanueva citing Solid Domes v% 7A. 075 S7)A
0;7)
a% !' wom e,ercised
Art. 1610. "he creditors of the vendor cannot
ma/e use of the right of redemption against the
vendee, until after they have e2hausted the
property of the vendor. (11%!
Art. 1611. 3n a sale with a right to repurchase,
the vendee of a part of an undivided immovable
who acquires the whole thereof in the case of
article 48#, may compel the vendor to redeem
BANDONG * A5s+2,a : "he provisions of the contract,
whereby the parties undertoo! by e%press agreement to
secure to the vendors a right to repurchase in the month of
;arch of any year after the date of the contract, 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.
66
GARGOLLO * DUERO: "he vendor a retro is not given
the option to require the vendee a retro to remove the
useful improvement, but must pay for the useful
improvements introduced by the vendee a retro# otherwise,
the latter may retain possession of the thing until
reimbursement is made.
50
the whole property, if the latter wishes to ma/e use
of the right of redemption. (11-!
Art. 1612. 3f several persons, &ointly and in the same
contract, should sell an undivided immovable with a
right of repurchase, none of them may e2ercise this
right for more than his respective share.
"he same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case
each of the latter may only redeem the part which he
may have acquired. (114!
Art. 1613. 3n the case of the preceding article, the
vendee may demand of all the vendors or co@heirs
that they come to an agreement upon the purchase of
the whole thing sold' and should they fail to do so,
the vendee cannot be compelled to consent to a
partial redemption. (11!
a! Eho may redeem
1.Cendor
%. 9is heirs or assigns
-. 9is agent
b! "he creditors of the vendor cannot ma/e use of the
right of redemption against the vendee, until after
they have e2hausted the property of the vendor.
b! 3f several persons, &ointly and in the same
contract, should sell an undivided immovable with a
right of repurchase, none of them may e2ercise this
right for more than his respective share. "he same
rule shall apply if the person who sold an immovable
alone has left several heirs.
c! Ehen the co@owners of an indivisible immovable, in
order to end the co@ownership, sold their interests
absolutely to the same person who previously bought
the share of a co@owner sub&ect to a right of
redemption, the latter can be compelled to redeem
the whole property.
b. from whom to redeem
Art. 1615. 3f the vendee should leave several heirs,
the action for redemption cannot be brought against
each of them e2cept for his own share, whether the
thing be undivided, or it has been partitioned among
them.
But if the inheritance has been divided, and the thing
sold has been awarded to one of the heirs, the action
for redemption may be instituted against him for the
whole. (11=!
Art. 1608. "he vendor may bring his action against
every possessor whose right is derived from the
vendee, even if in the second contract no mention
should have been made of the right to repurchase,
without pre&udice to the provisions of the
5ortgage Baw and the Band 6egistration Baw
with respect to third persons. (11,!
+rom whom to redeem
1. Cendee a retro
%. 9is heirs or assigns
-. 9is agent
c. effect of redemption
Art. 1617. 3f at the time of the e2ecution of the
sale there should be on the land, visible or
growing fruits, there shall be no reimbursement
for or prorating of those e2isting at the time of
redemption, if no indemnity was paid by the
purchaser when the sale was e2ecuted.
1hould there have been no fruits at the time of
the sale and some e2ist at the time of
redemption, they shall be prorated between the
redemptioner and the vendee, giving the latter
the part corresponding to the time he possessed
the land in the last year, counted from the
anniversary of the date of the sale. (118a!
Art. 1618. "he vendor who recovers the thing
sold shall receive it free from all charges or
mortgages constituted by the vendee, but he
shall respect the leases which the latter may
have e2ecuted in good faith, and in accordance
with the custom of the place where the land is
situated. (1%,!
a! "he vendor can e&ect a lessee only after the
e2piration of the period of lease or of the period
for redemption.
b! "he vendor a retro is entitled to the return of
the thing with damages for the use and
occupation if the same.
d. effect of non@redemption
Art. 1607. 3n case of real property, the
consolidation of ownership in the vendee by
virtue of the failure of the vendor to comply with
the provisions of article 1.1. shall not be
recorded in the 6egistry of :roperty without a
&udicial order, after the vendor has been duly
heard. (n!
Art. 1606. & & &
9owever, the vendor may still e2ercise the right
to repurchase within thirty days from the time
final &udgment was rendered in a civil action on
51
the basis that the contract was a true sale with right
to repurchase.
.=
a! "he ownership of the vendee becomes absolute
and irrevocable by operation of law.
b! "he vendee is not entitled to recover damages by
virtue of non@redemption, notwithstanding a
stipulation in the contract for payment of damages.
B. B?AAB 6?D?5:"3(>
Begal redemption * right to be subrogated, upon the
same terms and conditions stipulated in the contract,
in the place of one who acquires a thing by purchase
or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title.
Ehen period of legal redemption begins
Art. 1623. "he right of legal pre@emption or
redemption shall not be e2ercised e2cept within thirty
days from the notice in writing by the prospective
vendor, or by the vendor, as the case may be. "he
deed of sale shall not be recorded in the 6egistry of
:roperty, unless accompanied by an affidavit of the
vendor that he has given written notice thereof to all
possible redemptioners.
"he right of redemption of co@owners e2cludes that of
ad&oining owners. (1%4a!
.#

Baches seems to be a special e2ception to notice rule
under Art 1.%-. (Cillanueva citing Alon7o v. 3A)!

1. Re"emtion amon) coHo$ners
67
ABILLA * GABONSENG: "he applicability of rticle (060
rests on the bona fide intent of the vendor a retro, i.e., respondent
in this case. $f he honestly believed that the transaction was an
equitable mortgage, 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.
Carenthetically, it matters not what the vendee intended the
transaction to be.

68
(
HERMOSO * CA : $t was error for the respondent court to rule
that the right of the petitioner to redeem the alienated share had
long proscribed. "his finding fails to ta!e into account that the
period of legal redemption is not a prescriptive period. $t is a
condition precedent to the e%ercise of the right of redemption. $t
is a period set by law to restrict the right of the person e%ercising
the right of legal redemption. I+ ,s no+ one o. 32es02,3+,on. While
the law requires that the notice must be in writing, it does not
state any particular form thereof, so long as the reasons for a
written notice are present. "he records of the case show that the
sale of the brothersG share was deliberately hidden from the
petitioners. Jor sometime after the sale, the petitioners were
ignorant about its e%ecution. When they somehow heard rumors
about it, they had to ta!e one step after another to find out if the
information was true.
Art. 1620. A co@owner of a thing may e2ercise
the right of redemption in case the shares of all
the other co@owners or of any of them, are sold
to a third person. 3f the price of the alienation is
grossly e2cessive, the redemptioner shall pay
only a reasonable one.
1hould two or more co@owners desire to e2ercise
the right of redemption, they may only do so in
proportion to the share they may respectively
have in the thing owned in common. (1%%a!
a! Ehen the right may be e2ercised$ when a
share of a co@owner is sold to a third person,
who is a stranger.
b! "hrust of the law$ to reduce the number of
co@owners until the community is done away
with.

c! Ehen the right is not available
1! Ehere the share of the co@owner is sold
to another co@owner
%! Ehere the share of a co@owner was
merely mortgaged
d! 1hould two or more co@owners desire to
e2ercise the right, they may only do so in
proportion to the share they may respectively
have in the thing owned in common.
&. Re"emtion amon) a"3oinin) o$ners
"he law distinguishes between rural and urban
lands. "he distinction is based on the character
of the community or vicinity in which it is found.
"his is to encourage the ma2imum development
and utili7ation of lands.
a% )ural lands
Art. 1621. "he owners of ad&oining lands shall
also have the right of redemption when a piece
of rural land, the area of which does not e2ceed
one hectare, is alienated, unless the grantee
does not own any rural land.
"his right is not applicable to ad&acent lands
which are separated by broo/s, drains, ravines,
roads and other apparent servitudes for the
benefit of other estates.
3f two or more ad&oining owners desire to
e2ercise the right of redemption at the same
time, the owner of the ad&oining land of smaller
area shall be preferred' and should both lands
have the same area, the one who first requested
the redemption. (1%-a!
a! Ehen the right may be e2ercised$ when a
piece of rural land not e2ceeding 1 ha., is
52
alienated Junless the grantee does not own any rural
landQ
b! "hrust of the law
1. to prevent the rural land not e2ceeding 1 ha.
from passing into the hands of a person other
than the ad&acent owners who can ma/e use of
the alienated property for the development of
their own lands
%. to consolidate scattered small agricultural
lands under one ownership
c! Ehen the right is not available
o Ad&acent lands which are separated by
broo/s, drains, ravines, roads and other
apparent servitudes for the benefit of other
estates >!ecause owners cannot !e said to
!e ad&oining owners an'more?
d! 3f two or more ad&oining owners desire to e2ercise
the right of redemption at the same time, the owner
of the ad&oining land of smaller area shall be
preferred' and should both lands have the same area,
the one who first requested the redemption.
!% <r!an lands
;-

Art. 1622. Ehenever a piece of urban land which is
so small and so situated that a ma&or portion thereof
cannot be used for any practical purpose within a
reasonable time, having been bought merely for
speculation, is about to be re@sold, the owner of any
ad&oining land has a right of pre@emption at a
reasonable price.
3f the re@sale has been perfected, the owner of the
ad&oining land shall have a right of redemption, also
at a reasonable price.
Ehen two or more owners of ad&oining lands wish to
e2ercise the right of pre@emption or redemption, the
owner whose intended use of the land in question
appears best &ustified shall be preferred. (n!
a! Ehen the right may be e2ercised$ when a piece of
urban land which is so small and so situated that a
ma&or portion thereof cannot be used for any practical
purpose within a reasonable time, having been
bought merely for speculation, is about to be resold
b! "hrust of the law$ to discourage speculation in real
estate and aggravate the housing problem.
c! Ehen the right is not available$ Ehen the urban
land is transferred under an Oe2changeK of properties
>!ecause tere is no resale?
71
69
ORTEGA * ORCINE "he term EurbanF in rt. (099 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.
70
SEN PO E" MAR"ETING *. MARTINE:
d! Ehen two or more owners of ad&oining lands
wish to e2ercise the right of pre@emption or
redemption, the owner whose intended use of
the land in question appears best &ustified shall
be preferred.
Assignment of a chose in action
Art. 1634. Ehen a credit or other incorporeal
right in litigation is sold, the debtor shall have a
right to e2tinguish it by reimbursing the assignee
for the price the latter paid therefor, the &udicial
costs incurred by him, and the interest on the
price from the day on which the same was paid.
A credit or other incorporeal right shall be
considered in litigation from the time the
complaint concerning the same is answered.
"he debtor may e2ercise his right within thirty
days from the date the assignee demands
payment from him. (1-!
a! Ehen the right may be e2ercised$ when a
credit or other incorporeal right in litigation is
sold.
b! "hrust of the law$ to discourage speculation in
lawsuits which would ma/e the courts an
instrument for profit.
c! Ehen the right is not available >!ecause te
assignee as a valid interest in te rigt or
propert' assigned?
1. Ehen the assignment of a credit was
made before any litigation
%! Assignments made to a co@heir or co@
owner of the credit, to a creditor in payment
of his credit, to the possessor of a tenement
or land which is sub&ect to the assigned
credit. (Art% 1;:5)
6edemption of homestead
'A 141. Sec. 119. ?very conveyance of land
acquired under a free patent or homestead,
when proper, shall be sub&ect to repurchase by
the applicant, his widow or legal heirs within
years from the date of conveyance.
a! Eho may redeem
1. the applicant
%. his widow
-. legal heirs
rticle (099 is not applicable to a lessee trying to buy the
land he is leasing.
53
b! :eriod of redemption$ within years from the date
of conveyance
6edemption in ta2 sales
()R' of 1997. Sec. 215. 2or#eiture to (overnment
#or Bant o# Bidder% * 3n case there is no bidder for
real property e2posed for sale as herein above
provided or if the highest bid is for an amount
insufficient to pay the ta2es, penalties and costs, the
3nternal 6evenue (fficer conducting the sale shall
declare the property forfeited to the Aovernment in
satisfaction of the claim in question and within two
(%! days thereafter, shall ma/e a return of his
proceedings and the forfeiture which shall be spread
upon the records of his office. 3t shall be the duty of
the 6egister of Deeds concerned, upon registration
with his office of any such declaration of forfeiture, to
transfer the title of the property forfeited to the
Aovernment without the necessity of an order from a
competent court.
Eithin one (1! year from the date of such forfeiture,
the ta2payer, or any one for him may redeem said
property by paying to the )ommissioner or the
latter4s 6evenue )ollection (fficer the full amount of
the ta2es and penalties, together with interest
thereon and the costs of sale, but if the property be
not thus redeemed, the forfeiture shall become
absolute.
Eho may redeem
1. the delinquent ta2payer
%. anyone for him
:eriod of redemption$ within 1 year from the date of
sale
6edemption by a &udgment debtor
R$+es of 'i,i+ Proced$re. R$+e 39. Sec. 27. Bo
ma' redeem real propert' so sold%

6eal property sold as provided in the last preceding
section, or any part thereof sold separately, may be
redeemed in the manner hereinafter provided, by the
following persons$
(a! "he &udgment obligor, or his successor in
interest in the whole or any part of the property'
(b! A creditor having a lien by virtue of an
attachment, &udgment or mortgage on the property
sold, or on some part thereof, subsequent to the lien
under which the property was sold. 1uch redeeming
creditor is termed a redemptioner.
a! Eho may redeem
1. the &udgment obligor
%. his successors@in@interest
-. creditor having a lien by virtue of an
attachment
:eriod of redemption$ within 1 year from the
date of registration of the certificate of sale
6edemption in e2tra&udicial foreclosure of
mortgages
Act (o. 3135. Sec. 6. 3n e2tra&udicial
foreclosure of mortgage, the debtor, his
successors@in@interest, any &udicial or &udgment
creditor of said debtor, or any &unior
encumbrancer may redeem the property within 1
year from the date of the sale. >$is provision is
ta/en #rom Baviera onl'8 not sure i# tis is te
e,act wording o# te law%?
a! Eho may redeem
1. the debtor
%. his successors@ in@interest
-. &udicial creditorL&udgment creditor of the
debtor
4. any person having a lien on the property
:eriod of redemption$ within 1 year from the
date of the sale
6edemption in &udicial foreclosure of mortgages
RA 8791 ($e (eneral Ban/ing o# Law o# 0111).
Sec. 47. 2oreclosure o# )eal +state Mortgage. @
3n the event of foreclosure, whether &udicially or
e2tra@&udicially, of any mortgage on real estate
which is security for any loan or other credit
accommodation granted, the mortgagor or
debtor whose real property has been sold for the
full or partial payment of his obligation shall
have the right within one year after the sale of
the real estate, to redeem the property by
paying the amount due under the mortgage
deed, with interest thereon at rate specified in
the mortgage, and all the costs and e2penses
incurred by the ban/ or institution from the sale
and custody of said property less the income
derived therefrom. 9owever, the purchaser at
the auction sale concerned whether in a &udicial
or e2tra@&udicial foreclosure shall have the right
to enter upon and ta/e possession of such
property immediately after the date of the
confirmation of the auction sale and administer
the same in accordance with law. Any petition in
court to en&oin or restrain the conduct of
foreclosure proceedings instituted pursuant to
this provision shall be given due course only
upon the filing by the petitioner of a bond in an
amount fi2ed by the court conditioned that he
will pay all the damages which the ban/ may
suffer by the en&oining or the restraint of the
foreclosure proceeding.
54
>otwithstanding Act -1-, &uridical persons whose
property is being sold pursuant to an e2tra&udicial
foreclosure, shall have the right to redeem the
property in accordance with this provision until, but
not after, the registration of the certificate of
foreclosure sale with the applicable 6egister of Deeds
which in no case shall be more than three (-! months
after foreclosure, whichever is earlier. (wners of
property that has been sold in a foreclosure sale prior
to the effectivity of this Act shall retain their
redemption rights until their e2piration.
A?>?6AB 6<B?$ >o right to redeem is granted to the
debtor@mortgagor when there has been &udicial
foreclosure of real estate mortgage.
?G)?:"3(>$ Ehen the mortgagee is a ban/ or a
ban/ing institution.
Begal right to redeem under the Agrarian 6eform
)ode
RA 3844. Sec. 12. LesseeEs )igt o# )edemption%@3n
case the landholding is sold to a third person without
the /nowledge of the agricultural lessee, the latter
shall have the right to redeem the same at a
reasonable price and consideration' :rovided, "hat
the entire landholding sold must be redeemed$
:rovided, further, "hat where there are two or more
agricultural lessees, each shall be entitled to said
right of redemption only to the e2tent of the area
actually cultivated by him. "he right of redemption
under this 1ection may be e2ercised within two years
from the registration of the sale. and shall have
priority over any other right of legal redemption.
a! Eho may redeem$ the lessee who has no
/nowledge of the sale to a third person
b! :eriod of redemption$ within % years from the
registration the sale
c! )onditions for redemption* the entire landholding
sold must be redeemed
d! where there are two or more agricultural lessees,
each shall be entitled to said right of redemption only
to the e2tent of the area actually cultivated by him
E=. BU9D 0A9/0 9A4
71

A'- (#. 3952. An act to re)ulate t,e sale6
trans#er6 mort)a)e or assi)nment o# )oo"s6
$ares6 merc,an"ise6 rovisions or materials6 in
!ul%6 an" rescri!in) enalties #or t,e violation
o# t,e rovisions t,ereo#.
71
LI#ANAG * MENGHRAJ: "he constitutional right to dispose
freely of oneGs property is not absolute. "he creditor should be
protected in his rights against the debtor. "he State, in the
e%ercise of its police power, see!s to protect such creditor
against insolvent and fraudulent vendors
Sec 1. "his Act shall be /nown as C$e Bul/
Sales Law%C
Sec. 2. Sale and trans#er in !ul/% T Any sale,
transfer, mortgage or assignment of a stoc/ of
goods, wares, merchandise, provisions, or
materials otherwise than in the ordinary course
of trade and the regular prosecution of the
business of the vendor, mortgagor, transferor, or
assignor, or sale, transfer, mortgage or
assignment of all, or substantially all, of the
business or trade theretofore conducted by the
vendor, mortgagor, transferor, or assignor, or of
all, or substantially all, of the fi2tures and
equipment used in and about the business of the
vendor, mortgagor, transferor, or assignor, shall
be deemed to be a sale and transfer in bul/, in
contemplation of this Act$ :rovided, however,
"hat if such vendor, mortgagor, transferor or
assignor, produces and delivers a written waiver
of the provisions of this Act from his creditors as
shown by verified statements, then, and in that
case, the provisions of this section shall not
apply.
Sec. 3. Statement o# creditors% T 3t shall be the
duty of every person who shall sell, mortgage,
transfer, or assign any stoc/ of goods, wares,
merchandise, provisions or materials in bul/, for
cash or on credit, before receiving from the
vendee, mortgagee, or his, or its agent or
representative any part of the purchase price
thereof, or any promissory note, memorandum,
or other evidence therefor, to deliver to such
vendee, mortgagee, or agent, or if the vendee,
mortgagee, or agent be a corporation, then to
the president, vice@president, treasurer,
secretary or manager of said corporation, or, if
such vendee or mortgagee be a partnership firm,
then to a member thereof, a written statement,
sworn to substantially as hereinafter provided, of
the names and addresses of all creditors to
whom said vendor or mortgagor may be
indebted, together with the amount of
indebtedness due or owing, or to become due or
owing by said vendor or mortgagor to each of
said creditors, which statement shall be verified
by an oath to the following effect$
:93B3::3>? 31BA>D1
:6(C3>)? (6 )3"P (+ UUUUUUUUUUUUUUUUUV
Before me, the undersigned authority, personally
appeared UUUUUUUUUUUUUUUUUU (vendor,
mortgagor, agent or representative, as the case
may be!, bearing cedula >o. UUUUUUUUUUUU
issued at UUUUUUUUUUU on the day of
UUUUUUUUUUUUU who, by me being first duly
sworn, upon his oath, deposes and states that
the foregoing statement contains the names of
all of the creditors of UUUUUUUUUUUUUUUU
(vendor, or mortgagor! together with their
55
addresses, and that the amount set opposite each of
said respective names, is the amount now due and
owing, and which shall become due and owing by
UUUUUUUUUUUUU (vendor or mortgagor! to such
creditors, and that there are no creditors holding
claims due or which shall become due, for or on
account of goods, wares, merchandise, provisions or
materials purchased upon credit or on account of
money borrowed, to carry on the business of which
said goods, wares, merchandise, provisions or
materials are a part, other than as set forth in said
statement.
UUUUUUUUUUUUUUUUUUUUUU
1ubscribed and sworn to before me this UUUUUUUUUU
day of UUUUUUUUU, 18UUUU, at UUUUUUUUUUUUU.
Sec. 4. 2raudulent and void sale. trans#er or
mortgage% T Ehenever any person shall sell,
mortgage, transfer, or assign any stoc/ of goods,
wares, merchandise, provisions or materials, in bul/,
for cash or on credit, and shall receive any part of the
purchase price, or any promissory note, or other
evidence of indebtedness for said purchase price or
advance upon mortgage, without having first
delivered to the vendee or mortgagee or to his or its
agent or representative, the sworn statement
provided for in section three hereof, 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, as shown upon such sworn statement, he
shall be deemed to have violated this Act, and any
such sale, transfer or mortgage shall be fraudulent
and void.
Sec. 5. @nventor'% T 3t shall be the duty of every
vendor, transferor, mortgagor, or assignor, at least
ten days before the sale, transfer or e2ecution of a
mortgage upon any stoc/ of goods, wares,
merchandise, provisions or materials, in bul/, to
ma/e a full detailed inventory thereof and to preserve
the same showing the quantity and, so far as is
possible with the e2ercise of reasonable diligence, the
cost price to the vendor, transferor, mortgagor or
assignor of each article to be included in the sale,
transfer or mortgage, and notify every creditor whose
name and address is set forth in the verified
statement of the vendor, transferor, mortgagor, or
assignor, at least ten days before transferring
possession thereof, personally or by registered mail,
of the price, terms conditions of the sale, transfer,
mortgage, or assignment.
Sec. 6. Any vendor, transferor, mortgagor or
assignor of any stoc/ of goods, wares, merchandise,
provisions or materials, in bul/, or any person acting
for, or on behalf of any such vendor, transferor,
mortgagor, or assignor, who shall /nowingly or
willfully ma/e, or deliver or cause to be made or
delivered, a statement, as provided for in section
three hereof, which shall not include the names of all
such creditors, with the correct amount due and to
become due to each of them, or shall contain
any false or untrue statement, shall be deemed
to have violated the provisions of this Act.
Sec. 7. 3t shall be unlawful for any person, firm
or corporation, as owner of any stoc/ of goods,
wares, merchandise, provisions or materials, in
bul/, to transfer title to the same without
consideration or for a nominal consideration
only.
Sec. 8. >othing in this Act contained shall apply
to e2ecutors, administrators, receivers,
assignees in insolvency, or public officers, acting
under &udicial process.
Sec. 9. "he sworn statement containing the
names and addresses of all creditors of the
vendor or mortgagor provided for in section
three of this Act, shall be registered in the
Bureau of )ommerce. +or the registration of
each such sworn statement a fee of five pesos
shall be charged to the vendor or mortgagor of
the stoc/ of goods, wares, merchandise,
provisions or materials, in bul/.
Sec. 10. "he provisions of this Act shall be
administered by the Director of the Bureau of
)ommerce and 3ndustry, who is hereby
empowered, with the approval of the
Department 9ead, 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.
Sec. 11. Any person violating any provision of
this Act shall, upon conviction thereof, be
punished by imprisonment not less than si2
months, nor more than five years, or fined in
sum not e2ceeding five thousand pesos, or both
such imprisonment and fine, in the discretion of
the court.
Sec. 12. "his Act shall ta/e effect on its
approval.
A. RA (-5&
Sec. 2. Any sale, transfer, mortgage or
assignment of a stoc/ of goods, wares,
merchandise, provisions, or materials otherwise
than in the ordinary course of trade and the
regular prosecution of the business of the
vendor, mortgagor, transferor, or assignor, or
any sale, transfer, mortgage or assignment of
all, or substantially all, of the business or trade
theretofore conducted by the vendor, mortgagor,
transferor, or assignor, or of all, or substantially
all, of the fi2tures and equipment used in and
about the business of the vendor, mortgagor,
transferor or assignor, shall be deemed to be a
sale and transfer in bul/, in contemplation of this
56
Act$ :rovided, however, that if such vendor,
mortgagor, transferor or assignor produces and
delivers a written waiver of the provisions of this Act
from his creditors as shown by verified statements,
then, and in that case, the provisions of this section
shall not apply.
a! "hrust of the law$ to protect persons who e2tended
credit to merchants, relying on the fact that their
stoc/ of merchandise was not to be sold in bul/, but
/ept up and replenished from time to time (with the
e2tension of credit comes the presupposition of
continuance in the business of merchandising!
"ypes of transactions covered
=%

1. any sale, transfer, mortgage or assignment
of a stoc/ of goods, wares, merchandise,
provisions or materials otherwise than in the
ordinary course of trade and the regular
prosecution of the business
%. any sale, transfer, mortgage or assignment
of all, or substantially all, of the business or
trade theretofore conducted by the vendor,
etc.
-. any sale, transfer, mortgage or assignment
of all, or substantially all, of the fi2tures and
equipment used in and about the business of
the vendor, etc.
1toc/ * common use when applied to goods in a
mercantile house refers to those which are /ept for
sale
B. )(5:B3A>)? 6?M<36?5?>"
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, detailed inventory of the
goods sold or mortgaged
d! notification to creditors at least 1, days before
delivery
). ?++?)"1 (+ >(>@)(5:B3A>)?
a! 3f the purchase or mortgage money is not applied
pro5rata to the payment of the bona fide claims of the
creditors of the vendorLmortgagor, the sale, transfer,
or mortgage shall be fraudulent and void.
72
PEOPLE * #ONG: "he object of the sale in this case is not
covered by the provision alleged to have been infringed. WongGs
business was a foundry shop that manufactures iron wor!s and
processes or casts metals;erchandise N something that is sold
everday and is constantly going out of the store and being
replaced by other goods.
b! "he law penali7es any intentional omission of
the names of the creditors in the required list,
with the correct amount due or to become due,
or any false or untrue statement therein. "he law
also penali7es any transfer of title in bul/,
without consideration or for a nominal
consideration only
:?>AB"P1 . months * years imprisonment' fine
of W :,,,,' or both' penalty imposable to the
debtor
E=I. R/TAI9 TRAD/ 9IB/RA9IJATION ACT
RA 8762. An act li!eraliKin) t,e retail tra"e
!usiness6 reealin) #or t,e urose RA
118.6 as amen"e"6 an" #or ot,er uroses.

Sec. 1. $itle% @ "his Act shall be /nown as the
C)etail $rade Li!erali=ation Act o# 0111%C

Sec. 2. Declaration o# 9olic'% 5 3t is the policy of
the 1tate to promote consumer welfare in
attracting, promoting and welcoming productive
investments that will bring down prices for the
+ilipino consumer, create more &obs, promote
tourism, assist small manufacturers, stimulate
economic growth and enable :hilippine goods
and services to become globally competitive
through the liberali7ation of the retail trade
sector.
:ursuant to this policy, the :hilippine retail
industry is hereby liberali7ed to encourage
+ilipino and foreign investors to forge an efficient
and competitive retail trade sector in the interest
of empowering the +ilipino consumer through
lower prices, higher quality if goods, better
services and wider choices.
Sec. 3. De#inition% 5 As used in this Act$
(1! C)etail $radeC shall mean any act, occupation
or calling of habitually selling direct to the
general public merchandise, commodities or
goods for consumption, but the restriction of this
law shall not apply to the following$
(a! 1ales by a manufacturer, processor, laborer,
or wor/er, to the general public the products
manufactured, processed or produced by him if
his capital does not e2ceed (ne 9undred
"housand :esos (:1,,,,,,.,,!'
(b! 1ales by a farmer or agriculturist selling the
products of his farm'
(c! 1ales in restaurant operations by a hotel
owner or inn@/eeper irrespective of the amount
of capital$ 9rovided, that the restaurant is
incidental to the hotel business' and
57
(d! 1ales which are limited only to products
manufactured, processed or assembled by a
manufacturer through a single outlet, irrespective of
capitali7ation.
(%! CDig5end or lu,ur' goodsC shall refer to goods
which are not necessary for life maintenance and
whose demand is generated in large part by the
highest income groups. Bu2ury goods shall include,
but are not limited to, products such as$ &ewelry,
branded or designer clothing and footwear, wearing
apparel, leisure and sporting goods, electronics and
other personal effects.

Sec. 4. $reatment o# 4atural5Born 7iti=en Bo Das
Lost Dis 9ilippine 7iti=ensip% 5 A natural@born citi7en
of the :hilippines who has lost his :hilippine
citi7enship but who resides in the :hilippines shall be
granted the same rights as +ilipino citi7ens for
purposes of this Act.

Sec. 5. 2oreign +"uit' 9articipation% 5 +oreign@owned
partnerships, associations and corporations formed
and organi7ed under the laws of the :hilippines may,
upon registration with the 1ecurities and ?2change
)ommission (1?)! and the Department of "rade and
3ndustry (D"3! or in case of foreign@owned single
proprietorships, with the D"3, engage or invest in the
retail trade business, sub&ect to the following
categories$
7ategor' A @ ?nterprises with paid@up capital of the
equivalent in :hilippine :esos of less than "wo 5illion
+ive 9undred "housand <1 Dollars
(<1X%,,,,,,,.,,! shall be reserved e2clusively for
+ilipino citi7ens and corporations wholly@owned by
+ilipino citi7ens.
7ategor' B @ ?nterprises with a minimum paid@up
capital of the equivalent in :hilippine :esos of "wo
5illion +ive 9undred "housand <1 Dollars
(<1X%,,,,,,,.,,! may be wholly owned by
foreigners e2cept for the first two (%! years after the
effectivity of this Act wherein foreign participation
shall be limited to not more than (.,R! of total
equity.
7ategor' 7 @ ?nterprises with a paid@up capital of the
equivalent in :hilippine :esos of 1even 5illion +ive
9undred "housand <1 Dollars (<1X=,,,,,,,.,,! or
more maybe wholly owned by foreigners$ 9rovided.
owever. that in no case shall the investments for
establishing a store in )ategories B and ) be less
than the equivalent in :hilippine :esos of ?ight
9undred "hirty "housand <1 Dollars
(<1X#-,,,,,.,,!.
7ategor' D @ ?nterprises speciali7ing in high@end or
lu2ury products with a paid up capital of the
equivalent in :hilippine :esos of "wo 9undred +ifty
"housand <1 Dollars (<1X%,,,,,.,,! per store
may be wholly@owned by foreigners.
"he foreign investor shall be required to maintain
in the :hilippines, the full amount of the
prescribed minimum capital. <nless the foreign
investor has notified the 1?) and the D"3 of its
intention to repatriate its capital and cease
operations in the :hilippines. "he actual use in
:hilippine operations of the inwardly remitted
minimum capital requirements shall be
monitored by the 1?).
+ailure retail stores shall secure a certification
from the Bang/o 1entral ng :ilipinas (B1:! and
the D"3, which will verify or confirm inward
remittance of the minimum required capital
investment.

Sec. 6. 2oreign @nvestors Ac"uiring Sares o#
Stoc/ o# Local )etailers% 5 +oreign 3nvestors
acquiring shares from e2isting retail stores
whether or not publicly listed whose net worth is
in e2cess of the peso equivalent of "wo 5illion
+ive 9undred "housand <1 Dollars
(<1X%,,,,,,,.,,! may purchase only up to a
minimum of si2ty percent (.,R! of the equity
thereof within the first two (%! years from the
effectivity of this Act and thereafter, they may
acquire the remaining percentage consistent with
the allowable foreign participation as herein
provided.

Sec. 7. 9u!lic 3##ering o# Sares o# Stoc/% 5 All
retail trade enterprises under )ategories B and )
in which foreign ownership e2ceeds eighty
percent (#,R! of equity shall offer a minimum of
thirty percent (-,R! of their equity to the public
through any stoc/ e2change in the :hilippines
within eight (#! years from their start of
operations.

Sec. 8. Fuali#ications o# 2oreign )etailers% 5 >o
foreign retailer shall be allowed to engage in
retail trade in the :hilippines unless all the
following qualifications are met$
(a! A minimum of "wo 9undred 5illion <1
Dollars (<1X%,,,,,,,,,,.,,! net worth in its
parent corporation for )ategories B and ), and
+ifty 5illion <1 Dollars (<1X,,,,,,,,,.,,! net
worth in its parent corporation for )ategory D'

(b! +ive (! retailing branches or franchises in
operation anywhere around the world unless
such retailers has at least one (1! store
capitali7ed at a minimum of "wenty@+ive 5illion
<1 Dollars (<1X%,,,,,,,,.,,!'

(c! +ive (!@year trac/ record in retailing' and
58
(d! (nly nationals from, or &udicial entities formed or
incorporated in, countries which allow the entry of
+ilipino retailers, shall be allowed to engage in retail
trade in the :hilippines.
"he D"3 is hereby authori7ed to pre@qualify all foreign
retailers, sub&ect to the provisions of this Act, before
they are allowed to conduct business in the
:hilippines.
"he D"3 shall /eep a record of qualified foreign
retailers who may, upon compliance with law,
establish retail stores in the :hilippines. 3t shall
ensure that the parent retail trading company of the
foreign investor complies with the qualifications on
capitali7ation and trac/ record prescribed in this
section.
"he 3nter@Agency )ommittee on "ariff and 6elated
5atters of the >ational ?conomic Development
Authority (>?DA! Board shall formulate and regularly
update a list of foreign retailers of high@end or lu2ury
goods and render an annual report on the same to
)ongress.

Sec. 9. 9romotional o# Locall' Manu#actured
9roducts% 5 +or ten (1,! years after the effectivity of
this Act, at least thirty percent (-,R! of the
aggregate cost of the stoc/ inventory of foreign
retailers falling under )ategories B and ) and ten
percent (1,R! for )ategory D, shall be made in the
:hilippines.
Sec. 10. 9roi!ited Activities o# Fuali#ied 2oreign
)etailers% 5 Mualified 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, the use of sales
representatives, door@to@door selling, restaurants and
sari@sari stores and such other similar retailing
activities$ 9rovided. that a detailed list of prohibited
activities shall hereafter be formulated by the D"3.

Sec. 11. @mplementing Agenc'A )ules and
)egulations% 5 "he monitoring and regulation of
foreign sole proprietorships, partnerships,
associations or corporations allowed to engage in
retail trade shall be the responsibility of the D"3. "his
shall include resolution of conflicts.

"he D"3, in coordination with the 1?), the >?DA and
the B1:, shall formulate and issue the implementing
rules and regulations necessary to implement this Act
within ninety (8,! days after its approval.

Sec. 12. 9enalt' 7lause% 5 Any person who shall be
found guilty of violation of any provision of this Act
shall be punished by imprisonment of not less than
si2 (.! years and one (1! day but not more than eight
(#! years, and a fine of not less than (ne 5illion
:esos (:1,,,,,,,,.,,! but not more than
"wenty 5illion :esos (:%,,,,,,,,,.,,!.

3n the case of associations, partnerships or
corporations, the penalty shall be imposed upon
its partners, president, directors, managers and
other officers responsible for the violation. 3f the
offender is not a citi7en of the :hilippines, he
shall be deported immediately after service of
sentence. 3f the +ilipino offender is a public
officer or employee, he shall, in addition to the
penalty prescribed herein, suffer dismissal and
permanent disqualification from public office.

Sec. 13. )epealing 7lause% 5 6epublic Act >o.
11#,, as amended, is hereby repealed. 6epublic
Act >o. -,1#, as amended, and all other laws,
e2ecutive orders, rules and regulations or parts
thereof inconsistent with this Act are repealed or
modified accordingly.

Sec. 14. Separa!ilit' 7lause% 5 3f any provision
of this Act shall be held unconstitutional, the
other provisions not otherwise affected thereby
shall remain in force and effect.

Sec. 15. +##ectivit'% 5 "his Act shall ta/e effect
fifteen (1! days after its approval and
publication in at least two (%! newspapers of
general circulation in the :hilippines.
A. 1)(:? A>D D?+3>3"3(> (+ 6?"A3B
"6AD?
=-

6etail "rade * any act, occupation or calling of
habitually selling direct to the general public
merchandise, commodities or goods for
consumption
?G)?:"$
1. sales by a manufacturer, processor,
laborer or wor/er of products made by
him if his capital is less than or equal to
1,,,,,, pesos
%. sales by a farmer or agriculturist of the
products of his farm
-. sales limited only to products
manufactured, processed or assembled
by the manufacturer in a single outlet
irrespective of capitali7ation
a! OAeneral publicK $ activities of seller must be
such that the target clientele are not only a
particular person or group of persons.
73
"ING * HERNAE :

"here is no distinction between
control and nonIcontrol positions with respect to
employment of aliens. "he Aetail "rade Kaw read in
connection with the ntiI8ummy ct see!s a complete ban
on aliens.
59
b! 1?) (pinion >o. 11, series of %,,-$ ?ngaging in
the selling of merchandise as an incident to the
primary purpose of a corporation does not constitute
retail trade (e.g., operation of pharmacy by a
hospital! within the purview of the Act (Villanueva!
B. 63A9"1 (+ +(65?6 >A"<6AB@B(6>
+3B3:3>(1
>atural@born +ilipinos who have lost their citi7enship
!ut wo reside in te 9ilippines shall be given the
same rights as +ilipino citi7ens with respect to this
law.
C. )A"?A(63?1 (+ 6?"A3B "6AD?
?>"?6:631?1 (1ec. !
D. 9(E AB3?>1 5AP 3>C?1" 3> 6?"A3B "6AD?
3> "9? :93B3::3>?1 (1ec. #!
?. 6<B?1 (> +(6?3A> 6?"A3B?61 3> "9?
:93B3::3>?1
F. :?>AB"P )BA<1? (1ec. 1%!
'A 108 (Anti5Dumm' Act). An act to unis, acts
o# evasion o# t,e la$s on t,e nationaliKation o#
certain ri),ts6 #ranc,ises or rivile)es.
Sec. 1. 9enalt' T 3n all cases in which any
constitutional or legal provisions requires :hilippine or
any other specific citi7enship as a requisite for the
e2ercise or en&oyment of a right, franchise or
privilege, any citi7en of the :hilippines or of any other
specific country who allows his name or citi7enship to
be used for the purpose of evading such provision,
and any alien or foreigner profiting thereby, 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 franchise or privilege, which is
en&oyed or acquired in violation of the provisions
hereof but in no case less than :,,,.
"he fact that the citi7en of the :hilippines or of any
specific country charged with a violation of this Act
had, at the time of the acquisition of his holdings in
the corporations or associations referred to in section
two of this Act, no real or personal property, credit or
other assets the value of which shall at least be
equivalent to said holdings, shall be evidence of a
violation of this Act.
1
Sec. 2. Simulation o# minimum capital stoc/ T 3n all
cases in which a constitutional or legal provision
requires that, in order that a corporation or
association may e2ercise or en&oy a right, franchise or
privilege, not less than a certain per centum of its
capital must be owned by citi7ens of the :hilippines or
of any other specific country, it shall be unlawful to
falsely simulate the e2istence of such minimum stoc/
or capital as owned by such citi7ens, for the
purpose of evading said provision. "he 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, and by a fine not less than the
value of the right, franchise or privilege, en&oyed
or acquired in violation of the provisions hereof
but in no case less than :,,,.
%
Sec. 2*A. <nlaw#ul use. +,ploitation or
en&o'ment T Any person, corporation, or
association which, having in its name or under
its control, a right, franchise, privilege, property
or business, the e2ercise or en&oyment of which
is e2pressly reserved by the )onstitution or the
laws to citi7ens of the :hilippines or of any other
specific country, or to corporations or
associations at least si2ty per centum of the
capital of which is owned by such citi7ens,
permits or allows the use, e2ploitation or
en&oyment thereof by a person, corporation or
association not possessing the requisites
prescribed by a the )onstitution or the laws of
the :hilippines' or leases, or in any other way,
transfers or conveys said right, franchise,
privilege, property or business to a person,
corporation or association not otherwise qualified
under the )onstitution, or the provisions of the
e2isting laws' or in any manner permits or allows
any person, not possessing the qualifications
required by the )onstitution, or e2isting laws to
acquire, use, e2ploit or en&oy a right, franchise,
privilege, property or business, the e2ercise and
en&oyment of which are e2pressly reserved by
the )onstitution or e2isting laws to citi7ens of
the :hilippines or of any other specific country,
to intervene in the management, operation,
administration or control thereof, whether as an
officer, employee or laborer therein with or
without remuneration e2cept technical personnel
whose employment may be specifically
authori7ed by the 1ecretary of Fustice, and any
person who /nowingly aids, 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, franchise or
privilege en&oyed or acquired in violation of the
provisions hereof but in no case less than five
thousand pesos$ :rovided, however, "hat the
president, managers or persons in charge of
corporations, associations or partnerships
violating the provisions of this section shall be
criminally liable in lieu thereof$ :rovided, further,
"hat any person, corporation or association shall,
in addition to the penalty imposed herein, forfeit
such right, franchise, privilege, and the property
or business en&oyed or acquired in violation of
60
the provisions of this Act$ And provided, finally, "hat
the election of aliens as members of the board of
directors or governing body of corporations or
associations engaging in partially nationali7ed
activities shall be allowed in proportion to their
allowable participation or share in the capital of such
entities.
-

Sec. 2*.. Any violation of the provisions of this Act
by the spouse of any public official, if both live
together, shall be cause for the dismissal of such
public official.
4
Sec. 2*'. "he e2ercise, possession or control by a
+ilipino citi7en having a common@law relationship with
an alien of a right, privilege, property or business, the
e2ercise or en&oyment of which is e2pressly reserved
by the )onstitution or the laws to citi7ens of the
:hilippines, shall constitute a prima facie evidence of
violation of the provisions of 1ection %@A hereof.

Sec. 3. Any corporation or association violating any


of the provisions of this Act shall, upon proper court
proceedings, be dissolved.
Sec. 3*A. )eward to in#ormer% T 3n case of
conviction under the provisions of this Act, twenty@
five per centum of any fine imposed shall accrue to
the benefit of the informer who furnishes to the
Aovernment original information leading to said
conviction and who shall be ascertained and named in
the &udgment of the court. 3f the informer is a
dummy, who shall voluntarily ta/e the initiative of
reporting to the proper authorities any violation of the
provisions of this Act and assist in the prosecution,
resulting in the conviction of any person or
corporation profiting thereby or involved therein, 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 Aovernment, and
shall be e2empted from the penal liabilities provided
for in this Act. .
Sec. 4. "his Act shall ta/e effect upon its approval.
Approved, (ctober -,, 18-..
61