You are on page 1of 75

CIVIL LAW REVIEW II

Sales, Lease, Agency, Partnership, Trust and Credit Transactions

Atty. Crisostomo Uribe

SALES

act

like

it

may

be

a

donation

if

there

is

no

compensation for the transfer of ownership to the other party.

Articles / Laws to Remember: 1458, 1467, 1477 transfer of ownership, 1505, 559 who can transfer xxx, 1504, 1544, 1484 Recto Law, R.A. 6552, 1602, 1606, 1620, 1623, Redemption xxx

Q: A obliged himself to deliver a certain thing to B. Upon delivery, B would pay a sum of money to A. Is that a contract of sale?

  • 5. Commutative (2010) – meaning there is

equivalency in the value of the prestation to be performed by both parties. Normally, the thing sold would be equal to the price paid by the other party (buyer).

A: Not necessarily. Even if there is an obligation to deliver, if there is no obligation
A: Not necessarily. Even if there is an obligation to
deliver,
if
there
is
no
obligation
to transfer
ownership, it will not be a contract of sale. It may
Exception: a contract of sale which is an aleatory
contract like sale of hope. In sale of hope, the
obligation of 1 party will arise upon the happening
of a certain event or condition.
be a contact of lease.
Memorize: Art. 1458
Example Sale of Hope: Sale of a lotto ticket, PCSO
will have the obligation to pay you only if you got all
the 4 or 6 numbers which are drawn
Note: Sale is a contract, so the general principles
in oblicon are applicable to sale but note that there
are provisions which are contrary.
Another Example of Aleatory: Insurance
6.
Nominate (1458)
Characteristics of Contract of Sale (COS)
1. Consensual (1475) – COS is consensual, it is
Classification of Contract of Sale
1.
As to Nature of Subject Matter
a.
Movable
b.
Immovable
Q: Why there is a need to determine?
A: Because some concepts will apply if the object
is movable or some laws will apply if the object is
immovable.

perfected by mere meeting of the minds of the parties as to the object and price. Note: There is 1 special law which requires a particular form for the validity of a contract of sale – in that sale, it can be said that kind of sale is a formal contract Cattle Registration Decree. In a sale of large cattle, the law provides that the contract of sale of large cattle must be: in a public instrument, registered and a certificate of title should be obtained in order for the sale to be valid. But otherwise, the other contracts are perfected by mere consent or mere meeting of the minds.

  • 2. Principal – sale

is

a

principal contract, it can

stand on its own. It does not depend on other contracts for its existence and validity.

Examples: Under the Statute of Frauds, you have to determine if the object if movable or immovable in order that statute of frauds will apply. The Recto law will apply if the object is movable. The Maceda law will apply if the object is realty. Article 1544 or Double Sale will require you to determine the nature of the subject matter.

  • 3. Bilateral (1458) – necessarily in a COS, both

parties will be obligated. It is not possible that only 1 party is obligated because a contract of sale is essentially onerous.

  • 4. Onerous (1350) – COS is essentially onerous.

Otherwise, it may be another contract or any other

  • 2. As to Nature

  • a. Thing

  • b. Right

Q: Why there is a need to determine?

A: Relevant in the mode of delivery

Distinctions

  • 1. Deed of Absolute Sale (DAS) vs. Conditional

Sale (CS) vs. Contract to Sell (CTS)

  • 2. Dation in Payment (DIP) vs. COS

  • 3. Contract for a Piece of Work (CPW) vs. COS

  • 4. Barter vs. COS

  • 5. Agency to Sell (ATS) vs. COS

Example 2: If the pre-existing obligation is to deliver a specific horse but instead of delivering the horse, the debtor told his creditor and the creditor accepted, that he will instead deliver his car it is still DIP but it will not fall on 1245 but on novation because there is a change in the object of the obligation which would extinguish the obligation.

Deed of Absolute Sale (DAS) vs. Conditional Sale (CS) vs. Contract to Sell (CTS) DAS –
Deed of Absolute Sale (DAS) vs. Conditional
Sale (CS) vs. Contract to Sell (CTS)
DAS – seller does not reserve his title over the
thing sold and thus, upon delivery of the thing,
ownership passes regardless of whether or not the
buyer has paid.
Note:
A guide
to distinguish one concept from
another
is
to
know the
nature,
requisites
and
effects.
1.
As to Nature
DIP – a special form of payment
COS - it is a contract
CS - condition/s are imposed by the seller before
ownership will pass. Normally, the condition is the
full payment of the price. In CS, ownership
automatically passes to the buyer from the moment
the condition happens. There is no need for
another contract to be entered into.
2.
As to Requisites
DIP – with a pre-existing obligation
COS – not a requirement
3.
As to Effect
DIP – to extinguish the obligation either wholly or
BE: Receipt was issued by A to B. The receipt’s
tenor “Date of the receipt xxx Received from B
the sum of P75,000.00 as partial payment for
partially.
COS
obligation
will
arise
instead
of being
extinguished.
the car xxx the balance to be paid at the end of
the month xxx”. Contract to Sell?
Contract for a Piece of Work (CPW) vs. COS
SA: No. It does not pertain to a CTS because in a
CTS ownership is reserved by the seller despite
delivery to the buyer. The buyer does not acquire
ownership. This is an Absolute Sale.
Q:
In
a
CTS,
upon
the
happening
of
the
condition/s imposed
by
the
seller,
would
ownership automatically pass to buyer?
A: No. While a CTS is considered a special kind of
conditional
sale,
it
is
a
peculiar
kind
of
sale
because despite the happening of the condition
and
actual
delivery,
the
buyer
does
not
automatically
acquire
ownership.
In CTS,
if
condition/s happen, the right of the
buyer
is
to
BE: A team if basketball players went to a store
to buy shoes and out of the 10 members, 5 of
them were able to choose the shoes. They
agreed to pay the price upon delivery. The
other 4 members were able to choose but the
shoes were not available at that time but they
are normally manufactured. The last member
could not find shoes that could fit his 16 inches
feet and therefore he has to order for such kind
of shoes. What transactions were entered into
by these players?
SA: 1467 → the first 2 transactions involving a total
of 9 players would be considered a COS because
the shoes which they ordered are being

compel the seller to execute a final deed of sale. So ownership does not automatically pass.

Dation in Payment (DIP) vs. COS

DIP (1245) – whereby property is alienated to the creditor. It is provided that the law on sales shall govern such transaction. It is specifically provided that the pre-existing obligation must be in money. If not in money and there is DIP, it will not be governed by the law on sales but by the law on novation because practically there is a change in the object of the contract.

Example 1: If

A owes B P100,000.00 instead of

paying P100,000, he offers B and B accepts the car of A as an equivalent performance this is DIP and will be governed by the law on sales.

manufactured or procured in the ordinary course of business for the general market. However, the last transaction which will be manufactured only because of the special order of the player and is not ordinarily manufactured for the general market will be considered a CPW which is known as the Massachusetts rule. Massachusetts rule – rule in determining whether the contract is a COS or a CPW.

Barter vs. COS

Q: A obliged himself to deliver a determinate car with a market value of P250,000.00. B obliged himself to deliver his watch and P150,000.00 in cash. What kind of contract?

A: First, you have to consider the intention of the

parties. They may want this transaction to be considered as a sale or barter and that will prevail.

But if the intention of the parties is not clear from their agreement then the nature of the contract will

depend on the value of the watch. If the value of the watch is greater than P150,000 then this is

barter. If the value

of

the watch

is

equal or

less

than P150,000 then this is sale. The value of the car is irrelevant. What is only relevant is the value of the thing (watch) in relation to the cash to be

  • 3. Cause or Consideration – as far as seller is

concerned, it is the price

in money

or

the

equivalent of the payment of the price.

CONSENT OF THE CONTRACTING PARTIES

A. No consent of one or both of the parties

the contract is void. Under the law on sales, it is a fictitious contract where the signature of one of

given by one of the parties.

Agency to Sell (ATS) vs. COS

BE: A gave B the exclusive right to sell his maong pants (he has his own brand of maong pants) in Isabela. It was stipulated in the contract that B has to pay the price of maong within 30 days from delivery to B. It was stipulated that B will receive 20% commission (discount) on sale. The maong pants were delivered to B. However, before B could sell the goods, the store was burned without fault of anyone. Can B be compelled to pay the price?

the parties was forged. Normally, the seller’s signature is forged. If the signature of the seller is forged, that would be a fictitious contract. The alleged seller will not have participation in the execution of the contract. But another kind of contract recognized in the Civil Code is a simulated contract.

Simulated – parties to this contract actually would have participation. They would voluntarily sign in the deed of sale. However, they do not intend to be bound at all or they may intend to be bound to another contract but they executed a deed of sale. Thus, the law would ratify these contracts considering there is a simulated sale.

From the wordings of the problem you may have an idea that this is an agency
From the wordings of the problem you may have
an idea that this is an agency to sell. If this is an
ATS, the fact that the agent has not yet sold the
maong pants when they were burned will not result
in a liability on his part, there being no negligence
on his part because with the delivery of the thing
from the principal to the agent, ownership does not
pass. Under the principle in the Civil Code – res
perit domino – it will be the seller (owner) who will
bear the loss. But if this transaction is sale then
with the delivery of the maong pants to B,
ownership passed to B because he did not reserve
ownership over the pants despite the fact that the
other party has not paid the price. So when the
pants were burned, it would now be B as the owner
who will bear the loss.
Kinds of Simulated Contracts
1. Absolutely Simulated – they do not intend to be
bound at all.
Q: Why would they enter into this kind of sale?

SA: This is exactly the case of Quiroga vs. Parsons. Article 1466 – in construing a contract containing provisions characteristics of both a COS and ATS, you have to go into the essential clauses of the whole instrument. In this problem, one of the clauses “B has to pay the price within 30 days”. That would make the contract COS and not ATS because in 30 days from delivery, whether or not B has already sold those pants to other persons, he is already obliged to pay a price. That is not an ATS. Being a COS, therefore, after having been delivered, ownership passed to the buyer and hence under res perit domino rule, the buyer bears the loss and therefore he can be compelled to pay the price.

A: (a) To defraud creditors. The debtor would sell his remaining assets to make it appear that he has no more assets which may be reached by his creditors. (b) Applicants for residency abroad would normally be required to present certificate of title over parcels of land so that the applicant will appear to have assets. Therefore, hindi mag TNT yung applicant. These applicants would normally ask his brother or sister or friends na kunwari that land would be sold to them. They will have the property registered in their name. They will present the title to the Embassy. But actually the parties do not intend to be bound. Take note that this may be a root of a valid title as far as 3 rd persons are concerned. These 3 rd persons who relied on the transfer certificate of title in the name of the seller even if that seller is not the owner because the sale is simulated may acquire ownership.

  • 2. Relatively Simulated – sale where they actually

intended another contract which normally would be a donation.

Q: Why would they execute a deed of sale

instead of executing a deed of donation?

Essential Elements of a Contract of Sale 1. Consent of the Contracting Parties 2. Object or Subject Matter – which is a determinate thing or right Note: Service cannot be the subject matter of sale.

A: (a) To minimize tax liabilities. Donor’s tax is higher than capital gains tax or final income tax and documentary stamp tax. (b) To circumvent the provisions on legitimes and collation under succession. This may be

questioned if you can consideration.

prove that

there was

no

  • B. If consent was given

If consent was given, it does not necessarily mean that the COS is valid. The consent may be

notarization of the document and he was asked by the notary public as to his age and he again misrepresented, he will be bound to such contract.

Atty. Uribe’s Comment: Estoppel is not a good ground because the minor is not aware.

given by an incapacitated

person

or

one with

 

capacity to

give

consent.

If

given

by

an

Sale of Necessaries

incapacitated person, consider the nature of the incapacity. It may be:

In sale of necessaries such as food, clothing and medicine to a minor, the minor has to pay a

a.

Absolute Incapacity – the party cannot

reasonable price. This contract is not voidable. The

give consent to any and all contracts.

 

sale of necessaries will bind the minor and he will

b.

Relative

Incapacity

the

party

is

be compelled to pay not really the contract price

prohibited from entering sometimes with specific persons and sometimes over specific things.

but only to reasonable price.

Relative Incapacity (Articles 1490 and 1491)

  • 1. Sale between spouses – it is void except:

Kind of Capacity a. 1. Juridical Capacity – it is the fitness to be the subject
Kind of Capacity
a.
1. Juridical Capacity – it is the fitness to be the
subject of legal relations. If a party to a sale has no
juridical capacity, the contract is void. Note that all
natural living persons have juridical capacity. Even
if he is a 1 day old baby, he has juridical capacity.
The spouses executed a marriage
settlement and in the marriage settlement
they agreed for a complete separation of
property regime. Then they can sell to
each other.
b.
The baby can be the subject of donation. Even if
he is conceived, he has provisional personality.
If no marriage settlement, they may have
obtained judicial declaration of separation
of property. After that, they can sell to
each other.
Example: One example of a party to a sale without
juridical capacity would be a corporation not
registered with the SEC. The contract entered by
this corporation is a void contract because one of
the parties has no juridical capacity to enter into
that contract.
2. Those mentioned in Article 1491
a.
A guardian cannot buy the property of the
ward. The guardian is not actually
prohibited from entering into any and all
contracts. It is just that he cannot be the
buyer of a property of his ward.
2. Capacity to Act – it is the power to do acts with
b.
legal effects.
If
the incapacity only
pertains
to
capacity to act, the contract would normally be
voidable. Without capacity to act or there are
An agent cannot buy without the consent
of the principal a property which he was
supposed to sell or administer.
c.
The executors and administrators of the
restrictions with one’s capacity to act
such
as
minority, insanity, deaf mute and does not know
estate cannot buy a property which is part
of the estate.
how to write and civil interdiction.
d.
Note: Under R.A. 6809 (December 1989) there is
no more creature known as “unemancipated
minor”. Before 1989, the age of majority was 21.
Public officers, judges, their staff, clerk of
court, stenographers and lawyers are
prohibited from buying those properties
which are the subject of litigation during
the pendency of the case.
  • C. If both parties are incapacitated

Q:

What is the status of the contracts under

not only voidable but unenforceable.

A: The SC said that the minor will be bound to such

1491?

Q: What if one of the parties in a COS is a

A:

Prof. Tolentino – voidable

minor and the minor actively misrepresented as to his age?

contract under the principle of estoppel. Active misrepresentation, can be seen from the deed itself. In a deed of sale, normally after the name, the words “of age” were stated. If the minor signed

Justice Vitug & Prof. Baviera – void Prof. Pineda & Prof. de Leon – the first 3 are voidable and the last 3 are void. The better answer is void because these persons

are prohibited from entering into these contracts. Under Article 1409, if the contract is prohibited, it is void.

that contract, he will be bound. If no statement in the deed of sale as to his age, in one case, the fact

Discussion of Prof. De Leon’s Answer

he misrepresented to the notary public when he appeared before the notary public for the

The first 3 are voidable because these contracts may be the subject of ratification. If you will read

his discussion, he based his discussion in the case of Rubias vs. Batiller wherein the guardian bought the property of his ward. So the contract is voidable because if the ward becomes of age, he can enter a COS over the thing to his guardian and that sale would be a valid sale. (Pls. read the full text of Prof. De Leon’s comment) Atty. Uribe: It is correct that it is a valid sale. But does that mean that the sale ratified the 1 st contract? I disagree because ratification under the Civil Code has the effect of cleansing the contract from all its defects from the very beginning as if the contract was entered into during the first agreement that the agreement was valid from the very start. In fact, the SC said in Rubias vs. Batiller “ratification” (quote and quote), because the effect of the second contract will not retroact to the first contract. It will only be valid from the time the second contract was entered into. After all, there is no ratification in that sense under the Civil Code. Thus, since it does not retroact to the first, the second contract is void. Otherwise, if voidable then it can be ratified. The defect on the first contract would have been cleansed with the execution of the second contract.

are

not

appropriated

like

air

is

void

but

if

appropriated it can be the object of a valid sale.

  • 2. The thing must be licit – not contrary to law

Examples: sale of prohibited drugs or shabu is void, sale of marijuana is void, sale of wild flowers or wild animals is void

  • 3. Must be determinate

Q: Sale of a car without agreement as to the features for P1M. On the other hand, another transaction would be a sale of Mitsubishi Lancer, 2007, GSL and color black for P1M. Are these 2 transactions, valid sale?

Both would pertain to generic thing. Under the law, a thing is considered determinate only when it is particularly designated or physically segregated from all others of the same class. Both transactions pertain to generic so both transactions are void? A: No. The first transaction is void. The second transaction is valid because Article 1460 requires that the requirement of the law that a thing should be determinate would be sufficiently complied with if the thing which is the object of the sale is capable of being made determinate without a need of a new or further agreement.

2. Aliens are prohibited from acquiring by purchase private lands – Take note “acquiring” which means
2. Aliens are prohibited from acquiring by purchase
private lands – Take note “acquiring” which means
buying not selling. They can sell.
Exceptions / when aliens can buy:
Example: Sale of 1 gallon Minola pure coconut oil.
Though generic, it is valid under Article 1460.
a.
Former natural born Filipino citizen. Under
the Constitution they are allowed to buy
small land which they can use for
residential purpose.
RULES AS TO OBJECT OF COS
Q: A obliged himself to deliver and transfer
ownership over the palay that will be harvested
from a specific parcel of rice land in May 2008.
b.
Another way of acquiring is by succession
but this is not a sale
What if by May 2008, no palay was harvested?
a.
What is the status of the sale?
b.
D.
Even
if
consent was given
by
one
with
capacity to give consent but if the consent is
May the seller “A” be held liable for
damages for failure to comply with his
obligation?
vitiated
→ voidable. FIVUM
A:
a. Always consider that in a COS there are only
3 requisites. As long as these 3 were complied,

E. If the party gave such consent in the name of another without authority of that person or no authority of law unenforceable. Take note may be authorized by the person or by law. Example of authorized by law: notary public has the right to sell in pledge because he has the authority to sell under the law.

there is a valid sale. In fact, by express provision of law, sale of things having potential existence (emptio rei sperati) is valid.

  • b. Not necessarily because there are excuses to

non-performance such as pestilence, typhoon, flood and therefore his failure to comply is an

excuse. But if the reason of the seller is because of his negligence, he cannot find support under Art.

1174.

OBJECT OR SUBJECT MATTER

The requisites in sale as to thing would almost be the same as the requisites of contracts in general.

  • 1. The thing must be within the commerce of men

Examples: sale of a navigable river is void, sale of a cadaver is void but donation of a cadaver is allowed, sale of human organs is void, things which

Sale of Hope (Emptio Spei)

Example: Sale of a lotto ticket Q: Assuming the sale of a lotto ticket happened the day after it was drawn, what is the status of the sale?

A: It will depend whether the ticket is a winning or

losing ticket. What the law provides is that the sale

of

a

vain hope

is

a

void

sale.

If

the

ticket is

a

winning ticket, it is not a vain hope hence, it is a

 

Q:

Why

or when

a

right

would

not

be

valid sale.

 

transmissible?

 

Q: Why would a person sell a winning ticket?

A: If it is intransmissible by nature or by stipulation

or by provision of law.

A: He may need the money immediately. Parang discounted yung ticket. Nanalo ng P1M, ibebenta nya ng P990,000 because he needs the money immediately.

G.R.: As a rule, rights and obligations arising from

contracts are transmissible.

Exceptions:

Q: Sale of a land to B with a right to repurchase within 1 year which A delivered. On the 3 rd month, B sold the land to C. However, on the 9 th month, A offered to repurchase the land. (a) What is the status of the sale between A and C?

1.

Intransmissible by Nature Examples: right as

a legitimate child cannot be sold. Any contract where the personal qualifications has been considered .

2.

Intransmissible because of Stipulation

Example: The parties stipulated in a lease contract

that the right to sublease cannot be transferred if it

  • (b) Who will have a better right over the land? (Sale with a right to repurchase)

is prohibited by the lessor.

3.

Intransmissible because of Law Example: In

partnership, the right in specific partnership A: (a) Be guided by the fact that a COS
partnership,
the
right
in
specific
partnership
A: (a) Be guided by the fact that
a
COS
is
a
property without all the partners making the
consensual contract. The mere meeting of the
minds as to the object and the price, then there is a
valid and perfected sale. Hence, this is a valid sale
assignment cannot be validly assigned.
Q:
Sale of
a right, also perfected by mere
even if the object of the sale is a sale with a right to
repurchase. Article 1465
provides
that
things
subject to a resolutory condition may be the object
of a COS.
Atty. Uribe: Mas tamang sabihin – since the
consent?
A: Yes. To bind 3 rd persons, it must be in a public
instrument. Recorded in the Registry of Property.
ownership
thereof
is
subject
to
a resolutory
CAUSE OR PRICE CERTAIN IN MONEY OR ITS
EQUIVALENT
condition. Hindi naman yung thing is the subject of
resolutory condition, it is the ownership over the
thing.
Q: A deed of sale was entered into by A and B.
The price agreed upon was 1M yen.
If A exercises the right to repurchase
and such
(a)
May that be a valid sale?
would be a
valid exercise
of such right
then the
(b)
ownership of B would be extinguished. The
Can the seller compel the buyer
to pay in yen?
exercise
of
the
right is considered a resolutory
A:
(a)
Yes,
it
is
valid. Basis is Article 1458
condition as to the ownership of B. The fact that
the object of the sale is subject to a repurchase will
not affect the validity of the sale.
because the only requirement of
the
law
is
“in
money”. Even Japanese yen is in money. The law
states that it may not even be in money, it may be
(b) As a rule, it would be A as a seller a retro

because he has the right to repurchase assuming his repurchase is valid. C may have a better right if he can claim that he is an innocent purchaser for value. Example: maybe the right to repurchase was not annotated at the back of the title of the land and he has no actual knowledge. If that is the case, C may have a better right.

SALE OF RIGHT / ASSIGNMENT OF RIGHT

Assignment of right is not necessarily

a

sale.

If

there

is

a

valuable

consideration

for

the

assignment, it

is

a

sale.

If

there

is no valuable

consideration, it may be a donation or dacion en pago.

“equivalent” like promissory notes whether or not negotiable or letters of credit. (b) If the contract was entered into today, yes it is valid because of R.A. 8183 which repealed R.A. 529 in 1996. If COS was entered before R.A. 8183, the seller cannot compel even though the contract is valid. The payment has to be made in Philippine money. Consider the date of the sale. If parties failed to stipulate as to which currency, it has to be in Philippine currency.

Q: Can there be a valid payment in P10,000 - P1 coins?

A: Yes.

Examples of right: credit, shares of stock

Requisite of a right the only requirement is that the right must not be intransmissible

Q: Can you compel the seller to accept?

A: No. Under the Philippine law, P1 will have legal

tender power only up to P1,000. He may accept but he cannot be compelled.

Q:

Sale of

a

car, the price of the car is P1,

valid?

 

A: Yes, it is valid. It can be a valid sale. Lesion or gross inadequacy of the price does not as a rule invalidate a contract unless otherwise specified by law. Exception: when otherwise provided by law. Example: Article 1381 – when the guardian sells

the property of the ward and there is lesion of more than 25% or more than ¼ of the value of the thing. Take note that the buyer must not be the guardian

otherwise 1491 will apply

void. But if the

guardian

sold

it

to

another person there being

lesion of more than ¼ like when the value of the property is P100,000 was sold for P65,000, the contract is rescissible.

Note:

P1, P5, P10 up to P1,000 less than P1 up to P100

Price Must be Certain

Q: Sale of shares of stocks but there was no date as to the value of the share, valid?

A: The value of the shares as to what date is material because the value of the shares changes almost everyday depending on the shares. Shares of companies who are active in trading would change every now and then. In fact, even if the date as to the value of the shares has been fixed but the time was not considered, maybe the opening or the closing in a particular exchange would affect the validity of the sale. For example, in the opening, the value of the share is P50 but in the closing it is P39. So again, it has to be certain.

Q: If you will fix the price by considering the tuition fee of a student per
Q: If you will fix the price by considering the
tuition fee of a student per unit, would that be a
certain price?
A: No because different schools would have
different tuition fees and even in a certain school,
fees per college are different.
Q: Who can fix the price?
A: (1) The best way is for the parties to agree as to
the price. (2) They may agree that one of them will
fix the price.
Note: Under the law on sales, if there is gross
inadequacy, it may reflect vitiation of consent so
the SC would normally enjoin the lower courts to
be warned of the possibility of fraud in case of
lesion. Lesion must be proven as a fact. It is not
presumed.
If there is gross inadequacy, it maybe because
actually they intended another contract and that
would make the sale a simulated sale and
therefore the sale is void.
Example: The value of the property is P1M but only
P10,000 was written in the contract because they
intended it to be a donation → void.
Q: May the sale be perfected if the agreement
of the parties was for one of them to fix the
price?
TIME
OF
THE
PERFECTION
OF
THE
CONTRACT
A: Yes, it may be perfected only if the price fixed by
Auction Sale
the party who was asked to fix the price was
accepted by the other party. If not accepted, there
was no meeting of the minds.
Auction sale
is
perfected
upon the
fall
of
the
hammer or any other customary manner. Thus,
Note: The perfection will only be considered at the
time of the acceptance of the price fixed by the
other party not from the time of the first agreement
of the parties.
before the fall of the hammer in an auction sale,
the bidder even if he has already made a bid, he
can still withdraw the bid as long as he would do
that before the fall of the hammer. Otherwise, (if
after the fall
perfected sale.
of
the hammer), there is
already a

Q: What if a 3 rd person was asked to fix the price – A and B agreed that X will fix the price, may the sale be void?

A: Yes, the sale may be void if the third person does not want to fix the price or unable to fix the price. Hence, there was no meeting of the minds.

Q: If the 3 rd person fixed the price but it was too high or too low or maybe there was fraud committed by the 3 rd person or he was in connivance with one of the parties, may the sale be void?

A: No, because the remedy of the other party is to go to court for the court to fix the price.

Q: Can the auctioneer withdraw the goods before the fall of the hammer?

A: As a rule, yes because the sale has not been perfected at the moment unless the bidding or auction has been announced to be without reserve.

Note: Before perfection, there is one contract which maybe perfected. Before perfection meaning in the negotiation stage this contract is known as the option contract.

Option Contract

Sanchez vs. Rigos

Facts: Mrs. Rigos offered to sell her land to Sanchez for a certain price. Rigos gave Sanchez 2

years within which to decide. (Note: The optionee or promisee or offeree is not bound to purchase but he has the option to buy or purchase). In this case, Sanchez has the option. Before the lapse of 2 years, Sanchez told Rigos that he is buying and offered the price agreed upon but Rigos refused claiming that she was not bound by the written option agreement because no option money (consideration) was given by Sanchez. According to Rigos, the option contract is void.

Held: Since Sanchez accepted the offer and decided to buy within the period before the offer was withdrawn, a perfected COS was created even without option money. In this case, there was no option contract because it was merely an option agreement. Therefore, there was merely an offer on the part of Rigos and once the offer was accepted before it was withdrawn, regardless of whether option money was given and in this case no option money was given, a perfected COS was created.

as partial payment because it is a consideration for the option and therefore not part of the price.

Q: With EM, does it mean that there is already a perfected COS?

A: Not necessarily. Under the law, it is only a proof of the perfection of the sale. In fact, there may not be a perfected sale even if there was EM given, being merely a part of the purchase price or total contract price. The parties may not have actually agreed as to the total price, therefore, even if they agreed that a certain amount is part of the price, they have not agreed on the total price or if they agreed on the total price, they have not agreed on the object of the sale. So no perfected COS. EM goes into only 1 of the essential elements, that is not the only element in COS. That is only a proof of the perfection of the contract. Take note, a proof does not necessarily establish a fact, it may not be sufficient to establish a fact.

Q: With a perfected COS, does it mean it is already enforceable? Note: Iba pag may
Q: With a perfected COS, does it mean it is
already enforceable?
Note: Iba pag may option money
Q: 2 years within which to decide – assuming
there was option money, before the offeree
could decide to buy, the offeror withdraw on
the 6 th month.
A: Not necessarily. Note that upon perfection, the
parties may compel the other party to perform their
respective obligations. But the perfection is subject
to the formalities prescribed by law for that
contract. Therefore, even under 1475, the
(a)
Can the offeree on the 10 th month
say “I would like to buy”?
perfection of the contract is subject to the
provisions of law on the formalities of COS like the
(b)
Can the buyer compel the seller to
sell?
A: (a) No.
(b) No, an action for specific performance will
not prosper because when he said he will but there
was not more offer to be considered. Na-withdraw
na eh.
statute of frauds. There may be meeting of the
minds but if it is not in the form prescribed by law, it
may be unenforceable.
Q: If the offeree files an action for damages,
may that action prosper there being option
money given?

A: Yes, because with the option money, an option contract is perfected, the offeror is bound to give the offeree, 2 years within which to decide and failure to that he is liable not based on perfected COS but on perfected contract of option.

Option Money (OM) vs. Earnest Money (EM)

OM is not part of the price while EM is part of the price and at the same time, it is a proof of the perfection of the contract.

Q: Can the parties themselves agree that there would be a perfected COS and then the OM would be treated as part of the price?

A:

The SC

said that this

is binding between the

G.R.: A COS may be in any form. Article 1483 provides that a COS may be in writing, partly in writing xxx. This provision is exactly the same as Article 1356 in contracts which provides that contracts may be obligatory in whatever form they may have been entered into provided all the essential requisites are present. But then again even Article 1356 just like Article 1475 would provide for exceptions. Exceptions: The law may require a particular form for its validity. The Cattle Registration Decree is an example - where the law itself provides for a particular form for the validity of the sale. But the law may require particular form for its enforceability of the sale and that would be 1403 or the statute of frauds. Concretely, the sale of a parcel of land if not in writing is valid but unenforceable. It is not void. Note that the price of the land is irrelevant if immovable.

Example: Before, the sale

of

a

land

for

P300 is

valid

and

enforceable

even

if

not

in

writing. But

parties. Though it is an OM, it can be considered as part of the price as long as it is stipulated.

presently, it has to be in writing to be enforceable.

The price is still irrelevant.

Without stipulation, the OM cannot be considered

If the object of the sale is

movable, you have to

consider not the value of the thing

but the price

agreed upon. The value may be different from the price. You can sell a thing worth P1,000 for P400 but the law provides for the price. If the price is at least P500 and the sale is not in writing, it will be unenforceable.

execution and registration of the sale and obligation to pay the capital gains tax would be on the seller as a rule.

6.

Obligation to deliver the fruits which is related to the obligation to deliver the thing

OBLIGATION TO DELIVER THE FRUITS

Q: Sale of a watch P450, not in writing, may it be unenforceable?

A: It may be unenforceable if by the terms of such

agreement, the obligation

therein

is

not

to

be

performed within

1

year.

If they

agreed that the

watch will be delivered 2 years after and the payment will also be made upon delivery, it would be unenforceable.

Paredes vs. Espino

Facts: Paredes was a prospective buyer. Espino owns a land in Palawan. Paredes is from Northern Luzon. Their negotiation was thru letters and telegrams. Espino sent a letter to Paredes stating that he and his wife agreed to sell the land to Paredes, that the deed of sale will be executed

BE: A sold a mango plantation to B but they

stipulated that delivery will be after the signing of the deed of sale. After the expiration of the 6- month period, B demanded for the delivery. The vendor was able to deliver 1 month after the date when he was supposed to deliver the mango plantation. During this period, the vendor harvested mango fruits and sold them to X. The vendor was able to deliver only after the other fruits were harvested and sold to Y. Can B recover the mango fruits from Y during the 6 th month period? SA: Determine first whether B is entitled to the fruits because if he is not entitled, then he cannot recover the fruits. Is he entitled to the fruits after 6- month period during the 1-month period prior to delivery? Yes, in fact, under 1537, the fruits of the thing sold from the time of perfection shall pertain to the buyer.

upon the arrival of Paredes in Palawan. When Paredes arrived, Espino said he is no longer
upon the arrival of Paredes in Palawan. When
Paredes arrived, Espino said he is no longer
interested in selling. Paredes filed a case to
compel Espino to sell the land. Espino contended
that the contract is unenforceable because it is not
in writing. He contended that under the statute of
frauds it is unenforceable. His contention was
sustained by the trial court.
Q: Does it mean that the fruits from the time of
perfection shall pertain to the buyer?
Held: This contract is no longer covered by the
statute of frauds because there was a letter. Article
1403 provides that a note or memorandum signed
by the part charged would be sufficient to take that
contract out of the operation of the statute of
frauds. In this case, the defendant wrote a letter
with his signature on it. The letter took that contract
out of the operation of the statute of frauds and
therefore he may be compelled to execute the final
deed of sale.
A: Hindi naman. 1537 should be considered in
relation to 1164. Under 1164, the fruits shall pertain
to the creditor only from the time the obligation to
deliver the thing arises. Thus, B is entitled to the
fruits only from the time of the expiration of the 6-
month period. Di ba may agreement sila that the
mango plantation will be delivered only after 6
months? Upon the arrival of this period, the
obligation to deliver the thing arose, therefore, B,
consistent with 1164 and 1537 will have the right to
the fruits.
Q: Can he recover the fruits from X?

RIGHTS AND OBLIGATIONS OF THE VENDOR

In a deed of sale (DOS), there can be hundreds of obligations of the vendor but those obligations would be because of the stipulation.

A: No. Under 1164, 2 nd paragraph, the buyer or the creditor will have no real right over the fruits after the delivery of the thing.

Q: What is the remedy of the buyer?

But there are only few obligations imposed by law. The 3 most important:

A: The remedy is to go after the seller for selling these fruits na hindi naman sya entitled. The buyer

  • 1. To transfer ownership

is already entitled although again he will have no

  • 2. To deliver

real right over the fruits until the delivery of the

  • 3. To warrant the thing

thing to him.

There are other obligations:

  • 4. Obligation to take care of the thing sold with the diligence of a good father of a family prior to delivery.

  • 5. From the time of the perfection up to the time of delivery then there would be obligation to pay for the expenses for the

OBLIGATION TO TAKE CARE OF THE THING

G.R.: The thing sold should be determinate because if generic (1460, 2 nd paragraph) then there

is nothing to be taken cared of. It will become determinate only upon delivery.

Exceptions: There are sales transactions wherein

the vendor would not have this obligation:

  • a. Constructive delivery - brevi manu – There would be no obligation on the part of the seller to take care of the thing from the time of perfection because at the time of perfection, the buyer was already in possession of the thing. Maybe he borrowed the thing. Example: he borrowed the car and he decided to buy it – the thing was already in his possession.

Q: May a buyer acquire ownership over the

thing sold if the seller has no right to sell? A: The answer by way of exception is yes. But the general rule here is under 1505 – the buyer acquires no better title than what the seller had. If the seller is neither the owner nor does he have the authority to sell, the buyer acquires no better title

than what the seller had. If his right is only as a lessee that is the most that can be transferred to the buyer. If he has no title then no title can be transferred to the buyer.

b. “Kaliwaan” ang bentahan → upon Exceptions: (When the buyer can acquire a better perfection may
b.
“Kaliwaan” ang bentahan
→ upon
Exceptions: (When the buyer can acquire a better
perfection may delivery na then there
is nothing to be taken cared of.
OBLIGATION TO PAY EXPENSES / TAXES
These obligations may be the subject of
stipulation. By agreement, it would be the buyer
who will pay xxx Normally, dito hindi natutuloy ang
sale dahil hindi magkasundo kung sino
magbabayad ng tax.
title than what the seller had. Even if the seller
does not have the right to sell, the buyer may
acquire ownership over the thing sold because the
law so provides and not because the seller was
able to transfer ownership to the buyer.)
1.
By Estoppel
2.
Estoppel by Deed
3.
Estoppel by Record
4.
Sale by an Apparent Owner
5.
Negotiable Document of Title
OBLIGATION TO TRANSFER OWNERSHIP
6.
Purchases from a Merchant’s Store xxx
BE: May a person sell something which does
not belong to him? Would the sale be valid?
Would the buyer acquire ownership over the
thing sold, if seller does not own the thing?
1. By Estoppel – by the principle of estoppel, a
SA: Yes. Ownership over the thing sold is not an
essential requisite for the sale to be valid. But if the
seller does not own the thing, he may have a
problem on his obligation to transfer ownership.
The problem would be whether or not the buyer
would acquire ownership over the thing sold if the
person who sold the thing is not the owner.
person is precluded from denying that another
person has authority to sell because of his acts.
Also known as “Estoppel in Pais” which is a kind of
equitable estoppel because of the acts /
representation of the owner, he may not later on
deny the authority of the 3 rd person.
2. Estoppel by Deed
Q:
Who
can
transfer
ownership
by
way of
BE: A and B co-owners of land sold (sale is
verbal) to X their land. X subsequently sold the
land to Y. Would Y be considered to have
acquired ownership over the land?
sales?
A: Only those who have the right to sell.
Q:
Who
would
have
the
right
to
sell and
therefore they can transfer ownership by way
of sale?
A: First, is the owner. Even if he is not the owner,
SA: Under 1434 which is considered as “Estoppel
by Deed” (technical estoppel) – when the seller
who was not the ownerat the time of the sale,
acquires ownership, automatically, ownership
passes to the buyer by operation of law. However,
Article 1434 requires delivery to the buyer. And
under the facts, 1434 would not apply because:

he may have the right to sell because:

 
  • a) There was no showing there was

(1)

He

was given

the authority by

the

payment

owner. Example: Agent

  • b) No showing that there was delivery of

(2)

He may be the owner but he may

the land to X.

have the authority of the law to

sell,

It cannot be said that by operation of law, Y

known as “Statutory Power to Sell”

likewise acquired ownership by way of estoppel by

(Article 1505). Examples: Notary public in pledge, liquidators, guardians

deed.

and receivers.

  • 3. Estoppel by Record

(3)

Those who have the authority of the court. Example: Sheriff. Note: it is as if they have the authority of law because not even the judge can

Jurisprudence: Sale by nephew of the owner of the land. Since the nephew could not deliver the land, the buyer sued the nephew for estafa. For the accused to be acquitted, he asked his uncle to

validly sell

something

if

it

is

not

testify that he actually had the authority to sell.

consistent with the law.

When the uncle testified in court, the nephew is

acquitted. After acquittal, the buyer demanded from the uncle the delivery of the land. The uncle refused, claiming that “sa totoo land, I did not authorized my nephew”.

owner but the buyer must be a buyer in good faith. The buyers here were in bad faith because before they bought the land, they went to the house of Miguel and asked him whether he would allow

Q: Case was filed against the uncle, would that action prosper?

Maximo to sell the entire land. SC said they are in bad faith.

A: SC said yes because he cannot be allowed now to claim that his nephew was not authorize to sell

BE: The owner of a parcel of land covered by

after he testified in court that he gave such authority. This is estoppel by record which is considered a technical estoppel.

an OCT mortgaged the land to a creditor. The owner delivered the OCT to the creditor. The mortgagee forged the signature of the owner in a deed of sale. He was able to register the

4. Sale by an Apparent Owner

property in his name. He sold the land to a third person who had no knowledge of the

  • A. Factor’s Act

transaction. Did the mortgagee acquire

  • B. Recording Laws

ownership?

  • C. Any other provision of law enabling the apparent

owner of the goods to dispose of them as if he was

SA: No. A forged deed is a void instrument and cannot convey a valid title to the buyer but under the law the forged deed may actually be the root of a valid title under the “Mirror Principle” – when the buyer bought it from the mortgagee in whose name the property was registered and relied on the TCT, then if he bought the property in good faith, he will be considered the owner under Article 1505 in relation to P.D. 529. He bought the land relying on the TCT and bought the land in good faith then he would have a better right than the real owner.

really the owner. A. Factor’s Act Factor is an old name for agent. Even if agent
really the owner.
A. Factor’s Act
Factor is an old name for agent. Even if
agent has no right to sell, a third person may
acquire ownership because he may rely on the
power of attorney as written.
Example: Special Power of Attorney (SPA) – agent
was authorized to sell a car. However, in a verbal
instruction when the SPA was delivered, the
principal authorized the agent to sell that car to 1 of
the members of a certain organization but the
Q: When a buyer may be considered a buyer in
good faith?
agent did not sell that car to one of the members of
a certain organization.
Q: Would the buyer acquire ownership?
A: Yes. Article 1900 provides that so far as 3 rd
persons are concerned, they only have to rely on
the SPA as written, even if agent has no authority
or right to sell.
A: By the mere fact that he had no knowledge at
the time of the execution of the deed does not
necessarily mean that he is in good faith. The law
further requires that he must have fully paid without
knowledge of the defect in the title of the seller. So
if after execution he is in good faith but before
payment he is in bad faith then he is in bad faith.
B. Recording Laws
*most common question in the bar exam
Mapalo vs. Mapalo

Facts: The elder brother, Miguel Mapalo, donated half of his land to his younger brother, Maximo Mapalo, because the latter will get married. But instead of the younger brother asking his elder brother to sign a deed of donation over that land, he asked his elder brother and the latter’s spouse to sign a Deed of Sale over the entire parcel of land. He was able to have the entire property registered in his name. Few years after, he sold the land to the Narcisos. Obviously, he does not have

the right to sell the other half. The Narcisos

BE: A, the owner of a parcel of land entrusted to his clerk the TCT of the land for safekeeping. This clerk instead forged the signature in the DOS with him as the buyer. Thereafter, he was able to have the property registered in his name. Then he sold the land to a third person. Did the clerk acquire title over the land? Can the owner of the land have the property registered in his name?

SA: The 3 rd person being in good faith, he is considered to have acquired ownership over the thing sold even if the seller had no right to sell. By

way of exception because the buyer bought it from an apparent owner. An apparent owner who disposed the thing as if it was owned by him.

claimed that they are buyers in good faith from an apparent owner because the entire property was in the name of Maximo.

Q: Did the Narcisos acquire ownership?

A: SC Said no, because the law requires that the sale must not only be a sale by an apparent

5. Negotiable Document of Title

If

goods

are

covered

by

a

negotiable

document of title and it was thereafter negotiated. If the buyer bought it in good faith and for value, he will be protected under the law. He will acquire

ownership even if the seller did not have the right to sell. Example: The seller may have acquired title by violence. Binugbog nya yung owner ng goods. Pero kung negotiable document of title yan and properly negotiated, lalo na kung bearer document of title, then the buyer may acquire ownership even if the seller has no right to sell.

6. Purchases from a Merchant’s Store / Markets / Fairs

Sun Brothers vs. Velasco

Facts:

Sun

Brothers

was

the

owner

of

a

considered a public sale, he can recover as long as he is willing to reimburse the buyer of the price paid in that sale. Article 559 is applicable because the owner was unlawfully deprived.

BE: F lost her diamond ring in a hold-up. Later on, this ring was an object of a public sale of one pawnshop. Can F recover the ring from the buyer in that public sale?

SA: Yes, Article 559 provides that even if the buyer is in good faith so long as the owner is willing to reimburse the buyer of the price paid in that sale.

refrigerator. Sun Brothers was engaged in the business of selling refrigerator. Sun Brothers sold a

ref to Lopez on installment basis. As stipulated,

Sun Brothers reserved ownership

until

full

Note: Again in 1505, there is no right to recover as long as the buyer bought it in good faith from a merchant’s store, there can be no recovery as a matter of right.

payment. Lopez only paid P300 out of P1,500. The balance to be paid on installment. Lopez then sold the ref to Velasco.

Q: How transfer of ownership is effected? A: Under the law, as far as things are
Q: How transfer of ownership is effected?
A: Under the law, as far as things are concerned, it
is effected by delivery:
Q: Would Velasco acquire ownership?
(a)
Actual
A: No because Article 1505 provides that the buyer
acquired no better title than what the seller had.
However, Velasco was the owner of a store. On
the next day, Velasco sold the ref to Ko Kang Chu
who paid in full. When Sun Brothers learned this
transaction, it filed an action to recover the ref from
Ko Kang Chu.
(b)
Constructive
There can be no transfer of ownership without
delivery.
Q: Is it correct to say that every time there is
delivery, the buyer acquires ownership upon
delivery?
Q: Can Sun Brothers recover the ref from Ko
Kang Chu by reimbursing the price?
A: Not necessarily. This is not an absolute rule.
There are kinds of sale where despite delivery the
buyer does not acquire ownership upon delivery:
A: SC Said no. Article 1505 provides that the
ownership of the buyer who bought the thing from
a merchant’s store and he bought it in good faith is
absolute in character. Article 559 does not apply
because Sun Brothers was not unlawfully deprived
(1) Conditional Sale – ownership is reserved by
the seller such that despite delivery,
ownership does not pass.
of the ref and the ref was neither lost. 559 will
apply if the owner was unlawfully deprived
(Example: the thing was lost or stolen). Under 559
he can recover by reimbursing the buyer who
bought the thing in good faith. He has to reimburse.
Q: So when would the buyer acquire
ownership in conditional sale?
A: Not upon delivery but upon the happening of
the condition which is normally the full payment
of the price.

(2) Sun Brothers Case

BE: The painting owned by F was stolen from

(3) Sale on Trial / Sale on Satisfaction / Sale on

her and later she noticed the painting in the

Approval

upon delivery,

even

if

there is

room of B. When asked how he acquired the

actual delivery there

is

no

transfer of

painting, B said he bought it from a gallery

ownership at the time of delivery.

auction. Can the owner F recover the painting from B?

Q: When would the buyer acquire ownership?

SA: The first consideration here is the nature of the gallery auction. Is it a public sale or not? Some suggested answers of the UP Law Center would claim that a gallery auction is not a public sale. Atty. Uribe: I can agree that some gallery auctions are private – “by invitation”. Thus, in that auction I would definitely agree, hindi yan public sale. If it is not a public sale then the owner who was unlawfully deprived can recover that property even without reimbursement. If the auction sale is

A: From the moment he signifies his acceptance or approval of the thing.

Q: What if he did not signify his acceptance or approval? May he be considered to have accepted and therefore ownership may be considered to have passed to him?

A: Yes. 2 Scenarios:

  • (a) There may be a period agreed upon by the parties within which the buyer would have to

decide. Even if he failed to signify his acceptance by the mere lapse of the period, he is deemed to have accepted (impliedly accepted) hence, ownership passes to him.

  • (b) Even before the lapse of the period, he may be considered to have accepted if he did an act wherein he would be considered to have adopted the transaction then ownership

Facts: This pertains to

a sale of American

Jurisprudence to Atty. Tabora. It was a sale on installment basis. Upon delivery or on the day the books were delivered to the office of Atty. Tabora,

the entire block where Atty. Tabora’s office was located (in Naga City) was burned. The office including the books was burned. Atty. Tabora refused to pay the balance. Lawyers’ Cooperative

passed to him. Example: Even if he has 10 days within which to decide but on the 2 nd day, he sold the car to another. Obviously, he is deemed to have accepted the thing because he did

an

act

which

is

inconsistent

with

the

filed a case. Two defenses were raised by Atty. Tabora: (1) Res perit domino – there was a stipulation in the contract that Lawyers’ Cooperative will retain ownership over the books until full payment. When the books were lost, no

full payment so Atty. Tabora was not yet the owner.

ownership of the seller like he donated or destroyed the thing.

Hence, Lawyers’ Cooperative should bear the loss.

Q: Is this argument correct?

  • (c) If there is no period agreed upon, the law says if he did not signify his acceptance he will be considered to have accepted after the lapse of a reasonable time. Reasonable time will depend on the circumstances of the sale, purpose of the sale, nature of the thing sold. Example: Perishable goods.

A: SC Said no. Although there was a stipulation that Lawyers’ Cooperative retains ownership over the books until full payment, there was another stipulation in the contract which states that the risk of loss shall pertain to the buyer from the time the books are delivered whatever may be the cause of the loss.

So with that stipulation, that is one of the Sale or Return exceptions. Q: Ownership passes
So
with
that
stipulation,
that
is
one
of
the
Sale or Return
exceptions.
Q: Ownership passes upon delivery?
A: Yes. However, the buyer is given the right to
revest the title back to the seller normally within a
certain period. Example: Clauses in subscription
magazine which says that you can return within 30
days without payment.
2.
Title was reserved
by
the
seller
only to
secure the payment of the price by the buyer
Q: But even assuming that there was such no
stipulation under the contract, would Atty.
Tabora have to bear the loss?
BE: A car was sold for P150,000. P75,000 paid
upon the execution of DOS. The balance
payable on a monthly basis. P75,000 was paid.
The car was delivered to the buyer. However,
before he could pay the balance, the car was
destroyed due to a fortuitous event or was
burned xxx Can he still be compelled to pay the
balance?
A: Yes because it would fall into the other
exceptions under 1504 that when the title was
reserved by the seller only to secure the payment
of the price by the buyer, then by law, risk of loss
will already be with the buyer. This title of the seller
is known as “Security Title” and therefore by law
xxx the buyer will bear the loss.
3. Delay in the Delivery
SA: Yes. Upon the delivery of the car to the buyer,

there being no retention of ownership by the seller. (Note: Wala sa facts na na-retain ng seller and ownership). Therefore, ownership passed to the buyer. Under the principle of res perit domino – Article 1504 – the owner bears the loss and hence it can be compelled to pay the price.

G.R.: Res perit domino – 1504. Note: Determination of when ownership passed is

important because if at the time of the loss, the buyer is not yet the owner, as a rule, the buyer will not bear the loss like in sale on approval and he has 10 days within which to decide and the thing was lost through a fortuitous event within the 10- day period without fault on his part, the seller will bear the loss.

When there is delay in the delivery due to the fault of one of the parties, whoever was at fault will bear the loss. Note that either buyer or seller may be at fault.

Example 1: The

buyer

and the

seller may have

agreed that the goods are to be obtained by the buyer at the warehouse of the seller on a specific date. On the date agreed upon, the seller demanded the buyer to get the goods. Despite such, the buyer failed to get the goods. On the next day, the warehouse was destroyed due to

fortuitous event.

Q: Who is the owner at that time?

 

A: The seller but there was delay on the part of the

buyer hence bear the loss.

under 1504 it

is

the buyer

who

will

Exceptions:

1. Lawyers’ Cooperative vs. Tabora

Example 2: The seller himself maybe the one at fault. Thus, he is in delay in delivering the goods to the buyer.

BE: If a thing is sold to 2 or more persons, what would be the effect of:

  • (a) The first buyer who registered the sale

Q: Why would this be an exception to the res perit domino rule?

A: Ang premise dito, the ownership has already passed to the buyer but the goods are still with the seller. Can this happen? Yes, because of constructive delivery. If there was constructive delivery, ownership passes to the buyer but physical possession is still with the seller. They may have agreed this time that the seller will be the one to deliver the goods to the buyer at a certain date. When the date arrived, despite demand from the buyer, there was no delivery on the part of the seller. Even if the goods are destroyed the next day due to fortuitous event, take note ang owner ay ang buyer na but who will bear the loss? The seller because he was in delay in delivering the goods.

with knowledge of the 2 nd sale.

  • (b) The second buyer who first registered the sale with knowledge of the prior sale.

Who would have a better right?

SA: (a) In the first scenario – the first buyer who registered the sale with knowledge of the second sale would that make him a registrant in bad faith? No. Yung knowledge would pertain to the knowledge of the prior sale in order for him to be a bad faith registrant. Eh una naman syang buyer eh so even if he registered, it would not make him a bad faith registrant. (b) In the second scenario – the buyer there is in bad faith. He has knowledge of the prior sale. Hence, he has no right.

Q: If a person bought a thing without knowledge of the prior sale, does that mean
Q:
If
a
person
bought a thing without
knowledge of the prior sale, does that mean he
is a registrant in good faith?
DOUBLE SALE (ARTICLE 1544)
BE: F sold a registered parcel of land to R who
did not register the sale. Thereafter, F sold the
very same parcel of land to C who registered
and obtained a new TCT in his name. Who
would have a better right?
SA: Atty. Uribe: I fully agree with the UP Law
Center’s answer. It depends on whether or not C
registered the sale in good faith. Registration is
only one of the requirements good faith is equally
an important requirement.
A: Not necessarily because from the sale he may
have acquired knowledge prior to the registration.
What is required by law is not being a buyer in
good faith but a registrant in good faith. Pwedeng
at the time of the sale xxx the buyer had no
knowledge na nagkabentahan na pala nung una
but after 2 months nung magpaparegister na, the
buyer had the knowledge of the prior sale and
therefore he will be a registrant in bad faith.
Bautista vs. Sioson
Note:
In
1544 (double
sale),
as
to
which rule
applies will depend on the thing sold if movable or
immovable.
Facts: The owner A sold a registered land to B who
did not register and neither did B take physical
possession because after the sale they executed a
lease agreement in which B was now the lessor. A

Q: If the thing is sold twice, who would have the better right? A: If movable, the buyer who first took possession in good faith will have the better right. If immovable, the buyer, who first registered in good faith, will have the better right. If there was no registration, it will be the first who took possession in good faith. If no possession in good faith, the buyer who has the oldest title in good faith. Even the 1 st buyer is required to be in good faith. Obviously, the first buyer would have the oldest title. Yung good faith ditto obviously would not pertain to absence of knowledge of the 2 nd sale kasi syempre 1 st buyer sya. He is nonetheless required to have bought the thing in good faith. Good faith means that he had no knowledge of the defect of the title of the seller.

continued to be in possession of the land. After the sale and the contract of lease, A sold the land to C, this time C took physical possession. Can he do that? Yes. Kasi lessee sya eh, hence, he can transfer possession to the 2 nd buyer. Who between B and C would have a better right? (C did not also register the sale)

SC Said that B would have a better right because when he executed a lease agreement with A, he is in contemplation of law in possession which is legal possession over the thing and thus making him a possessor in good faith. Kay C, physical possession nga pero pangalawang possession lang. Yung legal possession was with B.

Note: This decision was criticized because some authors said that it should be actual possession but the SC said that legal possession would suffice.

Warning: Please be careful when you recite – you

Carumba vs. CA

 

register the sale not the land.

Facts:

Sale

of

land

to

B

who

took

physical

possession

but

did

not register.

He

is

the first

buyer. However, the seller (A) is a judgment debtor in one case to a certain creditor named C. The land became the subject of an execution sale. The buyer became C who registered the sale.

Note: Philippine law does not only require actual delivery – constructive delivery may result in transfer of ownership.

2. Constructive – by the

execution of a public

Q: Who would have a better right between C and B (C had no knowledge of
Q: Who would have a better right between C
and B (C had no knowledge of the sale)?
A: SC Said → B because this land was not
registered under the Torrens System. 1544 would
not apply to unregistered lands.
instrument if the contrary intention does not appear
on the document. By the mere execution of the
public instrument that is equivalent to delivery.
Hence, ownership passes to the buyer.
Kuenzle & Streiff vs. Macke & Chandler
Q: How would you know that the land is
registered under the Torrens System?
A: Pag may
documents
OCT or TCT
na.
Pero kung ibang
lang
like
tax
declaration,
it
is
not
considered registered.
Q: But C registered the sale, does it mean that
it is registered under the Torrens System?
A: No because there are also systems of
registration of sale of land in which the lands are
still considered as unregistered lands. Sa ibang
libro. Hindi libro under the Torrens System.
Facts: The original owner here Stanley and
Griffindor (parang Harry Potter ☺) and the property
involved here are fixtures of a saloon. Macke and
Chandler are judgment creditor of Stanley and
Griffindor. Because of a judgment in favor of
Macke and Chandler, the sheriff levied upon these
properties which was still in the possession of
Stanley and Griffindor. The properties under
execution were questioned by Kuenzle and Streiff.
Kuenzle and Streiff claimed that these things were
sold to them prior to the levy. If they claimed that
the properties were sold to them, the properties
Q: If 1544 will not apply, who has the better
right?
A: B because there was delivery to him which was
actual delivery and hence under the general rules
on delivery, ownership passes to the buyer and
when ownership have passed to the buyer, when
the property was sold in an execution sale, ano
makukuha ng buyer sa execution sale? Wala.
He merely steps into the shoes of the judgment
debtor at the time of the sale then he did not
acquire ownership by virtue of that sale.
should be in their possession. Take note that
Stanley and Griffindor were still in possession of
the goods physically. Hence, there was no actual
delivery.
Held: In order that ownership would pass, it has to
be in a public instrument if that would be by
constructive delivery.
OBLIGATION TO DELIVER THE OBJECT OF
THE SALE
Note: The execution of a public instrument may be
equivalent to actual delivery if the contrary intention
does not appear on the DOS. Kasi pwedeng
notarized but it is clear in the contract that
ownership will not pass until full payment of the
price then that is not equivalent to delivery. The
intention is clear.
Determine the subject matter if it is a thing
or a right because there are different modes of
delivery as to thing and as to right.
Kinds of Constructive Delivery
Things
Kinds of delivery of things as a consequence of
sale known as “tradition” – under the law:
1. Delivery of the Keys – of the place where the
goods are located like a warehouse.
Prof. De Leon: this also called as symbolic
delivery.

1. Actual Delivery / Material Delivery / Physical

Delivery / Real Delivery – the thing is in the possession and control of the vendee. Take note “control”. Take note “to the vendee”.

Q:

What if

the

thing

was

delivered to a

3 rd

person? A: Jurisprudence – SC said yes, there maybe

actual delivery if the third person has authority to

receive from the vendee.

Thus, making him an

agent of the vendee and that would still be actual delivery.

2. By Mere Consent or Agreement of the Parties if at the time of the sale, possession to the goods cannot be transferred to the buyer. There must be a reason why it cannot be transferred at the time of the sale. This is also known as tradition longa manu. Example 1: The thing was the subject matter of a lease with a 3 rd person until the expiration of the lease, the thing cannot be delivered.

Example 2: The thing was the subject matter of commodatum. As a rule, period of commodatum has to be respected.

3. Brevi Manu – this is a kind of constructive delivery because the buyer was already
3.
Brevi Manu
this
is
a
kind of constructive
delivery
because
the
buyer
was
already
in
possession of
the
thing
sold
at
the
time
of
the
perfection of the sale so he will continue to be in
possession after the sale, no longer as a lessee
but this time as the owner. So dati lessee lang sya
that is why he was in possession or maybe
depositary lang sya or maybe he was the agent at
the time prior to the sale.
Example: Sale of shares of stocks → the vendee
may not always have the right to exercise his rights
under the shares of stocks. Concretely, if there is a
stockholders’ meeting, the books of the corporation
will be closed for 30 days before the meeting.
Thus, if the sale occurred when the books are
already closed, no one will be recognized except
those registered owners. So if you are the buyer of
those stocks, you can only use your right with the
consent of the vendor.
4.
Constitutum Possessorium – the seller will
continue to be in the possession of the thing after
the sale but no longer as an owner but in another
capacity like lessee.
RULES ON SALE AS TO QUANTITY / QUALITY
OF THE THING SOLD
Bautista vs. Sioson
Because a lease agreement was entered into by
the buyer and seller after the sale then the buyer
became the lessor and the seller became lessee.
Therefore, the lessee would continue with the
possession no longer as an owner.
Q: In a sale involving 1,000 pairs of shoes with
a specific design as agreed upon. The seller
delivered 1,200 pairs of shoes instead of only
1,000. Can the buyer reject everything?
A: No. He has the right to reject only the excess.
Reject the 200 but he can be compelled to accept
the 1,000.
Q: What if pursuant to their agreement the
seller delivered the goods to a common carrier.
Upon delivery of the goods to a common
carrier, would that result in transfer of
ownership immediately? (This is important
because in case the goods were destroyed
even due to a fortuitous event while in transit,
who will bear the loss?)
Q: What if instead of 1,000, 800 was only
delivered?
A: The buyer cannot be compelled to receive 800
because partial performance is non-performance.
You cannot compel the creditor to accept partial
fulfillment as a rule because (1) it can be a subject
of a stipulation that there can be partial delivery.
Other Exceptions:
A: If delivery to a common carrier is delivery to the
buyer, then ownership passes to the buyer upon
delivery to the common carrier. That is the general
rule.
Exceptions:
(2) When obligation pertains to obligation which
is partly liquidated and partly unliquidated. The
debtor can compel the creditor to accept the
portion which was already liquidated.
(3) When the obligation is subject to different
terms and conditions.
(1) If stipulated in the DOS that despite delivery
to common carrier ownership will not pass to
the buyer because ownership will pass upon
full payment.
(2) Even if DOS does not provide for such
stipulation, the seller may have obtained a
bill of lading which provides that the goods
are deliverable to the seller himself or the
agent of the seller.
Q: The shoes per pair is P1,000. The seller only
delivered 800 pairs out of 1,000 pairs. The
buyer accepted. It turned out that the seller can
no longer deliver the balance (200 pairs). How
much can the buyer be compelled to pay? 800 x
P1,000?
Rights
Kinds of Delivery of Incorporeal Property /
Quasi – Tradition:
1.
Execution of Public Instrument
2.
Placing the Title of Ownership in the Possession
A: Not necessarily. You have to make a distinction
as to whether the buyer was aware that the seller
could no longer deliver the balance or when he
accepted, he was not aware. If he was aware that
the seller could no longer deliver the balance then
he can be compelled to pay at the contract rate so
800 x P1,000 = P800,000. If he had no knowledge,
he can be compelled to pay only the fair value. Fair
value siguro non P700 each instead of P1,000.
of Vendee – a right would normally be covered by
a certificate.
Example: delivery of the certificate of shares of
stocks.
3.
Use
by
the
Vendee
of
His Rights
with the
Q: The obligation to deliver 1,000 cavans of
Milagrosa rice. Instead of delivering 1,000
cavans of Milagrosa, the seller delivered 1,100
cavans of both Milagrosa and Burmese rice.
May the buyer reject everything?
Vendor’s Consent
A: Yes, if the goods are indivisible. Meaning each

sack of rice, Milagrosa and Burmese rice were

mixed.

However,

if

it

is clear

that per sack

it

is

(b)

The other one is even if the entire area was delivered as stated, proportional reduction / rescission may be a remedy if a part of the land delivered is of inferior quality than that stipulated by the parties. Example: Sale of rice field, it turned out about 20% of the land is swamp, so hindi pwede taniman. Hence, proportional reduction is possible if he still would want the land or rescission would be a remedy because the area of inferior quality is more than 10% of the total land area unless he can prove that he would not have bought the land had he known a portion of the land is of inferior quality.

Milagrosa rice and the 100 sacks, it is clear that

those are Burmese rice that would not be considered as indivisible. He can be compelled to accept 1,000 sacks Milagrosa and he has the right to reject 100 sacks Burmese rice.

SALE OF REALTY

Q: Sale of a parcel of land. Price agreed upon is P1M. More or less 100 sqm. The actual area delivered by the seller was only 95 sqm. What are the remedies of the buyer?

A: (1) Specific performance – would be a remedy if

the seller is still in the position to deliver the balance. Siguro yung katabing lupa sa seller din, hence, he can afford to give additional 5 sqm. (2) Q: If specific performance is not possible, is proportional reduction a remedy?

PLACE OF DELIVERY

Read 1524, 1525 and 1198 The seller delivered the goods to the place of business of the buyer. If the buyer refuses to receive the goods, the buyer will be considered in

A: It depends on whether the sale is considered as a sale with a statement of
A: It depends on whether the sale is considered as
a sale with a statement of an area of a rate of a
certain measure or if it is a lump sum sale.
(a)
If lump sum – even if the area delivered is
less than the area stated in the DOS, there
delay and therefore will be liable to the seller
because of unjust refusal.
is
no right
to demand
for the
proportional
reduction of the price.
Q:
Pero
pag
sumobra – 120 sqm na deliver, can the
Q: May the buyer be considered in delay for his
refusal to accept if there is no place stipulated
in the contract?
seller
demand
for
the increase
of
the
A: It depends on the kind of thing. Determine if it is
price? A: If lump sum sale, no.
determinate or generic. If the thing is determinate,
(b)
If the sale was based at a rate of a certain
price per unit of measure like it was so clear
in the contract that the land is being sold at
the law provides that it will be the place where the
thing is located at the time of the perfection of the
contract.
P10,000 per sqm so P10,000 per sqm x 100
= P1M, the remedy of proportional reduction
Q:
What
if
the
object of
the sale
is
a
generic
of
the
price
or
accion
quanti
minoris is
thing?
applicable.
(3) Q: Under the facts, 95 sqm was delivered,
would rescission be a remedy?
A: Seller’s place of business or residence.
Note:
If
there
is
no
stipulation
when
to
be
delivered,
the
seller
cannot
be
compelled
to
deliver.

A: As a rule no because rescission would only be a remedy if the area lacking is more than 10% of that area agreed upon. So kung 100 sqm, dapat 11 sqm or 15 sqm ang kulang, so out of 100 kung 85 lang ang na-deliver, then rescission is a matter of right.

Q: What if at the time of the perfection of sale, though the thing is determinate, it was on board a ship while in transit. Where will be the place of delivery?

Q: But kung 95 lang ang na-deliver meaning the area lacking is less than 10%, may rescission be a remedy?

A: Depending on the shipping arrangement agreed upon by the parties.

A: Yes, by way of exception

F.O.B. – Free on Board

  • (a) If

the buyer

can prove

that he

would

not

C.I.F. – Cost, Insurance, Freight

have bought the thing or land hand he known that is less than 100 sqm. It is a

F.O.B. and C.I.F are rules of presumption which

So in a C.I.F. arrangement, it is only presumed that

matter of proof.

 

would have to give way to the real intention of the

This is consistent with a characteristic of rescission under 1191, that in order for rescission to prosper – the breach must be a fundamental breach. Kung kulang lang ng 5sqm / 10 sqm at malaki yung area, there can be no rescission as a matter of right.

parties. So after all, the F.O.B. or C.I.F. arrangements do not really determine the place of delivery, they only make rules of presumption.

the place of delivery is the port of origin.

In a F.O.B. destination, it is only presumed that the point of destination is the place of delivery.

  • 1. Obligation to transfer

  • 2. Obligation to deliver

Q: What really determines the delivery? place of Obligation which can be Waived: 1. Obligation to
Q: What really determines the
delivery?
place
of
Obligation which can be Waived:
1.
Obligation to warrant the thing
A: SC said this indication as to the intention of the
parties as to the place of delivery is the manner
and place of payment. If there is an agreement as
to where and how the price is to be paid that would
be the place considered for purposes of delivery
and therefore for transfer of ownership.
Kinds of Warranties under the Law:
1.
Express
2.
Implied
Concretely, in one case which was C.I.F.
arrangement – it was stipulated that the seller can
demand the payment of the price upon the arrival
of the goods at the port of destination.
(Supposedly, in C.I.F. arrangement, the place of
delivery is the port of origin). SC said the place of
delivery because of the stipulation is the port of
destination. It is where the payment is to be made.
1. Express – any affirmation of fact or any promise
by the seller relating to the thing, the natural
tendency is to induce to purchase the thing.
Requisites:
(a)
There is an affirmation of fact
(b)
The fact must pertain to the thing either to
the quality, character or title of the thing
Any
other
matter may
not
be considered as an
express warranty.
Q: What was the purpose of fixing the delivery
arrangement as a C.I.F. but the place of delivery
is the port of destination?
A: SC said the C.I.F. arrangement may have been
agreed upon only to fix the price. Example: They
fixed the price for P2M that would include the
freight, insurance or cost but still the place of
delivery is the port of destination.
The use of the words / terminologies is not
conclusive as to whether or not there is an express
warranty.
Example: “I guaranty / warranty you that you will be
happy if you buy this car at P100,000”→ this does
not result in an express warranty
In
another
case,
F.O.B.
destination so
based on the presumption the place of delivery will
be the port of destination xxx the seller would have
to bear all the expenses for the delivery of the
goods up to the port of destination. However, it was
stipulated in the contract that the seller may
demand for the payment of the price by mere
Again, if the affirmation of fact pertains to the
quality of the thing, it is an express warranty.
Example: These 10 sacks of fertilizer would result
in 200 cavans of rice.
The statement of the seller’s opinion is not as a
rule considered an express warranty.
Example: “This is the best piña cloth” → it may turn
out that there are better piña cloth.
presentation of the bill of lading (BOL).
As long as the seller is not an expert on that field,
Q: Where do you get the BOL?
that would
be
treated merely as an opinion and
A: At the port of origin. Hence, even in the port of
origin he can already present the BOL to the buyer
there can be no liability for breach of an express
warranty.

and hence compel the buyer to pay the goods. Again SC ruled in that stipulation, the place of delivery is the port of origin. And the purpose of the F.O.B. arrangement, it was only agreed upon in order to fix the price meaning that the seller will still have to bear the expenses for the transportation of the goods up to the destination although the buyer can already be compelled to pay the price even at the port of origin.

So consider always the manner and place of payment which is determinative as to the place of delivery.

Read 1582

Obligations which cannot be Waived:

BE: “A” sold a land to B for P1M in Antipolo. As agreed upon P100,000 will be paid upon the signing of the DOS. The balance will be paid within 30 days from the time the occupants (squatters) of the land are evicted. It was so stipulated that if within 6 months, the squatters have not yet been evicted, the seller should return the P100,000. Another stipulation states – within the 6-month period, the value of the land doubled. Despite the filing of an eviction suit by the seller and the lapse of the 6-month period, the squatters were still occupying the land. The seller offers to return the P100,000 to the buyer. The buyer refused to accept the P100,000 and told the seller “never mind even if the squatters are still there. I will still buy the

land”. So the buyer offered to pay the balance P900,000 and demanded that a DOS be executed by the seller. The seller refused to

accept the P900,000. What he did is to file an action to rescind the contract. Would the action prosper?

SA: 2 answers:

Example: This warranty against eviction would include the warranty that the buyer from the moment of the sale have and enjoy the legal and

peaceful possession over the thing sold.

He may be deprived of the thing by a 3 rd person even if he would not lose ownership.

(1) If the answer is based on rescission, the

action will not prosper because rescission may only be invoked by the aggrieved party. The seller is not an aggrieved party. (2) However, under 1645 if the obligation is subject to the happening of a certain condition, Atty. Uribe: Actually, here the performance of the obligation is subject to the happening of the condition. If the condition did not happen, the buyer would have 3 options:

Q: When would this happen? A: Maybe the 3 rd person has a better right to the possession of the thing. Maybe there was a lease agreement entered into which has to be respected by the buyer. Note: A contract of lease may last for 99 years.

Q: If there is a claim or a 3 rd person claims a right over the thing bought, does it mean that the seller will already be liable for breach of warranty against eviction?

(a) Not to proceed with the contract, which is rescission. A: No because there are requisites
(a)
Not to proceed
with the contract, which is
rescission.
A: No because there are requisites which must be
complied with.
(b)
He may waive the condition (eviction of the
squatters) and proceed with the sale → this was
the remedy chosen by the buyer in this case.
Requisites:
1. There has to be final judgment depriving him of
(c)
He can treat the non-happening of the condition
as a breach of warranty and claim damages.
Obviously,
the
buyer
chose
option
(b)
and
therefore the seller cannot rescind the contract.
such thing either wholly or partially. In other words,
a case was filed by a 3 rd person against the buyer
which resulted in a favorable decision as to the
plaintiff resulting in the deprivation of the property
by the buyer.
2. Implied –
Prof. De Leon: because of this implied warranty, it
cannot be said that Philippine law does not adopt
caveat emptor “buyer beware”. (Faye’s Caveat ☺:
Note:
For
the
seller
to
be
liable, he
must have
been notified of this case against the buyer. In fact,
he should be impleaded as a co-defendant in the
action because:
Please check the book of Prof. De Leon regarding
this statement. Thanks ☺)
(a) The seller should have an opportunity to
defend his title.
(b)
The
seller
would
normally
have
the
Even
if
there
is
no
stipulation
as
to
these
warranties, the law itself would provide for these
warranties and hence if there are hidden defects
he would have remedies under the law or even if
he was deprived of the thing he bought he would
have a remedy against the seller. Hence, it is not
knowledge of the defenses as to the
property which is sold. If there is one
person who can mediate the claim of the
plaintiff between the seller and the buyer
normally it would be the seller.

correct

to

say

that

Philippine law has

adopted

Q: If there is a decision in favor of the plaintiff

caveat emptor. But there are certain instances

(3 rd person) against the buyer in the trial court,

when there

would

be

no

such implied warranty

is it required that the buyer should appeal in

against hidden defects. There may be warranty as to title or against eviction but there is no warranty

order for him to be able to hold the seller liable?

against hidden defects under certain circumstances.

Warranty Against Eviction / Title

Q: If the seller was able to transfer ownership

to the buyer may the seller nonetheless be held liable for breach of warranty against eviction?

A: Yes. These are 2 different obligations: the obligation to transfer ownership and the obligation to warrant the thing.

A: No because the party who should appeal if he is

interested should be the seller. If he does not want to be held liable, he should appeal the case up to the SC. If the decision becomes final, he may be held liable for breach of warranty.

  • 2. Deprivation must be either:

(2.1) Based on a 3 rd person’s prior right over the thing prior to the sale or (2.2) Based on an act after the sale but imputable to the vendor.

Concretely, the reason for the deprivation maybe because of non – payment of real property taxes by the seller and not the buyer. Example: If land was sold in an execution sale because of the failure of the seller to pay real property taxes this can be the basis of liability for breach of warranty.

Based on an Act after the Sale but Imputable to the Vendor

Example: There was a first sale to A and then a 2 nd sale to B. Under the law on double sale, B have a better right if this is a sale involving immovable, if he was the first one who registered the sale in good faith.

fact, if there is a waiver but the vendor is in bad faith, the waiver is void and hence he can be held liable for everything under the law. If there was no waiver and the vendor is in bad faith, again he will not only be liable for expenses xxx but also for damages, cost of suit xxx everything!

Q: If the seller was aware of the defect of his title at the time of the sale, hence, he is a seller in bad faith?

A: Not necessarily. He may be aware but he informed the buyer of such defect in the title and hence he cannot be considered bad faith vendor. Even if he did not inform the buyer but if the buyer was already aware of the defect.

The first buyer even if he was in possession maybe evicted from such property by the 2 nd buyer because the 2 nd buyer would have a better right. This is based on an act of the vendor after the sale or after the 1 st sale hence, there can be a liability for breach of warranty against eviction.

Q: Why would a buyer buy a thing if the title of the seller has defect?

A: Maybe because the buyer needs the thing for his business. If I am the vendor
A: Maybe because the buyer needs the thing for
his business.
If I am the vendor and I know there is a defect in
my title, I will ask the vendee to execute a waiver.
Q: If during the sale a 3 rd person was already
occupying the land by way of adverse
possession so in an open, continuous xxx for 7
years under the color of title. But after the sale,
the buyer did nothing. And hence, the
occupants claiming a right or ownership was
able to complete the prescriptive period of a
minimum of 10 years. Thus, if a 3 rd person
would be able to deprive this buyer of
ownership over the thing because of
acquisitive prescription, can the buyer hold the
vendor liable for breach of warranty?
Q: Thus, if there is such a waiver and assuming
the vendor acted in good faith, can the vendor
be held liable for breach of warranty?
A: It depends on the kind of waiver.
(a)
If waiver consiente – the buyer executed a
waiver without knowledge of the defect in
the title of the seller. Also, the vendor does
not know of the defect. The only liability of
the vendor for breach of warranty against
eviction is the value of the thing at the time
of eviction.
(b)
A: No because it was his fault that the 3 rd person
was able to complete the period for acquisitive
If the waiver is intentionada – when the
vendee executed the waiver with
knowledge in the defect of the title of the
seller, hence, he knew of the possibility of
prescription. Had he done something to interrupt
the running of the prescriptive period then he would
not have been deprived of the ownership of the
thing.
being evicted and nonetheless bought the
thing the vendee cannot hold the vendor
liable.

3. There should be no valid waiver

WARRANTY AGAINST HIDDEN DEFECTS Requisites:

4. The action to hold the vendor liable should be filed within the period prescribed by law.

1. The defect must exist at the time of the sale. If the defect started after the sale there can be no such liability.

Q: If indeed the seller can be held liable for breach of warranty against eviction, what will be the extent of liability of the vendor?

A: The vendor can be held liable for the value of

the thing at the time of the eviction, income or fruits, cost of suit, expenses of the contract and damages and interest.

Damages may only be

claimed if

the

seller

is

a

seller in bad faith. As long as he sold the thing in

good faith, he cannot be held liable for damages regardless of whether there was a waiver or not. In

2.

The

defect must be hidden.

If

the

defect is

patent and the buyer nonetheless bought the thing then he can no longer hold the seller liable. If the seller is not aware of the hidden defects, he can be held liable. If he was aware, his liability will

be greater because that makes him a bad faith seller.

Q: Even if there is such a hidden defect, is it

possible

that

the

vendee

cannot

hold

the

vendor liable despite the fact that there was

hidden defect even if he was not informed because maybe the seller was not aware?

A: Yes, he may not be able to hold the seller liable if he is an expert on the thing. He is expected to know the defect.

If the cause of the loss of the thing was a fortuitous event, he can only be held liable for the price less value. Example: If price is P100,000 and the value at the time of the loss is P80,000. He can be held liable for P20,000 (P100,000 - 80,000 = P20,000)

3. The defect must result in the thing being unfit for the purpose of the buyer or at least it diminish the fitness of the thing such that the buyer would not have bought it at the price had he known of such defect.

Q: If the thing which has a hidden defect was lost or destroyed, can the vendee hold the vendor liable for this breach of warranty? Does it matter if the loss was due to a fortuitous event or maybe the loss was due to the fault of the buyer himself, nonetheless, can he hold the vendor liable?

Q: How would defect be proven if the thing was lost or destroyed due to fortuitous event?

A: It is a matter of proof. The proof may have been

obtained already prior to loss. Pwedeng pina – examine na nya sa expert so meron na syang evidence of the defects prior to the loss.

If the cause of the loss was fortuitous event or fault of the vendee and the buyer was not aware of the defects, is it possible that the

vendor may

not

be

liable even for

a single

centavo? A: Yes. The vendee can hold the vendor liable for breach of warranty against hidden
centavo?
A: Yes. The vendee can hold the vendor liable for
breach of warranty against hidden defects even if
the thing was lost due to fortuitous event or due to
the fault of the vendee himself because of the
hidden defects. But of course, if the cause of the
loss was the defect itself, the liability is greater than
if the cause of the loss was a fortuitous event or
fault of the buyer.
A: Yes, in this scenario because he only had the
obligation to return the price less value at the time
of the loss. If it happens that the value is greater
than the price, the vendor has no liability even
there is hidden defect.
ANY CHARGE OR NON – APPARENT
ENCUMBRANCE NOT DECLARED OR KNOWN
TO THE BUYER
If there would be a problem here as to the extent of
the liability of the vendor, he should first consider
the cause of the loss, maybe it was lost due to the
defect itself or lost through fortuitous event or lost
through the fault of the vendee. After that, he
should determine whether the vendor was aware of
the defects or he was not aware. Again, if he was
aware, damages may be recovered. If he was not
aware, he may not be held liable for damages
unless he can only be held liable for interest.
Q: Would there be an encumbrance over an
immovable which is a form of easement or
servitude?
A: An example of this is a road right of way.
Q: If the buyer bought the land which turned
out to have a road right of way in favor of a 3 rd
person,
can
he
claim
breach
of
warranty
against
any
charge
or
non
– apparent
encumbrance?
A: Of course there are requisites:
(1) The encumbrance or easement or burden or
the
road
right
of
way
has
to
be
non
apparent.

If the defect was the cause of the loss, the vendor would be liable for the return of the price, not only the price less value but also to refund the expenses and damages because the vendor was aware of the defects.

Q: May a road be non-apparent?

A: Yes, like in rural areas. In rural areas, yung

 

road right of way mga

putik

lang

yan and

If

the vendor

was

not

aware of the defects,

he

normally the road will only be used by the person

cannot be held liable for damages but

he

would

having this right during harvest period. Harvest

only be held liable for the price.

period is once every 6 or 3 months. In

the

meantime, during the 3 or 6 – month period, puro

Q: The price may be higher or lower than the

cogon

yan

and

hence the road maybe non –

value of the thing?

apparent.

 

A: Yes. It does not matter. It may be higher or

lower. The thing may depreciate or appreciate or

maybe the thing was sold at a price less than the

value and therefore

at

the

time

of

the

loss, the

value is still greater than the price but he is only

obliged to return the price.

If it is apparent, no liability.

Q: If the encumbrance is non – apparent does that necessarily mean that the vendor can be held liable?

A: No because the encumbrance may be known to the buyer. This liability would arise only if the encumbrance is not known to the buyer.

2.

The seller manifested that the thing would be fit for the purpose and the buyer relied on such representation of the seller.

Q: If he was not aware of this encumbrance and the encumbrance is non – apparent, vendor will now be liable?

A: Not yet because the encumbrance may be registered or annotated at the back of the title – negligence of the vendee so he cannot hold the vendor liable.

Q: If there is an encumbrance, what are the remedies of the buyer?

A: (a) He can seek for the reduction of the price.

Note:

If

the thing

is

sold

under the trade name

there can be no warranty of fitness for a particular purpose.

WARRANTY OF MERCHANTABILITY

It pertains to the fact that it is fit for the general purpose. If the thing was sold by description or by sample, it is considered that there is such a thing as warranty of merchantability.

SALE OF ANIMALS WITH DEFECTS – RULES:

Q: Can he rescind the contract? A: (b) Yes but the law requires that the action
Q: Can he rescind the contract?
A: (b) Yes but the law requires that the action for
rescission must be filed within 1 year from the date
of the contract. If after 1 year, no more rescission.
1. The defect is a redhibitory defect – it is such kind
of defect that even by examination of expert it
cannot be discovered.
(c) If he became aware more than a year, he
Q: If one of the animals has redhibitory defect,
can the buyer rescind the entire contract
pertaining to all the animals?
may
file
an
action
for
damages,
But
the
law
requires that the action for damages has to be filed
within 1 year also but from the time of the
discovery
of
encumbrance.
If
he
filed
it
for
example, after 2
years
from
discovery
no
recovery of damages.
A: G.R.: No. He can only rescind the contract
pertaining to the animal with redhibitory defect. He
cannot rescind the entire contract pertaining to all
animals.
Exception: If he can prove that he would not have
bought the others had he known the defect of one
then he can rescind the entire contract.
WARRANTY OF QUALITY
Prof. Deleon, Prof. Vitug, Prof. Baviera: there is
another warranty which is WARRANTY OF
QUALITY which includes:
Q: Who has the burden of proof that he would
not have bought the others had he known of
the defect of one?
(1)
(2)
Warranty of Fitness
Warranty of Merchantability
A: Normally, it would be the buyer. But the law
To some authors the warranty of quality is
considered under the warranty of hidden defects.
Atty. Uribe: I cannot agree that the warranty of
quality is in the warranty of hidden defects. I agree
with Prof. De Leon, Prof. Vitug and Prof, Baviera
that there is a warranty of quality.
under certain circumstances would provide for this
presumption that it is presumed that he would have
bought the others had he known of the defect of
one.
Examples: He bought the animals in teams or in
pairs then the presumption arises.
-
Love
birds
(Ang
mga love birds,
kapag
namatay yung isa later on mamatay din
yung isa. Minsan nga mgsuicide pa
sya
WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE
pag mag isa na lang sya. Iuuntog nya ulo
nya sa cage nya. ☺)
The thing bought may not actually have any defect
and for 1 million buyers it would be fit for their
purpose. However, it may not be fit for the purpose
of 1 buyer and if all the requisites for this warranty
are present, then he may hold the seller liable for
breach of warranty of fitness for a particular
purpose although there is no hidden defect but it is
not fit for the purpose of the buyer.
In order for the seller may be held liable:
-
Sledge dogs (Sa mga countries na may
nyebe
“snow”
may
mga
sledge
dogs.
Kailangan pag binili ang mga dogs, team
sila.
May
leader
pa
nga
sila
eh
at
sumusunod sila sa leader nila ☺)
Q: If the animal which was bought, died of a
disease within 10 days, the disease existing at
the time of the sale, may he still have a remedy
  • 1. The buyer has to inform the seller of the particular purpose for which the thing is to be use and

under the law?

A: Yes, if the disease turned out to be a contagious disease. In fact, under the law, the sale is void. If he has already paid, he can recover what he paid because the sale is void.

 

Q:

When

will

he be considered to

have

If the disease us not contagious, under the law he

Instances whether there would be no warranty

accepted?

 

would only have a remedy if the animal died within 3 days.

against hidden defects and therefore caveat emptor may be invoked:

A: (1) When he intimated his acceptance to the seller. (2) Even if he did not intimate his acceptance or rejection, he will be deemed to have accepted if he did an act which is inconsistent with the ownership of the seller. Again, if he pledged

  • 1. Sale which is an “as is where is” sale which

the thing to another that is an act of ownership or if

means as it is found, where it is found xxx bahala ka sa buhay mo if you want to buy the thing and you cannot later on claim that there were hidden defects. (Faye: pls. research the complete meaning of “as is where is” sale. Atty. Uribe will ask the meaning. )

he sold or donated the thing. (3) If he did not do anything by mere lapse of a reasonable time, he will be deemed to have accepted the thing. What is reasonable time would depend on the circumstances surrounding the sale.

Q: What if after an examination or before the examination, the buyer refused to accept and informed the seller but the goods are already in his place? What if the goods were lost or destroyed in the possession of the buyer even due to fortuitous event, who will bear the loss?

Q: Can there be a claim of breach of warranty against eviction?

A: Yes because the seller would have or would still warrant the title over the goods.
A: Yes because the seller would have or would still
warrant the title over the goods.
2.
Sale of 2 nd hand items
3.
Sale of animals in fairs
4.
Sale in public auction
Note: There
would
still
be
warranty against
eviction.
Note: Rules on warranty also apply to judicial sale.
A: It will depend on the reason of the rejection. If
there is a just cause for the rejection, then the
seller will have to bear the loss because there will
be no transfer of ownership and he cannot be
compelled to pay the price. However, if the reason
for the rejection is unjustified, ownership passes to
the buyer by operation of law then he will have to
bear the loss under the res perit domino rule.
Q: In sale by authority of law or in execution
sale, can there be breach of warranty against
eviction?
2. Obligation to pay the price
Q: When?
A: Yes. The judgment debtor and not the sheriff
shall be liable.
A:
(1) As stipulated
(2) If there is no stipulation, it would be at
the time and place of delivery.
The law would specifically exempt certain persons
from liability for breach of warranty like sheriff,
auctioneer, mortgagee, pledge and other persons
who sell by virtues of an authority of law like notary
public because they are not really selling for
themselves, they are selling on behalf of another
person.
Q: If the delivery was made a year ago but the
payment of the price was made today, would
the buyer be liable for the interest from the time
of delivery up to the time of payment?
A: G.R. No. Exceptions:

RIGHTS AND OBLIGATIONS OF THE VENDEE

(1) Stipulation – the vendor may only agree for the payment of the price for a certain time only because there will be interest.

  • 1. Obligation to accept the thing delivered.

  • 2. Obligation to pay the price (if warranted, with interest)

(2)

Even if there is no stipulation – if the thing delivered produces fruits or income.

1.

Obligation to accept the thing delivered

Example 1: The object of sale is a rice land. Isang taon na sa buyer yung rice land ibig

Q: If the buyer received the goods delivered, does it mean that he already accepted?

A: No because receiving is preliminary to accepting. In fact, this is consistent to the right

sabihin he harvested twice already. The buyer should be liable to pay interest. Example 2: Apartment unit. Kumita na yung buyer sa rentals.

provided by law to the buyer which is the right of

(3)

Even

if

no

fruits,

he

may be

liable for

inspection or the right of examination. Thereafter,

interest if he is in delay. This delay would

he may reject the goods if defective.

start

from

the

time there

is

judicial or

extrajudicial demand.

A COS is a bilateral contract resulting in reciprocal obligations under 1169 from the moment one of the parties in reciprocal obligation performed his obligation and the other party has not even without demand, the other party would be in delay and therefore liable for interest and damages.

A: No. There is such a sale on credit which is on a straight term basis.

Example 1

1M – down payment of 500,000 today and the balance to be paid at the end of the year not covered by Maceda Law

But in this provision, in order for the buyer to be considered in delay there must be judicial or extrajudicial demand. This article should be construed to mean that there was a period fixed for the payment of the price. Nakalagay sa agreement “today ang sale, after 1 year payment”. Upon the expiration of the 1 year period, there has to be judicial or extrajudicial demand which is different from 1169 when the SC interpreted to mean that the obligation is already due and demandable at the time of the perfection of the contract. Hence, no need for demand anymore.

Example 2

300,000 today, the balance of 700,000 to be paid on 10 equal monthly installments covered by the Maceda Law

All the provisions under the Maceda Law are for the benefit of the buyer.

Q: Is it correct to say that in this law, the buyer cannot invoke this law if he has not yet paid for at least 2 years?

A: No. Even if he has only paid for a month, there Right to Inspect or
A: No. Even if he has only paid for a month, there
Right to Inspect or Examine
will
be rights
already of
such buyer
under the
This right may not be present in all COS because
you can waive the right of inspection. Upon
delivery and receiving the goods, if you agree that
you are deemed to have accepted – no more right
to inspect.
Maceda Law. If he has paid at least 2 years, he
would have better rights.
Q:
If
he
has
paid
less
than
2
years
of
installment, what are his rights?
A: (1) The grace period – he has a minimum
In C.O.D. arrangement, the delivery will not be
made until payment has already been made by the
buyer so in that scenario, he has to pay first even
before delivery. This is a sale transaction where
the buyer would have no right of examination prior
to acceptance.
of 60 days
grace period (the seller can
give him
more). During the 60-day grace period, he can sell
his
rights under
the
contract, he can
assign his
rights, he can update his account, he can pay the
balance.
Example
(2) The right to recover a portion of what
he has paid – cash surrender value (CSV). This
CSV is a minimum of 50% of what he has totally
paid. This includes installment payments, deposit,
downpayment – every amount paid – 50% of that.
It can be higher depending on the number of years
that he has already paid.

The arrangement between a mining company and NAPOCOR in the sale of coal. NAPOCOR will have no right to inspect preliminary to acceptance, they will always accept. But after acceptance, that there would be examination of the quality of the coal not for the purpose of rejecting but for the purpose of fixing the price. So this is not a right of examination prior to acceptance. This is only an examination for fixing the price.

Hence, if he has paid only twice, he may be entitled to CSV if the payment is on annual payments not monthly.

MACEDA LAW

BE: What is the Maceda Law? Give its essential

Q: The minimum of 50% - when higher?

features.

A:

2 years – 50%

8 years – 60%

A: R.A. 6552 “Realty Installment Buyer Protection

7 years

- 55%

9 years – 65%

Act”. Realty – object of the sale is realty (not real

10 years – 70% Every year thereafter, additional 5%.

estate). Specifically, residential unit and not commercial or industrial.

Q: What if it is 20 years – 100%?

Q: How about a condominium unit?

A: It is covered by the Maceda Law as long as it is residential in character.

Q: Sale on credit, does it mean that the sale will be covered by the Maceda Law?

A: No. Upto 90% only. So if 15 years or 16 years, still it is 90%.

Q: Would the amount recoverable be bigger?

A: Yes. 90% depends on the total amount paid. 90% pa din pero malaki ang base.

BE: Ayce bought a condo unit for 10M. 3M downpayment. The balance of 7M payable in 60 equal monthly payments. Ayce religiously paid until the 46 th installment. On the 49 th installment, she offered to update her account. The seller Gerard said “I have already cancelled the sale”. Is this cancellation valid?

A: No. Under the Maceda Law, if you have paid a minimum of 2 years, you are entitled to 30 days for every year of payment. Under the facts, she has paid 3 years. Hence, she is entitled to 90 days grace period. Nung nag default sya nung 47 th , magstart pa lang yung grace period. On the 48 th installment – she was only 30 days in default. 49 th installment – 60 days in default. She was very much within the 90-day grace period when she decided to update her account.

Q: Are there other remedies aside from Article

1526?

A: Yes, the seller may opt to file an action for specific performance or action for damages.

Q: Under 1526, who may be considered an unpaid seller? If the buyer has already paid 90% of the price, may the seller invoke these remedies?

A: Yes, because an unpaid seller is one who has

not been fully paid of the price.

Q:

May a

person who was not a party to the

sale be able to claim any of these remedies?

A: Yes, because a seller need not only pertain to a

party to the contract. A person who is

in

the

position of the seller is actually a seller under the

Q: What if the installment period is for 15 years. The buyer defaulted on the 3
Q: What if the installment period is for 15 years.
The buyer defaulted on the 3 rd year. Under the
law, she is entitled to a minimum grace period
of 60 days. Thereafter, she was able to update.
But on the 5 th year, she defaulted again. How
many days is her grace period?
law.
Q: Who would be in the position of the seller?
A: The assignee or heirs of the seller or the agent
to whom the bill of lading was indorsed by the
seller.
A: None. The default must be once for every 5-year
lifetime of the contract.
Q: If there is a stipulation for the forfeiture of
Q: In unpaid seller, are his remedies
alternative?
the payment made – “the buyer will lose the
house and lot and he will not recover anything
because all his payments will be treated as
rentals” – is this a valid clause?
A: No, the premise of course if he has already paid
for 2 years because by law he is entitled to 50%
CSV.
Q: “Upon failure to pay 1 or more installments
without need of notice, the seller would have
the right to cancel the sale” – is this automatic
cancellation clause valid?
A: Not necessarily, because in fact by express
provision of the law, the right of resale and the right
to rescind may only be exercised if the seller has
possessory lien. Pag wala na syang lien, he can no
longer exercise the right of resale or right to
rescind so cumulative to that extent. But if there
are 2 remedies that alternative and cannot exist at
the same time, these are the right of stoppage in
transitu and possessory lien because a requisite in
order for the seller to have a right of stoppage in
transitu is that the seller must have already parted
possession over the goods.
A: Void. There has to be notice to the buyer but

more than that if the buyer is already entitled to the CSV, the cancellation will take effect only upon full payment of the CSV.

Specific Remedies 1. Right to retain the thing in his possession (possessory lien / withhold delivery)

Q: Are the remedies under the Maceda Law

alternative? Can the buyer be able to exercise 2 or more remedies all at the same time?

A: Yes, remedies under the Maceda Law are cumulative.

REMEDIES FOR BREACH OF CONTRACT REMEDIES OF AN UNPAID SELLER (ARTICLE 1526)

Q: Why is it called possessory lien?

A: Because there is another lien in the law. This is the lien under the rules on concurrence and preference of credit. This is the lien of the seller for the price of the thing sold if the thing has already been delivered to the buyer and the buyer became insolvent. While the thing is in the possession of the buyer there is such a lien but that is not the lien under 1526. 1526 again is the right to retain the

goods in his possession – the possessory lien.

  • 1. Right to retain the thing in his possession (possessory lien / withhold delivery)

  • 2. Right of stoppage in transitu / right to resume possession of the goods

  • 3. Right of Resale

Q: When would the seller have this possessory

lien? Is it required that the buyer should be insolvent?

  • 4. Right to Rescind

A: It is not required that the buyer should be insolvent but this is one of
A:
It
is
not required
that
the
buyer should be
insolvent but this is one of the instances when the
to deliver because there was a final judgment in
his favor?
lien may be invoked when the buyer is insolvent.
Other
Instances
Where
Seller
May
Invoke
Possessory Lien
A: No, the very specific provision of the law – just
because there is a final judgment in favor of the
plaintiff, that would not mean he will lose his lien
over the goods.
1.
When
there
is
no stipulation as
to
the
credit
Atty. Uribe’s Comment: This is a very reasonable
2.
Or there may
be
a
stipulation as to the
period of credit but the period has already
rule because is there an assurance that the buyer
will pay even with court order?
expired.
2. Right
of
stoppage
in
transitu
/ right to
When would the Seller be Considered to have
Lost his Lien
resume possession of the goods
1.
If he waives his right
Requisites:
2.
If the buyer lawfully obtained possession
over the goods
1.
Insolvency of the buyer is an essential
requisite
3.
When the thing is delivered to a common
carrier and the seller did not prefer his
ownership and possession over the
goods.
2.
The seller must have parted possession
over the goods
3.
The goods must be in transit
If you remember the discussion on delivery – the
rule here is delivery to the common carrier is
delivery to the buyer and therefore when the seller
delivered the goods to a common carrier as a rule
he loses his lien over the goods. The premise of
that is that he did not preserve his possession over
the goods.
Q: Should the debtor be insolvent already at
the time of the perfection of the sale?
A: No, as long as at the time the right is invoked,
he is insolvent. The insolvency may happen a day
before or 2 days before basta at the time the right
is invoked, the buyer is insolvent.
Q: How is the right exercised?
A: (1) By obtaining actual possession of the goods
Atty. Uribe’s Comment: With due respect to this
article, the article says “if he did not reserve his
ownership or possession over the goods”. I don’t
think that phrase ownership is accurate because it
does not matter under the law regardless of
whether ownership has passed to the buyer, the
seller would have the right to exercise any of these
4 remedies, notwithstanding ownership has passed
pwede pa syang magkaron ng possessory lien. In
fact, by express provision of law even if he is only
holding the thing as a bailee, he will still have
possessory lien, hence, ownership is irrelevant
even if the seller did not reserve ownership, with or
without reservation he may or he may not be
deemed to have lost his lien. Pero kung na reserve
nya ang kanyang possession, definitely, he will not
be considered to have lost his lien kasi if under the
bill of lading deliverable to the seller then he will
not be considered to have lost his lien thus there is
no need for him to exercise the right of stoppage in
transitu.
(2) By mere notice to the common carrier.
Q: If such notice was sent to the common
carrier but the common carrier refused to
deliver the goods back to the seller, is the
common carrier liable?
A: Not necessarily, if the goods are covered by a
negotiable document of title, the common carrier
can be compelled to deliver the goods pursuant to
the exercise of the right of stoppage in transitu
back to the seller only if after the negotiable
document of title is surrendered to the common
carrier. It should be a negotiable document of title.
This is a protection to the common carrier. Kasi if
not negotiable, pwede yun i-negotiate sa 3 rd person
who may purchase the goods in good faith and for
value. That 3 rd person would have a better right
kaysa sa owner or seller.
Q: If the seller validly exercised the right of
stoppage in transitu, what is the effect?

Q: If the seller opted to file an action to compel the buyer to pay the price and the court decided in favor of the seller. The court ordered the buyer to pay the price. Can the buyer tell the seller to deliver the goods so that he will pay the price? Can the seller now be compelled

A: He will be considered to have regained his possessory lien.

Q:

In

a scenario where

the seller still has

possessory lien, he may have invoked the right

of stoppage in transitu so he regained possessory lien, in the meantime, the buyer sold the same goods to another person, so

tatlo na – the seller, the buyer and the 3 rd person. Can this 2 nd buyer compel the seller to deliver the goods to him as the 2 nd buyer? A: As a rule no because the seller’s lien over the

goods will not be affected by the disposition made by the buyer of the goods to a 3 rd person. He will retain his possessory lien. 2 exceptions:

  • 1. If the seller assented to the disposition

present and could have determined for himself whether in fact an actual sale conducted and there were actual bidders in that sale. Kasi pwedeng gawa gawa lang ng seller na kunwari may bumili.

Take note under the law,

the

resale

may

be

a

private sale. The only limitation here is that the

seller cannot buy directly or indirectly.

  • 2. Even if he did not give his consent to the sale, he will lose his possessory lien if:

Q: What if there was an excess? Example – out

  • a. the goods are covered by a negotiable document of title

  • b. the negotiable document of title was property negotiated to a 3 rd person in good faith and for value. Not negotiation to a donee.

of the 100k price the buyer paid 20k. balance 80k. What if in the exercise of the right of

resale, the seller was able to sell it at 130k? May the buyer be able to recover at least the amount that he paid?

A: No, because under the law, the seller will not be

responsible for any profit that will derive from the resale. (See Article 1533)

3. Right of Resale

Q: When would the seller have this right? A: (1) If the goods are perishable (2)
Q: When would the seller have this right?
A:
(1) If the goods are perishable
(2) The right is expressly reserved in the
contract
(3) The buyer has been in default for an
Q: Would there be unjust enrichment?
A: None, because it was precisely the fault of the
buyer - his failure to pay that the seller exercised
the right of resale.
unreasonable time
Note: In order to exercise this right, he must have
at the same time possessory lien.
Q: If necessary for the validity of resale that the
seller should send a notice of the intention to
resell to the buyer which means that if there is
no notice of the intention to resell and then the
resale will be void. Is that correct? Is it correct
to say that for the resale to be valid, there
should be notice to the buyer of the date, time
and place of resale?
A: The answers to both questions → No. They are
not necessary for the validity of the resale.
4. Right to Rescind
Would only be available under 2 instances na
kapareho ng resale. Di ba resale 3 instances- ang
di lang present sa rescission yung perishable
goods. So the grounds in rescission are:
a.
The right is expressly reserved
b.
The buyer has been in default for an
unreasonable time
Note: In resale, SC said - if the ownership of the
thing has already been transferred to the buyer, in
order for the seller to exercise the right of resale.
Should he first rescind the contract?
Q: So what is the relevance of these notices?
A: No, he can immediately sell the goods because
the effect of the resale is to terminate the
ownership of the 1 st buyer and that ownership
would be vested upon the 2 nd buyer by operation of
law, hindi na kailangan mag-rescind.

A: First, the notice of the intention to resell will only be relevant if the ground relied upon by the seller is that the buyer has been in default for an unreasonable time. Kasi from the notice makikita how long the buyer has been in default. Second, as to the notice of the date, time and place of resale, this is not necessary for the validity of resale but may be relevant in determining whether the sale was a good faith sale. This is relevant as a consequence of resale, if there is still a balance. For example, the total contract price is P100,000.

The buyer did not pay a single centavo. Out of the

In rescission, this cannot be exercised for casual breach. Parang 1191.

Song Fo vs Hawaiian

Facts: The buyer failed to pay around 20 days from

the time the obligation to pay become due.

Held: The SC said, that it not a serious breach of his obligation to pay which would entitle the seller

resale, ang proceeds lang P60,000.

So

may

 

the right to rescind the contract. The number of

balance pang P40,000,

can the buyer be

days would depend on the circumstances

compelled to pay the deficiency? Yes, but if the

surrounding the sale. In Song Fo, the sale pertains

sale is not

a

good faith

sale,

he

may

not be

to molasses/ sugar.

required to pay the balance. Why? What has the

 

letter got to do with good faith? Because if

a

RECTO LAW

letter was sent, then the

buyer could have been

- promulgated to protect the buyer

  • - pertains to the right of the buyer

  • - if you analyze the law, it only provided 3 remedies

  • - pertains to movable on installments

should return the thing delivered to him and the

seller should return the amount he received as payment. Would the seller really be obliged to

return the entire 200k (1 st and 2 nd installment)? A: No, under the law, he is allowed to retain a

Q: Assuming this is a sale of diamond ring for 1M payable in 10 equal annual. 100k each year payable Jan 1 each year. The buyer was able to