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I.

NATURE AND FORM OF THE CONTRACT


Sources of the Law on Sales
Sales are governed by the provisions of the Civil Code:
1. Book IV, Title VI, Articles 1458-1637 (Sales)
2. Title I, Arts. 1156-1422 (Obligations and Contracts)
3. Opinions of Commentators
4. Jurisprudence
Concept of Contract of Sale
The contract of sales is an agreement whereby one of the parties (called the sel
ler or vendor) obligates
himself to deliver something to the other (called the buyer or purchaser or vend
ee) who, on his part, hinds
himself to pay therefore a sum of money or its equivalent (known as the price).
The transfer of title to property or the agreement to transfer title for a price
paid or promised, not mere
physical transfer of the property, is the essence of sale.
Characteristics of a Contract of Sale
1. Consensual
- perfected by mere consent of the parties without further acts.
2. Bilateral
- both the contracting parties are bound to fulfill correlative obligations
towards each other (the seller to deliver and transfer ownership of the
thing sold, and the buyer to pay the price).
3. Onerous
- the thing sold is conveyed in consideration of the price and vice
versa.
4. Commutative
- the thing sold is considered the equivalent of the price paid and vice
versa.
5. Aleatory
- in the case of sale of hope, one of the parties or both reciprocally
bind themselves to give or to do something in consideration of what
the other shall give or do upon the happening of an event which is
uncertain, or which is to occur at an indeterminate time.
6. Nominate
- the contract is given a special name or designation in the Civil Code.
7. Principal
- the contract does not depend for its existence and validity upon
another contract.

Essential Requisites of a Contract of Sale
1. Consent or meeting of the minds refers to the conformity of the parties to th
e terms of the contract,
the acceptance by one of the offer made by the other. As a bilateral contract, t
he acceptance of payment by
a party is an indication of his consent to a contract of sale, thereby precludin
g him from rejecting its binding
effect [Clarin vs. Rulova, 127 SCRA 512].
. There may be a sale against the will of the owner in case of expropriation and
the three different
kinds of sale under the law ordinary execution sale, judicial foreclosure sale,
and extra-judicial
foreclosure sale.
2. Object or subject matter refers to the determinate thing which is the object
of the contract;
. Even a future thing not existing at the time the contract is entered into may
be the object of sale,
provided it has a potential or possible existence, that is, it is reasonably cer
tain to come into
existence as the natural increment or usual incident of something in existence a
lready belonging to
the seller, and the tile will vest the buyer the moment the thing comes into exi
stence (Art. 1461).
Emptio rei speratae
(sale of thing expected)
Rei spetae
- the sale of a thing not yet in existence,
subject to the condition that the thing will exist
and on failure of the condition, the contract
becomes ineffective and hence, the buyer has
not obligation to pay the price;
- the sale of hope itself that the thing will come
into existence, where it is agreed that the buyer
will pay the price even if the thing does not
eventually exist;
- the future thing is certain as to itself but
uncertain as to its quantity and quality;
- like the sale of a sweepstake ticket, it is not
certain that the thing itself (winning a prize) will
exist, much less it quantity and quality;
- contract deals with a future thing;
- contract relates to a thing which exists or is
present the hope or expectancy;
- sale is subject to the condition that the thing
should exist, so that if it does not, there will be
no contract by reason of the absence of an
essential element.
- produces effect even though the thing does not
come into existence because the object of the
contract is the hope itself, unless it is a vain hope
or expectancy (like the sale of a falsified
sweepstakes ticket which can never win).
3. Cause or consideration refers to the price certain in money or its equivalen
t.
Natural Elements those which are deemed to exist in certain contracts, in the ab
sence of any contrary
stipulations, like warranty against eviction;
Accidental Elements those which may be present or absent depending on the stipul
ations of the parties,
like conditions, interest, penalty, time or place of payment.
Kinds of a Contract of Sale
1. As to presence or absence of conditions
Absolute where the sale is not subject to any condition whatsoever and where the
title passes to the buyer
upon delivery of the thing sold.
Conditional where the sale contemplates a contingency and where the contract is
subject to certain
conditions, usually in the case of the vendee, for the full payment of the agree
d purchase price.
2. Other kinds
As to the nature of the subject matter real or personal, tangible or intangible
As to the manner of payment cash or installment
As to its validity valid, rescissible, unenforceable, void
Contract of Sale Distinguished from Contract to Sell

Contract of Sale
Contract to Sell
Transfer of
title:
- passes to the buyer upon
delivery of the thing sold.
- remains with the seller until
full payment of the agreed
price.
Payment of
price:
- non-payment of the price is a
negative resolutory condition,
and the remedy is to exact
fulfillment or to rescind the
contract.
- full payment is a positive
suspensive condition, the
failure of which is not a breach,
casual or serious, of the
contract but simply an event
that prevents the obligation of
the vendor to convey title from
acquiring binding force.
Ownership
of vendor:
- vendor loses and cannot
recover ownership of the thing
sold and delivered, actually or
constructively until and unless
the contract of sale itself is
resolved and set aside.
- title remains in the vendor
until full payment of price.
Sale Distinguished from Dation in Payment:
Sale
Dation in Payment
- no pre-existing credit
- there is pre-existing credit
- gives rise to obligation
- extinguishes obligation
- cause or consideration is the price, or the
acquisition of title to the property
- cause of consideration is extinguishment of the
debt (from the point of view of the offeror), and
the acquisition of the object offered (from the
point of view of the creditor) in lieu of the original
credit
- there is greater freedom in the determination of
the price
- less freedom
- giving of the price may generally end the
obligation of the buyer
- the giving of the object in lieu of the credit may
extinguish completely or partially the credit
(depending on the agreement)

Sale of goods by description
Sale of goods by sample
- occurs where the purchaser has not seen
the article sold and relies on the description given
him by the vendor, or has seen the goods but the
want of identity is not apparent on inspection.-

- the parties contracted solely with reference to
the sample, with the understanding that the bulk
was like it.- the vendor warrants that the thing
If the bulk of the goods delivered does not
correspond with the description, the contract may
be rescinded. (Art. 1481.)
sold and to be delivered by him shall conform
with the sample in kind, charater, and quality.
Form of Contract of Sale
Generally, a contract may be entered into in any form provided all the essential
requisites for its validity are
present (Art. 1356). It may be in writing, oral, or partly in writing and party
oral. It may even be inferred
from the conduct of the parties, since sale is a consensual contract that is per
fected by mere consent.
However, in case the contract of sale should be covered by the Statute of Frauds
, the law requires that the
agreement be in writing subscribed by the party charged, or by his agent; otherw
ise, the contract cannot be
enforced by action [see Art. 1403].
. Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the f
ollowing contracts must
be in writing to be enforceable:
(a) sale of personal property at a price not less than P500;
(b) sale of real property or an interest therein regardless of the price involve
d; and
(c) sale of property not to be performed within a year from the date thereof reg
ardless of the nature of
the property and the price involved.
. The Statute Frauds specifies three (3) ways in which contracts of sales of goo
ds within its terms
may be made binding:
(a) the giving of a memorandum;
(b) acceptance and receipt of part of the goods (or things in action) sold and a
ctual receipt of the same
(Art. 1585); and
(c) payment or acceptance at the time some part of the purchase price.
. The Statute of Frauds is applicable only to executory contracts (where no perf
ormance, i.e., delivery
and payment, has as yet been made by both parties), and not to contracts which a
re totally
consummated or partially performed [Vda. De Espiritu vs. CFI of Cavite, 47 SCRA
354].
Recto Law (Art. 1484) Remedies of Vendor in Sale of Personal Property Payable in

Installments:
(a) elect fulfillment upon the vendees failure to pay;
(b) cancel the sale, if the vendee shall have failed to pay two or more installm
ents;
(c) foreclose the chattel mortgage, if one has been constituted, if the vendee s
hall have failed to pay two
or more installments.
. These remedies are alternative and are not to be exercised cumulatively or suc
cessively and the
election of one is a waiver of the right to resort to the others [Pacific Commer
ial Co. vs De la RAma,
62 Phil. 380; Nonato vs. IAC, 140 SCRA 255].
. In transactions involving the sale of financing of real estate on installment
payments, including
residential condominium apartments, the following are the rights given to the bu
yer who has paid at
least two (2) years of installments in case he defaults in the payment of succee
ding payments
(a) to pay without additional interest the unpaid installments due within the to
tal grace period earned by
him fixed at the rate of one-month grace period for every one year of installmen
t payments made this
right shall be exercised by him only once in every five (5) years of the life of
the contract and its extension,
if any; and
(b) if the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the
payments on the property equivalent to 50% of the total payments made and, after
5 years of installments,
an additional 5% of every year but not to exceed 90% of the total payments made.
[Sec. 3, RA 6552 or the
Realty Installment Buyer Protection Act; see Layug vs. IAC, 67 SCRA 627].
(c) The buyer has the right to sell his right or assign the same before actual c
ancellation of the contract
and to pay in advance any unpaid installment anytime without interest and to hav
e such full payment of the
purchase price annotated in the certificate of title covering the property.
II. CAPACITY TO BUY OR SELL
Persons Who May Enter Into a Contract of Sale
As a general rule, all persons, whether natural or juridical, who can bind thems
elves, have the legal capacity
to buy and sell.
Persons Who Are Incapacitated to Enter Into a Contract of Sale
1. Absolute Incapacity pertains to persons who cannot bind themselves
(a) Minor
(b) Insane or demented persons
(c) Deaf-mutes who do not know how to read and write
. Contracts entered into by a minor and other incapacitated persons arevoidable.
However, where
the necessaries are sold and delivered to him (without the intervention of the p
arent or guardian),
he must pay a reasonable price therefor. The contract is therefore valid, but th
e minor has the right
to recover any excess above a reasonable value paid by him.
. Sale of real property by minors who have already passed the ages of puberty an
d adolescence and
are now in the adult age, when they pretended to have already reached their majo
rity, while in fact
they have not, is valid, and they cannot be permitted afterwards to excuse thems
elves from
compliance with the obligations assumed by them or to seek their annulment. This
is in accord with
the doctrine of estoppel[Mercado and Mercado vs. Espiritu, 37 Phil. 265].
2. Relative Incapacity where it exists only with reference to certain persons o
r class of property (Art.
1490-1491). The prohibition extends to sales by virtue of legal redemption, comp
romises, and
renunciations.
(a) Husband and wife to each other except when a separation of property was agre
ed upon in the
marriage settlements, or when there has been a judicial separation of property
(b) Guardian as to the property of his ward
(c) Agents as to the property whose administration or sale has been entrusted to
them, unless consent
of the principal is given
(d) Executors or administrators as to the state under their administration
(e) Public officers and employees as to the property of the State or any subdivi
sion thereof, or of the
government-owned or controlled corporations, the administration of which is entr
usted to them
(f) Judges and government experts who take part in the sale of the property and
rights under litigation
. The prohibition is based on the fiduciary relationship (based on trust), to pr
event fraud and undue
and improper influence.
. With respect to (b) to (d), the sale shall only be voidable because in such ca
ses only private
interests are affected. The defect can be cured by ratification by the seller. W
ith respect to (e) and
(f), the sale shall be null and void, public interests being involved therein.
(g) Aliens who are disqualified to purchase private agricultural lands under Art
. XII, Secs. 3 and 7 of the
Constitution
(h) Unpaid seller having a right of lien or having estopped the goods in transit
u
(i) Officer holding the execution or his deputy
III. EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST
. Where the thing is entirely lost at the time of perfection, the contract is in
existent and void because
there is no object. There being no contract, there is no necessity to bring an a
ction for annulment.
. Where the thing is only partially lost, the vendee may elect between withdrawi
ng from the contract
and demanding the remaining part, paying its proportionate price.
. The thing is lost when it perishes or goes out of commerce or disappears in su
ch a way that its
existence is unknown or it cannot be recovered.
IV. OBLIGATIONS OF THE VENDOR
Principal Obligations of the Vendor
to transfer the ownership of the determinate thing sold (Art. 1495);
. The vendor need not be the owner of the thing at the time of perfection of the
contract; it is
sufficient that he has a right to transfer the ownership thereof at the time it
is delivered (Art. 1459).
. If the seller promised to deliver at a stipulated period and such period is of
the essence of the
contract but did not comply with his obligation on time, he has no right to dema
nd payment of the
price. The vendee-buyer is fact may ask for the rescission or resolution of the
sale.
. If the failure of the seller to deliver on time is not due to his fault, as wh
en it was the buyer who
failed to supply the necessary credit for the transportation of the goods, delay
on the part of the
seller may be said to be sufficiently excused.
to deliver the thing, with its accessions and accessories, if any, in the condit
ion in which they were upon the
perfection of the contract (Art. 1537);
to warrant against eviction and against hidden defects (Arts. 1495, 1547);
to take care of the thing, pending delivery, with proper diligence (Art. 1163);
to pay for the expenses of the deed of sale, unless there is a stipulation to th
e contrary (Art. 1487).
Delivery or Tradition
Tradition or delivery is a derivative mode of acquiring ownership by virtue of w
hich one has the right and
intention to alienate a corporeal thing, transmits it by virtue of a just title
to one who accepts the same.
. Duty to Deliver at Execution Sale: a judgment debtor is not obliged to deliver
right away; he has
one (1) year within which to redeem the property.
Kinds of Delivery or Tradition
1. Actual or Real (Art. 1497) the thing sold is placed in the control and posses
sion of the vendee
or his agent. This involves the physical delivery of the thing and is usually do
ne by the passing of
a movable thing from hand to hand.
2. Legal or Constructive (Arts. 1498-1501) through the execution of a public ins
trument
Legal formalities applies to real and personal properties, where the delivery is
made through the execution
of a public document;
Traditio simbolica to effect delivery, the parties make use of a token symbol to
represent the thing
delivered;
Traditio longa manu movable property is delivered by mere consent by the contrac
ting parties if the thing
sold cannot be transferred to the possession of the vendee at the time of the sa
le;
Traditio brevi manu the vendee already has the possession of the thing sold by v
irtue of another title as
when the lessor sells the thing leased to the lessee;
Constitotum possessorium the vendor continues in possession of the property sold
not as owner but in
some other capacity (e.g., as tenant of the vendee).
3. Quasi-Traditio (Art. 1501) delivery of rights, credits or incorporeal real p
roperty, made by
placing the titles of ownership in the hands of the vendee or lawyer, by executi
on of a public instrument, or
by allowing the vendee to use his rights as new owner with the consent of the ve
ndor.
. Requisites in constructive delivery before ownership may be transferred:
(a) Seller must have control over the thing; otherwise, can he put another in co
ntrol?
(b) Buyer must be put under control;
(c) There must be the intention to deliver the thing for purposes of ownership.
. Rules of constructive delivery:
1. If a seller has an actual possession, he cannot transfer ownership by constru
ctive delivery.
2. There can be no constructive delivery by means of a public instrument if ther
e is a stipulation to the
contrary.
3. The execution of a deed or contract is only presumptive delivery.
An Unpaid Seller is one who has not been pair or rendered the whole price or who
has received a bill of
exchange or other negotiable instrument as conditional payment and the condition
on which it was received
has been broken by reason of the dishonor of the instrument.
Rights of an unpaid seller:
1. A lien on the goods or right to retain them for the price while in his posses
sion
2. A right of stopping the goods in transitu in case of insolvency of the buyer;
requisites:
(a) the seller must be unpaid;
(b) the buyer must be insolvent;
(c) the goods must be in transit;
(d) the seller must either actually take possession of the goods sold or give no
tice of his claim to the
carrier or other person in possession;
(e) the seller must surrender the negotiable document of title, if any, issued b
y the carrier or bailee; and
(f) the seller must bear the expenses of delivery of the goods after the exercis
e of the right.
3. A right of resale
4. A right to rescind the sale
Rules in case of loss, deterioration, or improvement of thing before delivery
1. If the thing is lost without the fault of the debtor, the obligation shall be
extinguished.
2. If the thing is lost through the fault of the debtor, he shall be obliged to
pay damages, if is
understood that the thing is lost when it perishes, or goes out of commerce, or
disappears in such
a way that its existence is unknown or it cannot be recovered.
3. When the thing deteriorates without the fault of the debtor, the impairment i
s to be borne by the
creditor.
4. If it deteriorates through the fault of the debtor, the creditor may choose b
etween the rescission
of the obligation and its fulfillment, with indemnity for damages in either case
.
5. If the thing is improved by its nature, or by time, the improvement shall inu
re to the benefit of the
creditor.
6. If it is improved at the expense of the debtor, he shall have no other right
than that granted to the
usufructuary.
Rules as to preference of ownership in case of double sale
1. If the property sold is movable, the ownership shall be acquired by the vende
e who first takes
possession in good faith [Villa Rey Transit, Inc. vs Ferrer, 25 SCRA 861].
2. If the property sold is immovable, the ownership shall belong to:
(a) the vendee who first registers the sale in good faith in the Registry of Dee
ds has preferred right over
another vendee who has not registered his title even if the latter is in actual
possession of the immovable
property governed by the principle prius tempore, patior jure (first in time, st
ronger in right) knowledge
by the first buyer of the second sale cannot defeat the first buyers right except
when the second first
registers in good faith the second sale;
(b) in the absence of registration, the vendee who first takes possession in goo
d faith; and
(c) in the absence of both registration and possession, the vendee who presents
the oldest title (who first
bought the property) in good faith.
. Article 1544 has no application to lands not registered with the Torrens syste
m.
V. CONDITION AND WARRANTIES
Condition means an uncertain event or contingency on the happening of which the
obligation (or right) of
the contract depends.
Warranty is a statement or representation made by the seller of goods, contempor
aneously and as a part of
the contract of sale, having reference to the character, quality, or title of th
e goods, and by which he
promises or undertakes to insure that certain facts are or shall be as he then r
epresents them.
If the obligation of either party is subject to any condition and such condition
is not fulfilled, such party may
either (1) refuse to proceed with the contract, or (2) proceed with the contract
, waiving the performance of
the condition.
If the condition is in the nature of a promise that it should happen, the non-pe
rformance of such condition
may be treated by the other party as a breach of warranty.
Implied warranty as to sellers title (Art. 1548) that the seller guarantees that
he has a right to sell the
thing sold and to transfer ownership to the buyer who shall not be disturbed in
his legal and peaceful
possession thereof.
Implied warranty against hidden defects or unknown encumbrance (Art. 1562) that
the seller guarantees
that the thing sold is reasonably fit for the known particular purpose for which
it was acquired by the buyer
or, where it was bought by description, that it is of merchantable quality.
Essential elements of warranty against eviction
1. the vendee is deprived in whole or in part of the thing purchased;
2. the vendee is so deprived by virtue of a final judgment ;
3. the judgment is based on a right prior to the sale or an act imputable to the
vendor;
4. the vendor was summoned in the suit for eviction at the instance of the vende
e; and
5. there is no waiver on the part of the vendee.
Kinds of waiver of eviction
1. Consciente the waiver is voluntarily made by the vendee without the knowledge
and
assumption of the risks of eviction. If the waiver was only conscious, the vendo
r shall pay only the
value which the thing sold had at the time of eviction this is a case of solutio
n indebiti the
effect is to deprive the purchaser of the benefits mentioned in Nos. 2, 3, 4 and
5 of Article 1555.
2. Intencionada the waiver is made by the vendee with knowledge of the risks of
eviction and
assumption of its consequence. The vendor is exempted from the obligation to ans
wer for eviction,
provided he did not act in bad faith [Andaya vs. Manansala, 107 Phil. 1151].
Rights of the vendee against the vendor in case eviction occurs (Art. 1555)
1. return of the value of the thing sold at the time of eviction;
2. income or fruits if he has been ordered to deliver them to the party who won
the suit against him;
3. costs of the suit;
4. expenses of the contract;
5. damages and interests and ornamental expenses if the sale was made in bad fai
th.
Redhibition
Redhibitory action
Redhibitory vice or defect

- the avoidance of a sale on
account of some vice or defect
in the thing sold, which
renders its use impossible, or
so inconvenient and imperfect
that it must be supposed that
the buyer would not have
purchased it had he known of
the vice.
- an action instituted to avoid a
sale on account of some vice or
defect in the thing sold which
renders its use impossible, or so
inconvenient and imperfect that it
must be supposed that the buyer
would not have purchased it had
he known of the vice. The object
is the rescission of the contract. If
the object is to procure the return
of a part of the purchase price
paid by the vendee, the remedy is
- a defect in the article sold
against which defect the seller is
bound to warrant. The vice or
defect must constitute an
imperfection, a defect in its
nature, of certain importance;
and a minor defect does not five
rise to redhibition. The mere
absence of a certain quality in
the thing sold which the vendee
thought it to contain is not
necessarily a redhibitory
known as accion
minoris orestimatoris.
defect. One thing is that is
positively suffers from certain
defects.
Doctrines of caveat venditor and caveat emptor
Caveat venditor
(Let the seller beware)
Caveat emptor
(Let the buyer beware)
- the vendor is liable to the vendee for any
hidden faults or defects in the thing sold, even
though he was not aware thereof (Art. 1566).-
Based on the principle that a sound price
warrants a sound article.
- applies in sheriffs sale, sales of animals, and tax
sales, for there is no warranty of title or quality
on the part of the seller in such sales.
- Also applies in double sales of property where
the issue is who between two vendees has a
better right to the property .
- Requires the purchaser to be aware of the
supposed title of the vendor and one who buys
without checking the vendors title takes all the
risks and losses consequent to such
failure [Solvoso vs. Tanega, 87 SCRA 349].
Alternative remedies of the buyer to enforce warranty (Art. 1567):
1. Accion redhibitoria to withdraw from the contract
2. Accion quanti minoris demand a proportionate reduction of the price, with a r
ight to damages in
either case
Effect of loss of thing sold on account of hidden defects (Art. 1568)
If the vendor was aware of the hidden defects
in consequence of which the thing sold was lost,
he shall bear the loss because he acted in bad
faith. In such case, the vendee has the right to
recover:
(a) the expenses of the price paid
b) the contract; and
(c) damages.
If the vendor was not aware of them, he shall
be obliged only to return:
(a) the price paid
(b) interest thereon; and
(c) expenses of the contract if paid by the
vendee. He is not made liable for damages
because he is not guilty of bad faith.
VI. OBLIGATIONS OF THE VENDEE
. The vendee is obliged to (1) accept delivery; and (2) pay the price of the thi
ng sold.
. The following rules must be borne in mind:
1. In contract of sale, the vendor is not required to deliver the thing sold unt
il the price is paid nor
the vendee pay the price before the thing is delivered in the absence of an agre
ement to the
contrary [La Font vs. Pascacio, 5 Phil. 591].
2. If stipulated, then the vendee is bound to accept delivery and to pay the pri
ce at the time and
place designated.
3. If there is no stipulation as to the time and place of payment and delivery,
the vendee is bound to
pay at the time and place of delivery.
4. In the absence also of stipulation, as to the place of delivery, it shall be
made wherever the thing
might be at the moment the contract was perfected (Art. 1251).
5. If only the time for delivery of the thing sold has been fixed in the contrac
t, the vendee is
required to pay even before the thing is delivered to him; if only the time for
payment of the price
has been fixed, the vendee is entitled to delivery even before the price is paid
by him (Art. 1524).
Instances when the vendee may suspend the payment of the price:
a) should he be disturbed in the possession or ownership of the thing sold;
b) should he have reasonable grounds to fear such disturbance by a vindicatory a
ction or by a foreclosure of
mortgage;
These rights do not exist in the following cases:
(a) should there be a stipulation to that effect; or
(b) should the vendor give security for the return of the price; or
(c) should the vendor have caused the disturbance or danger to cease; or
(d) should the disturbance consist only of a mere act or trespass.
VII. ACTIONS FOR THE BREACH OF CONTRACT OF SALE OF GOODS
Goods include all chattels personal but not things in action or money of legal t
ender in the Philippines. The
term includes growing fruits or crops.
Actions available for breach of the contract of sale of goods:
Action by the seller for payment of the price (Art. 1595)
Action by the seller for damages for non-acceptance of the goods (Art. 1596)
Action by the seller for rescission of the contract for breach thereof (Art. 159
7)
Action by the buyer for specific performance (Art. 1598)
Action by the buyer for rescission or damages for breach of warranty (Art. 1599)

Remedies allowed to the buyer when the seller has been guilty of a breach of pro
mise or
warranty (Art. 1599):
1
Recoupment - accept the goods and set up the sellers breach to reduce or extingui
sh the
price.The theory of recoupment is that the sellers damages are cut down to an amo
unt which
will compensate him for the value of what he has given.
2
Set-off or Counterclaim for damages - accept the goods and maintain an action fo
r
damages for the breach of the warranty. Both sides of the contract are enforced
in the same
litigation. The buyer (defendant) does not seek to avoid his obligation under th
e contract but
seeks to enforce the sellers (plaintiffs) obligation and to deduct it from his lia
bility for the price
for breach of warranty.
3
Action for damages refuse to accept the goods and maintain an action for damages
for the
breach of the warranty.
4
Rescission - rescind the contract of sale by returning or offering the return of
the goods, and
recover the price or any part thereof which has been paid. This remedy is not av
ailable in the
following cases:
(a) if the buyer accepted the goods knowing of the breach of warranty without pr
otest;
(b) if he fails to notify the seller within a reasonable time of his election to
rescind; and
(c) if he fails to return or offer to return the goods in substantially as good
condition as they
were in at the time of the transfer of ownership to him. But where the injury to
the goods was
caused by the very defect against which the seller warranted, the buyer may stil
l rescind the
sale.
VIII. EXTINGUISHMENT OF SALE
Classification of modes or causes of extinguishing the contract of sale:
Common those causes which are also the means of extinguishing all other contract
s like payment, loss of
the thing, condonation, etc. (Art. 1231).
Special those causes which are recognized by the law on sales (those covered by
Arts. 1484, 1532, 1539,
1540, 1542, 1556, 1560, 1567, and 1591).
Extra-special conventional redemption and legal redemption.
Conventional Redemption
(Arts. 1601-1618)
Legal Redemption
(Arts. 1619-1623)
It is the right which the vendor reserves to
himself, to reacquire the property sold provided
her returns to the vendee the price of the sale,
the expenses of the contract, any other legitimate
payments made therefore and the necessary and
useful expenses made on the thing sold, and
fulfills other stipulations which may have been
agreed upon.
It is the right to be subrogated, upon the same
terms and conditions stipulated in the contract, in
the place of one who acquires a thing by purchase
or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous
title.
Nature:
(a) it is purely contractual because it is a right
created, not by mandate of the law, but by virtue
of an express contract[Ordoez vs. Villaroman, 78
Phil. 116];
(b) it is an accidental stipulation and, therefore,
its nullity cannot affect the sale of itself since the
latter might be entered into without said
stipulation [Alojado vs. Lim Siongco, 51 Phil.
339];
Nature: (a) identical with conventional
redemption, except for the source of the right
conventional redemption arises from the
voluntary agreement of the parties; legal
redemption proceeds from law;
(b) it is not predicated on proprietary right but
on a bare statutory privilege to be exercised only
by the person named in the statute the statute
does not make actual ownership at the time of
sale or redemption a condition precedent, the
(c) it is a real right when registered, because it
binds third persons [Mortera vs. Martinez, 14 Phil.
541];
(d) it is a resolutory condition because when
exercised, the right of ownership acquired by the
vendee is extinguished[Aquino vs. Deal, 63 Phil.
582];
(e) it is potestative because it depends upon
the will of the vendor;
(f) it is a power or privilege, not an obligation,
that the vendor has reserved for himself [Ocampo
vs. Potenciano, CA 48 OG 2230];
(g) it is reserved at the moment of the
perfection of the contract for if the right to
repurchase is agreed upon afterwards, there is
only a promise to sell which produces different
rights and effects and is governed by Art.
1479 [Diamante vs. CA, 206 SCRA 52];
(h) the person entitled to exercise the right of
redemption necessarily is theowner of the
property sold and not any third party [Gallar vs.
Husain, 20 SCRA 186];
(i) it gives rise to reciprocal obligationthat of
returning the price of sale and other expenses, on
the part of the vendor, and that of delivering the
property and executing a deed of sale therefore,
on the part of the vendee [Pandaquilla vs. Gaza,
12 Phil. 663].
right following the person and not the
property[Magno vs. Viola and Sotto, 61 Phil. 80];
(c) it is in the nature of a mere privilegecreated
partly for reason of public policy and partly for the
benefit and convenience of the redemptioner to
afford him a way out of what might be a
disagreeable or inconvenient association into
which he has been thrust it is intended to
minimize co-ownership [Basa vs. Aguilar, 117
SCRA 128; Tan vs. CA, 172 SCRA 660].

Instances of Legal Redemption:

(a) Under the Civil Code, those found in Arts.
1620-1622, 1634, and 1088;

(b) Under special laws:
(1) redemption by owner of real property sold
for delinquent taxes period is within 1 year from
date of sale;
(2) repurchase by homesteader of homestead
sold under the Public Land Act period is 5 years
[Tupas vs. Damasco, 132 SCRA 593];
(3) redemption by judgment debtor or
redemptioner or real property sold on execution
period is 12 months;
(4) redemption by mortgagor after mortgaged
property has been judicially foreclosed and sold
period is 90 days but before confirmation of sale
by the court (in all cases of extra-judicial
foreclosure sale, the mortgagor may redeem the
property within 1 year from the date of
registration of the sale);
(5) redemption by an agricultural lessee of
landholding sold by the landowner period is 180
days from notice in writing which shall be served
by the vendee on all lessees affected by DAR
upon the registration of the sale.
An equitable mortgage is one which lacks the proper formalities, form of words,
or other requisites
prescribed by law for a mortgage, but shows the intention of the parties to make
the property subject of the
contract as security for a debt and contains nothing impossible or contrary to l
aw [Cachola vs. CA, 208 SCRA
496].
Dacion en pago is the transmission of the ownership of a thing by the debtor to
the creditor as the
accepted equivalent of the performance of an obligation.
Pacto de retro
Mortgage
Ownership is transferred but the ownership is
subject to the condition that the seller might
recover the ownership within a certain period of
time.
Ownership is not transferred but the property is
merely subject to a charge or lien as security for
the compliance of a principal obligation, usually a
loan.
If the seller does not repurchase the property upon
the very day named in the contract, he loses all
interest thereon.
The mortgagor does not lose his interest in the
property if he fails to pay the debt at its maturity.
There is no obligation resting upon the purchaser
to foreclose; neither does the vendor have any
right to redeem the property after the maturity of
the debt.
It is the duty of the mortgagee to foreclose the
mortgage if he wishes to secure a perfect title
thereto, and after the maturity of the debt secured
by the mortgage and before foreclosure, the
mortgagor has a right to redeem [Basilio vs.
Encarnacion, 5 Phil. 360].
Instances when conventional redemption is presumed to be an equitable mortgage:
1. when the price of a sale with right to repurchase is unusually inadequate;
2. when the vendor remains in possession as lessee or otherwise;
3. when upon or after the expiration of the right to repurchase another instrume
nt extending the
period of redemption or granting a new period is executed;
4. when the purchaser retains for himself a part of the purchase price;
5. when the vendor binds himself to pay the taxes on the thing sold;
6. in any other case where it may be fairly inferred the real intention of the p
arties is that the
transaction shall secure the payment of a debt or the performance of any other o
bligation; and
7. when there is a doubt as to whether the contract is a contract of sale with r
ight or repurchase or
an equitable mortgage.

Requisites before legal redemption can be exercised:
1
There must be a sale or assignment of credit. The concept of sale must be unders
tood in its
restricted sense. The right cannot be exercised if the transaction is exchange o
r donation.
2
There must be a pending litigation at the time of the assignment. The complaint
by the
assignor must have been filed and answered by the creditor before the sale of th
e credit.
3
The debtor must pay the assignee (a) the price paid by him, (b) the judicial cos
ts incurred by
him, and (c) the interests on the price from the date of payment.
4
The right must be exercised by the debtor within 30 days from the date the assig
nee demands
(judicially or extra-judicially) payment from him.


Redemption
Pre-emption
1
The sale to a third person has already been
perfected
The sale to a third person has not yet been
perfected
2
Has a much broader scope
Narrower in scope may be exercised only
where there is a prospective resale of a small
piece of urban land originally bought by the
prospective vendor merely for speculation
3
Directed against the third person who bought the
property
Directed against the prospective vendor who is
about to resell the property
4
Effect is to extinguish a contract that has already
been perfected or even consummated
Effect is to prevent the birth or perfection of a
contract
IX. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of credit a contract by which the owner of a credit transfers to anot
her his rights and actions
against a third person in consideration of a price certain in money or its equiv
alent (Art. 1458).
Assignment of credit and other incorporeal rights are consensual, bilateral, one
rous, and commutative or
aleatory contracts. The assignment involves no transfer of ownership but merely
effects the transfer of
rights which the assignor has at the time to the assignee [Casabuena vs. CA, 286
SCRA 594].
It may be done gratuitously, but if done onerously, it is really a sale. Thus, t
he subject matter is the credit
or right assigned; the consideration is the price paid for the credit or right;
and the consent is the
agreement of the parties to the assignment of the credit or right at the agreed
price.
Renunciation the abandonment of a right without a transfer to another.
Agency involves representation, not transmission wherein the agent acts for the
principal.
Substitution the change of a new debtor for the previous debtor with the credit
remaining in the same
creditor.
Subrogation the change in the person of the creditor with the credit being extin
guished.

Binding effects of assignment:
1
As between the parties, the assignment is valid although it appears only in a pr
ivate document
so long as the law does not require a specific form for its validity.
2
To affect third persons, the assignment must appear in a public instrument, and
in case it
involves real property, it is indispensable that it be recorded in the Registry
of Deeds [Lopez vs.
Alvarez, 9 Phil. 28].
3
The assignee merely steps into the shoes of the assignor, the former acquiring t
he credit
subject to defenses (fraud, prescription, etc.) available to the debtor against
the assignor. The
assignee is deemed subrogated to the rights as well as to the obligations of the
seller. He
cannot acquire greater rights than those pertaining to the assignor. [Koa vs CA,
219 SCRA 541].

X. BARTER OR EXCHANGE
Barter a contract whereby one person transfers the ownership of non-fungible thi
ngs to another with the
obligation on the part of the latter to give things of the same kind, quantity,
and quality.
The contract is perfected from the moment there is a meeting of the minds upon t
he things promised by
each party in consideration of the other. It is consummated from the time of mut
ual delivery by the
contracting parties of things they promised.
Effect where the giver is not the lawful owner of the thing delivered: the aggri
eved party cannot be
compelled to deliver the thing he has promised. He is entitled to claim damages
(Art. 1639). [Biagtan vs.
Viuda de Oller, 62 Phil. 933].
Remedy in case of eviction: the injured party is given the option to recover the
property he has given in
exchange with damages or only claim an indemnity for damages. The right to recov
er is, however, subject
to the rights of innocent third persons (Art. 1640).

XI. THE BULK SALES LAW
Purpose of the law (Act No. 3952) is to prevent the defrauding of creditors by t
he secret sale or disposal or
mortgage in bulk of all or substantially all of a merchants stock of goods.
The general scheme is to declare such bulk sales fraudulent and void as to credi
tors of the vendor, or
presumptively so, unless specified formalities are observed, such as the demandi
ng and the giving of a list
of creditors, the giving of actual and constructive notice to such creditors, by
record or otherwise, and the
making of an inventory.
A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer, mort
gage, or assignment
(a) of a stock of goods, wares, merchandise, provisions, or materials otherwise
than in the ordinary course
of trade and the regular prosecution of the business; or
(b) of all or substantially all, of the business or trade; or
(c) of all or substantially all, of the fixtures and equipment used in the busin
ess of the vendor, mortgagor
transferor, or assignor.
Acts punished by the law:
1. knowingly or willfully making or delivering a statement as required by the Ac
t which does not
include the names of all the creditors of the vendor, etc. with the correct amou
nt due and to
become due or which contains any false or untrue statement; and
2. transferring title to a any stock of goods, wares, merchandise, provisions or
materials sold in bulk
without consideration of for a nominal consideration only.
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