Concept of Contract of Sale

The contract of sales is an agreement whereby one of the parties (called the seller
or vendor) obligates himself to deliver something to the other (called the buyer or
purchaser or vendee) 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 indeterm vinate
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 the
terms of the contract, the acceptance by one of the offer made by the other. As a
bilateral contract, the acceptance of payment by a party is an indication of his
consent to a contract of sale, thereby precluding 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 certain to come into existence as the natural increment or
usual incident of something in existence already belonging to the seller, and
the tile will vest the buyer the moment the thing comes into existence (Art.
1461).
Emptio rei speratae
Rei spetae
(sale of thing expected)
the sale of a thing not yet in
the sale of hope itself that the thing
existence, subject to the condition
will come into existence, where it is
that the thing will exist and on failure agreed that the buyer will pay the
of the condition, the contract
price even if the thing does not
becomes ineffective and hence, the eventually exist;
buyer has not obligation to pay the
price;
the future thing is certain as to
like the sale of a sweepstake ticket, it
itself but uncertain as to its quantity is not certain that the thing itself
and quality;
(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 produces effect even though the
the thing should exist, so that if it
thing does not come into existence
does not, there will be no contract by because the object of the contract is
reason of the absence of an essential the hope itself, unless it is a vain hope
element.
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 equivalent.
Natural Elements those which are deemed to exist in certain contracts, in the
absence of any contrary stipulations, like warranty against eviction;
Accidental Elements those which may be present or absent depending on the
stipulations 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 agreed 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 passes to the buyer upon remains with the seller
title:
delivery of the thing sold.
until full payment of the
agreed price.
Payment of non-payment of the price full payment is a positive
price:
is a negative resolutory
suspensive condition, the
condition, and the remedy is failure of which is not a
to exact fulfillment or to
breach, casual or serious, of
rescind the contract.
the contract but simply an
event that prevents the
obligation of the vendor to
convey title from acquiring
binding force.
Ownership vendor loses and cannot
title remains in the vendor
of vendor: recover ownership of the
until full payment of price.
thing sold and delivered,
actually or constructively
until and unless the contract
of sale itself is resolved and
set aside.
Sale Distinguished from Dation in
Sale
no pre-existing credit
gives rise to obligation
cause or consideration is the price,
or the acquisition of title to the
property

there is greater freedom in the

Payment:
Dation in Payment
there is pre-existing credit
extinguishes obligation
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
less freedom

determination of the price

giving of the price may generally end the giving of the object in lieu of the
the obligation of the buyer
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 the parties contracted solely with
not seen the article sold and relies on reference to the sample, with the
the description given him by the
understanding that the bulk was like
vendor, or has seen the goods but the it.- the vendor warrants that the thing
want of identity is not apparent on
sold and to be delivered by him shall
inspection.If the bulk of the
conform with the sample in kind,
goods delivered does not correspond charater, and quality.
with the description, the contract may
be rescinded. (Art. 1481.)
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 perfected 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; otherwise, 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
following 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 involved; and
(c) sale of property not to be performed within a year from the date thereof
regardless of the nature of the property and the price involved.
The Statute Frauds specifies three (3) ways in which contracts of sales of
goods 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
actual 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
performance, i.e., delivery and payment, has as yet been made by both
parties), and not to contracts which are 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
installments;
(c) foreclose the chattel mortgage, if one has been constituted, if the vendee shall
have failed to pay two or more installments.
These remedies are alternative and are not to be exercised cumulatively or
successively and the election of one is a waiver of the right to resort to the
others [Pacific Commerial 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 buyer who has paid at least two (2) years of
installments in case he defaults in the payment of succeeding payments
(a) to pay without additional interest the unpaid installments due within the total
grace period earned by him fixed at the rate of one-month grace period for every
one year of installment 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
cancellation of the contract and to pay in advance any unpaid installment anytime
without interest and to have 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
themselves, 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 parent or guardian), he must pay a
reasonable price therefor. The contract is therefore valid, but the 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
and adolescence and are now in the adult age, when they pretended to have
already reached their majority, while in fact they have not, is valid, and they
cannot be permitted afterwards to excuse themselves 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 or
class of property (Art. 1490-1491). The prohibition extends to sales by virtue of
legal redemption, compromises, and renunciations.
(a) Husband and wife to each other except when a separation of property was
agreed 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
subdivision thereof, or of the government-owned or controlled corporations, the
administration of which is entrusted 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
prevent fraud and undue and improper influence.
With respect to (b) to (d), the sale shall only be voidable because in such
cases only private interests are affected. The defect can be cured by
ratification by the seller. With 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 transitu
(i)
Officer holding the execution or his deputy
III.
LOST

EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN

Where the thing is entirely lost at the time of perfection, the contract is
inexistent and void because there is no object. There being no contract,
there is no necessity to bring an action for annulment.
Where the thing is only partially lost, the vendee may elect between
withdrawing 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
such 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 demand 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 when 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 condition 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 the
contrary (Art. 1487).
Delivery or Tradition
Tradition or delivery is a derivative mode of acquiring ownership by virtue of which
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
possession of the vendee or his agent. This involves the physical delivery of
the thing and is usually done by the passing of a movable thing from hand to
hand.
2. Legal or Constructive (Arts. 1498-1501) through the execution of a public
instrument
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
contracting parties if the thing sold cannot be transferred to the possession of the
vendee at the time of the sale;
Traditio brevi manu the vendee already has the possession of the thing sold by
virtue 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
property, made by placing the titles of ownership in the hands of the vendee or
lawyer, by execution of a public instrument, or by allowing the vendee to use his
rights as new owner with the consent of the vendor.
Requisites in constructive delivery before ownership may be
transferred:
(a) Seller must have control over the thing; otherwise, can he put another in
control?

(b)
(c)

Buyer must be put under control;

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 constructive
delivery.
2. There can be no constructive delivery by means of a public instrument if there 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 possession
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 notice
of his claim to the carrier or other person in possession;
(e) the seller must surrender the negotiable document of title, if any, issued by
the carrier or bailee; and
(f)
the seller must bear the expenses of delivery of the goods after the exercise 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 is
to be borne by the creditor.
4. If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity for
damages in either case.
5. If the thing is improved by its nature, or by time, the improvement shall inure
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
vendee 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 Deeds
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, stronger 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 good
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
system.

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,
contemporaneously and as a part of the contract of sale, having reference to the
character, quality, or title of the goods, and by which he promises or undertakes to
insure that certain facts are or shall be as he then represents 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 nonperformance 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
vendee; 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 vendor shall pay only the value which the thing sold had at the
time of eviction this is a case of solution 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 answer 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
faith.
Redhibition
Redhibitory action
Redhibitory vice or
defect
the avoidance of a
an action instituted to
a defect in the article
sale on account of
avoid a sale on account of sold against which defect
some vice or defect in some vice or defect in the the seller is bound to
the thing sold, which
thing sold which renders warrant. The vice or
renders its use
its use impossible, or so defect must constitute an
impossible, or so
inconvenient and
imperfection, a defect in
inconvenient and
imperfect that it must be its nature, of certain
imperfect that it must supposed that the buyer importance; and a minor
be supposed that the would not have purchased defect does not five rise
buyer would not have it had he known of the
to redhibition. The mere
purchased it had he
vice. The object is the
absence of a certain
known of the vice.
rescission of the contract. quality in the thing sold

If the object is to procure which the vendee

the return of a part of the thought it to contain is
purchase price paid by the not necessarily a
vendee, the remedy is
redhibitory defect. One
known as accion
thing is that is positively
minoris orestimatoris.
suffers from certain
defects.
Doctrines of caveat venditor and caveat emptor
Caveat venditor
Caveat emptor
(Let the seller beware)
(Let the buyer beware)
the vendor is liable to the vendee applies in sheriffs sale, sales of
for any hidden faults or defects in
animals, and tax sales, for there is no
the thing sold, even though he was warranty of title or quality on the part
not aware thereof (Art. 1566).of the seller in such sales.
Based on the principle that a sound Also applies in double sales of
price warrants a sound article.
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
right 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
(a) the expenses of the price paid
hidden defects in consequence of
b) the contract; and
which the thing sold was lost, he
(c) damages.
shall bear the loss because he acted
in bad faith. In such case, the
vendee has the right to recover:
If the vendor was not aware of them, (a) the price paid
he shall be obliged only to return:
(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
thing sold.
The following rules must be borne in mind:
1. In contract of sale, the vendor is not required to deliver the thing sold until
the price is paid nor the vendee pay the price before the thing is delivered in
the absence of an agreement 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
price 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 contract,
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
action 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
tender 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. 1597)
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 promise or warranty (Art. 1599):
1 Recoupment accept the goods and set up the sellers breach to reduce
or extinguish the price.The theory of recoupment is that the sellers
damages are cut down to an amount 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 for 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 the contract but seeks to enforce
the sellers (plaintiffs) obligation and to deduct it from his liability 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 available in the following cases:
(a) if the buyer accepted the goods knowing of the breach of warranty
without protest;
(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 still 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
contracts 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
Legal Redemption
(Arts. 1601-1618)
(Arts. 1619-1623)
It is the right which the vendor
It is the right to be subrogated, upon
reserves to himself, to reacquire the the same terms and conditions
property sold provided her returns to stipulated in the contract, in the place
the vendee the price of the sale, the of one who acquires a thing by
expenses of the contract, any other
purchase or dation in payment, or by
legitimate payments made therefore any other transaction whereby
and the necessary and useful
ownership is transmitted by onerous
expenses made on the thing sold, and title.
fulfills other stipulations which may

have been agreed upon.

Nature:
Nature: (a)
identical with
(a) it is purely contractual because it conventional redemption, except for
is a right created, not by mandate of the source of the right conventional
the law, but by virtue of an express
redemption arises from the voluntary
contract[Ordoez vs. Villaroman, 78
agreement of the parties; legal
Phil. 116];
redemption proceeds from law;
(b) it is an accidental stipulation and,(b)
it is not predicated on
therefore, its nullity cannot affect the proprietary right but on a bare
sale of itself since the latter might be statutory privilege to be exercised only
entered into without said
by the person named in the statute
stipulation [Alojado vs. Lim Siongco, the statute does not make actual
51 Phil. 339];
ownership at the time of sale or
(c) it is a real right when registered, redemption a condition precedent, the
because it binds third
right following the person and not the
persons [Mortera vs. Martinez, 14 Phil. property[Magno vs. Viola and Sotto,
541];
61 Phil. 80];
(d) it is a resolutory
(c)
it is in the nature of a mere
condition because when exercised, the privilegecreated partly for reason of
right of ownership acquired by the
public policy and partly for the benefit
vendee is extinguished[Aquino vs.
and convenience of the redemptioner
Deal, 63 Phil. 582];
to afford him a way out of what might
(e) it is potestative because it
be a disagreeable or inconvenient
depends upon the will of the vendor; association into which he has been
(f)
it is a power or privilege, not an thrust it is intended to minimize coobligation, that the vendor has
ownership [Basa vs. Aguilar, 117 SCRA
reserved for himself [Ocampo vs.
128; Tan vs. CA, 172 SCRA 660].
Potenciano, CA 48 OG 2230];
(g) it is reserved at the moment of Instances of Legal Redemption:
the perfection of the contract for if the
right to repurchase is agreed upon
(a) Under the Civil Code, those found
afterwards, there is only a promise to in Arts. 1620-1622, 1634, and 1088;
sell which produces different rights
and effects and is governed by Art.
(b) Under special laws:
1479 [Diamante vs. CA, 206 SCRA 52]; (1) redemption by owner of real
(h) the person entitled to exercise
property sold for delinquent taxes
the right of redemption necessarily is period is within 1 year from date of
theowner of the property sold and not sale;
any third party [Gallar vs. Husain, 20 (2) repurchase by homesteader of
SCRA 186];
homestead sold under the Public Land
(i)
it gives rise to reciprocal
Act period is 5 years [Tupas vs.
obligationthat of returning the price of Damasco, 132 SCRA 593];
sale and other expenses, on the part (3) redemption by judgment debtor
of the vendor, and that of delivering or redemptioner or real property sold
the property and executing a deed of on execution period is 12 months;
sale therefore, on the part of the
(4) redemption by mortgagor after
vendee [Pandaquilla vs. Gaza, 12 Phil. mortgaged property has been
663].
judicially foreclosed and sold period
is 90 days but before confirmation of
sale by the court (in all cases of extrajudicial 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 law [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 not transferred but the
ownership is subject to the condition
property is merely subject to a charge
that the seller might recover the
or lien as security for the compliance of
ownership within a certain period of
a principal obligation, usually a loan.
time.
If the seller does not repurchase the
The mortgagor does not lose his
property upon the very day named in interest in the property if he fails to pay
the contract, he loses all interest
the debt at its maturity.
thereon.
There is no obligation resting upon the It is the duty of the mortgagee to
purchaser to foreclose; neither does the foreclose the mortgage if he wishes to
vendor have any right to redeem the
secure a perfect title thereto, and after
property after the maturity of the debt. 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
instrument 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
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation; and
7. when there is a doubt as to whether the contract is a contract of sale with
right 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
understood in its restricted sense. The right cannot be exercised if the
transaction is exchange or 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 the credit.
3 The debtor must pay the assignee (a) the price paid by him, (b) the
judicial costs 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 assignee demands (judicially or extra-judicially) payment from him.
Redemption
Pre-emption
1 The sale to a third person has already The sale to a third person has not yet
been perfected
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 Directed against the prospective
bought the property
vendor who is about to resell the

property
4 Effect is to extinguish a contract that Effect is to prevent the birth or
has already been perfected or even
perfection of a contract
consummated
IX. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of credit a contract by which the owner of a credit transfers to another
his rights and actions against a third person in consideration of a price certain in
money or its equivalent (Art. 1458).
Assignment of credit and other incorporeal rights are consensual, bilateral, onerous,
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, the
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
extinguished.
Binding effects of assignment:
1 As between the parties, the assignment is valid although it appears only in
a private 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 the 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
things 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
the things promised by each party in consideration of the other. It is consummated
from the time of mutual delivery by the contracting parties of things they promised.
Effect where the giver is not the lawful owner of the thing delivered: the aggrieved
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 recover is, however, subject to the rights of innocent third
persons (Art. 1640).