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PRACTICAL ACCOUNTING

BUSINESS LAW1

BL.M - 1602
LAW ON SALES
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Certs Knowledge Engineering Team

REVIEW NOTES

MARGINAL NOTES

Contract of Sale- By the contract of sale, one of the contracting


parties obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pat therefore a
price certain in money or its equivalent.
Essential Requisites of Contract of Sale:
1. Consent or meeting of the minds
2. Object or subject matter
3. Cause or consideration
Characteristics of contract of sale
1. Consensual
2. Bilateral
3. Onerous
4. Commutative
5. Nominate6. Principal
Two Kinds of Sale:
1. Absolute
2. Conditional
Requisites concerning Object:
1. Determinate Licit/Lawful
2. Possible
Requisites:
1. Things- determinate, lawful and possible (within the
commerce of men)
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BL.M-1602.Law on Sales

2. Rights- all rights not intransmissible


Rights of vendor to transfer ownership;
1. One can sell only what he owns
2. Sufficient if right exists at the time of delivery
When is subject matter determinate?
Emptio Rei Speratae
Emptio Spei
Future goods as object of sale- is valid only as an executory
contract to be fulfilled by the acquisition and delivery of the
goods specified.
Stages in Contract:
1. Negotiation
2. Perfection
3. Consummation
Fungible goods goods of which any unit is, from its nature
or by mercantile usage, treated as the equivalent of any
other unit.
Sale of an undivided share of a specific mass (fungible
goods).
1. If the mass bought is lower than the whole mass?
2. If the mass bought is higher than the whole mass?
Note: subject matter, incorporeal or intangible
right, ownership passes to the buyer by the
intention of the parties.
Contract of Sale distinguished from Contract to Sell (agency)
In the first, title passes to the vendee upon delivery
of thing sold; in second, ownership is reserved in
vendor and is not to pass until full payment
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In the first, nonpayment is negative resolutory


condition; in second, full payment is positive
suspensive condition
In the first, vendor has lost and cannot recover
ownership until and unless contract is rescinded; in
the second, title remains in the vendor and when he
seeks to eject the vendee because of noncompliance by such vendee with the suspensive
condition stipulated, he is enforcing the contract
and not resolving the same.

Piece of work distinguished from Contract of sale;


In the first, contractor binds himself to execute a
piece of work for the employer in consideration of a
certain price or compensation. The contractor may
either employ his labor, skill or furnish the material.
In the first, the thing transferred is not in existence
and which never would have existed but for the
order of the party desiring to acquire it; in the
second, the thing transferred is one which would
have existed and been the subject of sale to some
other person, even if the order had not been given.
In the first the risk of loss before delivery is borne
by the worker/contractor, not by the employer; in
the second, the risk of loss is borne by the buyer.
Contracts for a piece of work are not within the
statue of frauds unlike contracts of sale:
Sale distinguished from barter:
1. Intention of the parties
2. The intention cannot be determined or cannot be
ascertained
a. Thing higher- barter
b. Money higher- sale

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BL.M-1602.Law on Sales

Effect where price is fixed by third person?


Effect where price not fixed by third person designated?
Effect of gross inadequacy of price in voluntary sales:
General Rule mere inadequacy of the price does not
invalidate the contract.
Exception:
1. if indicates defect, fraud, mistake, or undue
influence voidable
2. if price is simulated or false void if not intended to
bound at all (absolute). If intended to transfer
gratuitously (relative) donation.
Effect of gross inadequacy of price in involuntary or
execution sales;
General Rule - mere inadequacy of price is not sufficient
ground for the cancellation of execution sale.
- with right to repurchase- still valid- low price
easy to redeem.
Exception - so low as to shock the minds of the court
Effect of failure to determine the price;?
Rule governing auction sale
1. Sale of separate lots by auction are separate sales
2. Sale perfected by the fall of the hammer
3. Right to bid by the seller with notice, yes
Without notice, no
Ownership of thing transferred by delivery
Exception to the rule: when there is a stipulation that despite
delivery, the ownership of the thing

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shall remain with the seller until full payment is made by the
buyer.
Kinds of promise:
1. Accepted unilateral promise to sell in which the
promissee (acceptor) elects to buy
2. Accepted unilateral promise to buy which the
promissee (acceptor) promise to sell.
3. Bilateral promise to buy and sell reciprocally
accepted.
Effect of unaccepted unilateral promise no juridical effect or
legal bond policitation.
Meaning of option contract and earnest money;
Option Contract agreement granting a privilege to buy or
sell within an agreed time and at a determined price. It is a
separate and distinct contract from that which the parties
may enter into upon consummation of contract. It must be
supported by consideration.
Earnest money part of the purchase price advanced by the
vendee to vendor as token of perfection of the contract.
Effect of accepted unilateral promise
A unilateral promise to sell or to buy a determinate
thing for a price certain does not bind the promisor
even if accepted and may be withdrawn at any time
if not supported by a consideration distinct and
separate from the price.
Effect of bilateral promise to buy and sell- the same effect as a
perfected contract
Sale of goods by description and/or sample;
1. By description
2. Sale by sample
3. Sale by description and by sample
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BL.M-1602.Law on Sales

Form of contract of sale


General Rule in any form provided all the essential requisites
are present.
Exception
1. If covered by statute of frauds (only to executory
contracts)
2. If required in order that the contra be valid
3. For convenience of the parties (Public instrument)
Sale of personal property by installments
Remedies of the vendor:
Sale of personal property by INSTALLMENT:
(a) Remedies (alternative remedies) available to the vendor
in case of breach:
a. Exact fulfillment (failure to pay one (1)
installment).
b. Cancel the sale, should failure to pay cover two
(2) or more installments.
c. Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should
vendees failure to pay cover two (2) or more
installments. If this is the remedy, he shall have
no further action against the purchaser to
recover any unpaid balance of the price. Any
agreement to the contrary shall be VOID.
Sale of real property by instalment
Realty Installment Buyer Protection Act (Maceda Law) law
that provides protection to buyers of REAL ESTATE ON
INSTALLMENT PAYMENTS

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a. Applies to contracts involving sale or financing of real


estate on instalment payments, including residential
condominium apartments but excluding industrial lots,
commercial buildings and sales to tenants under RA
3844 (Agricultural Land Reform Code)
b. Where buyer has paid at least 2 years of instalments,
buyer is entitled to the following rights in case he
defaults in the payment of succeeding instalments:
i. To pay, without additional interest, the unpaid
instalments due within the total grace period
earned by him, which is one month grace
period for every 1 year of instalments made.
This right shall be exercised by the buyer only
once in every 5 years of the life of the contract
and its extensions, if any;
ii. If the contract is cancelled, 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
instalments, and additional 5% ever year but
not to exceed 90% of the total payments made.
Cancellation shall only take place after 30 days
from receipt by the buyer or the notice of
cancellation or demand for rescission by
notarial act AND upon full payment of the cash
surrender to the buyer. Down payment,
deposits or options shall be included in the
computation of the total number of
installments
c. In case where less than 2 years of installments were
paid, seller shall give the buyer a grace period of not
less than 60 days from the date the instalment If buyer
fails to pay the instalment due at the expiration of the
grace period, seller may cancel the contract after 30
days from receipt by buyer of the notice of cancellation
or demand for rescission of the contract by a notarial
act.
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BL.M-1602.Law on Sales

CAPACITY TO BUY OR SELL


Person who may enter into a contract of sale- all natural or
juridical with legal capacity
Kinds of incapacity
1. Absolute- persons who cannot bind themselves
2. Relative- with reference only to certain persons
Liability for necessaries of minor or other person without
capacity to act
Necessaries- needed for sustenance
General Rule - contracts entered into by minors,
insane etc. voidable
Except: necessaries are sold, valid, to pay
reasonable price
Relative incapacity of husband and wife
Prohibited from selling to each other (void and
inexistent), except:
a. When a separation of property was agreed
upon in the marriage settlements; or
b. When there has been a judicial separation or
property.
Also donations except moderate gifts
Reason for prohibition- for the protection of third person.
Incapacity by reason of relation to property;
Persons prohibited from acquiring by purchase, even at public
or judicial auction, either in person or through the mediation of
another, are:
a. Guardian, the property of the person/s under his
guardianship.

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b. Agents, property whose administration or sale may


have been intrusted to them (UNLESS with consent of
principal)
c. Executors or administrators, the property of the estate
under administration
d. Public officers and employees, the property of the state
or any subdivision thereof, or of any GOCC or
institution, the administration of which has been
intrusted to them
e. Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and
employees connected with the administration of justice,
the property and rights in litigation or levied upon on
execution before the court whose jurisdiction or
territory they exercise their respective functions.
Lawyers also, the property and rights which may be the
object of any litigation in which they may take part by
virtue of their profession.
f. Any others disqualified by law.
Other persons especially disqualified?
Effect of sale in violation of prohibition.
1. 1 to 3- voidable
2. 4 to 6 null and void
Prohibition extends to sales in legal redemption:
1. Compromise
2. Renunciation
EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN
LOST
Effect of loss of thing at the time of sale
1. Thing entirely lost at the time of perfection void

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BL.M-1602.Law on Sales

2. Partially lost buyer may elect fulfilment of the


remaining part and paying proportionate price or
withdraw the contract
When a thing is considered lost?
Effect of loss in case of specific goods
1. divisible
a. avoided
b. or enforce the remaining
2. indivisible pay the proportionate amount of goods
remaining
OBLIGATIONS OF THE VENDOR
Principal obligations of the vendor
1. transfer the ownership of determinate thing
2. deliver the thing
3. to warrant against and hidden defects
4. to take of the thing with proper diligence pending
delivery
5. to pay for the expenses of execution and
registration except otherwise agreed upon.
Kinds of delivery:
a. Actual
b. Constructive
a. By public instrument- valid only when the thing
is subject to the control of the vendor.
b. Delivery of keys of place or depository where it
is stored or kept, as regards or movable
property- valid only when the thing is subject to
the control of the vendor.
c. Tradition longa manu takes place by mere
consent or agreement of the contracting parties
as when the vendor merely points to the thing

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sold which shall thereafter be at the control and


disposal of the vendee.
d. Tradition brevi manu by mere consent, as
when the vendee has already in possession of
the thing sold by virtue of another title, i.e.
lease
e. Tradition constitutum possessorium opposite
of tradition brevi manu. Takes place when the
vendor continues in possession of the property
sold not as owner but in some other capacity,
i.e. when vendor stays as tenant on the vendee.
f. Quasi tradition, delivery by agreement
signifying a transfer of possession.
a. Public instrument
b. Placing the title of ownership to the vendee
c. Allowing the vendee to use the rights as
new owner
Contracts of sale or return
Sale on trial or approval or satisfaction
Delivery of specific goods sold to the carrier generally passes
title.
Exception:
1. Reservation of right of possession or ownership when
specific goods are shipped
2. Where seller or his agent is consignee. By the bill of
lading the goods are deliverable to the seller or his
agent. Seller may dispose to third person.
3. Where buyer or his agent is consignee but seller
retains the bill of lading. Seller retains possession.
Risk of loss generally attends title. (owner)
1. Where sellers tittle only for purpose of security
title passes and buyer will bear the loss.
2. where actual delivery was delayed, the party at fault
shall bear the loss
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Risk of loss by fortuitous event after perfection but before


delivery (1480 vs 1504)
Sale by a person not the owner:
Rule where buyer buys object from somebody who is not the
owner and not authorized to sell it:
General rule: the vendee acquires no better title to the object
than the vendor had.
Exception:
a. where the owner of the goods is, precluded from
denying the sellers authority to sell.
b. where the law enables the apparent owner to
dispose of the goods as if he were the true owner
thereof.
c. where the sale is sanctioned by statutory or juridical
authority.
d. where the sale is made at merchants store, or in
fairs or markets.
e. Where the seller has a voidable title which has not
been avoided at the time of the sale.
f. Where seller subsequently acquires title.
Sale by one having a voidable title;
If the seller has only a voidable title to the goods,
the buyer acquires a good title to the goods
provided he buys them;
a. before the title of the seller has been
avoided
b. good faith for value
c. without notice of the sellers defect
Negotiable document of title a document of title in which it is
stated that the goods referred to herein will be delivered to the
bearer or to the order of any person named in such document.
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Nature and function of documents of title


1. receipts of, or orders upon, a bailee of goods
represented
2. evidence of transfer of title and possession of goods
and contract between the parties
Most common forms of documents of title?
Classes of documents of title
1. negotiable
2. non-negotiable
How may a negotiable document of title be negotiated by
indorsement?
By the indorsement of the person to whose order the
goods are by the terms of the document deliverable.
Indorsement may be in blank t bearer or to another specified
person.
Who may negotiate a negotiable document of title:
a. By the owner thereof; or
b. By any person to whom the possession or custody of
the document has been entrusted by the owner, if by
the terms of the document the bailee issuing the
document undertakes to deliver the goods to the order
of the person to whom possession or custody of the
document has been entrusted or if at the time of such
entrusting the document in such form that it may be
negotiated by delivery.
The implied warranties of the person who negotiates a
document of title by indorsement or delivery are:
a. The document is genuine
b. He has legal right to negotiate or transfer it
c. He has knowledge of no fact which would impair the
validity or worth of the document
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BL.M-1602.Law on Sales

d. He has right to transfer the title to the goods and that


the goods are merchantable or fit for a particular
purpose.
The indorser of a negotiable document of title is not a
guarantor.
Place of delivery
Time/hour
The seller has a duty to put goods in deliverable
condition
Delivery of goods less than quantity:
Delivery of goods more than the quantity:
Delivery of goods mixed with others:
C.O.D the carrier acts on behalf of the seller in collecting the
purchase price.
C.I.F they signify that the price fixed covers not only the cost
of the goods, but the expenses of freight and insurance to be
paid by the seller up to the point especially named.
F.O.B. they mean that the goods are to be delivered free of
expense to the buyer to the point where they are F.O.B. In
general, the point of F.O.B., either the point of shipment or the
point of destination, determines when the ownership passes.
Shipping point buyer must pay freight
Destination seller must pay freight
When is seller of goods deemed to be an unpaid seller?

Remedies of unpaid seller:


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a. Lien on the goods or right to retain them for the price


while he is in possession
b. In case of insolvency of buyer, right of stopping the
goods in transit after he parts with possession
c. Right of resale
d. Right to rescind
When is right to retain the goods available to the unpaid seller?
When does unpaid seller lose his lien on or right of retention
over goods?
Part delivery- lien not lost
Right of stoppage in transitu right of unpaid seller to resume
possession of goods at any time while they are in transit
Requisites:
Available to unpaid seller when he has already parted with the
possession of the goods and the buyer is or becomes insolvent:
1. Seller must be unpaid
2. Buyer must be insolvent
3. Goods must be in transit
4. exercised either by obtaining actual possession of
the goods or by giving notice of his claim to the
carrier or other bailee in whose possession the
goods are.
5. Must surrender the negotiable document of title, if
any
6. Seller must bear the expenses of delivery of the
goods after the exercise of the right
When goods considered in transit?
When goods considered not anymore in transit?

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Attornment by the bailee the right to stop the goods may be


terminated not simply by delivery, but by attornment or
acknowledgement of the bailee to the buyer that the former
holds the goods on behalf of the latter.
Effect of partial delivery. may still exercise stoppage in transit
to the remaining
Ways of exercising the right to stop
1. Taking actual possession
2. Giving notice of his claim to the carrier or bailee
When resale is available
a. Where goods are of perishable nature
b. Where seller has expressly reserved the right of resale
in case the buyer should make default
c. Where buyer has been in default in the payment of the
price for an unreasonable time
d. Before resale can be made, the unpaid seller should
have a right of lien or should have stopped the goods in
transit.
Effect of resale the seller is not liable for any profit made by
such resale in public or private sale, but if he sells for less than
the price, he has a right to sue for the balance. As against the
original buyer, the new buyer acquires a good title to the goods.
Notice of resale is not essential - but if resale is not due to
perishable nature of goods or upon express
provision
of
contract of sale, the failure to give notice shall be relevant in
any issue involving the question whether the buyer had been in
default for an unreasonable period of time.
When seller may rescind.
a. When right is expressly reserved in case of buyers
default
b. When buyer delays in the payment of the price for
unreasonable time
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Provided: the unpaid seller should have a right of lien or


should have stopped the goods in transit.
How the seller may rescind?
Effect of sale of goods subject to lien or stoppage in transit
1. No negotiable document of title a purchaser from
the original buyer may acquire only such right as
the buyer then had.
2. With negotiable document of title the sellers lien
cannot prevail against the rights against a purchaser
for value and in good faith.
Right of vendor to withhold delivery in sale or credit
1. Even if the vendee has the benefit of the period if
he lost the benefit of the period as provided by the
provision of obligations and contracts.
2. No obligation to deliver if not paid, except if period
has been agreed upon for the payment, delivery of
the goods should take place.
Condition of thing to be delivered?
Rules in case of loss, deterioration, improvement of
thing before delivery (the same rules as in obligations
and contracts)
Sale of real property by unit of measure or number.( cause is
the number or measure)
1. If the sale of real estate should be made with the
statement of its area, at the rate of a certain price
for a unit of measure or number. Vendor must
deliver the entire property agreed upon.
2. Where the entire area within the stipulated
boundaries could not be delivered,
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a. May rescind; or
b. Pay the proportionate amount (lower)
When vendee entitled to rescind sale of realty?
Rule where there is a greater area or number (immovable)?
Where in sale of real estate made for a lump sum (cause is the
thing sold regardless of the number or measure)?
Prescription of action- 6 months from delivery
Rule on Double Sales:
1. As to Movables- the ownership shall be acquired by the
vendee who first takes possession in good faith.
2. As to Immovables the ownership shall belong to:
a. The vendee who first recorded in good faith in
the registry of property (registry of deeds).
b. In the absence of registration, the vendee who
first takes possession in good faith.
c. In the absence of both registration and
possession, the vendee who presents oldest
title in good faith.
Law on Double Sales applies only to lands covered by
torrens title.
CONDITIONS AND WARRANTIES:
Meaning of condition uncertain event or contingency, may or
may not come.
Effect of conditions?
Meaning of warranty
Is any representation made by the seller of thing
with respect to its character, quality or ownership,
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by which he induces the buyer to purchase the


same relying on said representation.
Kinds of warranty;
1. Express warranty;
2. Implied warranties in contract of sale.
Meaning of implied warranty
Is that which the law derives by implication or
inference from the nature of the transaction or the
relative situation or circumstances of the parties,
irrespective of any intention of the seller to create
it.
Warranty against Eviction implied warranty in contracts of
sale, by virtue of which if the vendee is deprived of the thing
purchased by final judgment based on a prior right or an act
imputable to the vendor, the vendor shall answer for the
eviction.
Requisites for warranty against eviction:
1. Deprivation in whole or part of thing purchased
2. Deprivation is by virtue of final judgment
3. Deprivation is based on right prior to the sale or act
imputable to the vendor
4. Vendor must be summoned in the suit for eviction at
the instance of the vendee.
5. There is no waiver on the part of the vendee.
Refers to trespass in law, Vendors liability is waivable;
Deprivation for non-payment of taxes
Vendor liable provided that at the time of sale,
vendee has no knowledge of the non payment of
taxes.
Liability of judgment debtor
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Stipulation waiving warranty:


Kinds of waiver of warranty against eviction?
Extent of liability of vendor in warranty against eviction?
Rights of vendee in case of partial eviction:
1. Enforce the vendors liability ; or
2. Demand rescission of the contract
WARRANTY AGAINST HIDDEN DEFECTS
Requisites for warranty against hidden defects?
When defect important the defect is important when 1) it
renders the thing sold unfit from which it is intended 2) it
diminishes its fitness for such use to such an extent that the
vendee would not have acquired it had he been aware
thereof or would have given a lower price for
it.
When defect hidden not known or could not have known
by the vendee. Cannot be seen by your naked eye.
Implied warranties of quality:
a. Warranty of fitness
b. Warranty of merchantability
Sale under a patent or trade name - In the case of contract of
sale of a specified article under its patent or
other
trade
name, there is no warranty as to its fitness for any particular
purpose, unless there is a stipulation to the contrary.
Effect of ignorance of vendor against hidden defects?
Doctrines of caveat emptor buyer beware
caveat venditor vendor is liable even though he is
unaware thereof of the defect.
Alternative remedies of the buyer to enforce warranty;
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1. Withdraw from the contract or


2. Ask for reduction of the price
Effect of loss of thing sold on account of hidden defects?
1. Vendor aware of hidden defects :
2. If not aware :
Effect of loss of defective thing sold?
Warranty in judicial sales but the sheriff will be not liable for
damages.
Accion redhibitoria (redhibitory action):
Accion quanti minoris:
What are the remedies of vendee in case of breach by
vendor or implied warranty against hidden defects or
encumbrances upon the thing sold?
OBLIGATIONS OF THE VENDEE
Principal obligations of the vendee
a. Accept delivery
b. Pay the price
Rules governing delivery by installments
General Rule vendee not bound receive delivery by instalment
Exception:
1. By agreement
2. Where separate price has been fixed for each
instalment
Effect of breach?
Buyers right to examine the goods
Right of examination not absolute- reasonable
opportunity and within reasonable time only and upon
request
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Modes of manifesting acceptance


1. Express
2. Implied
Delivery and acceptance separate acts.
Where buyers refusal to accept justified?
Effect of buyers wrongful refusal to accept?
When is vendee liable for interest on the price?
When vendee may suspend payment of price?
Vendee cannot suspend payment of price when?
ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS
Actions available;
1. Action by the seller for payment of the price
2. Action by the seller for damages for non-acceptance
3. Action for the seller for the rescission of the contract
4. Action by the buyer for specific performance
5. Action by the buyer for rescission or breach of warranty
Sellers right of action for the price;
1. When the ownership of the goods has passed to the
buyer and he wrongfully neglects or refuses to pay
2. When the price is payable on a certain day and he
wrongfully neglects or refuses to pay. Even if ownership
has not passed.
3. When the goods cannot be readily resold for a
reasonable price and the buyer wrongfully refuses to
accept them even before the ownership of the goods
has passed.
Sellers right of action for damages
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1. If the buyer without lawful cause neglects or refuses to


accept and pay for the goods he a
agreed to buy.
2. In executor contract, where the ownership of the goods
has not passed, and the seller can con maintain an
action to the price.
3. If the goods are not yet identified at the time of the
contract.
Measure of damages for non-acceptance of goods
1. Difference between contract price and market price if
there is available market
2. If no available market, full amount of damages
3. Proximate damages
Measure of damages for repudiation or countermand;
1. The labor performed and expenses incurred for
materials before receiving notice of the buyers
repudiation
2. Profit he would have realized if the sale had been fully
performed.
Sellers right of rescission before delivery
1. When the buyer has repudiated the contract of sale
2. When the buyer has manifested his inability to perform
his obligations
3. When the buyer has committed a breach of the
contract.
Buyers right to specific performance- if seller has broken a
contract
What are the remedies of buyer for breach of warranty by
seller?
Nature of remedies?
When rescission by the buyer not allowed?
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BL.M-1602.Law on Sales

Rights and obligations of the buyer in case of rescission?


EXTINGUISHMENT OF SALE; pa lo re me co no an res res pres
CONVENTIONAL REDEMPTION
Conventional redemption (pacto de retro) takes place when
vendor reserves right to repurchase the thing sold with the
obligation to reimburse to the vendee the price of the sale,
the expenses of the contract, other legitimate expenses as well
as all necessary and useful expenses made on the thing sold.
Subject matter both real or personal property
Equitable mortgage- is one, which although it lacks the proper
formalities of a mortgage, shows the intention of the parties to
make the property subject of the contract as a security for the
fulfilment of an obligation.
Conventional Redemption presumed to be an equitable
mortgage when:
a. Price of sale with right to repurchase is unusually
inadequate
b. Vendor remains in possession as lessee or otherwise
c. Upon after expiration of right to repurchase, another
instrument extending the period of redemption or
granting a new period is executed.
d. When purchaser retains for himself a part of the
purchase price
e. When vendor binds himself to pay the taxes on the
thing sold
f. Any other case where it may be fairly inferred that the
real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of an
obligations

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g. When there is doubt as to whether the contract is a sale


or with right of repurchase or an equitable mortgage
Price in pacto de retro sale usually lower;
Presumption in case of doubt- doubt to be resolved in
favour of equitable mortgage
When vendor may ask for reformation- if the parties
really intended a mortgage but in the instrument what
was stated was a sale, reformation is allowed.
Redemption period?
Redemption in sale of part of undivided immovable
Art 494 and 498 allotted to the co-owner and the
latter indemnify the others
If the co-owners cannot agree that the thing be
allotted to one of them, sell and divide the
proceeds
In either case, the co-owner who acquires the
whole may demand the for the redemption of the
whole property
Redemption in joint sale by co-owners of undivided immovable?
Effect of redemption of co-owner of entire property?
Redemption in separate sales by co-owners of undivided
immovable?
Redemption against heirs of the vendee?
Obligations of vendor a retro when he exercises his right of
repurchase:
a. Return the price of the sale
b. Pay expenses of the contract and other expenses
c. Pay all necessary and useful expenses made on the
thing sold
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BL.M-1602.Law on Sales

Offer to redeem must be bona fide;


Rights of parties as to the fruits of land?
Right of vendor a retro to recover thing sold free from charges;
Legal redemption (retracto legal) right to be subrogated upon
the same terms and conditions stipulated in the contract or 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.
Right of legal redemption of co-owner
Requisites:
1. There must be co-ownership
2. There must be alienation of all or any of the
shares of the other co-owners
3. The sale must be to a third person or stranger
4. Sale must be before partition
5. Right must be exercised within the period
provided (1 month)
6. Vendee must be reimbursed for the price of the
sale
By whom and against whom right may be exercised?
Purpose of the grant of right to co-owners- the government
discourage co-ownership
Right of redemption of adjacent owners of rural lands
Requisites?
If two or more requested:
a. owner of adjoining land with smaller area
b. if the same, first who requested
c. if still the same, pro-rata

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Instances of legal redemption:


a. Redemption by other co-owners or by any or some of
them should a co-owner sell his undivided share to a
third person.
b. Redemption by other co-heirs or by any or some of
them, should co-heir sell his hereditary right to a
stranger
c. Redemption by owner of adjoining land should owner
of a piece of rural land, area of which does not exceed 1
hectare, alienate it to a 3rd person
d. Redemption by an owner of adjoining land should the
owner of a piece of urban land, which is so small and so
situated that a major portion cannot be used for any
practical purpose within a reasonable time and which
said owner had bought merely for speculation, resell it
to a third person. Reasonable price. The person who will
use the land appears to be justified.
e. Redemption by debtor should credit or other
incorporeal right in litigation be sold by creditor to third
person
Redemption distinguished from Pre-emption
In the first, sale to a third person has already been
perfected. In the second, sale to 3rd person has not
yet been perfected.
In the first, it is directed against the 3rd person who
bought the property. In the second, right of preemption is directed against the prospective vendor
who is about to resell the property
In the first, the effect is to extinguish a contract
already perfected or consummated. In the second,
the effect of pre-emption is to prevent the birth or
perfection of a contract.
Right of pre-emption or redemption: 30 days

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BL.M-1602.Law on Sales

MULTIPLE CHOICE QUESTIONS


1. One has the right to transfer ownership if he/ she with the
exception of
A. Was authorized by the owner
B. Is the owner
C. Paid half of the total price
D. None of the above
E. All of the above
2. This is not an essential element of a contract of sale
A. Warranty against eviction
B. Subject matter which should be determinate
C. Consent of the contracting parties
D. Consideration which is certain or its equivalent
3. Dacion en pago as distinguished from a contract of sale
A. There is a greater freedom in fixing the price
B. Obligations are created
C. A pre-existing credit is extinguished
D. Ownership of the object is transferred to the other
party
4. The
from
A.
B.
C.
D.
E.

following are characteristics of a contract of sale aside


Unilateral
Principal
Consensual
None of the above
All of the above

5. A contract of sale is not a (an)


A. Onerous contract
B. Accessory contract
C. Commulative contract
D. Bilateral contract

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6. Mrs. Lim agrees to sell his watch to Mr. Lomotan for P10,
000 in cash, and places the timepiece inside the car of Mr.
Lomotan, while he goes to an ATM to withdraw money.
Before Mr. Lomotan returns, Mr. Co arrives and claims
ownership of the watch presenting a document signed by
Mr. Lomotan selling the time piece to him. Mrs. Lim
discards the claim asserting that she is still the owner. In this
situation, who is the rightful owner of the watch?
A. Mr. Lomotan, since he & Mrs. Lim as already come into
an agreement and there is actual delivery of the watch
from Mrs. Lim to Mr. Lomotans vehicle
B. Mrs. Lim, because Mr. Lomotan has not yet paid the
agreed price
C. Mr. Co, given that he has a written agreement between
him and Mr. Lomotan
D. Both Mrs. Lim and Mr. Lomotan owns the watch since
their agreement is still incomplete
E. None as of the moment for the reason that the sale of
the watch is still ongoing
7. One of the following is not correct
A. The sole owner of the thing may sell an undivided
interest therein.
B. Things having a potential existence may be the object of
contract of sale.
C. A thing is generic when it is particularly designated or
physically segregated from all others of the same class.
D. Things subject to a resolutory condition may be the
object of the contract of sale.
8. Na Pulis offered to sell for P100,000 her house and lot to En
Really who was interested in buying the same. In her letter
to En Really, Na Pulis stated that she is giving him a period of
20 days within which to raise the amount and that as soon as
En Really is ready, they will sign the deed of absolute sale. 7
days before the expiration of the 20 day period, Na Pulis
went to En Really and told him that she is no longer willing to

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BL.M-1602.Law on Sales

sell the property unless the price is increased to


P200,000.00. which is correct?
A. En Really cannot compel Na pulis to accept the
P100,000.00 first offered
B. Na Pulis and En Really should shoulder the P100,000.00
difference
C. Na Pulis may compel En Really to pay P200,000.00
D. En Really may compel Na Pulis to accept the
P100,000.00 first offered
9. A contract of sale is
A. An agreement where ownership is reserved in the seller
and not to pass until full payment of price
B. Where full payment is a positive suspensive condition
C. Where title passes to the vendee upon delivery of the
thing sold
D. None of the above
E. All of the above
10. If immovable property should have been sold to different
vendees, the ownership shall be transferred to the person
A. Who have paid in good faith in full the purchase price
B. Who in good faith first recorded it in the Registry of
Deeds (Registry of Property)
C. Who presents the oldest title in good faith
D. Who have first taken possession in good faith
11. A thing can be considered determinate when
A. It is standard and within the same classification
B. Physically segregated from all others of the same class
C. Is specific and is identified by its individuality
D. A and B are correct
E. B and C are correct
F. All of the above
12. Quezon Bed Company (QBC) granted to Happy Sleep
Incorporated (HSI) the exclusive right to sell in North Luzon
a certain number of beds which the company was
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manufacturing at the invoice price of the beds in Manila,


with a discount of 20%, the price to be paid at the end of 60
days. What contract is perfect here?
A.
B.
C.
D.

Contract of Sale
Contract of Barter
Contract of Agency
None of the above

13. Action by the vendee against the vendor to nullify the sale
due to some vices or defects which render the object of sale
unfit for the use intended or knowledge of which, the
vendee would not have bought the thing
A. Accion redhibitoria
B. Accion pauliana
C. Accion reivindicatoria
D. Accion quanti minoris
14. Effect of price fixed by third person can be considered void
except
A. Third person adhere to the instructions laid down by
parties involve
B. Third person acts in bad faith
C. Third person disregards data and parameters given by
parties involve
D. None of the above
E. All of the above
15. A contract of agency to sell can be considered when
A. Receives the goods as the owner
B. Only accounts for the proceeds of the sale he/she may
make on the principals behalf
C. Not bound to the instructions of the principal and
cannot return object sold
D. None of the above
E. All of the above
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BL.M-1602.Law on Sales

16.

Alabang Shoe Store Incorporated (ASSI) entered into


separate contracts with 2 movie stars, Kimi and Honesto.
With Kimi, the agreement was that the shoe store shall
deliver at a specified date for a price of P2,000 a pair of
shoes of a specified brand which the store had been
manufacturing for the general public but which at the time
of the contract had already been sold out, and with
Honesto , the arrangement was that the shoe store shall
deliver at a specified date for a price of P3 ,000 a pair
of shoes to be made specifically for him,, in accordance
with a design submitted by him. What is the nature of the
contract between Kimi and ASSI?
A. Contract of barter
B. Contract for a piece of work
C. Contract of sale
D. None of the above
E. All of the above

17. (same situation as #16) What is the nature of the contract


between Honesto and ASSI?
A. Contract of barter
B. Contract for a piece of work
C. Contract of sale
D. None of the above
E. All of the above
18. Ronald transferred to Vincent a parcel of land for the
price of P15,000,000. It was stipulated in the contract that
Vincent will pay P5, 000,000 in cash and for the balance, we
will give a boat, valued at approximately P10, 000,000.
What kind of contract is this?
A. Contract of barter
B. Contract for a piece of work
C. Contract of sale
D. None of the above
E. All of the above

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19. In
sale is
A.
B.
C.
D.

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contract of sale, if the price is absolutely simulated, the


Rescissible
Void
Voidable
unenforceable

20. Voluntary renunciation made by the buyer of his right to


warranty against eviction where in case the buyer is evicted,
the seller is liable to the value of the thing at the time of
eviction
A. Waiver intentionada
B. Waiver consciente
C. Waiver paciente
D. Waiver cliente
21. After the death of X, Y, Xs daughter, sold her inheritance
though its amount has not yet been determined to Z for a
consideration of P50,000.00, which is correct?
A. The contract is unenforceable
B. The contract is void as future inheritance cannot be the
object of sale
C. The contract is valid even though the inheritance to be
given to Z is less than P50,000.00
D. The contract is valid if the value of inheritance is at least
equal to P50,000.00
22. Option money is explained by the statements below except
A. Part of the purchase price
B. No sale has been perfected
C. Buyers are not required to buy
D. None of the above
E. All of the above
23. Under the Statute of Frauds, the following contracts must
be in writing, otherwise they cannot be enforced in court
litigation except
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BL.M-1602.Law on Sales

A. Sale of personal property at a price not less than


P300.00
B. Sale of real property regardless of the price involved
C. Sale of property not to be performed within a year
from the date thereof regardless of the nature of the
property and price involved
D. None of the above
E. All of the above
24. Aida, Lorna and Fe are co-owners of an undivided parcel of
land, Aida sold his 1/3 interest Lorna absolutely. Which is
correct?
A. Fe may exercise his right of redemption on the interest
sold by Aida
B. Fe cannot exercise the right of redemption because the
sale was made in favour of a co-owner
C. The sale made by Aida to Lorna is void because it was
not made in favour of a stranger
D. Fe may redeem only of the interest sold by Aida to
Lorna
25. A offers to B 50 computer sets for P200,000.00 payable in
30 days with 6% interest per year. B accepted the offer by
letter, provided that the interest be reduced to 4%. If there
is no further communication between A and B involving the
terms
A. The contract is perfected because of the acceptance of
B
B. There is no contract yet between A and B because B
made the counter offer
C. The contract is perfected under the terms of A
D. There is no contract yet unless B gives an earnest
money
26. The principal obligations of the vendor are
A. Deliver the unit sold
B. Transfer the ownership of the unit sold
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C. To maintain with proper diligence the unit sold pending


delivery
D. None of the above
E. All of the above
27. It is a contract by which property is sold but the buyer, who
becomes the owner of the property on delivery, has the
option to return the same to the seller instead of paying the
price.
A. Sale on trial
B. Sale on satisfaction
C. Sale on approval
D. None of the above
E. All of the above
28. A seller sold to a buyer a rolex watch at a price of
P500,000.00. The contract provided that the buyer will pay the
seller P200,000.00 in cash and the balance, the buyer will give
the seller a car worth P300,000.00. What is the nature of the
contract?
A.
B.
C.
D.

Mutuum
Barter
Sale
Partly sale and partly barter

29. In Art 1490, a husband and wife, during marriage cannot


A. Donate property to each other
B. Sell property to each other
C. Borrow proper from each other
D. A and B are correct
E. B and C are correct
F. C and A are correct
30. What is an option contract?
A. An agreement granting a privilege to buy or sell with an
agreed time period and a determined price
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BL.M-1602.Law on Sales

B. It is a separate contract from that which the


parties may enter into upon the consummation of
the option
C. It is and must be supported by consideration
D. None of the above
E. All of the above
31. The following cannot acquire by purchase even at a public
auction, either in person or through the mediation of
another, except
A. Executors and administrators
B. Agents who was given consent by the principal
C. Guardian
D. Public employees/ officers
E. Justices, judges
F. None of the above
32. Mike sold a motorcycle to Powee for P50,000 to be
paid as follows: P30,000 upon delivery of the motorcycle
to Powee, and the balance at the rate of P5,000 per month
until paid in full. The motorcycle, however, was burned
in the possession of Powee without his fault, before the
balance was paid in full. Is Powee obliged to pay the
balance?
A. Yes, because Powee has already paid the downpayment
B. No, given that the motorcycle is not yet fully paid and in
turn still owned by Mike that make him responsible for
it
C. Yes, given that the ownership was already transmitted
to him upon delivery
D. None of the above
33. In a contract of sale of personal property the price of which
in payable in installments, what are the possible remedies
available to the vendor in case of breach?
A. Demand completion of the of the obligation should the
vendee fail to pay
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B. Cancel the sale if vendee fails to pay more the 2 months


installment
C. Foreclose chattel mortgage on the thing sold
D. None of the above
E. All of the above
34. In Art 1490, a husband and wife, during marriage
cannot sell property to each other except
A. When separation of property was agreed upon in the
marriage settlements
B. Property is donated by the other half
C. When separation of property was not agreed in the
marriage settlements
D. None of the above
E. All of the above
35. At a mortgage foreclosure, a sale was carried out as a result
of a judicial proceeding. Tessa, an attorney for the
mortgage creditor, bought the mortgaged property. If
she bought it for herself, is the sale void or voidable?
A. It is void because is it prohibited by the law
B. It is not void because her knowledge of the said
foreclosure has no impact on the sale of the property
C. It is voidable because there is vices of consent
D. None of the above
36. 1st statement - The ownership of the thing sold shall be
transferred to the vendee upon perfection of the contract.
2nd statement An unaccepted unilateral promise to buy
and to sell a determinate thing for a price certain is binding
upon the promissor.
A. 1st statement is true, 2 nd statement is false
B. 1st statement is false, 2nd statement is true
C. Both statements are true
D. Both statements are false

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BL.M-1602.Law on Sales

37. If at the time the contract of sale is already perfected but


the thing sold was partially lost, what options does the
vendee have over the vendor?
A. Vendee can demand damages from vendor due to the
result of the loss
B. Vendee has no choice but to follow the contract since
the thing was just partially lost
C. Vendee may withdraw from the contract with the
vendor
D. None of the above
E. All of the above
38. 1st statement - If two or more animals are sold together,
whether for lump sum or for a separate price for each of
them, the redhibitory defect of one shall give rise to the
redhibition of the others.
2nd statement there is no warranty against hidden defects
of animals sold at fairs or at public auctions or of livestock
sold as condemned.
A. 1st statement is true, 2 nd statement is false
B. 1st statement is false, 2nd statement is true
C. Both statements are true
D. Both statements are false
39. The ownership of the thing sold shall be transferred from
the vendor to the vendee upon delivery which may be not
done by
A. Legal delivery
B. Actual delivery
C. Proof of agreement that possession is already
transferred to the vendee
D. None of the above
E. All of the above
40. This mode of legal delivery happens when the vendee has
already the possession of the thing sold by virtue of another
title as when the lessor sells the thing leased to the lessee
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A.
B.
C.
D.
E.

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Traditio longa manu


Traditio constitutum possessorium
Traditio tempore constitutum
None of the above
All of the above

41. This mode of delivery is the opposite of traditio brevi manu.


This takes place when the vendor continues in possession
of the property sold not as owner but in some other
capacity.
A. Traditio longa manu
B. Traditio constitutum possessorium
C. Traditio tempore manu
D. None of the above
E. All of the above
42. A sold his only car to B for P300,000 to be paid as follows:
P150,000 upon delivery of the car to B and the balance at
P10,000 per month until full payment of the purchase price.
Later the car gets burned in the possession of B through
fortuitous event and without Bs fault before full payment
of the balance. Is B obliged to pay the balance?
A. No, because the car was lost through fortuitous event
and without Bs fault, hence, Bs obligation is
extinguished.
B. No, because the loss should be borne by the seller as
this is an instalment sale so until the buyer pays the full
amount of the price of the sale, A remains to be the
owner.
C. Yes, but A must give another car to B because of the
principle of genus nunquam peruit or generic thing
never perishes.
D. Yes, because of the principle of res perit domino or
the thing perishes with the owner
43. Contracts of sale or return can be considered when
A. Subject to a resolutory condition
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BL.M-1602.Law on Sales

B.
C.
D.
E.

Depends on the mind of the vendee


The risk of loss is with the vendee
None of the above
All of the above

44. A sold his motor vehicle to B who bought it for P500,000. It


turned out however, that A has two (2) motor vehicles.
BMW worth P560,000 and Ferrari worth P600,000. Which is
not correct?
a. The parties may not ask for interpretation or
reformation
b. The parties cannot ask for annulment of the contract
c. There is contract of sale between A and B
d. B may not choose between the BMW and Ferrari
45. What title is acquired by the buyer if the object which he
bought was sold by someone who is not the owner thereof
and who was not authorized to sell it?
A. The buyer in such a case still has the right to the
object since he had no knowledge before the contract
was perfected
B. The buyer in such a case acquires and interim title to
the object until the issue is resolved
C. The buyer in such a case acquires no better title to the
object the vendor had
D. None of the above
E. All of the above
46. In what situation can the buyer still acquire the object and
claim ownership in case he bought the object from
someone who is not the owner?
A. Where the true owner is estopped by his conduct
from denying the vendors authority to sell
B. Where the sale is made by the registered owner in
accordance with registration laws

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C. Where the purchase is made in a merchants store


of markets, in accordance with the code of commerce
and special laws
D. None of the above
E. All of the above
47. This is a circumstance where the goods are delivered to the
vendee and he was given an option to return goods instead
of paying. The ownership passes to the buyer on delivery,
but he/she may revest the ownership in the vendor by
tendering the goods within the time fixed in the contract or
within a reasonable time if no time was fixed.
A. Sale on trial
B. Sale on satisfaction
C. Sale or return
D. None of the above
E. All of the above
48. What are the implied warranties of the person who
negotiates a document of title by delivery?
A. Document is authentic or genuine
B. Has the legal right to transfer
C. Has the legal to negotiate
D. None of the above
E. All of the above
49. These are common forms of document of title except
A. Dock warrant
B. Promissory memo
C. Bill of lading
D. None of the above
E. All of the above
50. The principal obligations of the vendee are except
A. Accept delivery
B. Pay the agreed price
C. To maintain the unit pending delivery
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BL.M-1602.Law on Sales

D. None of the above


E. All of the above
51. The contract of sale is in the stage of conception when
A. The contract is perfected
B. The parties come to an agreement
C. Negotiations are in progress
D. There is meeting of the minds
52. 1st statement Earnest money and option money both apply
to perfected sale.
2nd statement in a contract of sale of personal property,
the price of which is payable in instalment, the vendor may
cancel
the sale should the vendee fail to pay.
A. 1st statement is true, 2 nd statement is false
B. 1st statement is false, 2nd statement is true
C. Both statements are true
D. Both statements are false
53. 1st statement - If the animal sold should die within the
period of three (3) days after its purchase, the vendor shall be
liable
to the vendee.
2nd statement The fixing of the price can never be left to
the discretion of one of the contracting parties, but if the price
is
fixed by one of the contracting parties is
accepted by the other, then the sale is considered perfected.
A. 1st statement is true, 2nd statement is false
B. 1st statement is false, 2nd statement is true
C. Both statements are true
D. Both statements are false
54. If redemption is to be made by the seller, one of the
following need not be given to the buyer
A. Price of the sale
B. Necessary expenses of the thing sold
C. Interest on the price of the sale
D. Expenses of the contract
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BL.M-1602.Law on Sales

BL

55. A sold his specific car (BMW) to B for P500,000 payable in 6


equal installments. A delivered the car to B and B has
constituted a mortgage to answer for the unpaid instalments
using his other car (Porshe). B paid the first 2 installments
but was not able to pay the last 3 installments. A foreclosed
the mortgaged car and sold it at public auction for P250,000.
Which is correct?
A. A can recover from B the deficiency even if there is no
stipulation to that effect
B. A can recover from B the deficiency if there is
stipulation to that effect
C. A cannot recover the deficiency even if there is
stipulation to the contrary
D. A cannot recover the deficiency except if there is
stipulation to the contrary

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