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THE LAW ON SALES, AGENCY, AND CREDIT TRANSACTIONS o Bilateral because both contracting parties are bound to fulfill

DE LEON & DE LEON obligations reciprocally towards each other

2010 o Onerous - thing sold is conveyed in consideration of price and
vice versa
Part 1: Sales o Commutative - thing sold is considered the equivalent of the
price paid and vice versa
Chapter 1 Nature and Form of Contract o Nominate it is given a designation in the Civil Code, namely
I. Definitions o Principal does not depend for its existence and validity upon
another contract
Contract of Sale a contract whereby one of the parties (called the
seller or vendor) obligates himself to deliver something to the other Contracts of sale that must be in writing to be enforceable by court
(called the buyer or purchaser or vendee) who, on his part, binds action (Under Statute of Frauds):
himself to pay therefore a sum of money or its equivalent o Sale of personal property at a price not less than P500
Natural Elements those which are deemed to exist in certain o Sale of real property or an interest therein regardless of the
contracts, in the absence of any contrary stipulations like warranty price involved
against eviction or hidden defects o Sale of property not to be performed within a year from the
Sale by description occurs where a seller sells things as being of a date thereof regardless of the nature of the property and the
particular kind, the buyer not knowing whether the sellers price involved
representations are true or false. Distinctions between a Contract of Sale and a Contract of Agency
o Note: If the bulk of the goods delivered do not correspond with Contract of Sale Contract of Agency
the description, the contract may be rescinded Buyer receives the goods as owner Agent receives the goods as the
Fungible goods goods of which any unit is, from its nature or by goods of the principal who retains his
mercantile usage, treated as the equivalent of any other unit such as ownership over them
grain, oil, wine, gasoline, etc. Buyer has to pay the price Agent has simply to account for the
Conditional Sale sale contemplates a contingency and in general proceeds of the sale he may make
where the contract is subject to certain conditions, usually the full on the principals behalf
payment of the purchase price Buyer, as a general rule, cannot Agent can return the object in case
o Note: The delivery of the thing sold does not transfer return the object sold he is unable to sell the same to a
ownership until the condition is fulfilled third person
Seller warrants the thing sold Agent makes no warranty for which
II. Discussions: he assumes personal liability as long
Difference between Earnest Money and Option Money as he acts within his authority and in
the name of the seller
Earnest Money Option Money Buyer can deal with the thing sold The agent in dealing with the thing
Part of Purchase Price Money given as distinct consideration for as he pleases received, must act and is bound
the option contract according to the instructions of his
Given only where there is a sale Applies to a sale not yet perfected principal
When earnest money is given, buyer is Would-be-buyer is not required to buy
bound to pay the balance when he gives option money

Remedies available to a vendor in sale of personal property payable in

installments Chapter 2 Capacity to Buy or Sell
o Elect fulfillment upon the vendees failure to pay
o Cancel the sale, if the vendee shall have failed to pay two or I. Definitions
more installments Necessaries things which are needed for sustenance, dwelling,
o Foreclose the chattel mortgage, if one has been constituted, if clodting and medical attendance, in keeping with the financial capacity
the vendee shall have paid to pay two or more installments of the family of the incapacitated person.
Characteristics of a contract of sale: Compromise - a contract whereby the parties, by reciprocal
o Consnsual perfected by mere consent without further act concessions, avoid a litigation or put an end to one already commenced
II. Discussions o It must be of such nature that expert knowledge is not sufficient
Relative incapacity of husband and wife to discover it
o Husband and wife are prohibited by the above article from o If veterinarian acts in bad faith (through ignorance or failure of
selling property to each other disclosure), he shall be liable for damages
People who may enter into a contract of sale *Article only applies tosale of animals
o As a general rule, all persons, whether natural or juridicial, who Implied Warranty of Fitness seller guarantees that the thing sold is
can bind themselves by contract have also legal capacity to reasonably fit for the known particular purpose for which it was acquired
buy and sell by the buyer
o If bought by description, it should be reasonably fit on its
Chapter 3 Effect of the Contract When The Thing Sold Has Been Lost merchantable quality
Eviction judicial process whereby the vendee is deprived of the whole
I. Definitions or part of the thing purchased by virtue of a final judgement based on a
Specific goods goods identified and agreed upon at the time a right prior to the sale or an act imputable to the vendor
contract of sale is made Caveat venditor doctrine that states that the vendor is liable to the
Divisible contract its consideration is made up of several parts vendee for any hidden faults or defects in the thing sold, even though h
was not aware thereof.
II. Discussions
When a thing is considered lost II. Discussions
o When it perishes or goes out of commerce Sale by a person not the owner
perishes material deterioration or complete change o Where the owner of the goods is, by his conduct, precluded
in the nature of the thing from denying the sellers authority to sell.
o Dissappears in such a way that its existence is unknown or it o Where the law enables the apparent owner to dispose of the
cannot be recovered goods as if he were the true owner thereof
Effect of loss of thing at the time of sale o Where the sale is sanctioned by statutory or judicial authority
o Lost totally: o Where the sale is made at merchants stores, fairs or markets
Contract is inexistent and void because there is no o Where the seller has a voidable title which has not been
object avoided at the time of the sale
o Lost partially: o Where seller subsequently acquires title.
Vendee may: Ways of effecting delivery
Withdraw from the contract or o By actual or real delivery
Demand the remaining part, paying its o By constructive or legal delivery
proportionate price Execution of a public instrument or document
Symbolic delivery
Chapter 4 Obligations of the Vendor Traditio Longa Menu
Takes place by mere consent or agreement
I. Definitions of the contracting parties as when the vendor
Unpaid Seller of Goods one who has not been paid or tendered the merely points to the thing sold which shall
whole price thereafter be at the control/disposal of the
Traditio Brevi Manu mode of legal delivery which happens when the vendee.
vendee has already the possession of the thing sold by virtue of another o Only qualifies if the thing sold
title as when the lessor sells the thing leased to the lessee cannot be delivered to the vendee
Sale or Return A contract by which property is sold but the buyer at time of sale
(who becomes the owner of the property on delivery), has the option to Traditio Brevi Manu
return the same to the seller instead of paying the price. Traditio Constitutum Posessorium
o Option to sale or return rests on the buyer Quasi-Traditio
Tradition a derivative mode of acquiring ownership by virtue of which o By delivery in any other manner signifying an agreement that
one who has the right and intention to alienate a corporeal thing, the possession is transferred to the vendee
transmits it by virtue of a just title to one who accepts the same Requisites for the exercise of right of stoppage in transit
Redhibitory defect a defect in the article sold against which defect o Seller must be unpaid
the seller is bound to warrant o Buyer must be insolvent
o Defect must be hidden; and o Goods must be in transit
o Seller must either actually take possession of the goods sold or Acceptance of the goods assent to become owner of the
give notice of his claim to the carrier or other person in specific goods when delivery of them is offered to the buyer
possession Wrongful refusal of buyer to accept when buyer refuses to
o Seller must surrender the negotiable instrument of title, if any, accept the goods without just cause
issued by the carrier or bailee o Risk of loss is borne by him from the moment they are
o Seller must bear the expenses of delivery of the goods after placed in his disposal
the exercise of the right
II. Discussions
Implied warranties in sale Implied acceptance by the vendee of the goods sold
o Implied warranty as to sellers title o After delivery of goods: When buyer does any act
Seller guarantees that he has a right to the the sell the inconsistent with the sellers ownership (as when he sells
thing sold and transfer ownership or attempts to sell the goods, uses or makes alteration in
o Implied warranty against hidden defects or unknown them in a manner proper only for an owner)
encumbrances o After the lapse of reasonable time: When buyer retains the
Seller guarantees that the thing sold is free from any goods without intimating his rejection
hidden defects
o Implied warranty as to fitness or merchantability When vendee can suspend payment of price
Sale or return distinguished from Sale on Trial o If he is disturbed in the possession or ownership of the
Sale or Return Sale on Trial thing bought
Sale subject to a resolutory Subject to a suspensive o If he has a well-grounded fear that his possession or
condition condition ownership would be disturbed by a vindicatory action or
Depends entirely on the will of Depends on the character or foreclosure of mortgage
the buyer quality of the goods
Ownership of the goods passes Ownership remains in the seller Chapter 6 Actions for Breach of Contract of Sale of Goods
to the buyer on deliveryand until the buyer signifies his
subsequent return of the goods approval or acceptance to the I. Definitions
revert ownership in the seller seller Goods includes all chattels personal but not things in action or
Risk of loss or injury rests upon Risk remains with the seller money of legal tender in the Philippines. This term also includes
the buyer growing fruits or crops
Recoupment accept the goods and set up the sellers breach to
Place of delivery of goods sold (with no agreement) reduce or extinguish the price
o Place of delivery is that determined by usage of trade
o When there is also no prevalent usage, the place of II. Discussions
delivery is the sellers place of business Actions available to the buyer in case of breach of warranty by
the seller of the goods:
Principal Obligations of the Vendor o Recoupment:
o To transfer ownership of the determinate thing sold Accept the goods and set up the sellers
o To deliver the thing breach to reduce or extinguish price
o To warrant against eviction and hidden defects o Action or counterclaim for damages:
o To take care of the thing, pending delivery, with proper Accept the goods and maintain an action for
diligence damages
o To pay for the expenses for the execution and registration Refuse to accept the goods and maintain an
of the deed of sale, unless there is stipulation to the contrary action for damages for the breach of the
Risk of loss by fortuitous event after perfection but before delivery warranty
o Borne by the buyer (as an exception to the rule of res perit o Rescission:
domino) Rescind the contract of sale by returning or
offering the return of the goods and recover
Chapter 5 Obligations of the Vendee the price
Cases where rescission by the buyer is not allowed although
I. Definitions the seller has committed a breach of warranty:
o If the buyer accepted the goods knowing of the o There must be alienation of all or of any of the shares of
breach of warranty without protest the other co-owners
o If the buyer fails to notify the seller within a o Sale must be to a third person or stranger
reasonable time of his election to rescind o Sale must the before partition
o If the buyer fails to return or offer to return the goods o Right must be exercised within the period provided in
in substantially as good condition as they were in at Article 1623
the time of the transfer of ownership to him o Vendee must be reimbursed for the price of the sale
Situations where the seller is given the right to bring an action
for damages against the buyer
o If the buyer, without lawful cause, neglects or refuses Cases when the contract shall be presumed to be an equitable
to accept and pay for the goods he agreed to buy mortgage:
(damages for non-acceptance) o When the price of a sale with right to repurchase is
o In an executory contract, where the ownership in the unusually inadequate
goods has not passed, and the seller cannot maintain o When the vendor remains in possession as lesee or
an action to the price, sellers remedy will be also an otherwise
action for damages o When upon or after the expiration of the right to
o If the goods are not yet identified at the time of the repurchase another instrument extending the period of
contract or subsequently, the sellers right is redemption or granting a new period is executed
necessarily confined to an action for damages o When the purchaser retains for himself a part of the
Situations where the seller of specific goods is given the right purchase price
to be paid notwithstanding that delivery to the buyer has not o When the vendor binds himself to pay the taxes on the
been effected: thing sold
o When the price is payable on a certain day, and the o In any other case where it may be fairly inferred that the
buyer wrongfully neglects or refuses to pay such real intention of the parties is that the transaction shall
price, irrespective of delivery or transfer of title secure the payment of a debt or the performance of any
o When the buyer wrongfully refuses to accept delivery other obligation
Obligations of a vendor a retro in case of redemption
o The vendor must return to the vendee:
Price of the sale (not the value of the thing)
Chapter 7 Extinguishment of Sale Expenses of contract and other legitimate
I. Definitions Necessary expenses those incurred
Legal Redemption is the right to be subrogated, upon the same for the preservation of the thing
terms and conditions stipulated in the contract, in the place of one Useful expenses those which increase
who acquires a thing by purchase or dation in payment, or by any the value of the thing or create
transaction whereby ownership is transmitted by onerous title improvements thereon
Equitable Mortgage is one which, although it lacks the proper
formalities of a mortgage, shows the intention of the parties to make Chapter 8 Assignment of Credits and Other Incorporeal Rights
the property subject of the contract as a security for the fulfillment of
an obligation I. Definitions
Conventional Redemption is the right which the vendor Assignment of credit a contract by which one person transfers
reserves to himself, to reacquire the property sold provided he to another his rights and actions against a third person (debtor) in
reimburses the vendee of the price, the expenses of the contract, consideration of a price certain in money or its equivalent
any other legitimate payments made therefor and the necessary
and useful expenses made on the thing sold and fulfills other II. Discussions
stipulations which may have been agreed upon Warranties of the assignor of credit
o The assignor of credit only warrants the existence and
II. Discussions legality of the credit at the perfection of the contract
Requisites for the right of legal redemption of a co-owner to exist o There is no warranty as to solvency of the debtor unless
o There must be co-ownership expressly stipulated or unless the insolvency was already
existing (and of public knowledge) at the time of the II. Discussions
assignment Similarities to Sale and Barter
Liabilities of the assignor of credit o Barter is similar to sale with the only difference is that
o The liability of the assignor in good faith is limited only to instead of paying a price in money, another thing is given
the price received and to the expenses of the contract, and in lieu thereof
any other legitimate payments by reason of the Perfection and Consummation of the Contract of Barter
assignment o Perfected from the moment there is a meeting of minds
o The assignor in bad faith is liable not only for the payment upon the things promised by each party in consideration of
of the price and all expenses, but also for damages. the other
Nature of assignment of credit o It is consummated from the time of mutual delivery by the
o It is really a sale contracting parties of things they promised
Subject matter: credit or right assigned Chapter 11 The Bulk Sales Law
Consideration: Price paid for the credit or right
Consent: The agreement of the parties to the I. Definitions
assignment at the agreed price Fixtures merchandise usually possessed and annexed to the
premises occupied by merchants to enable them better to store,
Chapter 9 General Provisions handle, and display their wares
Merchandise must be construed to mean such things as are
I. Definitions usually bought and sold in trade by merchants
Legal tender is that currency which a debtor can legally compel a II. Discussions
creditor to accept in payment of a debt in money when tendered by When sale or transfer in bulk
the debtor in the right amount o Sale, transfer, mortgage or assignment of
Thing or chose in action is any claim or right which may be A stock of goods, wares, and merchandise
pleaded in a suit at law, such as claim of reparation for a tort or otherwise than in the ordinary course of
right guaranteed under certain types of contracts trade and the regular prosecution of the
II. Discussions All or substantially all, of the business or
Objects included in the phrase document of title to goods trade
according to Art. 1636: All or substantially all, of the fixtures and
Any equipment used in the business of the
o Bill of Lading; vendor, mortgagor, transferor, or assignor
o Dock Warrant; Purpose of the Law
o Warehouse receipt or; o Designed to prevent defrauding of creditors by the
o Order for the delivery of goods or; secret sale in bulk of all or substantially all of a
o Any other document used in the ordinary course of merchants stock of goods
business as proof of the possession and control of the Scheme of the law
goods o That such Bulk Sales are fraudulent and void as to
A person is deemed insolvent when: creditors of the vendor, or presumptively so, unless
o A person who was ceased to pay his debt in the ordinary specified formalities are observed such as
course of business Demanding and giving list of creditors
Goods are in a deliverable state when: Giving of actual or constructive notice to
o They are in such a state that the buyer would, under the such creditors
contract, be bound to take delivery of them Making of an inventory

Chapter 10 Barter or Exchange

I. Definitions
Barter one of the parties binds himself to give one thing in
consideration of the others promise to give another thing.