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VII. Risk of loss or deterioration

A. Upon perfection of contract

Article 1493, Civil Code If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely lost, the
contract shall be without any effect.

But if the thing should have been lost in part only, the vendee may choose between:
 withdrawing from the contract and
 demanding the remaining part, paying its price in proportion to the total sum agreed upon

Article 1494, Civil Code Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part
or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the
sale:
(1) as avoided
(2) as valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price for
the goods in which the ownership will pass, if the sale was divisible

 Presupposes that risk of loss or deterioration had not yet passed to the buyer

McCullough v. Berger, G.R. No. L-19009 (1922)
Where the contract was to buy the tobacco which was then in tranit, provided that it be delivered in NY in “good condition” and the tobacco
turned out to be musty with mildew, the risk of deterioration was on the seller, as the sale was subject to a condition precedent.

B. After perfection of contract, before delivery

Article 1504, Civil Code Unless otherwise agreed, the goods remain at the seller’s risk until the ownership therein is transferred to the buyer, but
when the ownership therein is transferred to the buyer, the goods are at the buyer’s risk, whether actual delivery has been made or not, except
that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in
the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods
are at the buyer’s risk from the time of such delivery;
(2) Where actual delivery has been delayed through the fault of either the buyer or seller, the goods are at the risk of the party at fault.

Article 1496, Civil Code The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways
specified in Art 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.

Article 1538, Civil Code In case of loss, deterioration or improvement of the thing before its delivery, the rules in Art 1189 shall be observed, the
vendor being considered the debtor.

 Rules in Art 1189 (made applicable to absolute sales by Art 1538)
Loss without fault of vendor Obligation extinguished
Loss through the fault of vendor Vendor obliged to pay damages to the vendee
Deteriorates without fault of the vendor Impairment to be borne by the vendee
Deteriorates through the fault of vendor Vendee may choose between the
(1) rescission of the obligation and
(2) its fulfillment, with indemnity for damages in either case
Improved by its nature, time Inure to the vendee
Improved at the expense of the vendor Vendor shall have no other right than that granted to the usufructuary

 If goods are indeterminate OR price dependent on the weight, number or measure, the loss shall not be imputed on the buyer until the
goods have been weighed, counted or measured, unless the buyer should be in default (3rd Par, Art 1480 CC).
o Implication of this provision: In sale of specific objects, the risk of loss in on the buyer even if there is no delivery yet.
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Chrysler Philippines Corporation v. Court of Appeals, G.R. No. 55684 (1984)
Petitioner should shoulder the resulting loss. The general rule that, before delivery, the risk of loss is borne by the seller who is still the owner
under the principle of “res perit domino” is applicable in his case (found in Art 1504).

C. When ownership is transferred

Article 1504, Civil Code Already provided for above

Article 1502, Civil Code When the goods are delivered to the buyer “on sale or return” to give the buyer an option to return the goods instead of
paying the price, the ownership passes to the buyer on delivery, but he may revest the ownership in the seller by returning or tendering the goods
within the time fixed in the contract OR if not time has been fixed, within a reasonable time.

When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the
buyer:
(1) When he signifies his approval or acceptance to the seller OR does any act adopting the transaction
(2) If he does not signify his approval or acceptance to the seller, BUT retains the goods without giving notice of rejection, then if a time has
been fixed for the return of the goods, on the expiration of the time, and if no time has been fixed, on the expiration of a reasonable
time. What is a reasonable time is a question of fact.

Approval or trial Risk of loss borne by the seller before approval
Sale or return Risk of loss borne by the buyer until he returns or offers to return the goods

Delivery to buyer took place at Risk of loss of goods while in transit is borne by
 point of shipment to a common carrier Buyer
 point of destination Seller

Article 1262, Civil Code An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor and before he has incurred in delay.

When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation and he shall be
responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk.

Gaisano Cagayan, Inc. v. Insurance Company of North America, G.R. No. 147839 (2006)
When the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the buyer. Accordingly, the petitioner
bears the risk of loss of the goods delivered.

VIII. Documents of Title
Article 1636(1), Civil Code “Document of title to goods” includes any bill of lading, dock warrant, “quedan,” or warehouse receipt or order for the
delivery of goods or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or
control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by
delivery, goods represented by such document.

Baviera, p. 91

to the order of any person named in such document is a
A. Negotiable Documents of Title negotiable document of title. (n)

Arts 1507-1509, Civil Code Art. 1508. A negotiable document of title may be negotiated
Arts 1512-1520, Civil Code by delivery:
Article 1535, par.2, Civil Code
Art. 1507. A document of title in which it is stated that the
goods referred to therein will be delivered to the bearer, or
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(1) Where by the terms of the document the carrier, who assigns for value a claim secured by a document of title
warehouseman or other bailee issuing the same undertakes unless a contrary intention appears, warrants:
to deliver the goods to the bearer; or
(1) That the document is genuine;
(2) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes (2) That he has a legal right to negotiate or transfer it;
to deliver the goods to the order of a specified person, and
such person or a subsequent endorsee of the document has (3) That he has knowledge of no fact which would impair the
indorsed it in blank or to the bearer. validity or worth of the document; and

Where by the terms of a negotiable document of title the (4) That he has a right to transfer the title to the goods and
goods are deliverable to bearer or where a negotiable that the goods are merchantable or fit for a particular
document of title has been indorsed in blank or to bearer, purpose, whenever such warranties would have been implied
any holder may indorse the same to himself or to any if the contract of the parties had been to transfer without a
specified person, and in such case the document shall document of title the goods represented thereby. (n)
thereafter be negotiated only by the endorsement of such
endorsee. (n) Art. 1517. The endorsement of a document of title shall not
make the endorser liable for any failure on the part of the
Art. 1509. A negotiable document of title may be negotiated bailee who issued the document or previous endorsers
by the endorsement of the person to whose order the goods thereof to fulfill their respective obligations. (n)
are by the terms of the document deliverable. Such
endorsement may be in blank, to bearer or to a specified Art. 1518. The validity of the negotiation of a negotiable
person. If indorsed to a specified person, it may be again document of title is not impaired by the fact that the
negotiated by the endorsement of such person in blank, to negotiation was a breach of duty on the part of the person
bearer or to another specified person. Subsequent making the negotiation, or by the fact that the owner of the
negotiations may be made in like manner. (n) document was deprived of the possession of the same by
Art. 1512. A negotiable document of title may be negotiated: loss, theft, fraud, accident, mistake, duress, or conversion, if
the person to whom the document was negotiated or a
(1) By the owner therefor; or person to whom the document was subsequently negotiated
paid value therefor in good faith without notice of the breach
(2) By any person to whom the possession or custody of the of duty, or loss, theft, fraud, accident, mistake, duress or
document has been entrusted by the owner, if, by the terms conversion. (n)
of the document the bailee issuing the document undertakes
to deliver the goods to the order of the person to whom the Art. 1519. If goods are delivered to a bailee by the owner or
possession or custody of the document has been entrusted, by a person whose act in conveying the title to them to a
or if at the time of such entrusting the document is in such purchaser in good faith for value would bind the owner and a
form that it may be negotiated by delivery. (n) negotiable document of title is issued for them they cannot
thereafter, while in possession of such bailee, be attached by
Art. 1513. A person to whom a negotiable document of title garnishment or otherwise or be levied under an execution
has been duly negotiated acquires thereby: unless the document be first surrendered to the bailee or its
negotiation enjoined. The bailee shall in no case be
(1) Such title to the goods as the person negotiating the compelled to deliver up the actual possession of the goods
document to him had or had ability to convey to a purchaser until the document is surrendered to him or impounded by
in good faith for value and also such title to the goods as the the court. (n)
person to whose order the goods were to be delivered by the
terms of the document had or had ability to convey to a Art. 1520. A creditor whose debtor is the owner of a
purchaser in good faith for value; and negotiable document of title shall be entitled to such aid from
courts of appropriate jurisdiction by injunction and otherwise
(2) The direct obligation of the bailee issuing the document to in attaching such document or in satisfying the claim by
hold possession of the goods for him according to the terms means thereof as is allowed at law or in equity in regard to
of the document as fully as if such bailee had contracted property which cannot readily be attached or levied upon by
directly with him. (n) ordinary legal process. (n)

Art. 1516. A person who for value negotiates or transfers a Art. 1535. Subject to the provisions of this Title, the unpaid
document of title by endorsement or delivery, including one seller's right of lien or stoppage in transitu is not affected by
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any sale, or other disposition of the goods which the buyer to the order of any person named in such document is a
may have made, unless the seller has assented thereto. negotiable document of title. (n)
Art. 1514. A person to whom a document of title has been
If, however, a negotiable document of title has been issued transferred, but not negotiated, acquires thereby, as against
for goods, no seller's lien or right of stoppage in transitu the transferor, the title to the goods, subject to the terms of
shall defeat the right of any purchaser for value in good any agreement with the transferor.
faith to whom such document has been negotiated, If the document is non-negotiable, such person also acquires
whether such negotiation be prior or subsequent to the the right to notify the bailee who issued the document of the
notification to the carrier, or other bailee who issued such transfer thereof, and thereby to acquire the direct obligation
document, of the seller's claim to a lien or right of stoppage of such bailee to hold possession of the goods for him
in transitu. (n) according to the terms of the document.

Prior to the notification to such bailee by the transferor or
Baviera, pp. 91-95 transferee of a non-negotiable document of title, the title of
the transferee to the goods and the right to acquire the
obligation of such bailee may be defeated by the levy of an
attachment of execution upon the goods by a creditor of the
B. Non-negotiable Documents of Title transferor, or by a notification to such bailee by the
transferor or a subsequent purchaser from the transfer of a
Article 1507, Civil Code subsequent sale of the goods by the transferor. (n)
Article 1514, par. 3, Civil Code
Art. 1507. A document of title in which it is stated that the
goods referred to therein will be delivered to the bearer, or Baviera, pp.95-96

IX. Remedies of an unpaid seller
Article 1525, Civil Code The seller of goods is deemed to be an unpaid seller within the meaning of this Title:
(1) When the whole of the price has not been paid
(2) When a bill of exchange or other negotiable instrument has been received as a conditional payment and the condition on which it was
received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer or otherwise.

In Art 1525 to 1535, the term “seller” includes an agent of the seller to whom the bill of lading has been indorsed or a consignor or agent who has
himself paid, or is directly responsible for the price or any other person who is in the position of a seller.

Article 1526, Civil Code Subject to the provisions of this Title, notwithstanding that the ownership in the goods may have passed to the buyer, the
unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price while he is in possession of them
(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu, after he has parted with the possession of them
(3) A right of resale as limited by this Title
(4) A right to rescind the sale, as likewise limited by this Title

Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding
delivery similar to and co-extensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer.

 Ownership had not yet passed to the buyer
o Retain the goods
o Withhold delivery
o Stoppage in transitu should the buyer become insolvent
o Resume ownership over them, without court order
 Ownership had passed to the buyer but the goods are still in the possession of the seller OR are in transit to the buyer
o Retain the goods
o Stoppage in transitu should the buyer become insolvent
o Resell
o Rescind
o Sue the buyer for damages
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A. By Lien

Article 1527, Civil Code Subject to the provisions of this Title, the unpaid seller of goods who is in possession of them is entitled to retain possession
of them until payment or tender of price in the following cases, namely:
(1) Where the goods have been sold without any stipulation as to credit
(2) Where the goods have been sold on credit, but the term of the credit has expired
(3) Where the buyer has become insolvent

The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.

Article 1528, Civil Code Where an unpaid seller made part delivery of the goods, he may exercise a right of lien on the remainder, UNLESS such
part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention.

Article 1529, Civil Code The unpaid seller of goods loses his lien thereon:
(1) Where he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the ownership in
the goods or the right to the possession thereof
(2) When the buyer or his agent lawfully obtains possession of the goods
(3) By waiver thereof

 Implies that unpaid seller has right to retain possession of the goods until payment or tender of the whole price, UNLESS he agreed to sell
on credit. Nevertheless, even there had been stipulation as to credit, he can exercise lien in cases of Art 1527 No 2 (credit had expired)
and 3 (buyer becomes insolvent).

Bachrach Motor Co., Inc. v. Mendoza, G.R. No. L-17551 (1922)
A truck was sold on installment and it was brought back to seller for repairs, the unpaid seller had a right to refuse to return the truck until the
installments due were paid.

B. Stoppage in Transitu

Article 1531, Civil Code Goods are in transit within the meaning of the preceding article
(1) From the time when they are delivered to a carrier by land, water or air or other bailee for the purpose of transmission to the buyer,
until the buyer or his agent in that behalf, takes delivery of them from such carrier or other bailee
(2) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, even if the seller has refused to
receive them back

Goods are no longer in transit within the meaning of the preceding article:
(1) If the buyer or his agent in that behalf, obtains the delivery of the goods before their arrival at the appointed destination
(2) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he
holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent; and it is immaterial that further
designation for the goods may have been indicated by the buyer
(3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf

If the goods are delivered to a ship, freight, train, truck, or airplane chartered by the buyer, it is a question depending on circumstances of the
particular case, whether they are in the possession of the carrier as such or as agent of the buyer.

If part delivery of the goods has been made to the buyer, or his agent in that behalf, the remainder of the goods may be stopped in transitu,
UNLESS such part delivery has been under such circumstances as to show an agreement with the buyer to give up possession of the whole of the
goods.

Article 1535, Civil Code Subject to the provisions of this Title, the unpaid seller’s right of lien or stoppage in transitu is not affected by any sale or
other disposition of the goods which the buyer may have made, UNLESS the seller has assented thereto.

If, however, a negotiable document of title has been issued for goods, no seller’s lien or right of stoppage in transitu shall defeat the right of any
purchaser for value in good faith to whom such document has been negotiated, whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such document, of the seller’s claim to a lien or right of stoppage in transitu.

Par 2, Article 1532, Civil Code When notice of stoppage in transit is given by the seller to the carrier, or other bailee in possession of goods, he must
redeliver the goods to, or according to the directions of, the seller. The expenses of such delivery must be borne by the seller. If, however, a
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negotiable document of title representing the goods has been issued by the carrier or other bailee, he shall not be obliged to deliver or justified in
delivering the goods to the seller UNLESS such document is first surrendered for cancellation.

Baviera, pp. 100-102

C. Resale

Article 1533, Civil Code Where
(1) the goods are of perishable nature, OR
(2) the seller expressly reserves the right of resale in case the buyer should make default OR
(3) the buyer has been in default for an unreasonable time,

an unpaid seller having the right of lien or having stopped the goods in transitu may resell the goods. He shall not thereafter be liable to the
original buyer upon the contract of sale or for any profit made by such resale, but may recover from the buyer damages for any loss occasioned by
the breach of the contract of sale.

Where a resale is made, as authorized in this article, the buyer acquires a good title as against the original buyer.

It is not essential to the validity of a resale that notice of an intention to resell the goods be given by the seller to the original buyer. But where the
right to resell is not based on the perishable nature of the goods or upon an express provision of the contract of sale, the giving or failure to give
such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale
was made.

It is not essential to the validity of a resale that notice of time and place of such resale should be given by the seller to the original buyer.

The seller is bound to exercise reasonable care and judgment in making a resale, and subject to this requirement may make a resale either by
public or private sale. He cannot, however, directly or indirectly buy the goods.

 In case vendor sells them at a loss, he is entitled to recover the difference from the original buyer.
 MAIN PURPOSE: to liquidate his damages and under the general duty of mitigating damages, he must do so within a reasonable time and
in such manner so as to obtain the best price possible
 Resale is fair when it is in accordance with established business methods, with no attempt to take advantage of the original buyer.

D. Rescission

Article 1534, Civil Code An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind the transfer of title and
resume the ownership in the goods, where he expressly reserved the right to do so in case the buyer should make default, OR where the buyer
has been in default in the payment of the price for an unreasonable time. The seller shall not thereafter be liable to the buyer upon the contract of
sale, but may recover from the buyer damages for any loss occasioned by the breach of the contract.

The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other
overt act an intention to rescind. It is not necessary that such overt act should be communicated to the buyer, but the giving or failure to give
notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default for an
unreasonable time before the right of rescission was asserted.

Article 1385, Civil Code Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and
the price with its interests; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to
restore.

Neither shall rescission take place when the things which are the object of the contract are legally in the possession of 3 rd persons who did not act
in bad faith.

In this case, indemnity for damages may be demanded from the person causing the loss.

Article 1596, Civil Code Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against
him for damages for non-acceptance.
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The measure of available damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach of
contract.

Where there is an available market for the goods in question, the measure of damages is, in the absence of special circumstances showing
proximate damage of a different amount, the difference between the contract price and the market or current price at the time or times when the
goods ought to have been accepted OR if no time was fixed for acceptance, then at the time of the refusal to accept.

Rivera v. Del Rosario, G.R. No. 144934 (2004)
Rescission of reciprocal obligations under Art 1191 (resolution) is different from the rescissible contracts. Resolution is a principal action that is
based on the breach of a party, while rescission under Art 1383 is a subsidiary action limited to cases of rescission for lesion under Art 1381 of the
CC.

Yaneza v. Court of Appeals, G.R. No. 149322 (2008)
 Rescission of a contract is not permitted for a slight or casual breach, but only for a substantial and fundamental breach as would defeat
the very object of the parties in making the agreement. It must be a breach of faith that destroys or violates the reciprocity of between
the parties.
 It presupposes the existence of a valid and subsisting obligation.

Macasaet v. R. Transport Corporation, G.R. No. 172446 (2007)
 “Failure to pay consideration” is different from “lack of consideration”
 Non-payment of the purchase price of property constitutes a very good reason to rescind a sale for it violates the very essence of a
contract.
 A necessary consequence of rescission is restitution with payment of damages.

Baviera, pp. 104-106

X. Performance of Contract

A. Delivery of the thing of sold

a. In general

Article 1524, Civil Code The vendor shall not be bound to deliver the thing sold, if:
 the vendee has not paid him the price OR
 no period for the payment has been fixed in the contract

Article 1169, Civil Code Those obliged to deliver OR to do something incure in delay from the time the oblige judicially or extrajudicially demands
from them the fulfillment of their obligation

However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declares
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive for the establishment of the contract
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform

In reciprocal obligations, neither party incurs in delay if the other does not comply OR is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his obligations, delay by the other begins.

Article 1521, Civil Code Whether it is for the buyer to take the goods or for the seller to send them to the buyer is a question of depending in each
case on the contract, express or implied, between the parties. Apart from any such contract, express or implied or usage of trade to the contrary,
the place of delivery is the seller’s place of business, if he has one, and if not, his residence; but in case of a contract of sale of specific goods,
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which to the knowledge of the parties when the contract or the sale was made were in some other place [specific goods], then that place is the
palce of delivery.

Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send
them within a reasonable time.

Where the goods at the time of the sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer
UNLESS and UNTIL such third person acknowledges to the buyer that he holds the goods on the buyer’s behalf.

Demand or tender of delivery may be treated as ineffectual UNLESS made at a reasonable hour. What is a reasonable hour is a question of fact.

Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller.

 What constitutes a “reasonable time”? Determined by the circumstances attending the particular transaction e.g. character of goods,
purpose for which they are intended, ability of the seller to produce the goods if they are to be manufactured, etc

Article 1523, Civil Code Where in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the
goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the
buyer EXCEPT in the cases provided for in Art 1503, 1st, 2nd and 3rd Par OR unless contrary intent appears.

Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having
regard to the nature of the goods and other circumstances of the case. If the seller omits to do so AND the goods are lost or damaged in the course
of transit, the buyer may:
 Decline to treat the delivery to the carrier as delivery to himself
 Hold the seller responsible for damages

Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which the seller knows or ought to know that it is
usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their transit AND if the seller fails to do so,
the goods shall be deemed to be at his risk during the transit.

Article 1537, Civil Code The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon
the perfection of the contract.

All fruits shall pertain to the vendee from the day on which the contract was perfected.

Article 1164, Civil Code The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire
no real right over it until the same has been delivered to him.

Article 443, Civil Code He who receives the fruits has the obligation to pay the expenses made by a 3rd person in their production, gathering and
preservation.

Article 1536, Civil Code The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the term as
provided in Article 1198.

Article 1198, Civil Code The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt
(2) When he does not furnish to the creditor the guaranties or securities which he has promised
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they
disappear UNLESS he immediately gives new ones equally satisfactory
(4) When the debtor violates any undertaking in consideration of which the creditor agreed to the period
(5) When the debtor attempts to abscond

b. Sales of goods

Article 1522, Civil Code Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, buyer may:
 Reject them
 If buyer accepts or retains the goods so delivered, knowing that the seller is not going to perform the contract in full – pay for them at
contract rate
 If buyer used or disposed of the goods delivered before he knows that the seller is not going to perform the contract in full – not be
liable for more than the fair value/market price of the goods so received
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Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, buyer may:
 Accept the goods included in the contract and reject the rest
 If buyer accepts the whole of the goods – pay for them at contract rate

Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract:
 Accept the goods which are in accordance with the contract and reject the rest

In the preceding two paragraphs, if the subject matter is indivisible:
 Buyer may reject the whole of the goods

The provisions of this article are subject to any usage of trade, special agreement or course of dealing between parties.

Article 1583, Civil Code Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by installments.

Where there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for AND:
 Seller makes defective deliveries in respect of one or more installments OR
 Buyer neglects or refuses without just cause to take delivery of OR pay for one or more installments
It depends upon each case on the terms of the contract and the circumstances of the case:
 Whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for
breach of entire contract OR
 Whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken

Chrysler Philippines Corporation v. Court of Appeals, G.R. No. 55684 (1984)

Baviera, pp. 113-120

c. Sales of immovables

Article 1539, Civil Code The obligation to deliver thing sold includes that of placing in the control of the vendee all that is mentioned in the
contract, in conformity with the following rules:

If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit measure or number, the vendor shall
be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; BUT should this be not possible,
the vendee may choose between:
 Proportional reduction of price
 Rescission of the contract, PROVIDED that in the latter case, the lack in area shall not be less than 1/10 of that stated.

The same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract.
The rescission in this case, shall only take place at the will of the vendee, when the inferior value of the thing sold “exceeds” 1/10 of the price
agreed upon.
Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area OR inferior quality, he may rescind the sale.

Article 1391, Civil Code The action for annulment shall be brought within 4 years… In case of mistake OR fraud, from the time of the discovery of
the same.

Article 1540, Civil Code If, in the case of the preceding article, there is a greater area or number in the

Article 1541, Civil Code

Article 1542, Civil Code

Article 1543, Civil Code

c. Sales of Immovables

Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the
contract, in conformity with the following rules:
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If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number,
the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract;
but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the
contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated.

The same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract.

The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the thing sold exceeds one-
tenth of the price agreed upon.

Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area of inferior quality, he may
rescind the sale. (1469a)
Art. 1391. The action for annulment shall be brought within four years.

This period shall begin:

In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same.

And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship
ceases. (1301a)

Art. 1540. If, in the case of the preceding article, there is a greater area or number in the immovable than that stated in the contract,
the vendee may accept the area included in the contract and reject the rest. If he accepts the whole area, he must pay for the same
at the contract rate. (1470a)

Art. 1541. The provisions of the two preceding articles shall apply to judicial sales. (n)

Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there
shall be no increase or decrease of the price, although there be a greater or less area or number than that stated in the contract.

The same rule shall be applied when two or more immovables as sold for a single price; but if, besides mentioning the boundaries,
which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall
be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract;
and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number,
unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. (1471)

Art. 1543. The actions arising from Articles 1539 and 1542 shall prescribe in six months, counted from the day of delivery. (1472a)

Lietz, Inc. v. Court of Appeals, G.R. No. 122463 (2005)

Baviera, pp. 120-122

d. Inspection and acceptance

Article 1584, par. 2, Civil Code
Article 1585, Civil Code
Article 1586, Civil Code
Article 1587, Civil Code
Article 1588, Civil Code
Article 1599, par. 4, Civil Code
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Art. 1584. Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them
unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in
conformity with the contract if there is no stipulation to the contrary.

Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.

Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the buyer, upon the terms
that the goods shall not be delivered by the carrier to the buyer until he has paid the price, whether such terms are indicated by
marking the goods with the words "collect on delivery," or otherwise, the buyer is not entitled to examine the goods before the
payment of the price, in the absence of agreement or usage of trade permitting such examination. (n)

Art. 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the
goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or
when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. (n)

Art. 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge
the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale. But, if, after
acceptance of the goods, the buyer fails to give notice to the seller of the breach in any promise of warranty within a reasonable
time after the buyer knows, or ought to know of such breach, the seller shall not be liable therefor. (n)

Art. 1587. Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right so to
do, he is not bound to return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept them. If he
voluntarily constitutes himself a depositary thereof, he shall be liable as such. (n)

Art. 1588. If there is no stipulation as specified in the first paragraph of article 1523, when the buyer's refusal to accept the goods is
without just cause, the title thereto passes to him from the moment they are placed at his disposal. (n)

Art. 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:

(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction
of the price;

(2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;

(3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;

(4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to
return them to the seller and recover the price or any part thereof which has been paid.

Grageda and Montilla v. Intermediate Appellate Court, G.R. No. 67929 (1987)

Baviera, pp. 122-128

B. Payment of price

a. In general

Article 1582, Civil Code
Article 1589, Civil Code
Article 1590, Civil Code
Article 1560, Civil Code
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Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the
contract.
If the time and place should not have been stipulated, the payment must be made at the time and place of the delivery of the thing
sold. (1500a)

Art. 1589. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price, in the
following three cases:

(1) Should it have been so stipulated;

(2) Should the thing sold and delivered produce fruits or income;

(3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price. (1501a)

Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price
until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper
case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere
act of trespass shall not authorize the suspension of the payment of the price. (1502a)
Art. 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the
agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof, he
may ask for the rescission of the contract, unless he should prefer the appropriate indemnity. Neither right can be exercised if the
non-apparent burden or servitude is recorded in the Registry of Property, unless there is an express warranty that the thing is free
from all burdens and encumbrances.

Within one year, to be computed from the execution of the deed, the vendee may bring the action for rescission, or sue for
damages.

One year having elapsed, he may only bring an action for damages within an equal period, to be counted from the date on which he
discovered the burden or servitude. (1483a)

Central Bank of the Philippines v. Spouses Alfonso, G.R. No. 131074 (2000)

Arra Realty Corporation v. Guarantee Development Corporation and Insurance Agency, G.R. No.
142310 (2004)

Baviera, pp. 128-129

b. Sale of real property

Article 1191, Civil Code
Article 1592, Civil Code

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law. (1124)
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Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time
agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the
court may not grant him a new term. (1504a)

Blas v. Angeles-Hutalla, G.R. No. 155594 (2004)
Baviera, pp. 130-132

XI. Warranties

A. Express Warranties

Article 1545, Civil Code
Article 1546, Civil Code

Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may
refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition
should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as
described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his
promise to accept and pay for the thing. (n)

Art. 1546. Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such
affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchase the thing relying thereon. No affirmation
of the value of the thing, nor any statement purporting to be a statement of the seller's opinion only, shall be construed as a warranty,
unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer. (n)

Carrascoso, Jr. v. Court of Appeals, G.R. No. 123672 (2005)

Moles v. Intermediate Appellate Court, G.R. No. 73913 (1989)

Baviera, pp. 133-136

B. Implied Warranties

a. Implied warranty of title

Article 1547(1)
Articles 1548-1558, Civil Code

Art. 1547. In a contract of sale, unless a contrary intention appears, there is:

(1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that
the buyer shall from that time have and enjoy the legal and peaceful possession of the thing;

(2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or
known to the buyer.

This Article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by
virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest. (n)
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SUBSECTION 1. - Warranty in Case of Eviction

Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor,
the vendee is deprived of the whole or of a part of the thing purchased.
The vendor shall answer for the eviction even though nothing has been said in the contract on the subject.

The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor. (1475a)

Art. 1549. The vendee need not appeal from the decision in order that the vendor may become liable for eviction. (n)

Art. 1550. When adverse possession had been commenced before the sale but the prescriptive period is completed after the transfer,
the vendor shall not be liable for eviction. (n)

Art. 1551. If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale, the vendor is liable for
eviction. (n)

Art. 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment. (n)

Art. 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith. (1476)

Art. 1554. If the vendee has renounced the right to warranty in case of eviction, and eviction should take place, the vendor shall only
pay the value which the thing sold had at the time of the eviction. Should the vendee have made the waiver with knowledge of the risks
of eviction and assumed its consequences, the vendor shall not be liable. (1477)

Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee
shall have the right to demand of the vendor:

(1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale;

(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him;

(3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty;

(4) The expenses of the contract, if the vendee has paid them;

(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith. (1478)

Art. 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he
would not have bought it without said part, he may demand the rescission of the contract; but with the obligation to return the thing
without other encumbrances that those which it had when he acquired it.
He may exercise this right of action, instead of enforcing the vendor's liability for eviction.

The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a separate price for each of
them, if it should clearly appear that the vendee would not have purchased one without the other. (1479a)

Art. 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee loses the thing acquired or a
part thereof. (1480)

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the
instance of the vendee. (1481a)

Ang v. Court of Appeals, G.R. No. 177874 (2008)
Republic of the Philippines v. Alto Surety & Insurance Co. Inc., G.R. No. L-12375 (1958)
Power Commercial and Industrial Corporation v. Court of Appeals, G.R. No. 119745 (1997)

Baviera, pp. 136-138

b. Implied warranty against hidden encumbrances or defects

Article 1547(2), Civil Code
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(2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or
known to the buyer.

Article 1560, Civil Code

Art. 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the agreement, of
such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof, he may ask for the
rescission of the contract, unless he should prefer the appropriate indemnity. Neither right can be exercised if the non-apparent burden
or servitude is recorded in the Registry of Property, unless there is an express warranty that the thing is free from all burdens and
encumbrances.

Within one year, to be computed from the execution of the deed, the vendee may bring the action for rescission, or sue for damages.

One year having elapsed, he may only bring an action for damages within an equal period, to be counted from the date on which he
discovered the burden or servitude. (1483a)

Article 1561, Civil Code

Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it
unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent
defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or
profession, should have known them. (1484a)

Article 1566, Civil Code

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware
thereof.

This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the
thing sold. (1485)

Article 1567, Civil Code
Article 1568, Civil Code
Article 1569, Civil Code
Article 1570, Civil Code
Article 1571, Civil Code

Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and
demanding a proportionate reduction of the price, with damages in either case. (1486a)

Art. 1568. If the thing sold should be lost in consequence of the hidden faults, and the vendor was aware of them, he shall bear the
loss, and shall be obliged to return the price and refund the expenses of the contract, with damages. If he was not aware of them, he
shall only return the price and interest thereon, and reimburse the expenses of the contract which the vendee might have paid. (1487a)

Art. 1569. If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by a fortuitous event or through the
fault of the vendee, the latter may demand of the vendor the price which he paid, less the value which the thing had when it was lost.

If the vendor acted in bad faith, he shall pay damages to the vendee. (1488a)

Art. 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the judgment debtor shall not be
liable for damages. (1489a)

Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing
sold. (1490)

 Waivable EXCEPT when vendor acted in bad faith (what does this waiver pertain to?)

Goodyear Philippines, Inc. v Sy, G.R. No. 154554 (2005)
WARRANTY – affirmation of fact or any promise made by a vendor in relation to the thing sold; it has a natural tendency to induce the vendee—
relying on that affirmation or promise—to purchase the thing.
 Decisive test: whether the vendor assumes to assert a fact of which the vendee is ignorant
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Petitioner did not breach implied warranty against hidden encumbrances (free from all charge, lien or encumbrances) because vehicle which has
earlier been stolen by a 3rd party was subsequently recovered by the authorities and restored to petitioner, its rightful owner.
LIEN – a legal right or interest that a creditor has in another’s property, lasting usually until a debt or a duty that it secures is satisfied
ENCUMBRANCE – a claim or liability that is attached to some property or some other right and that may lessen its value, such as a lien or
mortgage
LEGAL IMPEDIMENT – a legal hindrance or obstruction
Granted there was a breach, notice of breach was not given to petitioner within a reasonable time (Art 1586).

Nutrimix Feeds Corporation v. Court of Appeals, G.R. No. 152219 (2004) – 3 requisites. It took three
months before they discovered the hidden defect (3rd requisite not proved)

Baviera, pp. 138-140

c. Implied warranty of quality

Article 1562, Civil Code
Article 1563, Civil Code
Article 1564, Civil Code

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows:

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired,
and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an
implied warranty that the goods shall be reasonably fit for such purpose;

(2) Where the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality. (n)

Art. 1563. 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. (n)

Art. 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade.
(n)

Moles v. Intermediate Appellate Court, G.R. No. 73913 (1989)

Baviera, pp. 143-144

C. Warranties in sales of animals

Article 1572, Civil Code
Article 1573, Civil Code
Article 1574, Civil Code
Article 1575, Civil Code
Article 1576, Civil Code
Article 1577, Civil Code
Article 1578, Civil Code
Article 1579, Civil Code
Article 1580, Civil Code
Article 1581, Civil Code

Art. 1572. If two or more animals are sold together, whether for a lump sum or for a separate price for each of them, the redhibitory
defect of one shall only give rise to its redhibition, and not that of the others; unless it should appear that the vendee would not have
purchased the sound animal or animals without the defective one.
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The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate price has been fixed for each one of the
animals composing the same. (1491)

Art. 1573. The provisions of the preceding article with respect to the sale of animals shall in like manner be applicable to the sale of
other things. (1492)

Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock sold as condemned.
(1493a)

Art. 1575. The sale of animals suffering from contagious diseases shall be void.

A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and
they are found to be unfit therefor. (1494a)

Art. 1576. If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that expert
knowledge is not sufficient to discover it, the defect shall be considered as redhibitory.

But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be liable for damages. (1495)

Art. 1577. The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their
delivery to the vendee.

This action can only be exercised with respect to faults and defects which are determined by law or by local customs. (1496a)

Art. 1578. If the animal should die within three days after its purchase, the vendor shall be liable if the disease which cause the death
existed at the time of the contract. (1497a)

Art. 1579. If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee being
answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect. (1498)

Art. 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned in article 1567; but he must
make use thereof within the same period which has been fixed for the exercise of the redhibitory action. (1499)

Art. 1581. The form of sale of large cattle shall be governed by special laws. (n)

Baviera, pp. 140-141

 What is a redhibitory defect? Expert knowledge insufficient to discover them
 Remedies of buyer in case of defects in animal sold? Before the animal dies. What are the general
remedies?
 When will the hidden defects in sale of animal not apply? Ans: Animal bought in livestock sold as
condemned.

D. Sale by sample or description

Article 1481, Civil Code
Article 1562(2), Civil Code
Article 1565, Civil Code

Art. 1481. In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered
do not correspond with the description or the sample, and if the contract be by sample as well as description, it is not sufficient that the
bulk of goods correspond with the sample if they do not also correspond with the description.

The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample. (n)

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows:
SALES Post-midterms | Karichi E. Santos Page 18 of 31

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired,
and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an
implied warranty that the goods shall be reasonably fit for such purpose;

(2) Where the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality. (n)

Art. 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there is an implied warranty that the
goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the
sample. (n)

Mendoza v. David, G.R. No. 147575 (2004)

Baviera, pp. 141-143

E. Additional warranties in sale of consumer products

Section 68, Republic Act No. 7394, Consumer Act of the Philippines

F. Breach of warranties

Article 1599, Civil Code

Art. 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:

(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of
the price;

(2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;

(3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;

(4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to
return them to the seller and recover the price or any part thereof which has been paid.

When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without
prejudice to the provisions of the second paragraph of Article 1191.

Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted
the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to
offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the
buyer. But if deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer
from returning or offering to return the goods to the seller and rescinding the sale.

Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to
return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been
paid, concurrently with the return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price.

Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the
goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure payment of any
portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article
1526.

(5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a
greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had
if they had answered to the warranty. (n)
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Supercars Management & Development Corporation v. Flores, G.R. No. 148173 (2004)
Harrison Motors Corporation v. Navarro, G.R. No. 132269 (2000)
 Why was question of fraud relevant here? It’s more of annulment, fraud is not relevant in warranties, except where there is waiver of warranty is void
because of bad faith
 Relevant if your practice Corpo Law, due diligence esp in this case where the primary consideration in buying all the shares is the ownership of the
pantranco property which is a high market value property so the obligation of the lawyer of the buyer is to do due diligence on the shares and not the
properties. Found a defect but didn’t raise it as a very important contract in lawyer. Competent lawyers have the selle warrant that all the titles are clean
even if you are buying only the shares. Company by itself is not really valuable. It is more of the buyer’s lawyer’s faul. They could have ensured that any
defect in the property, the buyer would have had an easier remedy. Easier in due diligence cases, warn the buyer or reduce the price. Or stipulated that in
case of breach, use liquidated damages as a remedy.
 Since it involved real property, do you remembers that in sale of real property, description of boundaries all within the area. Court here decided or ruled in
favor of the buyer and directed proportional reduction in price, following sale by sated area would the buyer have remedy for rescinding contract for lack
in area or proportional reduction?

Philippine National Bank v. Mega Prime Realty and Holdings Corporation, G.R. No. 173454 (2008)

XII. Breach of contract
Article 1191, Civil Code
Article 1192, Civil Code
Article 1545, Civil Code

A. Sale of goods

a. Remedies of the seller

Article 1595, Civil Code
Article 1596, Civil Code
Article 1597, Civil Code
Article 1593, Civil Code

Velarde v. Court of Appeals, G.R. No. 108346 (2001)

Visayan Sawmill Company, Inc. v. Court of Appeals, G.R. No. 83851 (1993)

Baviera, pp. 145-152

b. Remedies of the buyer

Article 1598, Civil Code
Article 1599, Civil Code

Gonzales v. Lim, G.R. No. 130403 (2007)

Baviera, pp. 152-156

B. Sale of immovables and things other than goods
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Article 1385, Civil Code Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and
the price with its interests; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to
restore.

Article 1591, Civil Code Should the vendor have reasonable grounds to fear the loss of immovable property sold and its price, he may immediately
sue for the rescission of the sale.

Should such ground not exist, the provisions of Art 1191 shall be observed.

Article 1592, Civil Code In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time
agreed upon, the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him
a new term.

 Limited cases where you can ask for specific performance and rescission
 Sale is for acquiring very unique type of goods. But for property, it takes into account the fact that every property is distinct, unique and different. You
always have remedy of specific performance or damages. Except when performance becomes impossible.
 Take into account that’s why you have that exception for movables, very specific movables you can ask for specific performance.
 Ask Nathan what his “good observation” was

Spouses Benos v. Spouses Lawilao, G.R. No. 172259 (2006)
A counterclaim in the answer satisfies the requisites for the judicial rescission of a pacto de retro sale.

Province of Cebu v. Heirs of Morales, G.R. No. 170115 (2008)

Baviera, pp. 156-157

C. Sale of movables on installment

Article 1484, Civil Code In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the
following remedies:
1) Exact fulfillment of the obligation, should the vendee fail to pay
2) Cancel the sale, should the vendee’s failure to pay cover two or more installments
3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more
installments. In this case, 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.

Article 1485, Civil Code The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when
the lessor has deprived the lessee of the possession or enjoyment of thing.

Article 1486, Civil Code In the cases referred to in the two preceding articles, a stipulation that the installments or rents paid shall not be returned
to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.

Act No. 4122, Installment Sales Law or the Recto Law

Magna Financial Services Group, Inc. v. Colarina, G.R. No. 158635 (2005)
CONTRACT OF CHATTEL MORTGAGE – in the nature of a conditional sale of personal property given as a security for the payment of a debt or the
performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller paying to the purchaser a
sum of money or doing some other act named. If this condition is performed according to its terms, the mortgage and sale immediately become
void, and the mortgagee divested of his title.
FORECLOSURE – one of the remedies available to mortgagee in case of non-payment.
 May be effected either judicially or extrajudicially, by ordinary action or by foreclosure under power of sale contained in the mortgage,
by usual methods e.g. including sale of goods at public auction
WON there had been an actual foreclosure (considering that vehicle is already in their possession)? It is deemed that there has been foreclosure,
when all the proceedings of the foreclosure, including the sale of the property at public auction have been accomplished.
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Hermanos, Inc. v. Gervacio, G.R. No. 46306 (1939)
Art 1484-1486 applies only to sale of movables in installments and not to straight term sales. Reason: It is in these cases that partial payments
consist in relatively small amounts, constituting thus a great temptation for improvident purchasers to buy beyond their means.

Baviera, pp. 157-160

D. Sale of immovables on installment

Republic Act No. 6552, Realty Installment Buyer Protection Act

Cordero et al. v. F.S. Management & Development Corporation, G.R. No. 167213 (2006)
Art 1191 (on resolution) does not apply to contract to sell because the obligation has not arisen yet. Art 1191 and Art 1592 are applicable to
contracts of sale, for contracts to sell, RA 6552 applies. Sellers of industrial and commercial lands are entitled to retain the payments already made
by defaulting seller.

Spouses Ramos v. Spouses Heruela, G.R. No. 145330 (2005)
Heruela paid less than 2 years, Sec 4 of RA 6552 is applicable even to absolute sale. However, since there had been no valid rescission, the court
first fixed a period within which Heruela could comply. In case of failure to pay within that period, they should immediately vacate the land.

Section 23, Presidential Decree No. 957, The Subdivision and Condominium Buyers’ Protective Decree
Non-forfeiture of payments - No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to
buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment
due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the
time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but
excluding delinquency interests, with interest thereon at the legal rate.

Section 24, Presidential Decree No. 957, The Subdivision and Condominium Buyers’ Protective Decree
Failure to pay installments. The rights of the buyer in the event of this failure to pay the installments due for reasons other than the failure of the
owner or developer to develop the project shall be governed by Republic Act No. 6552.

Relucio v. Brillante-Garfin, G.R. No. 76518 (1990)
Application of Sec 23, PD 957

Gold Loop Properties, Inc. v. Court of Appeals, G.R. No. 122088 (2001)
Failure of the condominium to furnish the buyer with copy of contract to sell entitles the latter to suspend payment. Otherwise, the buyer would
not be informed of their rights and obligations under the contract.

E. Barter

Article 1639, Civil Code If one of the contracting parties, having received the thing promised him in barter, should prove that it did not belong to the
person who gave it, he [aggrieved party] cannot be compelled to deliver that which he offered in exchange, but he shall be entitled to damages.

Article 1640, Civil Code One who loses by eviction the thing received in barter may:
 Recover that which he gave in exchange with a right to damages
- However, he can only make use of the right to recover the thing which he has delivered while the same remains in possession of the
other party, and without prejudice to the rights acquired in good faith in the meantime by a third person.
 Demand an indemnity for damages

Article 1641, Civil Code As to all matters not specifically provided for in this title, barter shall be governed by the provisions of the preceding Title
relating to Sales.

Baviera, pp. 160-161
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F. Assignment of credit and other incorporeal rights

Article 1628, Civil Code The vendor in good faith shall be responsible for:
 the existence and legality of the credit at the time of the sale UNLESS: it should have been sold as doubtful (e.g. assignor was
unaware of whether the performance of
 But not for: solvency of the debtor UNLESS: 1) it has been so expressly stipulated;
2) prior to the sale and of common knowledge
Even in these cases he shall only be liable for the price received and for the expenses specified in Art 1616 No. 1 (expenses of contract
and other legitimate payments by reason of sale)

The vendor in bad faith shall always be answerable for the payment of all expenses and for damages.

Article 1629, Civil Code In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the contracting
parties should not have agreed upon the duration of the liability, it shall last for one year only, from the time of assignment, if the period already
expired.

Article 1630, Civil Code One who sells an inheritance without enumerating the things of which it is composed shall only be answerable for his
character as an heir.

Article 1631, Civil Code One who sells for a lump sum the whole of certain rights, rents or products, shall comply by answering for the legitimacy of
the whole in general.

Article 1632, Civil Code Should the vendor have profited by the fruits or received anything from the inheritance sold, he shall pay the vendee
thereof, if the contrary has not been stipulated.

Article 1633, Civil Code The vendee shall, on his part, reimburse the vendor for all that the latter may have paid for the debts of and charges on the
estate and satisfy the credits he may have against the same, unless there is an agreement to the contrary.

Article 1634, Civil Code When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it [the credit] by
reimbursing the assignee for:
 The price the assignee paid therefor
 The judicial costs incurred by him
 The interest on the price from the day on which the same was paid

A credit or other incorporeal right shall be considered “in litigation” from the time the complaint concerning the same is answered.
The debtor may exercise his right within 30 days from the date the assignee demands payment from him.

Article 1635, Civil Code From the provisions of the preceding article shall be excepted the assignments or sales made:
(1) To a co-heir or co-owner of the right assigned
(2) The creditor in payment of his credit
(3) To the possessor of a tenement or piece of land which is subject to the right in litigation assigned

Philippine National Bank v. Court of Appeals, G.R. No. 118357 (1997)
ASSIGNMENT – a transfer or making over to another of the whole of any property, real or personal, in possession or in action or of any estate or
right therein. It includes transfers of all kinds of property, and is peculiarly applicable to intangible personal property and accordingly, it is ordinarily
employed to describe the transfer of non-negotiable choses in action and of rights in or connected with property as distinguished from particular
item or property.
 A contract between the assignor and the assignee and it operates by way of such contract or agreement.
 Subject to the requisites of the same valid contract.
 Consideration is not always a requisite, unlike in sales.
 Title is transferred but possession need not be delivered.

Project Builders, Inc. v. Court of Appeals, G.R. No. 99433 (2001)
Assignment of credit – act of transferring, either onerously or gratuitously, the right of an assignor to an assignee who would then be capable of
proceeding against the debtor for enforcement or satisfaction of the credit.
 Characteristics of an assignment of credit:
o The transfer of rights take place upon the perfection of contract, and ownership of the right including all appurtenant accessory
rights, is thereupon acquired by the assignee.
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o Assignment binds the debtor only upon acquiring knowledge of the assignment but he is entitled, even then, to raise against
the assignee the same defenses he could set up against the assignor.
o Pure liberality – rules on donation; valuable consideration – partakes of the nature of a contract of sale or purchase
o Upon assignment of CTS, assignee is effective subrogated in assignor and in a position to enforce the CTS to the same extent as
assignor could.
 Consent of the debtor is not essential for its perfection, his knowledge thereof or lack of it affecting only the efficaciousness or
inefficaciousness of any payment he might make. Law requires “notice to” and not “consent of” the debtor.

Baviera, pp. 161-162

XIII. Extinguishment of sale

A. In general

Article 1600, Civil Code Sales are extinguished by:
 same causes as all other obligations
 those stated in the preceding articles of this Title
 Baviera enumerates:
 rescission
 annulment of the contract
 prescription of the action to enforce the contract
 cancellation of the sale by virtue of a stipulation in the contract
 fulfillment of the resolutory condition (e.g. conventional and legal redemption)
 conventional and legal redemption

Article 1231, Civil Code Obligations are extinguished by:
1. payment or performance
2. loss of the thing due
3. condonation or remission
4. confusion
5. compensation
6. novation

B. Conventional Redemption

Article 1601, Civil Code Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Art 1616 and other stipulations which may have been agreed upon.

Article 1602, Civil Code The contract shall be presumed an equitable mortgage, in any of the following cases:
1. When the price of the sale is unusually inadequate
2. When the vendor remains in possession
3. When upon or after the expiration of the right of repurchase, another instrument extending the period of redemption or granting a new
term is executed
4. When the purchaser retains for himself a part of the purchase price
5. When the vendor binds himself to pay for the taxes on the thing sold
6. In any other case, where it can be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a
debt or performance of any other obligation

Article 1603, Civil Code In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.

Article 1604, Civil Code The provisions of Art 1602 shall also apply to a contract purporting to be an absolute sale.

Article 1605, Civil Code In the cases referred to in Art 1602 and 1604, the apparent vendor may ask for the reformation of the instrument.
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Article 1606, Civil Code The right referred to in Art 1601 in the absence of an express agreement, shall last 4 years from the date of the contract.
Should there be an agreement, the period shall not exceed 10 years.
However, the vendor may still exercise the right to repurchase within 30 days from the time final judgment was rendered in a civil action on the
basis that the contract was a true sale with right to repurchase.

Article 1607, Civil Code In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with
the provisions of Art 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard.

Article 1608, Civil Code The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second
contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land
Registration Laws with respect to third persons.

Article 1609, Civil Code The vendee is subrogated to the vendor’s right and actions.

Article 1610, Civil Code The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have exhausted
the property of the vendor.

Article 1611, Civil Code In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in
the case of Art 498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right to redemption.

Article 1612, Civil Code If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of
them may exercise his right for more than his respective share.

The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the
part which he may have acquired.

Article 1613, Civil Code In the case of the preceding article, the vendee may demand of all the vendors or coheirs that they come to an agreement
upon the purchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to partial redemption.

Article 1614, Civil Code Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently
exercise the right of repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property.

Article 1615, Civil Code If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his
own share, whether the thing be undivided, or it has been partitioned among them.

But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted
against him for the whole.

Article 1616, Civil Code The vendor cannot avail himself of the right to repurchase without returning to the vendee the:
 Price of the sale, and in addition
 Expenses of the contract and any other legitimate payments by reason of the sale
 Necessary and useful expenses made on the thing sold

Article 1617, Civil Code If at the time of the execution of the sale, there should be on the land visible or growing fruits, there shall be no
reimbursement for or prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was
executed.

Should there have been no fruits at the time of the sale, and some exist at the time of redemption, they shall be prorated between the
redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the
anniversary of the date of the sale.

Article 1618, Civil Code The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he
shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the place where the land is
situated.

Article 1144, Civil Code The following actions must be brought within ten years from the time the right of action accrues

1) Upon a written contract
2) Upon an obligation created by law
3) Upon a judgment
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Article 1677, Civil Code The purchaser in a sale with the right of redemption cannot make use the power to eject the lesseeindu until the end of the
period for the redemption.

Misterio v. Cebu State College of Science and Technology, G.R. No. 152199 (2005)
 The essence of pacto de retro sale is that title and ownership of the property sold is immediately vested in the vendee a retro, subjectto
the restrictive condition of repurchase by the vendor a retro within the period provided in Art 1606 CC.
 Pending the repurchase of the property, the vendee a retro may alienate, mortgage or encumber the same, but such alienation or
encumbrance is as revocable as is his right.
 If vendor a retro repurchases the property, the right of the vendee a retro is resolved, because he has to return the property free from all
damages and encumbrances imposed by him.
 Absent any stipulations as to the period of redemption, Art 1606 provides four years counted from the happening of the allocated
condition contained in the deed (which happened upon the passing of the law changing the name of the school)

Gajudo v. Traders Royal Bank, G.R. No. 151098 (2006)
 One year period of redemption provided in Act No. 3135, as amended—the law under which the property here was sold in a foreclosure
sale—is only directory and as such can be extended by agreement of the parties. (converting legal redemption into conventional
redemption)
 However, for legal redemption to be converted into a conventional redemption, 2 requisites must be established
o Voluntary agreement of the parties to extend the redemption period
o Debtor’s commitment to pay the redemption price on a fixed date

Agan v. Spouses Nueva, G.R. No. 155018 (2003)
 Application of 3rd Par of Art 1606. The legislative intent is “to accord the vendor a retro the maximum safeguards for the protection of his
legal rights under the true agreement of the parties” and to prevent circumvention of law on usury and rule against pactum
commissorium i.e. against a creditor appropriating the mortgage property
 It is intended to cover suits where the seller claims that the real intention was a loan with equitable mortgage but decides otherwise. The
seller, however, must entertain good faith belief that the contract is an equitable mortgage.
 Counting of the 30 days begin from the time the “final judgment” was rendered and not “receipt of the judgment.”

Dapiton v. Court of Appeals, G.R. No. 107259 (1997)
 Application of Art 1603 (in case of doubt, resolve in favor of equitable mortgage); buyer-judge transferred the tax declaration in his name
but allowed the petitioners to be in possession of the land for 30 years and even evaded the elder Dapiton to prevent him from paying
the P400 loan.
 Right to redemption must be reversed or stipulated at the moment of the perfection of the contract, and not afterwards (Art 1601). An
agreement granting such right to redeem subsequent to the perfection of the contract of sale is a mere promise to sell.

Molina v. Court of Appeals, G.R. No. 125755 (2003)
 EQUITABLE MORTGAGE – one, which, although lacking in some formality, or form or words, or other requisites demanded by a statute,
nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or
contrary to law.
 Requisites for the presumption of an equitable mortgage to arise
o Parties entered into a contract denominated as a contract of sale
o That their intention was to secure an existing debt by way of a mortgage

Baviera, pp. 163-175

C. Legal Redemption

a. Under the Civil Code

Article 1619, Civil Code Legal redemption is the right to be subrogated upon the same terms and conditions stipulated in the contract, in the place
of one who acquires a thing:
- by purchase or
- dation in payment or
- by any other transaction whereby ownership is transmitted by onerous title.
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 Only applies to transfer of ownership through onerous title, HENCE, not applicable to:
o Barter
o Transfers by gratuitous title
o Hereditary succession
 It can apply to sales with pacto de retro
 It arises from the moment of the sale, and once exercised by the redemptioner, the subsequent rescission of the sale cannot prejudice
the redemptioner.
 If redemption price is grossly excessive  it can be reduced by the court where the redemption is made by:
o a co-owner - only pay a reasonable one (Art 1620)
o adjoining land-owner of an urban land
o minor or his guardian

LEGAL REDEMPTION BY CO-OWNERS

1st Par, Article 1620, Civil Code A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or any of
them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

 “Third person” or “stranger” – anyone who are not heirs of the vendor, by will or intestate succession. Anyone who is not a co-owner.
 Basis of the law:
o To reduce the number of co-owners until the community is done away with on the grounds that co-ownership is a hindrance to
the development and administration of the property
o For the benefit of the redemptioner to keep strangers out of a joint family ownership if the presence of the outsider is
undesirable
o To afford a co-owner a way out of what might be a disagreeable and inconvenient association into which he has been thrust
 Right is not only available to original co-owners but to those who had later acquired the share of a co-owner. But it cannot apply where
the share of the co-owner was:
o Merely mortgaged
o Sold to another co-owner

2nd Par, Article 1620, Civil Code Should 2 or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the
share they may respectively have in the thing owned in common.

 c.f. with Art 1088 (two different situations give rise to same effect)
Article 1088, Civil Code Should any of the heirs sell his hereditary rights to a stranger before the partition, any OR all of the co-heirs may
be subrogated to the rights of the purchaser by reimbursing him for the price of sale, PROVIDED they do so within the period of 1 month
from the time they were notified in writing of the sale by the vendor.

LEGAL REDEMPTION BY LAND-OWNERS OF ADJOINING RURAL LAND

1st Par, Article 1621, Civil Code The owners of adjoining lands shall also have the right of redemption when a piece of RURAL LAND, the area of
which does not exceed 1 hectare, is alienated, UNLESS the grantee does not own any rural land.

 “Rural” means pertaining to the country, as distinguished from a city or town. It is to be determined from the character of the locality
and vicinity (e.g. neighboring and surrounding properties) (Ortega v Orcine) E.g. Buildings and improvements in the neighborhood are
few and scattered, if they partake the character of the country and are occupied by persons engaged in rural pursuits.

2nd Par, Article 1621, Civil Code The right is not applicable to adjacent lands which are separated by brooks, drains, ravines, road and other
apparent servitudes for the benefit of other estates.

 Object of the law:
o To prevent the rural land consisting 1 ha or less, from passing into the hands of a person other than the adjacent owners who
can make use of the alienated property for the improvement and development of their own lands
o To consolidate scattered small agricultural land under one ownership

3rd Par, Article 1621, Civil Code If 2 or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the
adjoining land of smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption.

LEGAL REDEMPTION BY LAND-OWNERS OF ADJOINING URBAN LAND

1st Par, Article 1622, Civil Code Whenever a piece of URBAN LAND which is so small and so situated that a major portion thereof cannot be used for
any practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of any adjoining land
has a right of pre-emption at a reasonable price.
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 Reason for the law:
o To discourage speculation in real-estate and aggravate the housing problem
 “Right of pre-emption” is a right to acquire certain property in preference to any other person. It usually refers to property newly coming
into existence (Wikipedia).

2nd Par, Article 1622, Civil Code If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a
reasonable price.

3rd Par, Article 1622, Civil Code When two or more owners of adjoining lands wish to exercise the rights of pre-emption or redemption, the owner
whose intended use of the land in question appears best justified shall be preferred.

LEGAL REDEMPTION IN ASSIGNMENT OF A CHOSE IN ACTION

 Debtor may extinguish the obligation by reimbursing the assignee of:
o Price the assignee paid for the incorporeal right in litigation
o Judicial costs incurred by him
o Interest on the price from the day on which the same was paid
 A credit or incorporeal right is “in litigation” from the time the complaint concerning the same is answered
 Reason for the law:
o To discourage speculation in lawsuits which would make courts an instrument for profit
 EXCEPTIONS - Right is not available when:
a. Assignment of credit was made before any litigation
b. Assignments made to:
 A co-heir or co-owner of the credit
 Creditor in payment of his credit
 Possessor of tenement or land which is subject to the assigned right
 Reason for exceptions:
o BECAUSE assignee has a valid interest in the right or property assigned, and that the assignment was not acquired for
speculative purposes

PERIOD TO REDEEM

1st Par, Article 1623, Civil Code The right of legal pre-emption or redemption shall not be exercised except within 30 days from the notice in writing
by the prospective vendor or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, UNLESS
accompanied by an affidavit by the vendor that he has given written notice thereof to all possible redemptioners.

 Mere knowledge of the sale by the redemptioner acquired in any manner does not satisfy the requirement.
 Purpose of the law:
o To remove all uncertainty as to the sale, its terms and validity
o To quiet any doubt that the alienation is not definitive
 Notice
o May be in the form of a letter or a copy of the motion filed in court on the redemptioner
o Must be of the actual sale and not of a mere intention to sell
 Reason for requirement of an affidavit:
o To impress upon the affiant the necessity of making a true statement
 Period to be counted: From the receipt of notice given by the vendor, AND not from the notice given by the vendee

2nd Par, Article 1623, Civil Code The right of redemption of co-owners excludes that of adjoining owners.

HOW EXERCISED

 “Bona fide redemption” seasonable and valid tender of the entire purchase price in legal tender, without the need of:
o Consigning the amount in court
o Consignation of the redemption price in court within the period of redemption, without need of a prior tender of redemption
 BECAUSE: redemption is not a payment of a debt, but an exercise of a privilege
 If redemption price is excessive: redemptioner may tender a price that can honestly be deemed reasonable under the circumstances,
without prejudice to final arbitration by the courts
 After making a valid tender of the redemption price within the period of redemption: the action to compel reconveyance may be brought
outside said period, subject to the prescriptive period for bringing the action.
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Fernandez v. Spouses Tarun, G.R. No. 143868 (2002)
Villegas v. Court of Appeals, G.R. No. 111495 (2006)

b. Under the Public Land Act

Section 12, Commonwealth Act No. 141 or the Public Land Act
Any citizen of the Philippines over the age of 18 years, or the head of a family, who does not own more than 24 hectares of land in the
Philippines or has not had the benefit of any gratuitous allotment of more than twenty-four hectares of land since the occupation of the
Philippines by the United States, may enter a homestead of not exceeding twenty-four hectares of agricultural land of the public domain.

Section 44, Commonwealth Act No. 141 or the Public Land Act
Any natural-born citizen of the Philippines who is not the owner of more than 24 hectares and who since July 4, 1926 or prior thereto, has
continuously occupied and cultivated, either by himself or through his predecessors-in-interest, a tract or tracts of agricultural public
lands subject to disposition, or who shall have paid the real estate tax thereon while same has not been occupied by any person shall be
entitled, under the provisions of this chapter, to have a free patent issued to him for such tract or tracts of such land not to exceed 24
hectares.

A member of the national cultural minorities who has continuously occupied and cultivated, either by himself or through his
predecessors-in-interest, a tract or tracts of land, whether disposable or not since July 4, 1955, shall be entitled to the right granted in the
preceding paragraph of this section: Provided, That at the time he files his free patent application he is not the owner of any real
property secured or disposable under this provision of the Public Land Law

Section 118, Commonwealth Act No. 141 or the Public Land Act
Except in favor of the Government or any of its branches, units, or institutions, lands acquired under free patent or homestead provisions
shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of 5 years from and
after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the
expiration of said period, but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or
corporations.

No alienation, transfer, or conveyance of any homestead after 5 years and before 25 years after issuance of title shall be valid without
the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal
grounds.

Section 119, Commonwealth Act No. 141 or the Public Land Act
Every conveyance of land acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by the:
o applicant,
o his widow, or
o legal heirs,
within a period of 5 years from the date of the conveyance.

Development Bank of the Philippines v. Gagarani, G.R. No. 172248 (2008)

Baviera, pp. 182-184

c. Under special laws

i. Foreclosure and execution sales

Section 6, Act No. 3135, as amended
In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any
judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of Sections 464 to 466, inclusive, of the Code of Civil Procedure, in so far as these are not
inconsistent with the provisions of this Act.

Section 2, Rule 68, Rules of Court - Judgment on foreclosure for payment or sale.
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If upon the trial in such action the court shall find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff
upon the mortgage debt or obligation, including interest and other charges as approved by the court, and costs, and shall render judgment for the
sum so found due and order that the same be paid to the court or to the judgment obligee within a period of not less than 90 days nor more than
120 days from the entry of judgment, and that in default of such payment the property shall be sold at public auction to satisfy the judgment.

Section 3, Rule 68, Rules of Court - Sale of mortgaged property; effect.

When the defendant, after being directed to do so as provided in the next preceding section, fails to pay the amount of the judgment within the
period specified therein, the court, upon motion, shall order the property to be sold in the manner and under the provisions of Rule 39 and other
regulations governing sales of real estate under execution. Such sale shall not affect the rights of persons holding prior encumbrances upon the
property or a part thereof, and when confirmed by an order of the court, also upon motion, it shall operate to divest the rights in the property of all
the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may be allowed by law.

Upon the finality of the order of confirmation or upon the expiration of the period of redemption when allowed by law, the purchaser at the
auction sale or last redemptioner, if any, shall be entitled to the possession of the property unless a third party is actually holding the same
adversely to the judgment obligor. The said purchaser or last redemptioner may secure a writ of possession, upon motion, from the court which
ordered the foreclosure.

Section 7, Rule 68, Rules of Court - Registration.

A certified copy of the final order of the court confirming the sale shall be registered in the registry of deeds. If no right of redemption exists, the
certificate of title in the name of the mortgagor shall be cancelled, and a new one issued in the name of the purchaser.

Where a right of redemption exists, the certificate of title in the name of the mortgagor shall not be cancelled, but the certificate of sale and the
order confirming the sale shall be registered and a brief memorandum thereof made by the registrar of deeds upon the certificate of title. In the
event the property is redeemed, the deed of redemption shall be registered with the registry of deeds, and a brief memorandum thereof shall be
made by the registrar of deeds on said certificate of title.
If the property is not redeemed, the final deed of sale executed by the sheriff in favor of the purchaser at the foreclosure sale shall be registered
with the registry of deeds; whereupon the certificate of title in the name of the mortgagor shall be cancelled and a new one issued in the name of
the purchaser.

Section 47, Republic Act No. 8791 or the General Banking Law of 2000 - Foreclosure of Real Estate Mortgage.

In the event of foreclosure, whether judicially or extra-judicially, of any mortgage on real estate which is security for any loan or other credit
accommodation granted, the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the
right within 1 year after the sale of the real estate, to redeem the property by paying the amount due under the mortgage deed, with interest
thereon at rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution from the sale and custody of said
property less the income derived therefrom. However, the purchaser at the auction sale concerned whether in a judicial or extra-judicial
foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction
sale and administer the same in accordance with law. Any petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted
pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned
that he will pay all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding. Notwithstanding Act
3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to redeem the property in
accordance with this provision until, but not after, the registration of the certificate of foreclosure sale with the applicable Register of Deeds
which in no case shall be more than 3 months after foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale
prior to the effectivity of this Act shall retain their redemption rights until their expiration.

Spouses Landrito and Edgalani v. Court of Appeals, G.R. No. 133079 (2005)
Spouses Rosales v. Spouses Alfonso, G.R. No. 137792 (2003)
Metrobank v. Spouses Tan, G.R. No. 178449 (2008)
Banco Filipino Savings and Mortgage Bank v. Court of Appeals, G.R. No. 143896 (2005)

Baviera, pp. 184-185

ii. Under the Agrarian Land Reform Code

Section 11, Republic Act No. 6389 or the Agricultural Land Reform Code, as amended
The Land Reform Project Administration and its governing body, the National Land Reform Council, under the Office of the President, are hereby
abolished; and their functions are transferred to the Department, together with applicable appropriations, records, equipment, property and all
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the organic, contributed and/or assigned personnel to the Land Reform Project Administration pursuant to this Code, other existing laws and
Executive Order No. 75, Series of 1964, as well as such personnel as may be necessary from its governing body, the National Land Reform Council.

Section 12, Republic Act No. 6389 or the Agricultural Land Reform Code, as amended
The Land Authority under the Office of the President and a member-agency of the Land Reform Project Administration is hereby abolished; and its
functions are transferred to the Department, together with applicable appropriations, records, equipment, property, and such personnel as may be
necessary.

Baviera, pp. 185-187

XIV. Bulk Sales Law

Act No. 3952, as amended, Bulk Sales Law
People v. Mapoy, G.R. No. L-48336 (1942)
Baviera, pp. 188-222

XV. Retail Trade Liberalization Act

Republic Act No. 8762, Retail Trade Liberalization Act of 2000

XVI. Consumer Act of the Philippines

Articles 50-60, Chapter I, Title III, Republic Act No. 7394, Consumer Act of the Philippines
REGULATION OF SALES ACTS AND PRACTICES

Article 50. Prohibition Against Deceptive Sales Acts or Practices. – A deceptive act or practice by a seller or supplier in connection with a consumer
transaction violates this Act whether it occurs before, during or after the transaction. An act or practice shall be deemed deceptive whenever the
producer, manufacturer, supplier or seller, through concealment, false representation of fraudulent manipulation, induces a consumer to enter
into a sales or lease transaction of any consumer product or service.

Without limiting the scope of the above paragraph, the act or practice of a seller or supplier is deceptive when it represents that:
a) a consumer product or service has the sponsorship, approval, performance, characteristics, ingredients, accessories, uses, or
benefits it does not have;
b) a consumer product or service is of a particular standard, quality, grade, style, or model when in fact it is not;
c) a consumer product is new, original or unused, when in fact, it is in a deteriorated, altered, reconditioned, reclaimed or second-hand
state;
d) a consumer product or service is available to the consumer for a reason that is different from the fact;
e) a consumer product or service has been supplied in accordance with the previous representation when in fact it is not;
f) a consumer product or service can be supplied in a quantity greater than the supplier intends;
g) a service, or repair of a consumer product is needed when in fact it is not;
h) a specific price advantage of a consumer product exists when in fact it does not;
i) the sales act or practice involves or does not involve a warranty, a disclaimer of warranties, particular warranty terms or other rights,
remedies or obligations if the indication is false; and
j) the seller or supplier has a sponsorship, approval, or affiliation he does not have.

Article 51. Deceptive Sales Act or Practices By Regulation. – The Department shall, after due notice and hearing, promulgate regulations declaring
as deceptive any sales act, practice or technique which is a misrepresentation of facts other than those enumerated in Article 50.

Article 52. Unfair or Unconscionable Sales Act or Practice. – An unfair or unconscionable sales act or practice by a seller or supplier in connection
with a consumer transaction violates this Chapter whether it occurs before, during or after the consumer transaction. An act or practice shall be
deemed unfair or unconscionable whenever the producer, manufacturer, distributor, supplier or seller, by taking advantage of the
consumer's physical or mental infirmity,
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ignorance,
illiteracy,
lack of time or the general conditions of the environment or surroundings,
induces the consumer to enter into a sales or lease transaction grossly inimical to the interests of the consumer or grossly one-sided in favor of the
producer, manufacturer, distributor, supplier or seller.

In determining whether an act or practice is unfair and unconscionable, the following circumstances shall be considered:
a) that the producer, manufacturer, distributor, supplier or seller took advantage of the inability of the consumer to reasonably protect
his interest because of his inability to understand the language of an agreement, or similar factors;
b) that when the consumer transaction was entered into, the price grossly exceeded the price at which similar products or services
were readily obtainable in similar transaction by like consumers;
c) that when the consumer transaction was entered into, the consumer was unable to receive a substantial benefit from the subject of
the transaction;
d) that when the consumer was entered into, the seller or supplier was aware that there was no reasonable probability or payment of
the obligation in full by the consumer; and
e) that the transaction that the seller or supplier induced the consumer to enter into was excessively one-sided in favor of the seller or
supplier.

Article 53. Chain Distribution Plans or Pyramid Sales Schemes. – Chain distribution plans or pyramid sales schemes shall not be employed in the
sale of consumer products.

Article 54. Home Solicitation Sales. – No business entity shall conduct any home solicitation sale of any consumer product or service without first
obtaining a permit from the Department. Such permit may be denied suspended or revoked upon cause as provided in the rules and regulations
promulgated by the Department, after due notice and hearing.

Article 55. Home Solicitation Sales; When Conducted. – Home solicitation sales may be conducted only between the hours of 9:00 AM and 7:00
PM of each working day: Provided, That solicitation sales may be made at a time other than the prescribed hours where the person solicited has
previously agreed to the same.

Article 56. Home Solicitation Sales; by Whom Conducted. – Home solicitation sales shall only be conducted by a person who has the proper
identification and authority from his principal to make such solicitations.

Article 57. Receipts for Home Solicitation Sales. – Sales generated from home solicitation sales shall be properly receipted as per existing laws,
rules and regulations on sale transactions.

Article 58. Prohibited Representations. – A home solicitation sale shall not represent that:
a) the buyer has been specially selected;
b) a survey, test or research is being conducted; or
c) the seller is making a special offer to a few persons only for a limited period of time.

Article 59. Referral Sales. – Referral selling plans shall not be used in the sale of consumer products unless the seller executes in favor of the buyer
a written undertaking that will grant a specified compensation or other benefit to said buyer in return for each and every transaction consummated
by said seller with the persons referred by said buyer or for subsequent sales that said buyer has helped the seller enter into.

Article 60. Penalties. –
a) Any person who shall violate the provisions of Title III, Chapter I, shall upon conviction, be subject to a fine of not less than P500.00 but
not more than P10,000.00 or imprisonment of not less than 5 months but not more than 1 year or both, upon the discretion of the court.
b) In addition to the penalty provided for in paragraph (1), the court may grant an injunction restraining the conduct constituting the
contravention of the provisions of Articles 50 and 51 and/or actual damages and such other orders as it thinks fit to redress injury to the
person caused by such conduct.

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