LAW ON SALES OUTLINE1

LYCEUM OF THE PHILIPPINES

COLLEGE OF LAW
1st Semester, S.Y. 2016-2017
ATTY. LUIS ALFONSO A. LLAGUNO

I. INTRODUCTION

A. DEFINITION OF SALE (Art. 1458) - Polytechnic University of the Philippines v. CA, 368
S 691 (2001).

1. Elements of Contract of Sale - Sanchez v. Mapalad Realty Corp, 541 SCRA 397
2. Stages of Contract of Sale Jovan Land v. CA, 268 S 160 (1997)
3. Obligations Created (Art. 1165) 2 sets of real obligations
4. Characteristic of Sale Balatbat v. CA, G.R. No. 109410, August 28, 1996;
Agasen v. CA, G.R. No. 115508, February 15, 2000; City of Cebu v. Heirs of Rubi,
G.R. No. 128579, April 29, 1999; Londres v. CA, 394 S 133 (2002); Gaite v. Fonacier,
2 SCRA 830 (1961); Spouses Buenaventura v. Court of Appeals, G.R. No. 126376,
November 2003

B. SALE DISTINGUISHED FROM SIMILAR CONTRACTS

1. Donation (Arts. 725 and 1471)

2. Barter (Arts. 1468, 1638 to 1641
3. Contract for Piece-of-Work (Arts. 1467, 1713 to 1715)
Celestino & Co. v. Collector, 99 Phil. 841 (1956); Commissioner of Internal Revenue v.
Engineering Equipment & Supply Co., 64 SCRA 590 (1975); Engineering & Machinery
Corp. v. CA, 252 SCRA 156.
4. Agency to Sell (Art. 1466) - Quiroga v. Parsons, 38 Phil. 501 (1918); Puyat v. Arco
Amusement Co., 72 Phil. 402' (1941); Ker and Co., Ltd. V. Lingad, 38 SCRA 524
(1971)
5. Dacion En Pago (Arts. 1245 and 1934) - Philippine Lawin Bus Co. v. CA, 374
SCRA 322 (2002)
6. Subscription Contract
7. Lease (Arts. 1484 and 1485)

II. PARTIES TO A CONTRACT OF SALE (Arts. 1489 and 1492)

1 Based on Dean Cesar Villanueva's topical index in his book entitled "Law on Sales ".

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A. MINORS, INSANE AND DEMENTED PERSONS, DEAF-MUTES (Arts. 1327,
1397, 1399)

1. Necessaries (Arts. 1489 and 290)

2. Emancipation (Arts. 399 and 1397, Art 234 and 236, Family Code)

B. SALES BY AND BETWEEN SPOUSES

1. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code) Ravina v.
Villa Abrille, G.R. No. 160708, October 16, 2009; Aggabao v. Parulan, Jr., 629 SCRA
562 (2010)
2. Between Spouses (Arts. 133, 1490, 1492) - Medina v. Collector, 1 SCRA 302
3. Applicability to Common-Law Spouses (Art. 133) - Calimlim Canullas v. Fortun,
129 SCRA 675 (1984);
4. Is in Pari Delicto Doctrine Applicable to Prohibit Recovery?

C. SCENARIOS INVOLVING CONFLICT OF INTEREST DUE TO TRUST

RELATIONSHIPS (Arts. 1491 and 1492)

1. Status of such contracts - Rubias v. Batiller, 51 S 120 (1973).

2. Guardians, agents and administrators- Phil. Trust Co. v. Roldan, 99 P 39 (1956)
3. Attorneys - Fabillo v. lAC, 195 S 28 (1991).
4. Judges

D. SALES BY ADMINISTRATORS/EXECUTORS - Lee v. RTC, G.R. No. 146006,

February 23, 2004

III. SUBJECT MATTER OF SALE (Arts. 1459 to 1465)

A. MUST BE EXISTING, FUTURE OR CONTIGENT (Arts. 1347, 1348 and 1462)

1. The thing must be capable of existence

a. Emptio Rei Speratae (1461 and 1347)
b. Emptio Spei (1461)
c. Subject to resolutory condition (1465) Quijada v. CA, GR. No. 126444,
December 4, 1988.
2. Sellers obligation to transfer ownership at the time of delivery (Arts. 1459,
1462, 1505, 1434 and 1462)

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B. MUST BE LICIT (Arts. 1347, 1459 and 1575)

C. MUST BE DETERMINATE OR DETERMINABLE (1460) - Melliza v. City of llo-ilo,

23 S 477 (1968); Heirs of San Andres v. Rodriguez, 332 S 769 (2000);

1. Generic things as objects of sale (Arts. 1246 and 1409[6]) - Yu Tek & co., v.
Gonzales, 29 Phil. 384 (1915)
2. Undivided Interest (1463, 1464)
3. Undivided Share in a mass of fungible goods may be object of sale. (Art. 1464)

D. WHETHER QUANTITY OF OBJECT IS ESSENTIAL FOR PERFECTION

(Art. 1349) National Grains Authority v. IAC, 171 SCRA 131 (1989); Johannes Schuback &
Sons Phil. Trading Corp. v. Court of Appeals, 227 SCRA 719 (1993).

E. LEGALITY OF SUBJECT MATTER(Arts. 1409, 1458, 1461, 1462 and 1575)

1. Special laws
2. Absolutely simulated sale

IV. PRICE

A. Meaning of Price Hernandez-Nievera v. Hernandez, 643 SCRA 646 (2011)

B. Requisites for valid Price

1. The Price Must Be Real - 1471 - Mapalo v. Mapalo, 17 SCRA 114 (1966); Ong v.
Ong 19 SCRA 133 (1985); Bagnas v. CA, 176 SCRA 159 (1989); Mate v. CA, 290
SCRA 463 (1998); Alino v. Heirs of Lorenzo, 556 SCRA 139

a) Simulated price - Land Bank of the Phils. v. Poblete, 691 SCRA 613;
b) False consideration - 1353 and 1354
c) Non-payment of price - Macasaet v. R. Transport Corp., 535 SCRA 503
(2007)

2. The Price Must Be in Money or Its Equivalent - 1458, 1468

3. The Price Must be Certain or Ascertainable at the Time of Perfection - 1469

C. Manner of Payment of Price must be Agreed Upon - Velasco v. CA, 51 SCRA 439
(1973); San Miguel Properties Philippines v. Huang, 336 SCRA 737 (2000); x Co v. CA, 286

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SCRA 76 (1998); Amado v. Salvador, 540 SCRA 161; Navarra v. Planters Development Bank,
527 SCRA 562.

D. How Price Determined

1. By Third Person 1469

2. By the Courts 1469
3. By reference to a definite day, particular exchange or market 1472
4. By reference to another thing certain
5. But never by one party to the contract - 1473, 1182
6. Effect of unascertainability - 1474

E. Gross Inadequacy of Price -1355, 1386, 1470 and 1602.

F. Judicial Sale
G. Rescissible Contracts of Sale - 1380 & 1381
H. Sales With Right to Purchase 1602 and 1604

V. FORMATION OF CONTRACT SALE (Arts. 1475-1488)-

A. PREPARATORY (Art. 1479)

1. Policitation

2. Option Contract - Capalla v. Comelec, 673 S 1 (2012) & 684 SCRA 387 (2012);
Carcellar v. CA, 302 SCRA 718 (1999); Soriano v. Bautista, 6 SCRA 946 (1962);
Limson v. CA, 357 SCRA 209 (2001); Sanchez v. Rigos, 45 SCRA 368 (1972)
Vazquez v. CA, 199 SCRA 102; Yao Ka Sin Trading v. CA, 209 SCRA 323 (1991);
Ang Yu Asuncion v. CA, 238 SCRA 602 (1994); Eulogio v. Sps. Epeles, G.R. No.
167884, January 20, 2009; Villamor v. Court of Appeals, 202 SCRA 607 (1991);
Nietes v. CA, 46 SCRA 654 (1972)

3. Distinguishing Option From Right of First Refusal Tuazon v. del Rosario-

Suarez, G.R. No. 168325, December 3, 2010; Polytechnic University of the Philippines v.
Golden Horizon Realty Corporation, 615 SCRA 478, (2010), Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc. 264 SCRA 483 (1996); Paranaque Kings
Enterprises, Inc. v. CA, 268 SCRA 727, 741 (1997);

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B. PERFECTION, Arts. 1325 & 1326 - Fule v. CA, 286 SCRA 685 (1998)

1. Perfection - (Arts. 1475)

2. When Deviation Allowed - Villonco v. Bormacheco, 65 SCRA 352 (1975)
3. Sale by Auction - (Arts. 1476, 1403 (2)(d) & 1326)
4. Earnest Money - (Art. 1482) - Spouses Doromal, Sr. v. CA, 66 SCRA 575 (1975);
Serrano v. Caguiat, 517 SCRA 57
5. Place of Perfection (Art. 1319)

C. FORM OF SALES (Arts. 1375, 1358, 1405, 1406 and 1483)

1. Really No Form- Dalion v. CA, 182 SCRA 872 (1990); Secuya v. Vda. De Selma,
326 SCRA 244 (2000)

2. Exceptions: When Form Important - Arts. 1403, 1405 and 1874 Yuviengco v.
Dacuycuy, 104 SCRA 668 (1981); Limketkai Sons Milling, Inc. v. CA, 255 SCRA
626; Ortega v. Leonardo, 103 Phil. 870 (1958); Claudel v. CA, 199 SCRA 113
(1991); Alfredo v. Boras, 404 SCRA 145 (2003).

D. THE E-COMMERCE ACT ON THE FORMATION OF SALE CONTRACTS

VI. CONSUMMATION (Arts. 1493-1506) AND PERFORMANCE OF

CONTRACT (Arts. 1536-1544, 1582-1590)

A. OBLIGATIONS OF SELLER

1. Preserve Subject Matter (Art. 1163)

2. Deliver With Fruits and Accessories (Arts. 1164, 1166, 1495, 1537)
3. Types of Delivery (Art. 1477) - Cebu Winland Development Corp. v. Ong Siao Hua,
G.R. No. 173215, May 21, 2009; Chua v. Court of Appeals, 401 SCRA 54 (2003);
Santos v. Santos, 366 SCRA 395 (2001); Addison v. Felix, 38 Phil. 404 (1918); x
Danguilan v. IAC, 168 SCRA 22 (1988); Pasagui v. Villablanca, 68 SCRA 18
(1975); Power Commercial and Industrial Corp. v. CA, 274 SCRA 597 (1997); Behn
Meyer & Co. v. Yancgo, 38 Phil. 602, 606 (1918); David v. Misamis Occidental II
Electric Cooperative, Inc., 676 S 367 (2012).

B. COMPLETENESS OF DELIVERY

1. In Case of Immovables - (Arts. 1539 and 1540): Sta. Ana v. Hernandez, 18

SCRA 973 (1966); Esguerra v. Trinidad, 518 SCRA 186; Cebu Winland Development

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 Corp. v. Ong Siao Hua, G.R. No. 173215, May 21, 2009.

2. In Case of Movables - (Art. 1522 and 1537, 1480)

3. Effects of Delivery - Vallarta v. CA, 150 SCRA 336 (1987).

C. TIME AND PLACE OF DELIVERY (Art. 1521)

D. EXPENSES OF EXECUTION AND REGISTRATION (Art. 1487)

E. DOUBLE SALES (Arts. 1544 and 1165)

1. Main Rule: Prior Tempore, Prior Jure - Carbonell v. CA, 69 SCRA 99 (1976);
2. Requisites of Double Sale - Consolidated Rural Bank (Cagayan Valley), Inc. v.
Court of Appeals, 448 SCRA 347 [2005]; Cheng v. Genato, 300 SCRA 722
(1998); San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005); Cano
Vda. De Viray v. Usi, 686 SCR 211 (2012).
3. Registration as First Priority Taedo v. CA, 252 SCRA 80 (1996)
4. No registration - De leon v. Ong, 611 SCRA 381, February 2, 2010
5. Who is Purchaser in Good Faith? - Agricultural and Home Extension Dev. V.
CA, 213 SCRA 563 (1992)
6. Possession in Double Sale refers to material and symbolic Navera v. CA,
184 SCRA 584
7. When Unregistered Land ~ Naawan Community Rural Bank, Inc. v. CA, 395
SCRA 43 (2003); Carumba v. CA, 31 SCRA 558 (1970); Radiowealth Finance
Co. v. PaWeo, 197 SCRA 245 (1991).

VII. DOCUMENTS OF TITLE

(Arts. 1507-1520, 1636)
A. NATURE
B. TYPES
C. EFFECTS OF UNAUTHORIZED OR LACK OF NEGOTIATION
D. WARRANTIES ON NEGOTIATION
E. RULES ON LEVY/GARNISHMENT OF GOODS

VIII. SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE

A. EFFECT OF SALE WHERE SELLER NOT OWNER AT TIME OF DELIVERY

(Art. 1505) -
1. Sale by Co-Owners - Mindanao v. Yap, 13 SCRA 190 (1965) Estoque v. Pajimula, 24
SCRA 59 (1968); Paulmitan v. CA, 215 SCRA 866 (1992); Almendra v. lAC, 204 SCRA

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 142 (1991); Republic v. Heirs of Francisca Dignos Sorono, 549 SCRA 58; Vda. De
Figuracion v. Giguracion-Gerilla, 690 SCRA 495 (2013).

B. EXCEPTIONS: A NON-OWNER IS ABLE TO TRANSFER OWNERSHIP

1. Estoppel on True Owner - (Art. 1434: Bucton v. Gabar, 55 SCRA 499 (1974)
2. Recording Laws: Torrens System (Pres. Decree 1529)
3. Sale in Merchants Stores, Fairs or Markets (Arts. 85 and 86, Code of
Commerce: City of Manila v. Bugsuk, 101 Phil. 859(1957)

C. SALE BY ONE HAVING VOIDABLE TITLE - compare with Arts. 559 and 1506 -
EDCA Publishing v. Santos, 184 SCRA 614 (1990); Aznar v. Yapdiangco, 13 SCRA 486
(1965); Tagatac v. Jimenez, 53 O.G. 3792 (1957)

IX. LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS

A. NO APPLICATION WHEN SUBJECT MATTER IS DETERMINABLE (Art.

1263)

B. EFFECT OF LOSS/DETERIORATION OF THING SOLD

1. Before Perfection - Roman v. Grimalt, 6 Phil. 96 (1906)
2. At Time of Perfection - (Arts. 1493 and 1494)
3. After Perfection But Before Delivery (Arts. 1150, 1189, 1163, 1164, 1165,
1262, 1189, 1480, 1504, 1537, 1538, 1594).
- Asset Privatization Trust v. T.J. Enterprises, G.R. No. 167195, May 8, 2009
4. After Delivery -Arts. 1504; Song Fo & Co. v. Ona, 33 Phil. 3 (1915); Lawyer's Coop
v. Tabora, 13 SCRA 762 (1965).

X. REMEDIES FOR BREACH OF CONTRACT OF SALE

A. SELLERS REMEDIES I N SALE OF MOVABLES AND GOODS

1. Ordinary Remedies

a. Movables In General (Arts. 1593, 1595 to 1597)

b. Goods

2. Special Remedies of Unpaid Seller (Arts. 1524-1535)

3. Remedies in Sale of Movables in Installments (Arts. 1484, 1485, 1486); Levy v.

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 Gervacio, 69 Phil. 52 (1939); Tajanglangit v. Southern Motors, 101 Phil. 606 (1957);
Nonato v. IAC, 140 SCRA 255 (1985); Delta Motor Sales Corp. v. Niu Kim Duan,
213 SCRA 259 (1992); Ridad v. Filipinas Investment, 120 SCRA 246; Zayas v.
Luneta Motors, 117 SCRA 726 (1982); Cruz v. Filipinas Investment & Finance Corp.
23 SCRA 791 (1968); Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634
(1998); Filipinas Investment & Finance Corp. v. Ridad, 30 SCRA 564 (1969); PCI
Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July
12, 2007

B. BUYERS REMEDIES IN SALE OF MOVABLES AND GOODS- (Arts. 1522,

1598-1599)

C. SELLERS REMEDIES IN SALE OF REAL PROPERTY

1. Ordinary remedies (Art. 1191)
2. Remedy in a contract of sale due to a special ground (Arts. 1591-1592)
3. Maceda Law: Sales of Residential Realty on Installments (R.A. 6552) -
McLaughlin v. CA, 144 SCRA 693 (1986); Mortel v. KASSCO, Inc., 348 SCRA
391,298 (2000); Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002);
Fabrigas v. San Francisco del Monte, 475 SCRA 247 (2005);

D. BUYERS REMEDIES IN SALE OF IMMOVABLES - (Arts 1191, 1590; Secs 23

and 24, P.D. 957)

XI. REMEDY OF RESCISSION IN SALES CONTRACTS COVERING

IMMOVABLES: Contract of Sale vs. Contract to Sell

A. NATURE OF REMEDY OF RESCISSION (RESOLUTION) (Arts. 1191, 1479,

1592)

1. Distinguishing from other remedy of rescission - Universal Food Corp. v. CA,

33 SCRA 22 (1970)

B. DISTINCTIONS BETWEEN CONTRACT OF SALE AND CONTRACT TO

SELL -

1. Contract of Sale versus Contract to Sell (Art. 1458) Sps. Valenzuela v.

Kalayaan Development Corporation, G.R. No. 163244, June 22, 2009; Montecalvo
v. Heirs of Eugenia Primero, 624 SCRA 575, July 9, 2010; BPI v. SMP, Inc., 609
SCRA 129, (2009); Ver Reyes v. Salvador, 564 SCRA 456.
2. Minimum Requirement of Rescission - University of the Philippines v. de los

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 Angeles, 35 SCRA 103 (1970).

XII. CONDITIONS AND WARRANTIES

A. CONDITIONS (Art. 1545) - Romero v. CA, 250 SCRA 223 (1995);

B. WARRANTIES (Arts. 1545-1581) Heirs of Pedro Escanlar v. CA, 281 SCRA 176
(1997) Nutrimix Feeds Corp. v. Court of Appeals, 441 SCRA 357 (2004)

XIII. EXTINGUISHMENT OF SALE

A. CONVENTIONAL REDEMPTION

1. Definition (Art. 1601) - Villarica v. CA, 26 SCRA 189 (1968);

2. Equitable Mortgage (Arts. 1602-1604) - Guerrero v. Ynigo, 96 Phil. 37 (1954)
3. Myrna Ramos v. Susana Sarao & jonas Ramos, G.R. No. 149756, February 11, 2005,;
Ayson, Jr. v. Paragas, 557 SCRA 50
4. Situation Prior to Redemption - Reyes v. Hamada, 14 SCRA 215 (1965).
5. Who can redeem (Arts. 1611-1614)
6. How Redemption Effected (Art. 1616) - ; Vda de Zuleta v. Octaviano, 121 SCRA 3 14
(1983)
7. Fruits (Art. 1617) - Almeda v. Daluro, 79 SCRA 327 (1977)

B. LEGAL REDEMPTION

1. Definition (Art. 1619)

2. When Period of Legal Redemption Begins (Art. 1623) Francisco v. Boiser, 322
SCRA 575 (2000); Calma v. Santos, G.R. No. 161027, June 22, 2009
3. Instances of Legal Redemption (Articles 1088, 1621, 1622, 1623) - De Guzman v.
CA, 148 SCRA 75 (1987); Soriano v. Bautista, 6 SCRA 946 (1962)

XIV. ASSIGNMENT

A. DEFINITION AND NATURE OF ASSIGNMENT - Licaros v. Gatmaitan, 362

SCRA 548 (2001) - PNB v. CA, 272 SCRA 291 (1997); Lo v. KJS Eco-Formwork System
Phil., Inc., G.R. No. 149420, October 8, 2003.

B. PERFECTION BY MERE CONSENT (Art. 1624)

C. WARRANTIES OF ASSIGNOR - (Art. 1628) - Nyco Sales Corp. v. BA Finance, 200

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CRA 637 (1991)

XV. BULK SALES LAW (Act No. 3952)

XVI. RETAIL TRADE LIBERALIZATION ACT OF 2000 AND RELATED

PROVISIONS OF THE ANTI-DUMMY LAW

A. SCOPE AND DEFINITION OF RETAIL TRADE - King v. Hemaez, 4 SCRA 792

1. Elements
2. Meaning of Consumption (Op. secretary of Justice No. 325, series of 1945;
IRR of the Law)
3. Consumer Goods Coverage - Balmaceda v. Union Carbide Philippines, Inc. 124
SCRA 893 (1983); B.F. Goodrich Philippines, Inc. v. Reyes, Sr., 121 SCRA 363;
Goodyear Tire v. Reyes, Sr., 123 SCRA 273; Marsman & Co., Inc. v. First Coconut
Central Co., Inc., 162 SCRA 206 (1988).
4. Meaning of "general public" (Op. Secretary of Justice No. 253, series of
1954)

B. HOW ALIENS MAY INVEST IN RETAIL TRADE IN THE PHILIPPINES

1. Grandfather rule on 100% Filipino Ownership of Corporate Entity.

2. Requirements of foreign Investors 3. Public Offerings of Shares of stock

C. RULES ON FOREIGN RETAILERS IN THE PHILIPPINES

1. Pre-qualification requirements
2. Rules on Branches/Stores
3. Promotion of Locally-Manufactured Products
4. Prohibited Activities of Foreign Retailers
5. Binding Effect of License to Engage in Retail on Private Parties.

Prepared by:

ATTY. LUIS ALFONSO A. LLAGUNO

Faculty

Noted by:

ATTY. MA. SOLEDAD DERIQUITO-MAWIS

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Dean

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