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SALES WEEK 1 m. What is an auto-contract?

- Two opposite parties are represented

a. Discuss In re: Joaquin Borromeo by the one and the same person, who
b. Discuss Department of Education Culture represents and acts in different
and Sports v. San Diego capacities.
c. What is law as defined by St. Thomas n. What are the characteristics of a contract?
Aquinas? - Obligatory force
- Ordinance of reason promulgated by - Autonomy of contracts
a competent authority for the sake of - Mutuality of contracts
common good - Relatively of contracts
d. Discuss the hierarchy of laws - Perfection by mere consent
- Constitution > Statutes > IRR o. What are the essential elements of a
e. Discuss the hierarchy of courts contract?
- SC > CA > RTC > MTC - Essential elements, accidental
f. What is obligation according to the Civil elements, natural elements
Code (Art. 1156)? p. What are natural elements?
- An obligation is a juridical necessity to - Suppletory (i.e. warranty)
give, to do, or not to do. q. What are accidental elements?
g. Is the Civil Code’s definition of obligation - Agreed upon the parties; cannot exist
complete? without being stipulated
- No.
h. Give the definition of an obligation
according to Arias Ramos.
- Obligation is a juridical relation SALES WEEK 2
whereby a person (called a creditor) 1. What is Art. 1458?
may demand from another (called a - By the contract of sale one of the
debtor) the observance of a contracting parties obligates himself
determinate conduct, and, in case of to transfer the ownership of and to
breach, may obtain damages deliver a determinate thing, and the
satisfaction from the assets of the other to pay thereof a price certain in
latter. money or its equivalent.
i. What are the sources of obligation? A contract of sale may be absolute or
Explain each. conditional.
- Laws
- Contracts 2. What is a contract of sale?
- Quasi-contracts - Agreement between a party called
- Crimes seller or vendor obligates himself to
- Quasi-delicts deliver and transfer the ownership of
j. What is a contract according to the Civil a determinate thing to another party
Code? called the buyer or vendee who in turn
- A contract is a meeting of minds obligates himself to pay a price
between two persons whereby one certain in money or its equivalent.
binds himself, with respect to the
other, to give something or to render 3. What are the stages of a contract of sale?
service. - a. Preparation – period of negotiation
k. Is the definition of a contract under the and bargaining; ends at the moment
NCC accurate? of agreement of the parties
- No. b. Perfection – birth of contract
l. What is a contract according to Ernesto L. c. Consummation – Fulfillment or
Pineda? performance of the terms

4. What are the characteristics of a contract - Must be present for the validity of the
of sale? sale; absence of any of the essential
- A. Bilateral – Both are obliged to elements will render the contract
fulfill reciprocal obligations void
B. Consensual – Perfected by consent a. Meeting of the minds
C. Commutative – The thing sold is b. Object
considered the equivalent of the price c. Price certain
and the price paid is the equivalent of
the thing sold 7. What are the natural elements of a
D. Onerous – Thing sold is conveyed contract of sale?
in consideration of the purchase price - Inherent in the contract and are
and the purchase price is paid in deemed to exist in the contract of sale
consideration of the conveyance of in the absence of clear contrary
the thing delivered agreement
E. Principal – Existence does not a. Warranty against eviction – Art.
depend upon the existence and 1548. Vendor shall answer for
validity of another contract the eviction even though nothing
F. Nominate – Specific name given by has been said in the contract on
law the subject
b. Warranty against hidden defects
5. Distinguish between absolute sale and 8. What are the accidental elements of a
conditional sale. contract?
- May or may not exist depending on
Absolute Sale Conditional stipulation of the parties
Sale 9. Distinguish between a contract of sell and
No condition is Subject to a contract of sale?
imposed and certain Contract of Sale Contract to Sell
ownership contingency or Title over the Ownership
passes to the condition property passes to passes to the
vendee upon the buyer upon buyer only upon
delivery of the delivery unless full payment of
thing there is a contrary the price
No stipulation Ownership is agreement
in the deed that not to vest in the Non-payment will If the price is not
title to the buyer until the result to the paid, the
property sold is happening of the ineffectiveness of obligation to
reserved in the condition, the sale (resolutory deliver and to
seller until the usually full condition) transfer
full payment of payment of the ownership on
the price or one price the part of the
giving the seller does not
vendor the become effective
right to (suspensive
unilaterally condition)
resolve the After delivery of Whether there is
contract the the object, the delivery or not,
moment the seller loses the seller retains
buyer fails to ownership ownership of the
pay within the object
fixed period
10. Ace Foods, Inc. v Micro Pacific
6. What are the essential elements of a Technologies
contract of sale?

11. Sacobia Hills Development Corp. v Ty without the necessity of a new or
12. Is a sale valid even if made against the further agreement between the
will of the property’s owner? parties.
- Yes.
a. Property is subject to 19. Camacho vs. Court of Appeals and Banzon
expropriation 20. Heirs of San Andres vs. Tria
b. In case of ordinary execution sale 21. What is Art 1462?
conducted under Section 14, Rule - The goods which form the subject of a
15, 1997 Revised Rules of Civil contract of sale may be either existing
Procedure. goods, owned or possessed by the
c. Judicial foreclosure sale under seller, or goods to be manufactured,
Rule 68 raised, or acquired by the seller after
d. Extra-judicial foreclosure sale the perfection of the contract of sale,
under RA 3135 in this Title called “future goods.”
13. What is Art. 1459? There may be a contract of sake of
- The thing must be licit and the vendor goods, whose acquisition by the seller
must have a right to transfer the depends upon the contingency which
ownership thereof at the time it is may or may not happen.
14. What is the object for a contract in 22. Define goods.
general? - All chattels personal but not things in
- A. All things which are not outside the action or money of legal tender in the
commerce of man, including future Philippines
things, may be the object of a
contract. 23. What are the kinds of good?
B. All rights which are not - A. Existing goods owned or possessed
transmissible by the seller – Existing at the time of
the perfection of the contract
15. What is the object of contract of sale? B. Future goods – do not exist yet but
- Subject matter/Cause of the contract have potential existence

16. When an object is considered illicit? 24. What is Art. 1463?

- Illicit or unlawful things or rights - The sole owner of the thing may sell an
cannot be valid objects undivided interest therein.
a. Illicit per se – by its nature
heinouse, immoral, and wrongful 25. What is the effect of a sale under Art.
b. Illicit per accidents – illegal only 1463 as far as ownership of the thing is
because a law is prohibiting it concerned?
17. What is the effect if the object of sale is - The sole owner can sell an undivided
illicit? interest therein like one-half or any
- The contract Is void (Art. 1409, (par. other aliquot part.
18. What is Art. 1460? 26. What is Art. 1464?
- A thing is determinate when it is - In the case of fungible goods, there
particularly designated or physically may be a sale of an undivided share of
aggregated from all others of the same a specific mass, though the seller
class. purports to sell and the buyer to buy a
The requisite that a thing can be definite number, weight or measure of
determinate is satisfied if at the time the goods in the mass, and though the
the contract is entered into, the thing number, weight, or measure of the
is capable of being made determinate goods in the mass is undetermined. By

such a sale the buyer becomes the - If the consideration of the contract
owner in common of such a share of consists of party in money, and partly
the mass as the number weight or in another thing, the transaction shall
measure bought bears to the number, be characterized by the manifest
weight, or measure of the mass. If the intention of the parties. If such
mass contains less than the number, intention does not clearly appear, it
weight, or measure bought, the buyer shall be considered a barter of the
becomes the owner of the while mass value of the thing given as a part of the
and the seller is bound to make good consideration exceeds the amount of
the deficiency from goods of the same the money or its equivalent; otherwise,
kind and quality, unless a contrary it is a sale.
intent appears. 8. What is Art. 1469?
27. What are fungible goods? - In order that the price may be
- Those which cannot be used without considered certain, it shall be sufficient
being consumed that it be so with reference to another
thing certain, or that the
determination thereof be left to the
SALES WEEK 3 judgment of a specified person or
1. What is Art. 1465? persons.
- Things subject to a resolutory Should such person or persons be
consition may be the object of the unable or unwilling to fix it, the
contract of sale. contract shall be inefficacious, unless
2. What is a resolutory condition? the parties subsequently agree upon
- This is a condition which is uncertain, the price.
the happening or fulfillment of which If the third person or persons acted in
extinguishes a subsisting obligation. bad faith or by mistake, the courts mat
3. What is a suspensive condition? fix the price.
- Condition which suspends rights and Where such third person or persons
obligation until the certain future are prevented from fixing the price or
event occurs. terms by fault of the seller or the
4. What is Art. 1466? buyer, the party not in fault may have
- In construing a contract containing such remedies against the party in the
provisions characteristic of both the fault as allowed the seller or buyer, as
contract of sale and of the contract of the case may be.
the agency to sell, the essential clauses 9. What is the definition of price?
of the whole instruments shall be - Consideration, usually in money,
considered. given for the purchase of a thing.
5. Discuss Quiroga vs Parsons Hardware Co. 10. What are the requisites of price?
6. What is Art. 1467? 11. What is Art. 1470?
- A contract for the delivery at a certain - Gross inadequacy of price does not
price of an article which the vendor in affect a contract of sale, except as it
the ordinary course of his business may indicate a defect in the consent, or
manufacturers or procures for the that the parties really intended a
general market, whether the same is donation or some other act of
on hand at the time or not, is a contract.
contract of sale, but if the goods are to 12. Singson v. Badiba
be manufactured specially for the 13. What is Art. 1471?
costumer and upon his special order, - If the price is simulated, the sale is
and not for the general market, it is void, but the act may be shown to have
contract for a piece of wark. been in reality a donational, or some
7. What is Art. 1468? other act or contract.

14. What is Art. 1472? 21. What is the effect of perfection of a
- The price of securities, grain, liquids, contract of sale?
and other things shall also be - The seller is bound to deliver the
considered certain, when the price thing sold and the buyer is bound to
fixed is that which the thing sold pay the price thereof. The parties
would have a definite day, or in such must execute their their mutual
exchange or market, or when an agreement.
amount is fixed above or below the 22. Is there a required form for a contract of
price on such day, or in such exchange sale to be binding?
or market, provided said amount be - GEN: Contracts shall be obligatory, in
certain. whatever form they may have been
15. What is Art. 1473? entered into, provided all the
- The fixing of the price can never be left essential requisites are present.
to the discretion of one of the EXP: When the law requires the
contracting parties. However, if the contract to be on a certain form.
price fixed by one of the parties is - The absence of a formal deed of sale
accepted by the other, the sale if does not render the agreement null
perfected. and void. The necessity of a public
16. What is Art. 1474? document is only for convenience, not
- Where the price cannot be determined for validity or enforceability.
in accordance with the preceding 23. When must a contract of sale be in writing
articles, or in any other manner, the or in a public instrument to be
contract is inefficacious. However, if enforceable?
the thing or any part thereof has been - Contract of sale must be in writing or
delivered to and appropriated by the evidenced by writing, note, or
buyer, he must pay a reasonable price memorandum, otherwise, they
therefor. What is a reasonable price is cannot be proved in court. These are
a question of fact dependent on the namely: sale of real property or of an
circumstances of each particular case. interest and sale of personal property
17. What is a reasonable price? if the price is P500 or more.
- Generally, the market value is a good 24. Gabelo vs. Court of Appeals
standard in determining the 25. What is Art. 1476?
reasonable price. - Article 1476. In the case of a sale by
18. What is market value? auction: (1) Where goods are put up
- Market value is that reasonable sum for sale by auction in lots, each lot is
which a property would command in the subject of a separate contract of
a fair sale by a man willing but not sale. (2) A sale by auction is perfected
obliged to buy. when the auctioneer announces its
19. What is Art. 1475? perfection by the fall of the hammer,
- The contract of sale is perfected at the or in other customary manner. Until
moment there is a meeting of minds such announcement is made, any
upon the thing which is the object of bidder may retract his bid; and the
the contract and upon the price. auctioneer may withdraw the goods
From the moment, the parties may from the sale unless the auction has
reciprocally demand performance, been announced to be without reserve.
subject to the provisions of the law (3) A right to bid may be reserved
governing the form of contracts. expressly by or on behalf of the seller,
20. When does meeting of the minds exist? unless otherwise provided by law or by
- When there is both have agreed and stipulation. (4) Where notice has not
consented. been given that a sale by auction is
subject to a right to bid on behalf of

the seller, it shall not be lawful for the B.4. Tradicion Brevi Mani – grantee’s
seller to bid himself or to employ or continuation of his possession over
induce any person to bid at such sale the thing delivered but now under a
on his behalf or for the auctioneer, to title of ownership
employ or induce any person to bid at B.5. Tradicion Constututum
such sale on behalf of the seller or Possessrium – owner’s continuous
knowingly to take any bid from the possession of the property he sold to
seller or any person employed by him. another
Any sale contravening this rule may be B.6. Tradicion by Operation of Law –
treated as fraudulent by the buyer. (n) delivery of the things by operation of
26. May the seller bid in an auction? law
- Yes, provided: B.7. Quasi-tradicion – delivery of
a. The right to bid has been incorporeal property like rights and
expressly reserved unless credits done through (a) placing the
prohibited by law or by title of ownership in the hands of the
stipulation. grantee or (b) by allowing the
b. Notice is given that the auction grantee to make use of the rights with
sale is subject to a right of the the consent of the grantor
seller to bid or another to bid on
behalf of the seller 30. What is Art. 1478?
27. What does the term “as is” mean? - The parties may stipulate that ownership in the
- Physical condition of the thing shall not pass to the purchaser until he has
merchandise for sale and not the legal fully paid the price.
situation which the merchandise has
at the time of the sale. 31. What is Art. 1479
28. What is Art. 1477?
- A promise to buy and sell a determinate thing for
- The ownership of the thing sold shall
a price certain is reciprocally demandable.
be transferred to the vendee upon the
actual or constructive delivery thereof.
29. What are the kinds of constructive SALES 4th Week
a. What is Art. 1480?
- A. Actual or reak delivery – when the
- Any injury to or benefit from the thing
thing is places in the control and
sold, after the contract has been
possession of the vendee
perfected, from the moment of the
B. Constructive or legal delivery –
perfection of the contract to the time
when delivery is effect not by actually
of delivery, shall be governed by
transferring the possession of the
articles 1163 to 1165, and 1262.
thing to the vendee but by legal
This rule shall apply to the sale of
formalities or by symbolic tradition.
fungible things, made independently
Classified as:
and for a single price, or without
B.1. Trandicion Symbolica – delivery
consideration of their weight, number,
of certain symbols or things
or measure
representing the thing being
Should fungible things be sold for a
delivered such as keys or titles
price fixed according to weight
B.2. Tradicion Instrumental – delivery
number, or measure, the risk shall not
of the instrument of conveyance
be imputed to the vendee until they
B.3. Tradicion Langa Manu – pointing
have been weighted, counted, or
in the thing (movable property)
measured and delivered, inless the
within sight
latter has incurred in delay.

b. What is the effect of the loss or in kind but also in quality and
destruction of the thing? character
- Before the perfection of the contract: g. What is sale by description and sample?
suffered by vendor/seller - Seller has to satisfy the requirements
- At the time of perfection: contract is in sale by description as well as in
inexistent because its object did not sale by sample
exist; sellers bears the lost h. What is the meaning of “bulk of goods”?
- After the perfection of the contract - Whole of the goods
but before the delivery: i. What is Art. 1482?
 Fault of vendor: vendor shall - Whenever earnest money is given in a
suffer contract of sale, it shall be considered
 Fault of vendee: Vendee shall as part of the price and as proof of the
suffer perfection of the contract.
 Delivery of determinate thing j. What is earnest money?
c. What is the effect of the fortuitous event? - Money given to the seller by the
- After delivery: Vendee will bear the prospective buyer to show that the
loss (res perit domino) latter is truly interested in buying the
- Before delivery: property, and its aim is to bind the
 1st theory: vendor shall bear the bargain
loss (there being no delivery yet, k. Should earnest money be returned if sale
ownership is still in the hands of does not materialize?
the vendor - Earnest money delivered to the seller
 2nd theory: vendee bears the loss must be returned
and as such he must still pay the l. Distinguish between earnest money and
price option money?
d. What is Art. 1481? Earnest Money Option Money
- In the contract of the sale of goods by Part of the As distinct
description or by sample, the contract purchase consideration
may be rescinded if the bulk of the for an option
goods delivered do not correspond
Given only Given when the
with the description or the sample, and
when there is sale is not yet
if the contract be by sample as well as
already a perfect
by description, it is not sufficient that perfected sale
the bulk of goods correspond with the Buyer is bound Buyer is not
sample if they do not also correspond to pay balance bound to buy the
with the description. thing
The buyer shall have a reasonable Sale does not Cannot recover
opportunity of comparing the bulk materialize:
with the description or the sample. money must be
e. What is sale by description? returned
- A seller sells things as being of a unless a
certain kind of verbally describing contrary
them, and the buyer simply relies on agreement has
been stipulated
the seller’s descriptions of the things,
not knowing whether the seller’s
m. Discuss Rizalino Oesmer v. Paraiso
representations are true or not
Development Corp.
f. What is sale by sample?
n. What is Art. 1483?
- Seller warrants that the bulk of the
- Subject to the provisions of the Statute
goods sold correspond with the
of Frauds and of any other applicable
sample or samples exhibited not only
statute, a contract of sale may be

made in writing, or by word of mouth, u. What is Art. 1487?
or partyle in writing and partly by - The expenses for the execution and
word of mouth, or may be inferred registration of the sale shall be borne
from the conduct of the parties. by the vendor, unless there is a
o. What is Art. 1484 or the Recto Law? stipulation to the contrary.
- In a contract of sale of personal v. What is Art. 1488?
property the price of which is payable - The expropriation of property for
in installments, the vendor may public use is governed by special laws.
exercise any of the following remedies: w. What is expropriation?
(1) Exact fulfillment of the obligation, - Process of enforcing that right in
should the vendee fail to pay court as provided under Rules of
(2) Cancel the sale, should the Court
vendee’s failure to pay cover two - Involuntary in nature
or more installment - Requisites:
(3) Foreclose the chattel mortgage on  Private property as the object of
the thing sold, if one has been expropriation
constituted, should be vendee’s  Property is taken by the State or
failure to pay cover two or more by any competent authority
installments. In this case, he shall  Taking must be attended with
have no further action against the due process of law
purchaser to recover any unpaid  There is payment of just
balance of the price. Any compensation
agreement to the contrary shall be
p. What is the nature of the three remedies
a. What is Art. 1489?
under Art. 1484?
- All persons who are authorized in this
- Alternative not cumulative
Code to obligate themselves, may enter
- If the creditor chooses one remedy,
into a contract of sale, saving the
he cannot avail himself of the other
modifications contained in the
following articles.
- However, should the first remedy not
Where necessaries are those sold and
be completed or execised, the vendor
delivered to a minor or other person
may still avail of another
without capacity to act, he must pay a
q. Discuss Industrial Finance Corp. v
reasonable price therefor. Necessaries
are those referred to in Article 290.
r. What is Art. 1485?
- The preceding article shall be applied
b. What are the kinds of incapacity?
to contracts purporting to be leases of
- Absolute incapacity – person cannot
personal property with option of buy,
bind himself in any contract (ex.
when the lessor has deprived the lessee
Minority, imbecility, prodigality, or
of the possession or enjoyment of the
civil interdiction
- Relative incapacity – person cannot
s. Discuss the application of Art. 1485.
buy a certain property because of
t. What is Art. 1486?
special prohibition (ex. By reason of
- In the cases referred to in the two
his/her relationship to the other
preceding articles, a stipulation that
party; relation to the object of sale
the installments or rents paid shall not
c. What are necessaries?
be returned to the vendee or lessee
- Refer to all what is needed for the
shall be valid insofar as the same may
support of a person, who need not be
not be unconscionable under the

a minor. Note: Other instances are and government experts who, in any
found in Art. 38 and 39 of NCC. manner whatsoever, take part in the sale;
- Support comprises everything (5) Justices, judges, prosecuting attorneys,
indispensable for sustenance, clerks of superior and inferior courts, and
dwelling, clothing, medical other officers and employees connected
attendance, education and with the administration of justice, the
property and rights in litigation or levied
transportation, in keeping with the
upon an execution before the court within
financial capacity of the family
whose jurisdiction or territory they
d. What is Art. 1490? exercise their respective functions; this
- The husband and the wife cannot sell prohibition includes the act of acquiring by
property to each other, except: assignment and shall apply to lawyers,
(1) When a separation of property was with respect to the property and rights
agreed upon in the marriage which may be the object of any litigation in
settlements; or which they may take part by virtue of their
(2) When there has been a judicial profession.
separation or property under (6) Any others specially disqualified by law.
Article 191. (1458a) (1459a)
e. What is the rationale for the prohibition? h. What is the consequences of violation Art.
- Prevent stronger spouse from 1491?
exploiting the weaker spouse - Grounded on public policy.
- Prevent donations disguised as sales i. Discuss Macariola v. Asuncion
- Protect third persons, specially j. What is Art. 1493?
creditors, against fraud through the - If at the time the contract of sale is
transfer of the properties of one perfected, the thing which is the object
spouse to the other to evade payment of the contract has been entirely lost,
of obligations the contract shall be without any
f. What is the consequence of violating Art. effect.
1490? But if the thing should have been lost
- The sale executed in violation shall be in part only, the vendee may choose
inexistent and void from the between withdrawing from the
beginning. contract and demanding the
g. What is Art. 1491? remaining part, paying its price in
- The following persons cannot acquire by proportion to the total sum agreed
purchase, even at a public or judicial upon. (1460a)
auction, either in person or through the k. What is loss?
mediation of another: - A thing is considered lost when it
(1) The guardian, the property of the perishes, or goes out of commerce, or
person or persons who may be under his disappears in such a way that its
guardianship; existence is unknown or it cannot be
(2) Agents, the property whose recovered.
administration or sale may have been - Material deterioration or complete
entrusted to them, unless the consent of the change in nature of the thing
principal has been given; l. What is Art. 1494?
(3) Executors and administrators, the - Where the parties purport a sale of
property of the estate under specific goods, and the goods without
administration; the knowledge of the seller have
(4) Public officers and employees, the
perished in part or have wholly or in a
property of the State or of any subdivision
material part so deteriorated in
thereof, or of any government-owned or
controlled corporation, or institution, the quality as to be substantially changed
administration of which has been intrusted in character, the buyer may at his
to them; this provision shall apply to judges option treat the sale:

(1) As avoided; or depository where it is stored or
(2) As valid in all of the existing goods kept. (1463a)
or in so much thereof as have not r. What is Art. 1499?
deteriorated, and as binding the buyer - The delivery of movable property
to pay the agreed price for the goods may likewise be made by the mere
in which the ownership will pass, if the consent or agreement of the
sale was divisible. (n) contracting parties, if the thing sold
m. What is Art. 1495? cannot be transferred to the
- The vendor is bound to transfer the possession of the vendee at the time
ownership of and deliver, as well as of the sale, or if the latter already
warrant the thing which is the had it in his possession for any
object of the sale. (1461a) other reason. (1463a)
n. What are the principal obligation of a s. What is Art. 1500?
vendor? - There may also be tradition
- To transfer the ownership of the constitutum possessorium. (n)
object of the sale which is effected by t. What is Art. 1501?
delivering it to the vendee together - With respect to incorporeal
with its accessories and accessions. property, the provisions of the first
- To warrant the object sold against paragraph of article 1498 shall
eviction govern. In any other case wherein
- To preserve the thing with proper said provisions are not applicable,
diligence pending its delivery to the the placing of the titles of
vendee ownership in the possession of the
- To pay for the execution and vendee or the use by the vendee of
registration of the sale unless there is his rights, with the vendor's
a contrary agreement consent, shall be understood as a
o. What is Art. 1496? delivery. (1464)
- The ownership of the thing sold is u. What is Art. 1502?
acquired by the vendee from the - When goods are delivered to the
moment it is delivered to him in any buyer "on sale or return" to give the
of the ways specified in Articles buyer an option to return the goods
1497 to 1501, or in any other instead of paying the price, the
manner signifying an agreement ownership passes to the buyer of
that the possession is transferred delivery, but he may revest the
from the vendor to the vendee. (n) ownership in the seller by returning
p. What is Art. 1497? or tendering the goods within the
- The thing sold shall be understood time fixed in the contract, or, if no
as delivered, when it is placed in the time has been fixed, within a
control and possession of the reasonable time. (n)
vendee. (1462a) When goods are delivered to the
q. What is Art. 1498? buyer on approval or on trial or on
- When the sale is made through a satisfaction, or other similar terms,
public instrument, the execution the ownership therein passes to the
thereof shall be equivalent to the buyer:
delivery of the thing which is the (1) When he signifies his approval
object of the contract, if from the or acceptance to the seller or does
deed the contrary does not appear any other act adopting the
or cannot clearly be inferred. transaction;
With regard to movable property, (2) If he does not signify his
its delivery may also be made by the approval or acceptance to the
delivery of the keys of the place or seller, but retains the goods without

giving notice of rejection, then if a - When there is a contract of sale of
time has been fixed for the return of specific goods, the seller may, by the
the goods, on the expiration of such terms of the contract, reserve the right
time, and, if no time has been fixed, of possession or ownership in the
on the expiration of a reasonable goods until certain conditions have
time. What is a reasonable time is a been fulfilled. The right of possession
question of fact. (n) or ownership may be thus reserved
v. Distinguish between delivery on sale or notwithstanding the delivery of the
return and sale on trial or approval or goods to the buyer or to a carrier or
satisfaction. other bailee for the purpose of
Basis On Sale Sale of transmission to the buyer.
Or Return Approval Where goods are shipped, and by the
Condition Subject to Subject bill of lading the goods are deliverable
resolutor to to the seller or his agent, or to the
y suspensi order of the seller or of his agent, the
condition ve seller thereby reserves the ownership
conditio in the goods. But, if except for the form
of the bill of lading, the ownership
Premise Will of Suitabilit
would have passed to the buyer on
the buyer y, quality
or shipment of the goods, the seller's
characte property in the goods shall be deemed
r of the to be only for the purpose of securing
goods performance by the buyer of his
Transfer Immediat Passes obligations under the contract.
of ely passes only Where goods are shipped, and by the
ownership to the upon bill of lading the goods are deliverable
buyer on approval to order of the buyer or of his agent,
delivery or but possession of the bill of lading is
satisfacti retained by the seller or his agent, the
on of the seller thereby reserves a right to the
buyer possession of the goods as against the
Where the seller of goods draws on the
ed trial
Revesting Revested No buyer for the price and transmits the
of back to revestin bill of exchange and bill of lading
ownership seller if g of together to the buyer to secure
in the buyer so ownersh acceptance or payment of the bill of
owner decides ip exchange, the buyer is bound to return
because the bill of lading if he does not honor
it is the bill of exchange, and if he
retained wrongfully retains the bill of lading he
by the acquires no added right thereby. If,
seller however, the bill of lading provides
until sale that the goods are deliverable to the
buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by
Risk of Rests on Remains
loss or the buyer in the the consignee named therein, one who
deteriorat seller purchases in good faith, for value, the
ion bill of lading, or goods from the buyer
will obtain the ownership in the goods,
w. Explain Art. 1503. although the bill of exchange has not

been honored, provided that such (3) Purchases made in a merchant's
purchaser has received delivery of the store, or in fairs, or markets, in
bill of lading indorsed by the consignee accordance with the Code of
named therein, or of the goods, Commerce and special laws. (n)
without notice of the facts making the
transfer wrongful. (n) z. Explain Art. 1506.
x. Explain Art. 1504. - Where the seller of goods has a
- Unless otherwise agreed, the goods voidable title thereto, but his title
remain at the seller's risk until the has not been avoided at the time of
ownership therein is transferred to the sale, the buyer acquires a good
the buyer, but when the ownership title to the goods, provided he buys
therein is transferred to the buyer them in good faith, for value, and
the goods are at the buyer's risk without notice of the seller's defect
whether actual delivery has been of title. (n)
made or not, except that:
(1) Where delivery of the goods has SALES WEEK 6
been made to the buyer or to a a. What is Art. 1524?
bailee for the buyer, in pursuance of - The vendor shall not be bound to
the contract and the ownership in deliver the thing sold, if the vendee
the goods has been retained by the has not paid him the price, or if no
seller merely to secure performance period for the payment has been
by the buyer of his obligations fixed in the contract. (1466)
under the contract, the goods are at b. When will a buyer lose his right to make
the buyer's risk from the time of use of a period under this Art. 1524?
such delivery; - When the buyer has not paid the
(2) Where actual delivery has been price, or if no period for the payment
delayed through the fault of either has been fixed
the buyer or seller the goods are at c. Who is an unpaid seller under Art.1525?
the risk of the party in fault. (n) - Agent of the seller; consignor or the
y. Explain Art. 1505. sgent who has himself paid the price
- Subject to the provisions of this Title, or is responsible for the price; any
where goods are sold by a person who person in the position of the seller
is not the owner thereof, and who does d. What are the rights of an unpaid seller
not sell them under authority or with under Art. 1526?
the consent of the owner, the buyer - Right to retain the goods as security
acquires no better title to the goods for the payment of the price while he
than the seller had, unless the owner of remains in possession of them.
the goods is by his conduct precluded - Right of stopping the foods while they
from denying the seller's authority to are in transit in case of insolvency of
sell. the buyer so that he can resume his
Nothing in this Title, however, shall possession of the goods
affect: - Rights to resell the goods when the
(1) The provisions of any factors' act, same are of perishable nature; if
recording laws, or any other provision resale is agreed upon in case of
of law enabling the apparent owner of default; or when the buyer is sin
goods to dispose of them as if he were default in the payment for an
the true owner thereof; unreasonable length of time provided
(2) The validity of any contract of sale the seller himself does not buy the
under statutory power of sale or under goods
the order of a court of competent - Right to rescind the sale if this right is
jurisdiction; reserved or the buyer has defaulted

in the payment for an unreasonable
length of time i. What is Art. 1530?
e. What is lien? - Subject to the provisions of this
- Legal claim that someone or Title, when the buyer of goods is or
something has on the property of becomes insolvent, the unpaid
another person until a debt has been seller who has parted with the
paid back possession of the goods has the
right of stopping them in transitu,
f. What is Art. 1527? that is to say, he may resume
possession of the goods at any time
- Subject to the provisions of this while they are in transit, and he will
Title, the unpaid seller of goods who then become entitled to the same
is in possession of them is entitled rights in regard to the goods as he
to retain possession of them until would have had if he had never
payment or tender of the price in parted with the possession. (n)
the following cases, namely: j. Who is considered an insolvent under Art.
- (1) Where the goods have been sold 1530?
without any stipulation as to credit;
- If he ceased to pay his debts as they
- (2) Where the goods have been sold
become due, whether or not
on credit, but the term of credit has
expired; insolvency proceedings have been
- (3) Where the buyer becomes commenced or not
- The seller may exercise his right of k. What is the rationale for the seller’s right
lien notwithstanding that he is in of stoppage in tranfsitu?
possession of the goods as agent or - Clearly to prevent the injustice if
bailee for the buyer. allowing the buyer to acquire
ownership and possession of the
g. What is Art. 1538? goods when owning to his insolvency,
- Where an unpaid seller has made he cannot pay the price of the goods
part delivery of the goods, he may l. When are goods considered in transit
exercise his right of lien on the under Art. 1531?
remainder, unless such part - From the time they have been
delivery has been made under such delivered to a carrier or other bailee
circumstances as to show an intent and before the buyer or his gaent has
to waive the lien or right of taken possession of them
retention. (n) - When the goods were rejected by the
h. What is Art. 1529? buyer, and the carrier or other bailee
- The unpaid seller of goods loses his continues possessing them
lien thereon: m. When are goods considered no longer in
- (1) When he delivers the goods to a transit under Art. 1531?
carrier or other bailee for the purpose - When the buyer intercepted the
of transmission to the buyer without shipment before it reaches its original
reserving the ownership in the goods or appointed destination (premature
or the right to the possession thereof;
- (2) When the buyer or his agent
lawfully obtains possession of the - When after the arrival of the goods at
goods; the appointed destination, the carrier
- (3) By waiver thereof.The unpaid seller or bailee in that behalf acknowledges
of goods, having a lien thereon, does to the buyer or his agent that he is
not lose his lien by reason only that he holding the goods on his behalf
has obtained judgment or decree for - When the carrier or other bailee
the price of the goods. (n) wrongfully refuses to deliver the

goods to the buyer or his agent that requirement may make a resale either
he is hilding the goods on his behalf by public or private sale. He cannot,
however, directly or indirectly buy the
n. What are the ways of exercising the right goods. (n)
of stoppage in transit under Art. 1532?
- Obtaining actual possession of the p. When and how may an unpaid seller
goods, or rescind the sale under Art. 1534?
- Giving notice of the seller’s claim to - He has the right of lien over the goods
the carrier or other bailee in or he has stooped the goods in
possession transitu
o. What is Art. 1533? q. What is Art. 1535?

Where the goods are of perishable - Subject to the provisions of this

nature, or where the seller expressly Title, the unpaid seller's right of
reserves the right of resale in case the lien or stoppage in transitu is not
buyer should make default, or where affected by any sale, or other
the buyer has been in default in the disposition of the goods which the
payment of the price for an buyer may have made, unless the
unreasonable time, an unpaid seller seller has assented thereto.
having a right of lien or having stopped - If, however, a negotiable document
the goods in transitu may resell the of title has been issued for goods, no
goods. He shall not thereafter be liable seller's lien or right of stoppage in
to the original buyer upon the contract transitu shall defeat the right of
of sale or for any profit made by such any purchaser for value in good
resale, but may recover from the buyer faith to whom such document has
damages for any loss occasioned by the been negotiated, whether such
breach of the contract of sale. negotiation be prior or subsequent
to the notification to the carrier, or
Where a resale is made, as authorized other bailee who issued such
in this article, the buyer acquires a good document, of the seller's claim to a
title as against the original buyer. lien or right of stoppage in transitu.

It is not essential to the validity of r. What is Art, 1536?

resale that notice of an intention to - The vendor is not bound to deliver
resell the goods be given by the seller to the thing sold in case the vendee
the original buyer. But where the right should lose the right to make use of
to resell is not based on the perishable the terms as provided in Article
nature of the goods or upon an express 1198. (1467a)
provision of the contract of sale, the s. What is Art. 1537?
giving or failure to give such notice - The vendor is bound to deliver the
shall be relevant in any issue involving thing sold and its accessions and
the question whether the buyer had accessories in the condition in
been in default for an unreasonable which they were upon the
time before the resale was made.
perfection of the contract.
All the fruits shall pertain to the
It is not essential to the validity of a
vendee from the day on which the
resale that notice of the time and place
contract was perfected. (1468a)
of such resale should be given by the
seller to the original buyer. t. What is Art. 1538?

The seller is bound to exercise - In case of loss, deterioration or

reasonable care and judgment in improvement of the thing before its
making a resale, and subject to this delivery, the rules in Article 1189

shall be observed, the vendor being - The provisions of the two preceding
considered the debtor. (n) articles shall apply to judicial sales.
u. What is Art. 1539? x. What is Art. 1542?

- The obligation to deliver the thing In the sale of real estate, made for a
sold includes that of placing in the lump sum and not at the rate of a
control of the vendee all that is certain sum for a unit of measure or
mentioned in the contract, in number, there shall be no increase or
conformity with the following rules: decrease of the price, although there be
a greater or less area or number than
If the sale of real estate should be made that stated in the contract.
with a statement of its area, at the rate
of a certain price for a unit of measure The same rule shall be applied when
or number, the vendor shall be obliged two or more immovables as sold for a
to deliver to the vendee, if the latter single price; but if, besides mentioning
should demand it, all that may have the boundaries, which is indispensable
been stated in the contract; but, should in every conveyance of real estate, its
this be not possible, the vendee may area or number should be designated in
choose between a proportional the contract, the vendor shall be bound
reduction of the price and the rescission to deliver all that is included within
of the contract, provided that, in the said boundaries, even when it exceeds
latter case, the lack in the area be not the area or number specified in the
less than one-tenth of that stated. contract; and, should he not be able to
do so, he shall suffer a reduction in the
The same shall be done, even when the price, in proportion to what is lacking in
area is the same, if any part of the the area or number, unless the contract
immovable is not of the quality is rescinded because the vendee does
specified in the contract. not accede to the failure to deliver what
has been stipulated. (1471)
The rescission, in this case, shall only
take place at the will of the vendee, y. Discuss Semira vs CA.
when the inferior value of the thing sold z. FACTS:
exceeds one-tenth of the price agreed - Gutierrez was the owner of a parcel
upon. of land. This parcel was sold to
Buenaventura An. He entered the
Nevertheless, if the vendee would not premises based on the boundaries
have bought the immovable had he stated in the deed of sale. He then
known of its smaller area of inferior bought two additional parcels of land.
quality, he may rescind the sale. On a relevant date, he sold the first
(1469a) parcel to his nephew who also
entered the premises based on the
boundaries stated in the deed. The
v. What is Art. 1540?
deed also stated the same boundaries
- If, in the case of the preceding
and area of the lot, which was larger
article, there is a greater area or in actuality. This nephew then sold
number in the immovable than that the land to petitioner. The deed this
stated in the contract, the vendee time reflected a different area, the
may accept the area included in the actual area of the land. The land was
contract and reject the rest. If he found to be larger than what was
accepts the whole area, he must pay stated in the previous documents.
for the same at the contract rate. Semira entered then the premises
w. What is Art. 1541?’ based on the boundaries and began
construction of a rice mill.

Buenaventura then filed an action for different vendees by the same owner,
forcible entry against Semira, alleging the ownership shall be transferred to
that latter illegally encroached on the the vendee who has first taken
other parcel of land previously possession of it in good faith
bought by the former and that the - Immovable – ownership to
land that was supposed to be - (a) To the vendee who first registered
occupied by the latter was smaller
or recorded his deed of sale in good
than the land he was actually
- (b) If there isno inscription or
- HELD: recording, the onweship shall pertain
- In the case at bar, the issue of to the vendee who first took
possession cannot be decided possession of the property in good
independently of the question of faith
ownership. Private respondent - (c) If the vendees take possession at
claimed constructive possession of the same time and both in good faith,
the parcel of land he alleged to be the ownership shall pertain to the
encroached by Semira. Likewise, one who presents the oldest title
Semira based his occupancy of the dd. Discuss Rasarosa vs. Sora
land by virtue of the Ramirez’s sale of
ee. Discuss Radiowealth Finance Company v
the land to him. The question of prior
possession may
only be resolved in answering the - FACTS: Defendant spouses Castro
question of who is the real owner of sold to plaintiff-appellee Palileo
the disputed portion. Where land is (private respondent herein), a parcel
sold for a lump sum and not so much of unregistered coconut land situated
per unit of measure, the boundaries in Surigao del Norte. The sale is
of the land stated in the contract evidenced by a notarized Deed of
determines the effects Absolute Sale (Exh. “E”). The deed
and scope of the sale, not the area was not registered in the Registry of
thereof. The vendor is thus obligated Property for unregistered lands.
to deliver the land included within Since the execution of the deed of
the boundaries regardless of whether sale, appellee Palileo exercised acts of
the land is greater or lesser than the
ownership over the land through his
area stipulated in the sale.
mother as administratrix or overseer.
Appellee has continuously paid the
aa. Which between boundaries and the area
real estate taxes on said land from
stated in the title will define a parcel of
1971 until the present.
- A judgment was rendered against
- The vendoe is bound to deliver all
defendant Castro by the then CFI to
that is included within the
pay herein defendant-appellant
boundaries stated, although the same
Radiowealth Finance Company
exceeds the area or number specified
(petitioner herein). Upon the finality
in the contract
of the judgment, a writ of execution
bb. What is Art. 1543?
was issued. Pursuant to said writ,
- The actions arising from Articles
defendant provincial Sheriff levied
1539 and 1542 shall prescribe in six
upon and finally sold at public
months, counted from the day of
auction the subject land that
delivery. (1472a)
defendant Enrique Castro had earlier
cc. What are the rule of preference in double
sold to appellee Palileo. A certificate
sale of property under Art. 1544?
of sale was executed by the Provincial
- Movable property – If the same
Sheriff in favor of defendant-
property was sold to two or more
appellant Radiowealth Finance

Company, being the only bidder. After petitioner is of no effect because the
the period of redemption has (sic) land no longer belonged to the
expired, a deed of final sale was also judgment debtor as of the time of the
executed by the same Provincial said execution sale.
Sheriff. Both the certificate of sale and
the deed of final sale were registered
with the RD. SALES WEEK 7
- Learning of what happened to the a. What is Art. 1545?
land, private respondent Palileo filed Where the obligation of either party to a
an action for quieting of title over the contract of sale is subject to any condition
same. After a trial on the merits, the which is not performed, such party may
court a quo rendered a decision in his refuse to proceed with the contract or he
favor. On appeal, the decision of the may waive performance of the condition. If
trial court was affirmed. Hence, this the other party has promised that the
petition for review on certiorari. condition should happen or be performed,
- ISSUE: Who, as between two buyers such first mentioned party may also treat
of unregistered land, is the rightful the nonperformance of the condition as a
owner—the first buyer in a prior sale breach of warranty.
that was unrecorded, or the second
buyer who purchased the land in an Where the ownership in the thing has not
execution sale whose transfer was passed, the buyer may treat the fulfillment
registered in the RD by the seller of his obligation to deliver the
- HELD: PALILEO HAS THE SUPERIOR same as described and as warranted
RIGHT OVER THE LAND expressly or by implication in the contract
- There is no doubt that had the of sale as a condition of the obligation of
property in question been a the buyer to perform his promise to accept
registered land, this case would have and pay for the thing. (n)
been decided in favor of petitioner
since it was petitioner that had its b. What is a condition?
claim first recorded in the RD. - A future and an uncertain event
- It must be stressed however that this which may or may not happen, upon
case deals with a parcel of which depends the rising or
unregistered land and a different set extinction of an obligation
of rules applies. We affirm the - Suspensive condition – gives rise to
decision of the CA. an obligation
- Under Act No. 3344, registration of - Resolutory condition – extinguishes a
instruments affecting unregistered subsisting obligation
lands is “without prejudice to a third c. What is the effect of non-fulfillment of a
party with a better right”. The condition?
aforequoted phrase has been held by - He may refuse to proceed with the
this Court to mean that the mere contract
registration of a sale in one’s favor - He may ignore the non-performance
does not give him any right over of such conidition and proceed with
the land if the vendor was not the contract
anymore the owner of the land d. What is Art. 1546?
having previously sold the same to - Any affirmation of fact or any promise
somebody else even if the earlier sale by the seller relating to the thing is an
was unrecorded. express warranty if the natural
- Applying this principle, the CA tendency of such affirmation or
correctly held that the execution sale promise is to induce the buyer to
of the unregistered land in favor of purchase the same, and if the buyer

purchase the thing relying thereon. No - Implied warranty against hidden
affirmation of the value of the thing, defects, or faults, or charges, or
nor any statement purporting to be a encumbers unknown to the buyer
statement of the seller's opinion only, j. When is implied warranty not applicable?
shall be construed as a warranty, - Sale made by sheriff, auctioneer,
unless the seller made such affirmation mortgagee, pledgee, or other person
or statement as an expert and it was professing to sell by virtue of
relied upon by the buyer. (n) authority fact or law
e. What is a warranty? - Sale under as is and where is
- A collateral undertaking in a sale of - Sale of second hand articles
either realty or personalty, express or - Sale of property sold at the public
implied, and that id the property sold auction for tax delinquency
does not possess certain incidents k. What is Art. 1548?
and qualities, the purchases may - Eviction shall take place whenever by
either consider the sale void or claim a final judgment based on a right prior
damages for breach of warranty to the sale or an act imputable to the
f. What is an express warranty? vendor, the vendee is deprived of the
- Seller’s representation that it had whole or of a part of the thing
already paid the taxes and customs purchased.
duties The vendor shall answer for the
g. What is Art. 1547? eviction even though nothing has been
- In a contract of sale, unless a contrary said in the contract on the subject.
intention appears, there is: The contracting parties, however, may
increase, diminish, or suppress this
(1) An implied warranty on the part of legal obligation of the vendor. (1475a)
the seller that he has a right to sell the
thing at the time when the ownership l. What is eviction?
is to pass, and that the buyer shall - Judicial process by virtue of which
from that time have and enjoy the the vendee is deprived of the
legal and peaceful possession of the ownership of the whole or part of the
thing; thing he purchased by final judgment
(2) An implied warranty that the thing or by an act imputable to the vendor
shall be free from any hidden faults or m. What are the requisites of warranty
defects, or any charge or encumbrance against eviction?
not declared or known to the buyer. - Vendor was summoned in the suit for
eviction at the instance of tge vendee
This Article shall not, however, be held or by the vendor’s voluntary
to render liable a sheriff, auctioneer, appearance in the very case where
mortgagee, pledgee, or other person the vendee is a defendant
professing to sell by virtue of authority - Final judgment is rendered in the
in fact or law, for the sale of a thing in case where judgment consists in the
which a third person has a legal or deprivation of the vendor’s
equitable interest. (n) ownership or possession over the
whole or part of the property
h. What is implied warranty? - Judgment is in favor of the plaintiff
- Warranty is implied if not expressly and is based on the right prior to the
made in the contract of sale sale or even after the sale if the cause
i. What are the implied warranties? of eviction is due to an act or acts
- Right of the seller to sell at the time imputable to the vendor
when ownership has to pass - The vendee has not waived the
vendor’s warranty against eviction

n. Discuss Ang v. Court of Appeals. - (4) The expenses of the contract, if the
o. Discuss Art. 1549 to 1560. vendee has paid them;
- Art. 1549. The vendee need not appeal - (5) The damages and interests, and
from the decision in order that the ornamental expenses, if the sale was
vendor may become liable for eviction. made in bad faith. (1478)
(n) - Art. 1556. Should the vendee lose, by
- Art. 1550. When adverse possession reason of the eviction, a part of the
had been commenced before the sale thing sold of such importance, in
but the prescriptive period is relation to the whole, that he would
completed after the transfer, the not have bought it without said part,
vendor shall not be liable for eviction. he may demand the rescission of the
(n) contract; but with the obligation to
- Art. 1551. If the property is sold for return the thing without other
nonpayment of taxes due and not encumbrances that those which it had
made known to the vendee before the when he acquired it.
sale, the vendor is liable for eviction. - He may exercise this right of action,
(n) instead of enforcing the vendor's
- Art. 1552. The judgment debtor is also liability for eviction.
responsible for eviction in judicial - The same rule shall be observed when
sales, unless it is otherwise decreed in two or more things have been jointly
the judgment. (n) sold for a lump sum, or for a separate
- Art. 1553. Any stipulation exempting price for each of them, if it should
the vendor from the obligation to clearly appear that the vendee would
answer for eviction shall be void, if he not have purchased one without the
acted in bad faith. (1476) other. (1479a)
- Art. 1554. If the vendee has renounced - Art. 1557. The warranty cannot be
the right to warranty in case of enforced until a final judgment has
eviction, and eviction should take been rendered, whereby the vendee
place, the vendor shall only pay the loses the thing acquired or a part
value which the thing sold had at the thereof. (1480)
time of the eviction. Should the vendee - Art. 1558. The vendor shall not be
have made the waiver with knowledge obliged to make good the proper
of the risks of eviction and assumed its warranty, unless he is summoned in
consequences, the vendor shall not be the suit for eviction at the instance of
liable. (1477) the vendee. (1481a)
- Art. 1555. When the warranty has - Art. 1559. The defendant vendee shall
been agreed upon or nothing has been ask, within the time fixed in the Rules
stipulated on this point, in case of Court for answering the complaint,
eviction occurs, the vendee shall have that the vendor be made a co-
the right to demand of the vendor: defendant. (1482a)
- (1) The return of the value which the - Art. 1560. If the immovable sold should
thing sold had at the time of the be encumbered with any non-apparent
eviction, be it greater or less than the burden or servitude, not mentioned in
price of the sale; the agreement, of such a nature that it
- (2) The income or fruits, if he has been must be presumed that the vendee
ordered to deliver them to the party would not have acquired it had he
who won the suit against him; been aware thereof, he may ask for the
- (3) The costs of the suit which caused rescission of the contract, unless he
the eviction, and, in a proper case, should prefer the appropriate
those of the suit brought against the indemnity. Neither right can be
vendor for the warranty; exercised if the non-apparent burden

or servitude is recorded in the Registry t. What is Art. 1562?
of Property, unless there is an express - In a sale of goods, there is an implied
warranty that the thing is free from all warranty or condition as to the quality
burdens and encumbrances. or fitness of the goods, as follows:
- Within one year, to be computed from - (1) Where the buyer, expressly or by
the execution of the deed, the vendee implication, makes known to the seller
may bring the action for rescission, or the particular purpose for which the
sue for damages. goods are acquired, and it appears
- One year having elapsed, he may only that the buyer relies on the seller's skill
bring an action for damages within an or judgment (whether he be the
equal period, to be counted from the grower or manufacturer or not), there
date on which he discovered the is an implied warranty that the goods
burden or servitude. (1483a) shall be reasonably fit for such
p. What is Art. 1561?
- The vendor shall be responsible for (2) Where the goods are brought by
warranty against the hidden defects description from a seller who deals in
which the thing sold may have, should goods of that description (whether he be
they render it unfit for the use for the grower or manufacturer or not), there
which it is intended, or should they is an implied warranty that the goods shall
diminish its fitness for such use to such be of merchantable quality. (n)
an extent that, had the vendee been
aware thereof, he would not have u. Distinguish between Warranty of Fitness
acquired it or would have given a for a Particular Purpose and Warranty of
lower price for it; but said vendor shall Merchantibility.
not be answerable for patent defects - Warranty of fitness – goods are
or those which may be visible, or for suitable for the particular or special
those which are not visible if the purpose disclosed by the buyer which
vendee is an expert who, by reason of will not be satisfied by the mere
his trade or profession, should have fitness of the goods for general
known them. (1484a) purposes
q. What are the requisites for enforcement - Warranty of merchantable quality –
of the warranty against hidden defect? goods purchased are reasonably fit
- The defect must be important or for the general purpose for which
grave they are sold
- Defect must be hidden v. What is Art. 1563?
- Defect must be present at the time of - In the case of contract of sale of a
the execution of the sale specified article under its patent or
- No waiver to warranty against hidden other trade name, there is no warranty
effects as to its fitness for any particular
- Action for rescission or reduction of purpose, unless there is a stipulation to
price must be filed within the the contrary. (n)
prescriptive period w. What is Art. 1564?
r. What is a redhibitory action? - An implied warranty or condition as to
- Action based on the redhitory the quality or fitness for a particular
defaults or defects of animals which purpose may be annexed by the usage
are deermined by law or by local of trade. (n)
customs must be brought within 40 x. What is Art. 1565?
days from date of delivery - In the case of a contract of sale by
s. Discuss Nurtrimux Feeds Corporation v. sample, if the seller is a dealer in goods
Court of Appeals of that kind, there is an implied

warranty that the goods shall be free price which he paid, less the value
from any defect rendering them which the thing had when it was lost.
unmerchantable which would not be If the vendor acted in bad faith, he
apparent on reasonable examination shall pay damages to the vendee.
of the sample. (n) (1488a)
y. What is Art. 1566?
- The vendor is responsible to the ff. What is Art. 1570?
vendee for any hidden faults or defects - The preceding articles of this
in the thing sold, even though he was Subsection shall be applicable to
not aware thereof. judicial sales, except that the judgment
This provision shall not apply if the debtor shall not be liable for damages.
contrary has been stipulated, and the (1489a)
vendor was not aware of the hidden gg. What is Art. 1571?
faults or defects in the thing sold. - Actions arising from the provisions of
(1485) the preceding ten articles shall be
z. What consists good faith? barred after six months, from the
- Good faith consist in the honest delivery of the thing sold. (1490)
intention to abstain from taking any hh. Discuss Art. 1572 to 1581.
unconscientious advantage of
another Art. 1572. If two or more animals are sold
aa. What is caveat emptor? together, whether for a lump sum or for a
- Buyer is the one who is directed to separate price for each of them, the
beware redhibitory defect of one shall only give
bb. When is caveat emptor applicable? rise to its redhibition, and not that of the
- Sales of animals, double sales, in others; unless it should appear that the
sheriff’s sale, tax sale vendee would not have purchased the
sound animal or animals without the
cc. What are the remedies in case of sale of
defective one.
things with hidden defects?
- Accion redhibitoria – seeking
The latter case shall be presumed when a
withdrawal from the conract
team, yoke pair, or set is bought, even if a
- Accion quanti minors es estimatoria –
separate price has been fixed for each one
action for proportionate reduction of of the animals composing the same. (1491)
the price
dd. What is Art. 1568? Art. 1573. The provisions of the preceding
- If the thing sold should be lost in article with respect to the sale of animals
consequence of the hidden faults, and shall in like manner be applicable to the
the vendor was aware of them, he shall sale of other things. (1492)
bear the loss, and shall be obliged to
return the price and refund the Art. 1574. There is no warranty against
expenses of the contract, with hidden defects of animals sold at fairs or at
damages. If he was not aware of them, public auctions, or of live stock sold as
he shall only return the price and condemned. (1493a)
interest thereon, and reimburse the
expenses of the contract which the Art. 1575. The sale of animals suffering
vendee might have paid. (1487a) from contagious diseases shall be void.
ee. What is Art. 1569?
- If the thing sold had any hidden fault A contract of sale of animals shall also be
at the time of the sale, and should void if the use or service for which they are
thereafter be lost by a fortuitous event acquired has been stated in the contract,
or through the fault of the vendee, the and they are found to be unfit therefor.
latter may demand of the vendor the (1494a)

Art. 1576. If the hidden defect of animals, - If the time and place should not have
even in case a professional inspection has been stipulated, the payment must be
been made, should be of such a nature that made at the time and place of the
expert knowledge is not sufficient to delivery of the thing sold. (1500a)
discover it, the defect shall be considered as
redhibitory. b. What are the remedies of the vendor
should the vendee refuse to accept
But if the veterinarian, through ignorance delivery?
or bad faith should fail to discover or
- Vendor may elect to enforce
disclose it, he shall be liable for damages.
compliance or to rescind the contract
c. Discuss Arts. 1583 to 1592.
- Article 1583. Unless otherwise
Art. 1577. The redhibitory action, based on
agreed, the buyer of goods is not
the faults or defects of animals, must be
brought within forty days from the date of bound to accept delivery thereof by
their delivery to the vendee. installments.
Where there is a contract of sale of
This action can only be exercised with goods to be delivered by stated
respect to faults and defects which are instalments, which are to be
determined by law or by local customs. separately paid for, and the seller
(1496a) makes defective deliveries in respect
of one or more instalments, or the
Art. 1578. If the animal should die within buyer neglects or refuses without just
three days after its purchase, the vendor cause to take delivery of or pay for
shall be liable if the disease which cause one or more instalments, it depends
the death existed at the time of the in each case on the terms of the
contract. (1497a) contract and the circumstances of the
case, whether the breach of contract
Art. 1579. If the sale be rescinded, the is so material as to justify the injured
animal shall be returned in the condition in party in refusing to proceed further
which it was sold and delivered, the vendee and suing for damages for breach of
being answerable for any injury due to his the entire contract, or whether the
negligence, and not arising from the
breach is severable, giving rise to a
redhibitory fault or defect. (1498)
claim for compensation but not to a
right to treat the whole contract as
Art. 1580. In the sale of animals with
broken. (n)
redhibitory defects, the vendee shall also
enjoy the right mentioned in article 1567; d. Article 1584. Where goods are delivered
but he must make use thereof within the to the buyer, which he has not previously
same period which has been fixed for the examined, he is not deemed to have
exercise of the redhibitory action. (1499) accepted them unless and until he has had
a reasonable opportunity of examining
Art. 1581. The form of sale of large cattle them for the purpose of ascertaining
shall be governed by special laws. (n) whether they are in conformity with the
contract if there is no stipulation to the
SALES WEEK 8 contrary.
e. Unless otherwise agreed, when the seller
a. What is Art. 1582? tenders delivery of goods to the buyer, he
- Article 1582. The vendee is bound to is bound, on request, to afford the buyer a
accept delivery and to pay the price reasonable opportunity of examining the
of the thing sold at the time and place goods for the purpose of ascertaining
stipulated in the contract. whether they are in conformity with the

f. Where goods are delivered to a carrier by from the moment they are placed at
the seller, in accordance with an order his disposal. (n)
from or agreement with the buyer, upon - Article 1589. The vendee shall owe
the terms that the goods shall not be interest for the period between the
delivered by the carrier to the buyer until delivery of the thing and the payment
he has paid the price, whether such terms of the price, in the following three
are indicated by marking the goods with cases:
the words "collect on delivery," or - (1) Should it have been so stipulated;
otherwise, the buyer is not entitled to - (2) Should the thing sold and
examine the goods before the payment of delivered produce fruits or income;
the price, in the absence of agreement or - (3) Should he be in default, from the
usage of trade permitting such time of judicial or extrajudicial
examination. (n) demand for the payment of the price.
g. Article 1585. The buyer is deemed to have (1501a)
accepted the goods when he intimates to - Article 1590. Should the vendee be
the seller that he has accepted them, or disturbed in the possession or
when the goods have been delivered to ownership of the thing acquired, or
him, and he does any act in relation to should he have reasonable grounds to
them which is inconsistent with the fear such disturbance, by a
ownership of the seller, or when, after the vindicatory action or a foreclosure of
lapse of a reasonable time, he retains the mortgage, he may suspend the
goods without intimating to the seller that payment of the price until the vendor
he has rejected them. (n) has caused the disturbance or danger
h. Article 1586. In the absence of express or to cease, unless the latter gives
implied agreement of the parties, security for the return of the price in
acceptance of the goods by the buyer shall a proper case, or it has been
not discharge the seller from liability in stipulated that, notwithstanding any
damages or other legal remedy for breach such contingency, the vendee shall be
of any promise or warranty in the bound to make the payment. A mere
contract of sale. But, if, after acceptance of act of trespass shall not authorize the
the goods, the buyer fails to give notice to suspension of the payment of the
the seller of the breach in any promise of price. (1502a)
warranty within a reasonable time after - Article 1591. Should the vendor have
the buyer knows, or ought to know of reasonable grounds to fear the loss of
such breach, the seller shall not be liable immovable property sold and its
therefor. (n) price, he may immediately sue for the
- Article 1587. Unless otherwise rescission of the sale.
agreed, where goods are delivered to - Should such ground not exist, the
the buyer, and he refuses to accept provisions of article 1191 shall be
them, having the right so to do, he is observed. (1503)
not bound to return them to the - Article 1592. In the sale of immovable
seller, but it is sufficient if he notifies property, even though it may have
the seller that he refuses to accept been stipulated that upon failure to
them. If he voluntarily constitutes pay the price at the time agreed upon
himself a depositary thereof, he shall the rescission of the contract shall of
be liable as such. (n) right take place, the vendee may pay,
- Article 1588. If there is no stipulation even after the expiration of the
as specified in the first paragraph of period, as long as no demand for
article 1523, when the buyer's refusal rescission of the contract has been
to accept the goods is without just made upon him either judicially or by
cause, the title thereto passes to him a notarial act. After the demand, the

court may not grant him a new term. shall give the buyer a grace period of not
(1504a) less than sixty days from the date the
installment became due.
i. Discuss Sections 3 to 5 of R.A. 6552 If the buyer fails to pay the installments
(Realty Installment Buyer Protection Act) due at the expiration of the grace period,
Section 3. In all transactions or contracts the seller may cancel the contract after
involving the sale or financing of real thirty days from receipt by the buyer of
estate on installment payments, including the notice of cancellation or the demand
residential condominium apartments but for rescission of the contract by a notarial
excluding industrial lots, commercial act.
buildings and sales to tenants under
Republic Act Numbered Thirty-eight Section 5. Under Section 3 and 4, the
hundred forty-four, as amended by buyer shall have the right to sell his rights
Republic Act Numbered Sixty-three or assign the same to another person or
hundred eighty-nine, where the buyer has to reinstate the contract by updating the
paid at least two years of installments, the account during the grace period and
buyer is entitled to the following rights in before actual cancellation of the contract.
case he defaults in the payment of The deed of sale or assignment shall be
succeeding installments: done by notarial act.
(a) To pay, without additional interest,
the unpaid installments due within the j. Sps. Sebastian v. BPI
total grace period earned by him which is k. What is Art. 1593?
hereby fixed at the rate of one month - Article 1593. With respect to movable
grace period for every one year of property, the rescission of the sale
installment payments made: Provided, shall of right take place in the interest
That this right shall be exercised by the of the vendor, if the vendee, upon the
buyer only once in every five years of the expiration of the period fixed for the
life of the contract and its extensions, if delivery of the thing, should not have
any. appeared to receive it, or, having
(b) If the contract is canceled, the seller appeared, he should not have
shall refund to the buyer the cash tendered the price at the same time,
surrender value of the payments on the unless a longer period has been
property equivalent to fifty per cent of the stipulated for its payment. (1505)
total payments made, and, after five years l. What is Art. 1594?
of installments, an additional five per cent - Article 1594. Actions for breach of the
every year but not to exceed ninety per contract of sale of goods shall be
cent of the total payments made: governed particularly by the
Provided, That the actual cancellation of provisions of this Chapter, and as to
the contract shall take place after thirty matters not specifically provided for
days from receipt by the buyer of the herein, by other applicable provisions
notice of cancellation or the demand for of this Title. (n)
rescission of the contract by a notarial act m. Discuss Arts. 1595 to 1599.
and upon full payment of the cash - Article 1595. Where, under a contract
surrender value to the buyer. of sale, the ownership of the goods
Down payments, deposits or options on has passed to the buyer and he
the contract shall be included in the wrongfully neglects or refuses to pay
computation of the total number of for the goods according to the terms
installment payments made. of the contract of sale, the seller may
maintain an action against him for the
Section 4. In case where less than two price of the goods.
years of installments were paid, the seller

- Where, under a contract of sale, the - If, while labor or expense of material
price is payable on a certain day, amount is necessary on the part of
irrespective of delivery or of transfer the seller to enable him to fulfill his
of title and the buyer wrongfully obligations under the contract of sale,
neglects or refuses to pay such price, the buyer repudiates the contract or
the seller may maintain an action for notifies the seller to proceed no
the price although the ownership in further therewith, the buyer shall be
the goods has not passed. But it shall liable to the seller for labor
be a defense to such an action that performed or expenses made before
the seller at any time before the receiving notice of the buyer's
judgment in such action has repudiation or countermand. The
manifested an inability to perform profit the seller would have made if
the contract of sale on his part or an the contract or the sale had been fully
intention not to perform it. performed shall be considered in
- Although the ownership in the goods awarding the damages. (n)
has not passed, if they cannot readily - Article 1597. Where the goods have
be resold for a reasonable price, and not been delivered to the buyer, and
if the provisions of article 1596, the buyer has repudiated the contract
fourth paragraph, are not applicable, of sale, or has manifested his inability
the seller may offer to deliver the to perform his obligations
goods to the buyer, and, if the buyer thereunder, or has committed a
refuses to receive them, may notify breach thereof, the seller may totally
the buyer that the goods are rescind the contract of sale by giving
thereafter held by the seller as bailee notice of his election so to do to the
for the buyer. Thereafter the seller buyer. (n)
may treat the goods as the buyer's - Article 1598. Where the seller has
and may maintain an action for the broken a contract to deliver specific
price. (n) or ascertained goods, a court may, on
- Article 1596. Where the buyer the application of the buyer, direct
wrongfully neglects or refuses to that the contract shall be performed
accept and pay for the goods, the specifically, without giving the seller
seller may maintain an action against the option of retaining the goods on
him for damages for nonacceptance. payment of damages. The judgment
- The measure of damages is the or decree may be unconditional, or
estimated loss directly and naturally upon such terms and conditions as to
resulting in the ordinary course of damages, payment of the price and
events from the buyer's breach of otherwise, as the court may deem
contract. just. (n)
- Where there is an available market - Article 1599. Where there is a breach
for the goods in question, the of warranty by the seller, the buyer
measure of damages is, in the absence may, at his election:
of special circumstances showing - (1) Accept or keep the goods and set
proximate damage of a different up against the seller, the breach of
amount, the difference between the warranty by way of recoupment in
contract price and the market or diminution or extinction of the price;
current price at the time or times - (2) Accept or keep the goods and
when the goods ought to have been maintain an action against the seller
accepted, or, if no time was fixed for for damages for the breach of
acceptance, then at the time of the warranty;
refusal to accept. - (3) Refuse to accept the goods, and
maintain an action against the seller

for damages for the breach of which has been paid, and with the
warranty; remedies for the enforcement of such
- (4) Rescind the contract of sale and lien allowed to an unpaid seller by
refuse to receive the goods or if the article 1526.
goods have already been received, - (5) In the case of breach of warranty
return them or offer to return them of quality, such loss, in the absence of
to the seller and recover the price or special circumstances showing
any part thereof which has been paid. proximate damage of a greater
- When the buyer has claimed and amount, is the difference between the
been granted a remedy in anyone of value of the goods at the time of
these ways, no other remedy can delivery to the buyer and the value
thereafter be granted, without they would have had if they had
prejudice to the provisions of the answered to the warranty. (n)
second paragraph of article 1191.
- Where the goods have been delivered n. What is Art. 1600?
to the buyer, he cannot rescind the - Article 1600. Sales are extinguished
sale if he knew of the breach of by the same causes as all other
warranty when he accepted the obligations, by those stated in the
goods without protest, or if he fails to preceding articles of this Title, and by
notify the seller within a reasonable conventional or legal redemption.
time of the election to rescind, or if he (1506)
fails to return or to offer to return the o. Discuss Art. 1601 in relation to Art. 1616.
goods to the seller in substantially as - Article 1601. Conventional
good condition as they were in at the redemption shall take place when the
time the ownership was transferred vendor reserves the right to
to the buyer. But if deterioration or repurchase the thing sold, with the
injury of the goods is due to the obligation to comply with the
breach or warranty, such provisions of article 1616 and other
deterioration or injury shall not stipulations which may have been
prevent the buyer from returning or agreed upon. (1507) ARTICLE 1602.
offering to return the goods to the The contract shall be presumed to be
seller and rescinding the sale. an equitable mortgage, in any of the
- Where the buyer is entitled to rescind following cases:
the sale and elects to do so, he shall - (1) When the price of a sale with right
cease to be liable for the price upon to repurchase is unusually
returning or offering to return the inadequate;
goods. If the price or any part thereof - (2) When the vendor remains in
has already been paid, the seller shall possession as lessee or otherwise;
be liable to repay so much thereof as - (3) When upon or after the expiration
has been paid, concurrently with the of the right to repurchase another
return of the goods, or immediately instrument extending the period of
after an offer to return the goods in redemption or granting a new period
exchange for repayment of the price. is executed;
- Where the buyer is entitled to rescind - (4) When the purchaser retains for
the sale and elects to do so, if the himself a part of the purchase price;
seller refuses to accept an offer of the - (5) When the vendor binds himself to
buyer to return the goods, the buyer pay the taxes on the thing sold;
shall thereafter be deemed to hold - (6) In any other case where it may be
the goods as bailee for the seller, but fairly inferred that the real intention
subject to a lien to secure the of the parties is that the transaction
payment of any portion of the price shall secure the payment of a debt or

the performance of any other - Article 1609. The vendee is
obligation. subrogated to the vendor's rights and
- In any of the foregoing cases, any actions. (1511)
money, fruits, or other benefit to be - Article 1610. The creditors of the
received by the vendee as rent or vendor cannot make use of the right
otherwise shall be considered as of redemption against the vendee,
interest which shall be subject to the until after they have exhausted the
usury laws. (n) property of the vendor. (1512)
- Article 1603. In case of doubt, a - Article 1611. In a sale with a right to
contract purporting to be a sale with repurchase, the vendee of a part of an
right to repurchase shall be undivided immovable who acquires
construed as an equitable mortgage. the whole thereof in the case of
(n) article 498, may compel the vendor to
- Article 1604. The provisions of article redeem the whole property, if the
1602 shall also apply to a contract latter wishes to make use of the right
purporting to be an absolute sale. (n) of redemption. (1513)
- Article 1605. In the cases referred to - Article 1612. If several persons,
in articles 1602 and 1604, the jointly and in the same contract,
apparent vendor may ask for the should sell an undivided immovable
reformation of the instrument. (n) with a right of repurchase, none of
- Article 1606. The right referred to in them may exercise this right for more
article 1601, in the absence of an than his respective share.
express agreement, shall last four - The same rule shall apply if the
years from the date of the contract. person who sold an immovable alone
- Should there be an agreement, the has left several heirs, in which case
period cannot exceed ten years. each of the latter may only redeem
- However, the vendor may still the part which he may have acquired.
exercise the right to repurchase (1514)
within thirty days from the time final - Article 1613. In the case of the
judgment was rendered in a civil preceding article, the vendee may
action on the basis that the contract demand of all the vendors or co-heirs
was a true sale with right to that they come to an agreement upon
repurchase. (1508a) the repurchase of the whole thing
- Article 1607. In case of real property, sold; and should they fail to do so, the
the consolidation of ownership in the vendee cannot be compelled to
vendee by virtue of the failure of the consent to a partial redemption.
vendor to comply with the provisions (1515)
of article 1616 shall not be recorded - Article 1614. Each one of the co-
in the Registry of Property without a owners of an undivided immovable
judicial order, after the vendor has who may have sold his share
been duly heard. (n) separately, may independently
- Article 1608. The vendor may bring exercise the right of repurchase as
his action against every possessor regards his own share, and the
whose right is derived from the vendee cannot compel him to redeem
vendee, even if in the second contract the whole property. (1516)
no mention should have been made of - Article 1615. If the vendee should
the right to repurchase, without leave several heirs, the action for
prejudice to the provisions of the redemption cannot be brought
Mortgage Law and the Land against each of them except for his
Registration Law with respect to own share, whether the thing be
third persons. (1510)

undivided, or it has been partitioned the property is interest in the
among them. consolidated in property
- But if the inheritance has been the vendee
divided, and the thing sold has been There is no The mortgage
awarded to one of the heirs, the obligation on the must foreclose if
action for redemption may be part of the he wants to secure
instituted against him for the whole. vendee to a perfect title on
foreclose the property
Vendor has no Mortgagor may
- Article 1616. The vendor cannot avail
more right to redeem before the
himself of the right of repurchase redeem the foreclosure sale or
without returning to the vendee the property after the even after, within
price of the sale, and in addition: maturity date of one year from
- (1) The expenses of the contract, and the right to registration of the
any other legitimate payments made redeem sale in case of
by reason of the sale; extra-judicial
- (2) The necessary and useful foreclosure. In
expenses made on the thing sold. judicial
(1518) foreclosure,
redemption may
p. What are the characteristics of be made before
the confirmation
conventional redemption?
of the sale by the
- Accidental element
- Express condition Vendee may Mortgagee cannot
- Potestive resolutory condition alienate the alienate the
- Real right which may be sold or property subject property
assigned and enforced against a third to ta resolutory
person condition of
q. Discuss the effects of a pacto retro sale. repurchase
- Once contract is consummated, Vendee becomes Mortgagee cannot
ownership is transferred to the automatically the become
vendee. In the absence of any owner of the automatically the
contrary agreement, the transfer of property in case owner
an ownership carries with it the of vendor’s
transfer of possession. Upon the failure to redeem
Vendee is entitled Mortgagee is not
exercise of the right of redemption,
to be reimbursed entitled to
the ownership of the vendee ceases
for necessary and reimbursement
and he is obliged to return the useful expenses for improvements
property to the vendor who in turn he made
must return the price and other
legitimate expenses incurred by the s. What is the effect if the right to
former which are authorized by law repurchase is embodied in a separate
r. Distinguish between pacto de retro sale instrument?
and a mortgage. - There is no effect.
Sale with pacto Mortgage t. What is Art. 1602?
de retro u. What is an equitable mortgage?
If the vendor If mortgagor fails v. Sps. Bagadiong v. Vda. De Abunda
does not to pay his w. Sps. Lumayag v. Heirs of Jacinto Nemeno
repurchase mortgage
x. What is Art. 1603?
within the time obligations on
agreed upon time, the former - Article 1603. In case of doubt, a
ownership over does not lose his contract purporting to be a sale with
right to repurchase shall be

construed as an equitable mortgage. - Implied – the agency created in
(n) deduced from the (a) acts or conducts
y. Discuss Art.6 1606. of the principal, (b) silence or lack of
- Article 1606. The right referred to in action, (c) failure to repudiate the
article 1601, in the absence of an agency
express agreement, shall last four g. What are the kinds of agency as to
years from the date of the contract. nature?
z. Discuss Maceda Law - Conventional – created by agreement
of the parties
SALES WEEK 9 - Legal – formed by operation of law
a. What is Art. 1868? h. What are the kinds as to consideration?
- By the contract of agency a person - Gratuitous – agent does not receive
binds himself to render some service or any compensation
to do something in representation or - Onerous – agent receives
on behalf of another, with the consent compensation for his services as such
or authority of the latter. (1709a) i. What are the kinds of agency as to extent
b. What are the essential elements of a of transaction covered? (Art.1876)
contract of agency? - General – comprises all the
- Consent (express or implied) transactions of the principal
- Object - Special – comprises one or more
- Agent acts a representative and not specific transactions
for himself j. What are the kinds of agency as to
- Agent acts as a representative within manner of management? (Arts. 1877 and
the scope of his authority 1876)
c. What are the characteristics of an agency - Agency couched in general terms –
contract? comprises only of administration
- Nominate contract - Agency couched in specific terms –
- Bilateral comprises acts of dominion or
- Preparatory ownership and which needs a special
- Fiduciary power of attorney to bind the
- Representative relation principal
- Onerous k. What are the kinds of agency as to
d. Who are the parties in a contract of manner of appointment?
agency? - Direct – principal has appointed the
- Buyer agent directly
- Principal - Indirect – appointment is through
- Agent another person
e. What is Art. 1869? l. What is Art. 1870?
- Agency may be express, or implied - Acceptance by the agent may also be
from the acts of the principal, from his express, or implied from his acts which
silence or lack of action, or his failure carry out the agency, or from his
to repudiate the agency, knowing that silence or inaction according to the
another person is acting on his behalf circumstances. (n)
without authority. m. What is Art. 1871?
- Agency may be oral, unless the law - Between persons who are present, the
requires a specific form. (1710a) acceptance of the agency may also be
f. What are the classes of agency? implied if the principal delivers his
- Express – agent is actually clothed by power of attorney to the agent and the
the principal with authority; may be latter receives it without any
in writing or oral objection. (n)
n. What is a power of attorney?

- It is an instrument in writing whereas t. When are special powers of an attorney
one person, as principal, appoints necessary? (Art. 1878)
another as his agent and confers - (1) To make such payments as are not
authority to perform certain specified usually considered as acts of
acts or kind of acts in behalf of the administration;
principal - (2) To effect novations which put an
o. What is Art. 1872? end to obligations already in existence
- Between persons who are absent, the at the time the agency was
acceptance of the agency cannot be constituted;
implied from the silence of the agent, - (3) To compromise, to submit
except: questions to arbitration, to renounce
- (1) When the principal transmits his the right to appeal from a judgment, to
power of attorney to the agent, who waive objections to the venue of an
receives it without any objection; action or to abandon a prescription
- (2) When the principal entrusts to him already acquired;
by letter or telegram a power of - (4) To waive any obligation
attorney with respect to the business gratuitously;
in which he is habitually engaged as - (5) To enter into any contract by
an agent, and he did not reply to the which the ownership of an immovable
letter or telegram. (n) is transmitted or acquired either
p. What is Art. 1873? gratuitously or for a valuable
- If a person specially informs another consideration;
or states by public advertisement that - (6) To make gifts, except customary
he has given a power of attorney to a ones for charity or those made to
third person, the latter thereby employees in the business managed by
becomes a duly authorized agent, in the agent;
the former case with respect to the - (7) To loan or borrow money, unless
person who received the special the latter act be urgent and
information, and in the latter case indispensable for the preservation of
with regard to any person. The power the things which are under
shall continue to be in full force until administration;
the notice is rescinded in the same - (8) To lease any real property to
manner in which it was given. (n) another person for more than one
q. What is Art. 1874? year;
- When a sale of a piece of land or any - (9) To bind the principal to render
interest therein is through an agent, some service without compensation;
the authority of the latter shall be in - (10) To bind the principal in a
writing; otherwise, the sale shall be contract of partnership;
void. (n) - (11) To obligate the principal as a
r. What is Art. 1875? guarantor or surety;
- Agency is presumed to be for a - (12) To create or convey real rights
compensation, unless there is proof to over immovable property;
the contrary. (n) - (13) To accept or repudiate an
s. What is the measure of compensation of inheritance;
an agent? - (14) To ratify or recognize obligations
- Depends upon the specific stipulation contracted before the agency;
of the parties. In the absence of any - (15) Any other act of strict dominion.
specific agreement, the agent is (n)
entitled to receive compensation on u. Discuss Art. 1881 to 1883.
quantum meruit basis - Article 1881. The agent must act
within the scope of his authority. He

may do such acts as may be conducive would do, as required by the nature of
to the accomplishment of the purpose the business. (1719)
of the agency. (1714a) - Article 1888. An agent shall not carry
- Article 1882. The limits of the agent's out an agency if its execution would
authority shall not be considered manifestly result in loss or damage to
exceeded should it have been the principal. (n)
performed in a manner more - Article 1889. The agent shall be liable
advantageous to the principal than for damages if, there being a conflict
that specified by him. (1715) between his interests and those of the
- Article 1883. If an agent acts in his principal, he should prefer his own. (n)
own name, the principal has no right - Article 1890. If the agent has been
of action against the persons with empowered to borrow money, he may
whom the agent has contracted; himself be the lender at the current
neither have such persons against the rate of interest. If he has been
principal. In such case the agent is the authorized to lend money at interest,
one directly bound in favor of the he cannot borrow it without the
person with whom he has contracted, consent of the principal. (n)
as if the transaction were his own, w. What is Art. 1891?
except when the contract involves - Every agent is bound to render an
things belonging to the principal. The account of his transactions and to
provisions of this article shall be deliver to the principal whatever he
understood to be without prejudice to may have received by virtue of the
the actions between the principal and agency, even though it may not be
agent. (1717) owing to the principal.
v. Discuss Art. 1884 to 1890. - Every stipulation exempting the agent
- Article 1884. The agent is bound by his from the obligation to render an
acceptance to carry out the agency, account shall be void. (1720a)
and is liable for the damages which, - Will an agent who refuses to render
through his nonperformance, the accounting incur criminal liability?
principal may suffer. He must also - Yes. It is his duty to turn over the funds
finish the business already begun on as stated in Art. 1891.
the death of the principal, should delay - What is Art. 1892?
entail any danger. (1718) - The agent may appoint a substitute if
- Article 1885. In case a person declines the principal has not prohibited him
an agency, he is bound to observe the from doing so; but he shall be
diligence of a good father of a family in responsible for the acts of the
the custody and preservation of the substitute:
goods forwarded to him by the owner - (1) When he was not given the power
until the latter should appoint an to appoint one;
agent or take charge of the goods. (n) - (2) When he was given such power,
- Article 1886. Should there be a but without designating the person,
stipulation that the agent shall and the person appointed was
advance the necessary funds, he shall notoriously incompetent or insolvent.
be bound to do so except when the All acts of the substitute appointed
principal is insolvent. (n) against the prohibition of the principal
- Article 1887. In the execution of the shall be void. (1721)
agency, the agent shall act in - Discuss Arts. 1893 to 1899.
accordance with the instructions of the - Article 1893. In the cases mentioned in
principal. In default thereof, he shall Nos. 1 and 2 of the preceding article,
do all that a good father of a family the principal may furthermore bring
an action against the substitute with

respect to the obligations which the
latter has contracted under the  Art. 1900. So far as third persons are
substitution. (1722a) concerned, an act is deemed to have been
- Article 1894. The responsibility of two performed within the scope of the agent's
or more agents, even though they have authority, if such act is within the terms of
been appointed simultaneously, is not the power of attorney, as written, even if
solidary, if solidarity has not been the agent has in fact exceeded the limits of
expressly stipulated. (1723)
his authority according to an
- Article 1895. If solidarity has been
understanding between the principal and
agreed upon, each of the agents is
the agent. (n)
responsible for the non-fulfillment of
agency, and for the fault or negligence
of his fellows agents, except in the  When is an act deemed performed within
latter case when the fellow agents the scope of agents’ authority? It is
acted beyond the scope of their deemed so when the act is performed
authority. (n) within the terms of the power of attorney
- Article 1896. The agent owes interest as written.
on the sums he has applied to his own  In other words, the basis is the written
use from the day on which he did so, statements in the contract of agency. The
and on those which he still owes after written provisions of the contract shall be
the extinguishment of the agency. the yardstick and not the unwritten
(1724a) arrangement between the principal and
- Article 1897. The agent who acts as the agent. It does not matter if the agent
such is not personally liable to the exceeded his authority under the
party with whom he contracts, unless
unwritten arrangements between the
he expressly binds himself or exceeds
principal and agent.
the limits of his authority without
 It is still considered within the scope of his
giving such party sufficient notice of
his powers. (1725) authority because third persons are not
- Article 1898. If the agent contracts in bound by the unknown internal
the name of the principal, exceeding arrangement of the principal and agent. It
the scope of his authority, and the is understood under the article that the
principal does not ratify the contract, authority contemplated be in writing.
it shall be void if the party with whom
the agent contracted is aware of the b. Explain Article 1901
limits of the powers granted by the
principal. In this case, however, the  Art. 1901. A third person cannot set up the
agent is liable if he undertook to fact that the agent has exceeded his
secure the principal's ratification. (n) powers, if the principal has ratified, or has
- Article 1899. If a duly authorized signified his willingness to ratify the
agent acts in accordance with the agent's acts. (n)
orders of the principal, the latter
cannot set up the ignorance of the  Effects of ratification and expression of
agent as to circumstances whereof he
willingness to ratify: After the principal’s
himself was, or ought to have been,
ratification of the contract entered into by
aware. (n)
the agent, or after the principal had
signified his willingness to ratify the
SALES WEEK 10 contract, the third person with whom the
agent had contracted, cannot disaffirm the
a. Explain Article 1900
contract by claiming that the agent

exceeded his authority. Before the agent to present or show to them the
principal has made the ratification or the agent’s power of attorney or instructions
expression of willingness to ratify, the whether private or not as regards the
third person may revoke the act of the agency. By the terms of the power or
agent. A third person cannot question the instructions, the third persons will be
lack of authority of the agent. guided on their actions.
c. What is ratification? How is it done?
e. Explain Article 1903
 Acceptance or confirmation of an act or
agreement that was signed (executed) by  Art. 1903. The commission agent shall be
the confirming party itself. responsible for the goods received by him
 Ratification is a principal's approval of an in the terms and conditions and as
act of its agent where the agent lacked described in the consignment, unless upon
authority to legally bind the principal. receiving them he should make a written
 Ratification may be express or implied. statement of the damage and deterioration
Regardless of its form, ratification is suffered by the same. (n)
retroactive at effect. Only the principal and
not the agent may validly ratify.
 Aside from the intent to ratify, the f. Who is a commission agent?
following conditions must be fulfilled for
ratification to be effective:  A commission agent or factor is a person
(1) The principal must have the capacity whose business is to receive and sell goods
and power to ratify; entrusted to him by the principal for a
(2) He must have had knowledge or had commission and is usually selling in his
reason to know of material or essential own name.
facts about the transaction;  As contradistinguished from an ordinary
(3) He must ratify the acts entirely; agent, he is in possession of the goods to
(4) The act must be capable of ratification; be sold and he can sell in his own name or
and that of the principal.
(5) The act must be done in behalf of the
principal g. What are the responsibilities of a
commission agent?
d. Explain Article 1902
 The commission agent who received
 Art. 1902. A third person with whom the goods consigned to him for sale is
agent wishes to contract on behalf of the responsible for any damage or
principal may require the presentation of
deterioration suffered by the same “in the
the power of attorney, or the instructions terms and conditions as described in the
as regards the agency. Private or secret
consignment” referring to the physical
orders and instructions of the principal do
condition of the goods and other matters
not prejudice third persons who have appearing in the consignment agreement.
relied upon the power of attorney or
 To avoid responsibility, the commission
instructions shown them. (n)
agent or factor, should make a written
statement of the damage or deterioration
 The article presupposes that the power of
of the goods received by him do not match
attorney is in writing because unless it is
with the description made in the
so, it cannot be physically presented.
 The assist third persons, the present
article provides that they may require the

 If there is damage or deterioration to the  Art. 1905. The commission agent cannot,
goods consigned, there is rebuttable without the express or implied consent of
presumption that the same was caused the principal, sell on credit. Should he do
while in the custody of the agents. And the so, the principal may demand from him
presumption goes further that it is the payment in cash, but the commission
commission agent who is at fault. agent shall be entitled to any interest or
benefit, which may result from such sale.
h. Distinguish an agent from a broker (n)

 A broker maintains no relation with the  Without the express or implied consent of
thing which he purchases or sells. He is the principal, a commission agent cannot
merely a go-between or an intermediary sell on credit. Otherwise, the principal has
between the seller and the buyer. As such the right to demand from him payment in
intermediary, he does not have either the cash. But, any interest or benefit arising
custody of the possession of the thing that from such sale shall pertain to the
he disposes of. His function is, therefore, to commission agent. This is to compensate
bring the parties to the transaction. An him for his efforts and industry.
agent Maintains relations with the thing,
the buyer and the seller  Art. 1906. Should the commission agent,
 An agent receives a commission upon the with authority of the principal, sell on
successful conclusion of a sale. credit, he shall so inform the principal,
 Broker earns his pay merely by bringing with a statement of the names of the
the buyer and the seller together, even if buyers. Should he fail to do so, the sale
no sale is eventually made. shall be deemed to have been made for
cash insofar as the principal is concerned.
i. Explain Article 1904 to 1908 (n)

 Art. 1904. The commission agent who  The reason behind the law is to protect the
handles goods of the same kind and mark, principal because it prevents the
which belong to different owners, shall commission agent from pretending that
distinguish them by countermarks, and the sale was on credit basis when in truth
designate the merchandise respectively it is for cash. In effect, the law is meant to
belonging to each principal. (n) discourage the commission agent from
misusing the proceeds of the sale or from
 Under the provision of the article, the delaying the delivery thereof to the
commission agent must provide principal.
identifying marks on the goods
belonging to different owners so that  Art. 1907. Should the commission agent
segregation will be easy. He must not receive on a sale, in addition to the
commingle the goods which will cause ordinary commission, another called a
confusion. guarantee commission; he shall bear the
 Exception: if the goods are mixed by risk of collection and shall pay the
the will of the owners; by chance; or principal the proceeds of the sale on the
by will of one owner but in good faith, same terms agreed upon with the
each co-owner acquires a right in the purchaser. (n)
goods in proportion to the part
belonging to him.  The purpose of guarantee commission is
to compensate the agent for the

inconveniences and risks he has to was Manila-Hong Kong via PAL and then
undergo in the collection of the purchase Hong Kong-India via British Airways. Prior
price payable to the principal. to his departure, he checked in two pieces
of luggage containing his clothing and
 Art. 1908. The commission agent who does other personal effects, confident that the
not collect the credits of his principal at the same would be transferred to his BA
time when they become due and flight.
demandable shall be liable for damages,
unless he proves that he exercised due Unfortunately, when he arrived in India,
diligence for that purpose. (n) he discovered that his luggage was
 A commission agent must collect the
credits of his principal when they become The RTC awarded Mahtani damages which
due and demandable. Failure to do so will was affirmed by CA.
make him liable to the principal for
damages if the latter suffered any Issue: Whether or not in a contract of air
prejudice. carriage a declaration by the passenger is
 Exception: agent incurs no liability if he needed to recover a greater amount?
had exercised due diligence in the
collection of the credits. Held: American jurisprudence provides
 Exception to the exception: even if the that an air carrier is not liable for the loss
agent can prove that he exercised due of baggage in an amount in excess of the
diligence in collecting the credits, limits specified in the tariff which was filed
nonetheless, he would still be liable for the with the proper authorities, such tariff
non-payment of credits on time if he being binding on the passenger regardless
assumed the risks of collection by of the passenger’s lack of knowledge
receiving a guarantee or del credere thereof or assent thereto. This doctrine is
commission. recognized in this jurisdiction.

j. What is Article 1909? The inescapable conclusion that BA had

waived the defense of limited liability
 Art. 1909. The agent is responsible not when it allowed Mahtani to testify as to the
only for fraud, but also for negligence, actual damages he incurred due to
which shall be judged with more or less misplacement of his luggage, without any
rigor by the courts, according to whether objection.
the agency was or was not for a
compensation. (1726) It is a well-settled doctrine that where the
proponent offers evidence deemed by
 In determining the extent of liability of the counsel of the adverse party to be
agent, the court may consider the question inadmissible for any reason, the latter has
of whether or not the contract of agency is the right to object. However, such right is a
for compensation, the liability will be more mere privilege which can be waived.
than when it is not. Necessarily, the objection must be made at
the earliest opportunity, in case of silence
k. Discuss British Airways v. CA, Mahtani and when there is opportunity to speak may
PAL, G.R. 121824, 29 January 1998 operate as a waiver of objections.
 Facts: On April 16, 1989, Mahtani is on his
way to Bombay, India from Manila. His trip l. Discuss Article 1910

where the liability of two or more
 Art. 1910. The principal must comply with tortfeasors is solidary.
all the obligations which the agent may
have contracted within the scope of his n. Discuss Article 1912 to 1915
 Art. 1912. The principal must advance to
As for any obligation wherein the agent the agent, should the latter so request, the
has exceeded his power, the principal is sums necessary for the execution of the
not bound except when he ratifies it agency.
expressly or tacitly. (1727)
Should the agent have advanced them, the
 Whatever has been done or executed by principal must reimburse him therefor,
the agent within the scope of his authority even if the business or undertaking was
is binding upon the principal. not successful, provided the agent is free
Consequently, the principal must comply from all fault.
with all the obligations arising from the
authorized acts of the agent. The reimbursement shall include interest
 Conversely, the principal is not bound by on the sums advanced, from the day on
the acts of the agent if the latter acted which the advance was made. (1728)
without or has exceeded his authority. In
such cases, the act of the agent is  The right of the agent to be reimbursed is
not dependent upon the success of the
unenforceable. By the exception, the
undertaking or transaction. He must not,
principal may be bound thereby if he
expressly or impliedly ratifies the however, commit any of the acts
mentioned in Article 1918.
 The reimbursement shall include interest,
 In the absence of any ratification of the
unenforceable contract, the agent alone is in the absence of any agreement; it shall be
the legal rate at six percent.
personally liable.

m. Discuss Article 1911  Art. 1913. The principal must also

indemnify the agent for all the damages
 Art. 1911. Even when the agent has which the execution of the agency may
exceeded his authority, the principal is have caused the latter, without fault or
solidarily liable with the agent if the negligence on his part. (1729)
former allowed the latter to act as though
he had full powers. (n)  The principal is answerable not only to the
agent’s claims for reimbursement with
 When an agent exceeds his authority in his
interest on amounts advanced by him, but
agency the principal whom he is
supposedly representing is not bound also to indemnify the agent for damages
suffered by the latter in the course of the
thereby. The contract is considered
fulfillment or execution of the agency so
“unenforceable” as long as it is not ratified
by the principal. Such contract only binds long as the agent is not at fault.
the agent.
 Art. 1914. The agent may retain in pledge
 However, the principal becomes bound if
the things which are the object of the
knowing the acts of the agent as beyond
agency until the principal effects the
his powers, he allowed the agent to act as
reimbursement and pays the indemnity
if he had full powers. Their liability is
set forth in the two preceding articles.
solidary. They are guilty id quasi-delict

which is the object of the agency, the
 For the protection of the agent, the law following rules shall be observed:
provides that the agent has the right to 1. The contract of prior date shall
retain in pledge the objects of the agency prevail.’
until the principal shall have reimbursed 2. But, if the rule on double sale under
him for the advances he made with Article 1544 is applicable, said article
interest as well as the amount of applies.
indemnity for the losses and damages he
suffered while fulfilling the agency. p. What is Article 1917?
 Article 1914 provides for a legal pledge or
pledge by operation of law.  Art. 1917. In the case referred to in the
 The agent can exercise the right of lien preceding article, if the agent has acted in
only when the things subject of the agency good faith, the principal shall be liable in
are still in his possession, custody and damages to the third person whose
control. contract must be rejected. If the agent
acted in bad faith, he alone shall be
 Art. 1915. If two or more persons have responsible. (n)
appointed an agent for a common
transaction or undertaking, they shall be q. What is Article 1918?
solidarily liable to the agent for all the
consequences of the agency. (1731)  Art. 1918. The principal is not liable for the
expenses incurred by the agent in the
 The article applies when an agent is following cases:
appointed for a common transaction by
two or more persons. (1) If the agent acted in contravention of
 Whether the appointment of the agent is the principal's instructions, unless the
jointly or separately made, as long as the latter should wish to avail himself of the
appointment is for the performance of a benefits derived from the contract;
common transaction or undertaking, the
(2) When the expenses were due to the
liability for the principals is solidary.
fault of the agent;
 This rule of solidary liability applies with
respect to the attorney-in-fact or with
(3) When the agent incurred them with
third persons. knowledge that an unfavorable result
would ensue, if the principal was not
o. Discuss Article 1916 in relation to Article aware thereof;
(4) When it was stipulated that the
 Art. 1916. When two persons contract expenses would be borne by the agent, or
with regard to the same thing, one of them that the latter would be allowed only a
with the agent and the other with the certain sum. (n)
principal, and the two contracts are
incompatible with each other, that of prior r. Discuss the modes of extinguishing an
date shall be preferred, without prejudice agency under Article 1919
to the provisions of Article 1544. (n)
 Art. 1919. Agency is extinguished:
 When the principal and agent separately
contracted for the sale of same property (1) By its revocation;

(2) By the withdrawal of the agent;

(3) By the death, civil interdiction, t. What are the kinds of revocation?
insanity or insolvency of the principal or of
the agent;  Express- when the principal clearly and
directly makes a cancellation of the
(4) By the dissolution of the firm or authority of the agent either in writing or
corporation which entrusted or accepted orally.
the agency;  Implied- (1) The appointment of a new
(5) By the accomplishment of the object
agent for the same business or transaction
or purpose of the agency;
revokes the previous agency from the day
on which notice thereof was given to the
(6) By the expiration of the period for
former agent, without prejudice to the
which the agency was constituted. (1732a)
requirement of notice to third persons
s. Explain Article 1920 [Art. 1923].
(2) The agency is revoked if the principal
 Art. 1920. The principal may revoke the directly manages the business entrusted
agency at will, and compel the agent to to the agent, dealing directly with third
persons [Art. 1924].
return the document evidencing the
agency. Such revocation may be express or
u. Discuss Article 1921 to 1926
implied. (1733a)
 Art. 1921. If the agency has been entrusted
 May an agency be terminated by a
for the purpose of contracting with
subsequent act of the principal? Yes, when
specified persons, its revocation shall not
he does so, it’s called revocation.
prejudice the latter if they were not given
 May an agency be terminated by a
notice thereof. (1734)
subsequent act of the agent? Yes, it’s called
withdrawal or renunciation.
 If the agent had general powers,
 Does it matter if the agency is gratuitous or
revocation of the agency does not
with compensation when we speak of
prejudice third persons who acted:
revocation by the principal? No, art 1920
(1) In good faith; and
makes no distinction. (2) Without knowledge of the revocation.
 Qualifications: The right of the principal to  The revocation of this kind of agency shall
terminate the authority of his agent is not prejudice specified persons who were
absolute and unrestricted, except that he is not timely notified of the act of revocation.
liable for damages in case: They must be given the opportunity to
(1) He revokes the agency in bad faith meet the situation so they may be able to
(2) He revokes the agency before the protect their rights and interest.
expiration of the period stipulated in the
agency contract.
 Art. 1922. If the agent had general powers,
Exception: Agency cannot be revoked if it
revocation of the agency does not
is coupled with an interest, such that:
(1) A bilateral contract depends upon it; prejudice third persons who acted in good
(2) It is the means of fulfilling an obligation faith and without knowledge of the
already contracted; or revocation. Notice of the revocation in a
(3) A partner is appointed manager of a newspaper of general circulation is a
partnership in the contract of partnership sufficient warning to third persons. (n)
and his removal from the management is

 The article applies when the agent is latter will not revoke the agency if there is
clothed with general powers. If the agency no incompatibility.
is revoked by the principal and the third
person dealing with the agent is not aware  Art. 1925. When two or more principals
of the revocation, the transaction have granted a power of attorney for a
concluded by the agent with the third common transaction, any one of them may
person shall be binding upon the principal revoke the same without the consent of
even if the agent is in bad faith. In such the others. (n)
case, the recourse of the principal is
directly against the agent.  The power to revoke the agency by one
 Notice of the revocation in a newspaper of principle without the consent of the other
general circulation is a sufficient warning principals, who all granted a special power
to third persons [Art. 1922]. of attorney to the agent involving a
common transaction, is presumed on the
 Art. 1923. The appointment of a new agent principle of solidarity of liability on the
for the same business or transaction part of the principals. The act of one
revokes the previous agency from the day considered the act of all.
on which notice thereof was given to the
former agent, without prejudice to the  Art. 1926. A general power of attorney is
provisions of the two preceding articles. revoked by a special one granted to
(1735a) another agent, as regards the special
matter involved in the latter. (n)
 If no notice is given to the first agent and
he continued with the agency in good faith,  When an agent is granted a general power
the contract he entered into is binding to do certain acts by his principal and the
upon the principal. The second power of latter subsequently granted a special
attorney revoking the first one operates power to another agent to do the same
only after due notice has been given to the matter or transaction, the former power is
first agent. impliedly revoked.
 There is a parallelism with the rule that a
 Art. 1924. The agency is revoked if the special law prevails over a general law.
principal directly manages the business Impliedly, a general power subsequently
entrusted to the agent, dealing directly granted to another agent does not revoke
with third persons. (n) the special power, unless it is clearly
stated that the special power is revoked by
 The agency is deemed impliedly revoked the subsequent general power.
because there is no more basis for the
existence of the agency. There is no more v. Discuss Article 1927
representation of the principal which is
the basis of agency.  Art. 1927. An agency cannot be revoked if
 If the principal directly manages the a bilateral contract depends upon it, or if it
business which he entrusted to the agent is the means of fulfilling an obligation
and he directly deals with third persons, already contracted, or if a partner is
the agency is impliedly revoked. However, appointed manager of a partnership in the
the intervention of the principal after contract of partnership and his removal
having appointed an agent in the very from the management is unjustifiable. (n)
business which he has delegated to the

 The article provides 3 exceptions to the amounts of P113,257 for payment of taxes
general rule that a principal may revoke an due on the transaction as well as
agency of will P50,000.00 as broker's commission. Lim
1. When a bilateral contract depends also issued in the name of Saban four
upon it. postdated checks in the aggregate amount
2. When the agency is the means of of P236,743.00.
fulfilling an obligation already
contracted. Subsequently, Ybañez sent a letter dated
3. When a partner is appointed manager June 10, 1994 addressed to Lim. In the
of a partnership and is removed letter Ybañez asked Lim to cancel all the
unjustifiably. checks issued by her in Saban's favor and
to "extend another partial payment" for
w. What is an agency coupled with interest? the lot in his (Ybañez's) favor.

 Where it is established for the mutual After the four checks in his favor were
benefit of the principal and of the agent, or dishonored upon presentment, Saban filed
for the interest of the principal and of third a complaint for collection of sum of money
persons, and it cannot be revoked by the and damages against Ybañez and Lim
principal so long as the interest of the Saban alleged that Ybañez told Lim that he
agent or of a third person subsists. (Saban) was not entitled to any
commission for the sale since he concealed
x. Discuss Lim v. Saban, G.R. No. 163720, 16 the actual selling price of the lot from
December 2004 Ybañez and because he was not a licensed
 FACTS: real estate broker. Ybañez was able to
convince Lim to cancel all four checks.
Under an Agency Agreement, Ybañez
authorized Saban to look for a buyer of the In his Answer, Ybañez claimed that Saban
lot for Two Hundred Thousand Pesos was not entitled to any commission
(P200,000.00) and to mark up the selling because he concealed the actual selling
price to include the amounts needed for price from him and because he was not a
payment of taxes, transfer of title and licensed real estate broker.
other expenses incident to the sale, as well
as Saban's commission for the sale.
Through Saban's efforts, Ybañez and his Whether Saban is entitled to receive
wife were able to sell the lot to the his commission from the sale
petitioner Genevieve Lim (Lim) and the
spouses Benjamin and Lourdes Lim (the
Spouses Lim) on March 10, 1994. The HELD:
price of the lot as indicated in the Deed of
Absolute Sale is Two Hundred Thousand Yes, Saban is entitled to receive his
Pesos (P200,000.00). It appears, however, commission from the sale.
that the vendees agreed to purchase the lot
at the price of Six Hundred Thousand The Supreme Court held that to
Pesos (P600,000.00), inclusive of taxes deprive Saban of his commission
and other incidental expenses of the sale. subsequent to the sale which was
consummated through his efforts would
After the sale, Lim remitted to Saban the be a breach of his contract of agency with

Ybañez which expressly states that Saban z. Discuss Articles 1930 to 1933
would be entitled to any excess in the
purchase price after deducting the  Art. 1930. The agency shall remain in full
P200,000.00 due to Ybañez and the force and effect even after the death of the
transfer taxes and other incidental principal, if it has been constituted in the
expenses of the sale. common interest of the latter and of the
Moreover, the Court has already agent, or in the interest of a third person
decided in earlier cases that would be in who has accepted the stipulation in his
the height of injustice to permit the favor. (n)
principal to terminate the contract of
agency to the prejudice of the broker when  GR: the death of the principal terminates
he had already reaped the benefits of the the authority of the agent appointed by
broker's efforts. him.
 Exception: 1. When the agency is coupled
y. Discuss Articles 1928 and 1929 with a common interest of the principal
 Art. 1928. The agent may withdraw from and agent.
the agency by giving due notice to the 2. when the agency is coupled with the
principal. If the latter should suffer any interest of a third person who has
damage by reason of the withdrawal, the accepted the stipulation in his favor.
agent must indemnify him therefor, unless
the agent should base his withdrawal upon  Art. 1931. Anything done by the agent,
the impossibility of continuing the without knowledge of the death of the
performance of the agency without grave principal or of any other cause which
detriment to himself. (1736a) extinguishes the agency, is valid and shall
be fully effective with respect to third
 A notarial notice of withdrawal or a simple persons who may have contracted with
notice of the agent’s resignation in an him in good faith. (1738)
authentic manner will be sufficient to give
effect to his withdrawal.  The article applies when the principal had
died without having revoked the power he
 Art. 1929. The agent, even if he should had granted to the agent and the latter
withdraw from the agency for a valid proceeded with the transaction (covered
reason, must continue to act until the by the said power) in good faith with a
principal has had reasonable opportunity third person who is also in good faith.
to take the necessary steps to meet the
situation. (1737a)  Art. 1932. If the agent dies, his heirs must
notify the principal thereof, and in the
 The law seeks to reconcile the interests of meantime adopt such measures as the
the agent with those of the principal and if circumstances may demand in the interest
it permits the withdrawal of the former, it of the latter. (1739)
is a condition that it should not cause
damages.  The object of the requirement is to enable
 The principal should be given sufficient the principal the principal to take prompt
time to appoint another agent or to and necessary steps or actions to protect
perform the assigned task by himself or his interest such as the appointment of a
pursue other appropriate steps to protect new agent or caretaker.
his interests.

 Art. 1933. By the contract of loan, one of
the parties delivers to another, either
something not consumable so that the c. What is bailment and what are its
latter may use the same for a certain time elements?
and return it, in which case the contract is
called a commodatum; or money or other  It is the delivery of a personal property for
consumable thing, upon the condition that some particular use, or on mere deposit,
the same amount of the same kind and upon a contract, express or implied, that
quality shall be paid, in which case the after the purpose has been fulfilled, it shall
contract is simply called a loan or mutuum. be redelivered to the person who
delivered it, or otherwise dealt with
Commodatum is essentially gratuitous. according to his directions, or kept until he
reclaims it, as the case may be.
Simple loan may be gratuitous or with a  Note: Generally, no fiduciary relationship
stipulation to pay interest. is created by bailment. No trustee‐
beneficiary relationship is created.
In commodatum the bailor retains the
ownership of the thing loaned, while in d. Who are the parties of in a bailment?
simple loan, ownership passes to the
borrower. (1740a) 1. Bailor- the one who gives or delivers the
property bailed.
2. Bailee- the one who receives the things
a. What is the meaning of credit transaction? delivered or bailed.

 It refers to agreements based on the trust  Bailor is also known as comodatario or

or belief of someone on the ability of commodans. Bailee is also known as
another person to comply with his comodante or commodatarius.
 Includes all transactions involving loans of e. What is Article 1933?
money, goods or services extended to
another either gratuitously or onerously.  Art. 1933. By the contract of loan, one of
the parties delivers to another, either
b. What are the two types of credit something not consumable so that the
transactions in terms of security? latter may use the same for a certain time
and return it, in which case the contract is
1. Contracts of real security – These are called a commodatum; or money or other
contracts supported by collateral/s or consumable thing, upon the condition that
burdened by an encumbrance on the same amount of the same kind and
property such as mortgage and quality shall be paid, in which case the
pledge. contract is simply called a loan or mutuum.

2. Contracts of personal security – These Commodatum is essentially gratuitous.

are contracts where performance by
the principal debtor is not supported Simple loan may be gratuitous or with a
by collateral/s but only by a promise stipulation to pay interest.
to pay or by the personal undertaking
or commitment of another person
In commodatum the bailor retains the
such as in surety or guaranty. They are
unsecured transactions. ownership of the thing loaned, while in

simple loan, ownership passes to the is agreed
borrower. (1740a) upon)
It is a loan for It is a loan for
f. What is commodatum? Purpose use or consumption.
 Commodatum – where the bailor (lender) possession.
(Art. 1935)
delivers to the bailee (borrower) a non‐
Kind of Real or Only personal
consumable thing so that the latter may property personal property.
use it for a given time and return the same involved property.
thing. Lender or Ownership is
Risk of loss bailor retains transmitted to
g. What are the characteristic of a contract ownership of the borrower
of commadatum? the property. or bailee.
May be Not
Time of returnable at returnable
1. It is essentially gratuitous. If any
payment the end of the until the end
compensation is payable for the use of the period in the of the period.
thing, it ceases to be a commodatum. case of urgent
2. Its purpose is to transfer the temporary need.
use of the thing loaned to the bailee. Character Purely personal Not personal
3. The use of thing is for a “certain time” (Art. of the in character. in character.
1933) contract (Art. 1939)
4. It is a real contract because it required
delivery of the object for its perfection. i. What is a consumable thing?
5. It is a principal contract because its
existence does not depend upon another  A thing is consumable when it cannot be
contract. used in a manner appropriate to its nature
6. It is a unilateral contract because after the without being consumed. Examples: Food,
object had been delivered by the bailor firewood, gasoline.
(lender), it creates obligations to be
performed by the bailee alone (borrower). j. What is a non-consumable thing?
7. It is purely personal because of the trust
and belief reposed on the bailee (Art.  A non-consumable thing is a movable
1939) thing which can be used in a manner
appropriate to its nature without it being
h. Distinguish commodatum from mutuum. consumed. Examples: Car, TV, radio.

Basis Commodatum Mutuum k. What is a fungible thing?

Non- Money or
consumable consumable  Is one where the parties have agreed to
thing. Same thing. The
allow the substitution of the thing given
Subject thing must be equivalent
matter returned. amount of or delivered with an equivalent thing.
same kind and
quality is to be l. What is a non-fungible thing?
Essentially May be  Is one where the parties have the intention
Nature gratuitous. gratuitous or of having the same identical thing
onerous (as returned after the intended use.
when interest

m. What are the kinds of commodatum? 2. Its purpose is to transfer the temporary
use of the thing loaned to the bailee.
1. Ordinary commodatum – bailor
3. The use of thing is for a “certain time” (Art.
cannot just demand the return of the
thing at will, because there is a period
agreed upon by the parties. 4. It is a real contract because it required
2. Precarium – one whereby the bailor delivery of the object for its perfection.
may demand the thing loaned at will
5. It is a principal contract because its
in the following cases.
existence does not depend upon another contract.

a. if the duration of the contract had 6. It is a unilateral contract because after the
not been stipulated; object had been delivered by the bailor (lender), it
creates obligations to be performed by the bailee
b. if the use to which the thing loaned should be alone (borrower).
devoted had not been stipulated; or
7. It is purely personal because of the trust
c. if the use of the thing is merely by tolerance of the and belief reposed on the bailee (Art. 1939)
q. Discuss Articles 1936 to 1940.
n. What is Article 1934?
 Art. 1936. Consumable goods may be the
 Art. 1934. An accepted promise to deliver
subject of commodatum if the purpose of
something by way of commodatum or
the contract is not the consumption of the
simple loan is binding upon parties, but
object, as when it is merely for exhibition.
the commodatum or simple loan itself
shall not be perfected until the delivery of
the object of the contract. (n)  GR: Under Art. 1933, the subject matter of
commodatum must be non‐consumable
 These two contracts cannot be perfected
because the thing must be returned.
by mere consent because they are not
 XPN: Consumable goods may be the object
consensual agreements. They are
of commodatum if the purpose is not to
contracts which require the delivery of the
consume them such as when they were
objects of the obligations.
loaned merely for ad ostentationem or
exhibition purposes. After the affair, the
o. What is Article 1935?
same and identical goods shall be returned
to the lender or bailor (Art. 1936, NCC).
 Art. 1935. The bailee in commodatum
acquires the used of the thing loaned but
 Art. 1937. Movable or immovable property
not its fruits; if any compensation is to be
may be the object of commodatum. (n)
paid by him who acquires the use, the
contract ceases to be a commodatum.
 Both movable and immovable property
may be the object of commodatum. (Art.
1937, NCC)
p. What are the characteristics of a
 Art. 1938. The bailor in commodatum
1. It is essentially gratuitous. If any need not be the owner of the thing loaned.
compensation is payable for the use of the thing, it (n)
ceases to be a commodatum.

 Art. 1939. Commodatum is purely loaned, provided the bailee brings the
personal in character. Consequently: same to the knowledge of the bailor before
incurring them, except when they are so
(1) The death of either the bailor or the urgent that the reply to the notification
bailee extinguishes the contract; cannot be awaited without danger.

(2) The bailee can neither lend nor lease If the extraordinary expenses arise on the
the object of the contract to a third person. occasion of the actual use of the thing by
However, the members of the bailee's the bailee, even though he acted without
household may make use of the thing fault, they shall be borne equally by both
loaned, unless there is a stipulation to the the bailor and the bailee, unless there is a
contrary, or unless the nature of the thing stipulation to the contrary. (1751a)
forbids such use.
 Obligations to pay for ordinary expenses:
 The present article superseded the old The ordinary expenses for the use and
rule by making commodatum a purely preservation of the thing loaned must be
personal contract. Thus, the rights and shouldered by the bailee (borrower)
obligations arising from commodatum are because he is under obligation to return
extinguished by the death of either the the identical thing to the bailor.
bailor or bailee. Consequently, it is understood that he
 Article 1939 is an exception to the broader should take good care of the thing with the
rule that all rights acquired in the virtue of diligence of a good father of a family as
an obligation are transmissible (Art. mandated by Article 1163.
 The article prohibits transmission of the  Article applies only to ordinary expenses:
use of the thing to third persons subject, if the expenses incurred by the bailee are
however, to the exception above stated. extraordinary, the bailor must reimburse
the bailee provided that before incurring
 Art. 1940. A stipulation that the bailee may them, he first informs the bailee about it.
make use of the fruits of the thing loaned
is valid. (n)  If the extraordinary expenses are incurred
during the actual use of the thing, the
 GR: the bailee is not entitled to the use or bailee and the bailor shall equally bear the
enjoyment of the fruits of the thing loaned. expenses unless there is a stipulation to
The fruits belong to the owner (Art. 441). the contrary (Art. 1949).
 EXP: However, if there is a stipulation to
that effect, the bailee may make use of the s. Discuss Articles 1942 to 1945.
fruits of the thing.
 Art. 1942. The bailee is liable for the loss of
r. Discuss Article 1941 in relation to Article the thing, even if it should be through a
1949 fortuitous event:

 Art. 1941. The bailee is obliged to pay for (1) If he devotes the thing to any
the ordinary expenses for the use and purpose different from that for which it
preservation of the thing loaned. (1743a) has been loaned;

 Art. 1949. The bailor shall refund the (2) If he keeps it longer than the period
extraordinary expenses during the stipulated, or after the accomplishment of
contract for the preservation of the thing

the use for which the commodatum has ingratitude considering that the loan is
been constituted; gratuitous. The bailee did not mind the
liberality of the bailor (lender) when he
(3) If the thing loaned has been chose to save his own property.
delivered with appraisal of its value,
unless there is a stipulation exemption the  Art. 1943. The bailee does not answer for
bailee from responsibility in case of a the deterioration of the thing loaned due
fortuitous event; only to the use thereof and without his
fault. (1746)
(4) If he lends or leases the thing to a
third person, who is not a member of his  No liability for the deterioration of the
household; thing in the absence of fault: deterioration
is the lowering of the value or character of
(5) If, being able to save either the thing
a thing. It normally occurs by reason of
borrowed or his own thing, he chose to
ordinary wear and tear. Such depreciation
save the latter. (1744a and 1745)
is borne by the bailor (lender) being the
 The article is an exception to the general owner of the thing. However, if the
rule that “no person shall be responsible deterioration is caused by the fault or
for those events which could not be negligence of the bailee, he is responsible
foresee, or which, through foreseen, were for it.
inevitable” (Art. 1174). It is that kind of
exception expressly specified by law. It  Art. 1944. The bailee cannot retain the
also constitutes as an exception to Article thing loaned on the ground that the bailor
1262. owes him something, even though it may
be by reason of expenses. However, the
 RATIONALE: 1st paragraph: He is in bad bailee has a right of retention for damages
faith. He deviated the purpose for which mentioned in Article 1951. (1747a)
the thing was borrowed.
 GR: the bailee (borrower) cannot retain
2nd paragraph: he is guilty of mora or the thing loaned to him on the ground that
default. Article 1165, also renders him the bailor (lender) owes him something
liable due to delay. including claims for extraordinary
expenses incurred by him (bailee).
3rd paragraph: The law presumes that the
parties, due to the appraisal, have  EXP: excepted from the rule are claims for
intended that the bailee (borrower) shall damages which the bailee suffered by
be liable for the loss due to fortuitous reason of the hidden defects or flaws of the
event. That appears to be the reason for thing loaned, of which he was not warned
the appraisal of the value of the thing or advised by the bailor (lender) (Article
before its delivery. 1951). However, his right is only to retain
the thing until he is finally reimbursed. He
4th paragraph: The bailee violated the pure
has no right to sell the thing to satisfy his
personal character of the commodatum.
claims for damages.
He abused the trust reposed in him by the
bailor (lender).
 RATIONALE: The reason for the general
5th paragraph: In preferring to save his rule of no right of retention is that
own property than the thing loaned, he “bailment implies trust that as soon as the
committed an act tantamount to time has expired, or the purpose

accomplished, the bailed property must be (1) If neither the duration of the contract
restored to the bailor. nor the use to which the thing loaned
should be devoted, has been stipulated; or
 Art. 1945. When there are two or more
bailees to whom a thing is loaned in the (2) If the use of the thing is merely
same contract, they are liable solidarily. tolerated by the owner. (1750a)
 Art. 1948. The bailor may demand the
 Solidary obligation is one wherein either immediate return of the thing if the bailee
one of several creditors has the right to commits any act of ingratitude specified in
demand full and complete compliance of Article 765. (n)
an obligation against either one of the
 This article applies to ordinary
commodatum. In precarium, the bailor
 2 kinds of solidary obligation: (lender) can always demand the
1. Passive- which is the immediate return of the thing at will or
solidarity on the part of the pleasure of the bailor (lender).
2. Active- which is the solidarity  Art. 1950. If, for the purpose of making use
on the part of the creditors. of the thing, the bailee incurs expenses
other than those referred to in Articles
t. Discuss Articles 1946 to 1948; 1950 to 1941 and 1949, he is not entitled to
1952. reimbursement. (n)

 Art. 1946. The bailor cannot demand the  Art. 1951. The bailor who, knowing the
return of the thing loaned till after the flaws of the thing loaned, does not advise
expiration of the period stipulated, or after the bailee of the same, shall be liable to the
the accomplishment of the use for which latter for the damages which he may suffer
the commodatum has been constituted. by reason thereof. (1752)
However, if in the meantime, he should
have urgent need of the thing, he may  RATIONALE: When a person lends a thing,
demand its return or temporary use. he ought to confer a benefit, not to do
mischief. If he does not reveal the flaws, he
In case of temporary use by the bailor, the is liable for his bad faith.
contract of commodatum is suspended
while the thing is in the possession of the  Art. 1952. The bailor cannot exempt
bailor. (1749a) himself from the payment of expenses or
damages by abandoning the thing to the
 EXP: An exception to the rule of “no bailee. (n)
demand “arises when the bailor in the
meantime, has an urgent need of the thing u. What is Article 1953?
loaned, in which case, he may demand its
return or its temporary use.  Art. 1953. A person who receives a loan of
money or any other fungible thing
 Art. 1947. The bailor may demand the acquires the ownership thereof, and is
thing at will, and the contractual relation is bound to pay to the creditor an equal
called a precarium, in the following cases: amount of the same kind and quality.

same kind, quantity, and quality to another
v. What is mutuum? party is considered barter.

 It is a contract whereby one of the parties  GR: Non- fungible things are irreplaceable.
called the “lender” delivers to another
called the “borrower”, money or other  EXP: The present article is an exception.
consumable thing subject to the condition The non-fungible things may be replaced
that the same amount of the same kind and by agreement of the parties. However, the
quantity shall be paid. contract ceased to be a loan. It becomes
w. What are the characteristics of a contract
of mutuum? y. Distinguish between barter and a loan.

1. Borrower acquires ownership of the thing. Basis Loan Barter

If the thing loaned is money, Subject Money or other Non-fungible
payment must be made in the currency Matter fungible things things
which is legal tender in the Philippines and Mutuum may be It is always
Nature gratuitous or onerous
in case of extraordinary deflation or
inflation, the basis of payment shall be the
While in It is in effect, a
value of the currency at the time of the mutuum, there mutual sale
creation of the obligation. Effect is transfer of resulting in
ownership, the transfer of
2. If fungible thing was loaned, the borrower there is no sale. ownership on
is obliged to pay the lender another thing both sides.
of the same kind, quality and quantity. If the loan is a The parties do
commodatum, not return the
 Note: Mere issuance of checks does not Return of the borrower things subject
the thing returns the of the
perfect the contract of loan. It is only after
things after the exchange.
the checks have been encashed that the expiration of
contact may be deemed perfected. Further, the period
when the movable thing delivered in loan agreed upon
is not to be returned to the bailor, but may
be substituted or replaced with another
z. Discuss Article 1955 in relation to Articles
equivalent thing, it is a fungible thing.
1249 and 1250.
x. Discuss Article 1954.
 Art. 1955. The obligation of a person who
borrows money shall be governed by the
 Art. 1954. A contract whereby one person
provisions of Articles 1249 and 1250 of
transfers the ownership of non-fungible
this Code.
things to another with the obligation on
the part of the latter to give things of the
If what was loaned is a fungible thing other
same kind, quantity, and quality shall be
than money, the debtor owes another
considered a barter. (n)
thing of the same kind, quantity and
quality, even if it should change in value. In
 The present Article speaks of a barter or case it is impossible to deliver the same
exchange. The transfer of ownership of kind, its value at the time of the perfection
non-fungible things to a party with of the loan shall be paid. (1754a)
obligation on his part to give things of the

 The subject matter of simple loan may
either be money or consumable thing. The  Art. 1956. No interest shall be due unless it
rules of payment shall be as follows: has been expressly stipulated in writing.
I. If it is money, the obligation of the (1755a)
debtor or borrower shall be
governed by the following  Interest- It is nothing more than the
Articles: compensation to be paid by the borrower
for the use of the money lent to him by the
Art. 1249. The payment of debts lender.
in money shall be made in the
currency stipulated, and if it is not  Classes of Interest:
possible to deliver such currency, 1. Simple – interest which is paid for the
then in the currency which is legal use of the money, at a certain rate
tender in the Philippines. stipulated in writing by the parties.
2. Compound – interest which is imposed
The delivery of promissory notes upon accrued interest, that is, the interest
payable to order, or bills of due and unpaid.
exchange or other mercantile 3. Legal – that interest which the law
documents shall produce the directs to be paid in the absence of any
effect of payment only when they agreement as to the rate.
have been cashed, or when
through the fault of the creditor  Art. 1957. Contracts and stipulations,
they have been impaired. under any cloak or device whatever,
intended to circumvent the laws against
In the meantime, the action usury shall be void. The borrower may
derived from the original
recover in accordance with the laws on
obligation shall be held in the
usury. (n)
abeyance. (1170)
 Q: Must the principal debt still be paid in
Art. 1250. In case an
extraordinary inflation or usurious transactions?
deflation of the currency A: Yes. Under the Usury Law,
stipulated should supervene, the notwithstanding stipulations of usurious
value of the currency at the time interest, the debtor must still pay the
of the establishment of the principal debt
obligation shall be the basis of
payment, unless there is an  Art. 1958. In the determination of the
agreement to the contrary. (n) interest, if it is payable in kind, its value
shall be appraised at the current price of
II. Consumable or fungible thing – the products or goods at the time and place
debtor or borrower shall pay of payment. (n)
another thing of the same kind,
quality and quantity even if it  Art. 1959. Without prejudice to the
should change in value. If cannot provisions of Article 2212, interest due
be done, the value of the thing at and unpaid shall not earn interest.
the time of its perfection However, the contracting parties may by
(delivery) shall be the basis of the stipulation capitalize the interest due and
payment of the loan. unpaid, which as added principal, shall
earn new interest. (n)
aa. Discuss Articles 1956 to 1961.

 Accrued Interest- interest due and
remaining unpaid.
 Compound Interest- This is the interest on
the accrued interest.
 Rationale behind the general rule against
compound interests: If there is no rule
against compound interest, debts would
accumulate with rapidity beyond all
ordinary calculation and endurance. It
would tend also to inflame the avarice and
harden the heart of the creditor. Some
allowance must be made for the indolence
of mankind.

 Art. 1960. If the borrower pays interest

when there has been no stipulation
therefor, the provisions of this Code
concerning solutio indebiti, or natural
obligations, shall be applied, as the case
may be. (n)

 This article means that if unstipulated

interest is paid by mistake, the debtor
may recover as this would be the case of
solutio indebiti or undue payment.

 But where the unstipulated interest, or

stipulated interest, there being a
stipulation but not in writing, is paid
voluntarily, the debtor feels morally
obliged to do so, there can be no recovery
as in the case of natural obligations.

 Art. 1961. Usurious contracts shall be

governed by the Usury Law and other
special laws, so far as they are not
inconsistent with this Code. (n)

 Forbearance: an intentional delay in

collecting a debt or demanding
performance on a contract, usually for a
specific period of time. Forbearance is
often consideration for a promise by the
debtor to pay an added amount.