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SALES AND LEASE

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SECTION 3. – CONDITIONS AND NOTE: if the condition is in the nature of a promise


WARRANTIES that it should happen, the non-performance of such b. Implied warranty -
condition may be treated by the other party as a
Article 1545. Where the obligation of either party to breach of warranty – damages  The seller is liable for his express warranties and
a contract of sale is subject to any condition which is for the implied warranties of title, absence of
not performed, such party may refuse to proceed with Article 1546. Any affirmation of fact or any promise hidden defects, fitness or merchantability,
the contract or he may waive performance of the by the seller relating to the thing is an express description, and sample
condition. If the other party has promised that the warranty if the natural tendency of such affirmation
condition should happen or be performed, such first or promise is to induce the buyer to purchase the EFFECT OF EXPRESSION OF OPINION
mentioned party may also treat the nonperformance same, and if the buyer purchases the thing relying  A mere expression of opinion, no matter how
of the condition as a breach of warranty. thereon. No affirmation of the value of the thing, nor positively asserted, does not import a warranty
any statement purporting to be a statement of the unless the seller is an expert and his opinion was
Where the ownership in the thing has not passed, the seller's opinion only, shall be construed as a relied upon by the buyer.
buyer may treat the fulfillment by the seller of his warranty, unless the seller made such affirmation or
obligation to deliver the same as described and as statement as an expert and it was relied upon by the
warranted expressly or by implication in the contract buyer. (n) Article 1340. The usual exaggerations in trade, when
of sale as a condition of the obligation of the buyer to the other party had an opportunity to know the facts,
perform his promise to accept and pay for the thing. WARRANTY – is a statement or representation are not in themselves fraudulent. (n)
(n) made by the seller of goods, contemporaneously and
as a part of the contract of sale, having reference to Article 1341. A mere expression of an opinion does
the character, quality or title of goods and by which not signify fraud, unless made by an expert and the
CONDITION - means an uncertain event or he promises or undertakes to insure that certain facts other party has relied on the former's special
are or shall be as he then represents them knowledge. (n)
contingency on the happening of which the obligation
or right of the contract depends NOTE: it is not necessary that “warranty” be used by
Article 1343. Misrepresentation made in good faith is
the seller
- the obligation of the contract does NOT not fraudulent but may constitute error. (n)
attach until the condition is performed KINDS OF WARRANTY
- not used in the sense of a promise a. Express warranty – affirmation of fact or Article 1547. In a contract of sale, unless a contrary
any promise by the seller relating to the intention appears, there is:
In the context of PERFECTED CONTRACT of thing, the natural tendency of which is to
sale – the compliance by one party of an undertaking, induce the buyer to purchase the thing and (1) An implied warranty on the part of the seller that
the fulfillment of which would beckon, in turn, the the buyer thus induced, does purchase the he has a right to sell the thing at the time when the
same ownership is to pass, and that the buyer shall from
demand ability of the reciprocal prestation of the
Note: statements relating to other incidents may be that time have and enjoy the legal and peaceful
other party warranties possession of the thing;
 Being a part of COS, it is immaterial ehther
EFFECT OF NON-FULFILLMENT OF the seller did not know that it was true or (2) An implied warranty that the thing shall be free
CONDITION false from any hidden faults or defects, or any charge or
 No intent is necessary to make the seller encumbrance not declared or known to the buyer.
a. refuse to proceed with the contract liable for his warranty
b. proceed with the contract , waiving the  It is the natural consequences of what the
This article shall not, however, be held to render
performance of the condition seller says and the reliance thereon by the
liable a sheriff, auctioneer, mortgagee, pledgee, or
buyer that alone are important
other person professing to sell by virtue of authority

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in fact or law, for the sale of a thing in which a third takes them in the conditions in which that nothing has been said in the contract on the subject.
person has a legal or equitable interest. (n) they are found and from the place where
they are located The contracting parties, however, may increase,
IMPLIED WARRANTY – is that which the law  Does not extend to liens or diminish, or suppress this legal obligation of the
derives by implication or inference from the nature of encumbrances unknown to the vendor. (1475a)
the transaction or the relative situation or vendee and could not be disclosed
circumstances of the parties, irrespective of any by a physical examination of the EVICTION – is a judicial process, whereby the
intention of the seller to create it goods sold vendee is deprived of the whole or part of the thing
 It is reserved for cases where the law  “as is” refers to the physical purchased by virtue of a final judgment based on a
attaches an obligation to the seller condition of the merchandise right prior to the sale or an act imputable to the
which is not expressed in any words 2. Sale of second-hand articles – there is no vendor
a. Implied warranty as to seller’s title - implied warranty as to the condition,
seller guarantees that he has a right to sell adaptation, fitness or suitability ESSENTIAL ELEMENTS OF WAE
the thing sold and to transfer ownership to 3. Sale by virtue of authority in fact or law -
the buyer who shall not be disturbed in his no warranty of title is implied in a sale by 1. The vendee is deprived in whole or in part
legal and peaceful possession thereof one not professing to be the owner of the thing purchased
b. Implied warranty against hidden defects  Not apply to a sheriff, auctioneer, 2. He is so deprived by virtue of a final
– that the seller guarantees that the thing mortgagee, pledge or other person judgment
sold is free from any hidden faults or defects who sells by virtue of authority in 3. The judgment is based on a right prior to
or any charge or encumbrance not declared fact or in law. the sale or an act imputable to the vendor
or known to the buyer  They are not liable to a person with 4. The vendor was summoned in the suit for
c. Implied warranty as to fitness or a legal or equitable interest in the eviction and made co-defendant at the
merchantability - that the seller guarantees thing sold. Liable only for actual instance of the vendee
that the thing sold is reasonably fit for the representations, fraud or negligence 5. There is no waiver on the part of the vendee
known particular purpose for which it was in the exercise of their duties
acquired by the buyer or, where it was  RISK OF DEFECTIVE TITLE- NOTE: in the absence of these requisites, a breach of
bought by description, that it is of is on the purchaser WAE cannot be declared
merchantable quality
CAVEAT EMPTOR (buyers beware) – applies to TRESPASS IN FACT – does not give rise to the
NOTE: An implied warranty is a natural, not execution sales. The sheriff does not guarantee the application of the doctrine of eviction. The vendee
essential, element of a contract, because it is title to real property sold by him as sheriff and it is has a direct action against the trespasser in the same
presumed to exist even though nothing has been said not incumbent upon him to place the purchaser in way as the lessee has such right
in the contract on the subject possession of such property
 Deemed as incorporated in the COS NOTE: the disturbance referred to in the case of
 It may be waived or modified by SUBSECTION 1. – WARRANTY IN CASE OF eviction is a disturbance in law which requires that a
express stipulation EVICTION person go to courts of justice claiming the thing sold,
or part thereof, and invoking reasons
IMPLIED WARRANTY IS NOT APPLICABLE Article 1548. Eviction shall take place whenever by a  Vendor’s liability is waivable
WHEN: final judgment based on a right prior to the sale or an  Any stipulation exempting the vendor from
act imputable to the vendor, the vendee is deprived of the obligation to answer for eviction shall be
1. “As is and where is” sale – it means the whole or of a part of the thing purchased. void if he acted in bad faith
nothing more that that the vendor makes no
warranty as to the quality or workable The vendor shall answer for the eviction even though Article 1549. The vendee need not appeal from the
condition of the goods, and that the vendee decision in order that the vendor may become liable

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for eviction. (n) otherwise decreed in the judgment. (n) 2. Intencionada – waiver is made by the
 The judgment debtor is responsible for vendee with the knowledge of the risks of
 Vendee’s right against the vendor is not lost eviction, hidden defects, even judicial sales, eviction and assumption of its consequences
because, he, the vendee, did not appeal. unless otherwise decreed in the judgment  The vendor is exempted from the
BASIS: general principle that a person may not obligation to answer for eviction,
Article 1550. When adverse possession had been enrich himself at the expense of another. provided he did not act in bad faith
commenced before the sale but the prescriptive WHAT CAN THE PURCHASER DO?
period is completed after the transfer, the vendor  The purchaser is entitled to recover the price WHAT IS THE PRESUMPTION?
shall not be liable for eviction. (n) paid with interest from the judgment debtor  Every waiver is presumed to be
consciente,
1. Completed before sale - the vendee may Article 1553. Any stipulation exempting the vendor
lose the thing purchased to a third person from the obligation to answer for eviction shall be Article 1555. When the warranty has been agreed
who has acquired title thereto by void, if he acted in bad faith. (1476) upon or nothing has been stipulated on this point, in
prescription case eviction occurs, the vendee shall have the right
 When prescription has commenced to run WHAT CONSTITUTES BAD FAITH (vendor) to demand of the vendor:
against the vendor and was already  It consists in his knowing beforehand at the
completer before the sale, the vendee can time of the sale, of the presence of the fact (1) The return of the value which the thing sold had
enforce the WAE giving rise to eviction, and its possible at the time of the eviction, be it greater or less than
2. Completed after sale –even prescription consequence the price of the sale;
has started before the sale but has reached
the limit prescribed by law after the sale, the VENDEE’S BAD FAITH (2) The income or fruits, if he has been ordered to
vendor is not liable for eviction, because the  If he knew the defect of title at the time of deliver them to the party who won the suit against
vendee could easily interrupt the running of sale, or had knowledge of the facts which him;
the prescriptive period by bringing the should have put him upon inquiry any
necessary action investigation as might be necessary is not
(3) The costs of the suit which caused the eviction,
 if the land sold is registered under the entitled to WAE nor damages
and, in a proper case, those of the suit brought against
Torrens system, 1550 will not apply ,
the vendor for the warranty;
because under such system, ownership of Article 1554. If the vendee has renounced the right to
land is not subject to prescription warranty in case of eviction, and eviction should take
place, the vendor shall only pay the value which the (4) The expenses of the contract, if the vendee has
Article 1551. If the property is sold for nonpayment thing sold had at the time of the eviction. Should the paid them;
of taxes due and not made known to the vendee vendee have made the waiver with knowledge of the
before the sale, the vendor is liable for eviction. (n) risks of eviction and assumed its consequences, the (5) The damages and interests, and ornamental
vendor shall not be liable. (1477) expenses, if the sale was made in bad faith. (1478)
 if the vendee is deprived of the ownership of
the property because it is sold at public for KINDS OF WAIVER OF EVICTION 1. Return of value of thing – all kinds of
nonpayment of taxes due from the vendor, 1. Consciente - waiver is voluntarily made by improvements whether useful of necessary
the latter is liable for eviction for an act the vendee without the knowledge and or even recreational expense voluntarily
imputable to him. assumption of the risks of eviction incurred by the vendee or caused by nature
 Nonpayment of taxes was not known by the  If the waiver is only conscious, the or time in so far as they may affect the value
vendee vendor shall pay only the value which of property are taken into account
the thing sold had at the time of eviction  The interest on the price shall be set off
Article 1552. The judgment debtor is also (solutio indebiti against the fruits received by the vendee
responsible for eviction in judicial sales, unless it is

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2. Income or fruits of thing – the vendee is He may exercise this right of action, instead of  The vendor should be made a party to the
liable to the party who won the suit agaist enforcing the vendor's liability for eviction. suit either by way of asking that the former
him for the income or fruits received only if be made co-defendant, or by filing of a
The same rule shall be observed when two or more third-party complaint against said vendor
so decreed by the court
things have been jointly sold for a lump sum, or for a
separate price for each of them, if it should clearly OBJECT OF THE LAW: to give the vendor an
3. The cost of the suit – the vendee is also appear that the vendee would not have purchased one opportunity to intervene and defend the title that he
entitled to recover the expense litgation, without the other. (1479a) has transferred, for after all, he alone would know the
including the costs of action brought against circumstances or reasons behind the claim
the vendor to enforce his warranty.  If there is partial eviction, the vendee has the
“COST OF SUTI” does not include option either to enforce the vendor’s liability for Article 1559. The defendant vendee shall ask, within
eviction or to demand recission of the contract the time fixed in the Rules of Court for answering the
travelling expenses
complaint, that the vendor be made a co-defendant.
 No damages unless vendor acted in BF (1482a)
WHEN APPLICABLE:
1. When the vendee is deprived of a part of the
4. Expenses of contract – in the absence of thing sold if such part is of such importance Article 1560. If the immovable sold should be
stipulation, the expenses in the execution to the whole that he would not have bought encumbered with any non-apparent burden or
and registration of the sale shall be borne by the thing without said part servitude, not mentioned in the agreement, of such a
the vendor 2. When two or more things are jointly sold, nature that it must be presumed that the vendee
whether for lump sum or for a separate price would not have acquired it had he been aware
for each, and the vendee would not have thereof, he may ask for the rescission of the contract,
5. Damages and interests – qualified by the purchased one without the other unless he should prefer the appropriate indemnity.
condition that the sale was made in bad Neither right can be exercised if the non-apparent
faith. If good faith is presumed, the vendee REMEDY OF RECISSION NOT AVAILABLE burden or servitude is recorded in the Registry of
is not entitked to reciver damages IN CASE OF TOTAL EVICTION Property, unless there is an express warranty that the
 Because this remedy contemplates that thing is free from all burdens and encumbrances.
the one demanding it is able to return
RIGHT OF SECOND PURCHASER TO WHOM whatever he has received under the Within one year, to be computed from the execution
WARRANTY ASSIGNED contract of the deed, the vendee may bring the action for
 This is not so when the vendee loses rescission, or sue for damages.
 Has a right of action against the first vendor to only a part of the thing sold because
make good he warranty against eviction there still remains a portion of the thing One year having elapsed, he may only bring an action
BASIS: First vendee’s transfer to him of the right to for damages within an equal period, to be counted
the warranty, a right which the latter had against the Article 1557. The warranty cannot be enforced until from the date on which he discovered the burden or
seller and which the former exercises by virtue of a final judgment has been rendered, whereby the servitude. (1483a)
transfer vendee loses the thing acquired or a part thereof.
(1480) RIGHT OF VENDEE – vendee may rescind or ask
Article 1556. Should the vendee lose, by reason of for indemnity. Lack of knowledge on the part of the
the eviction, a part of the thing sold of such Article 1558. The vendor shall not be obliged to vendor is not a defense. The contractcan still be
importance, in relation to the whole, that he would make good the proper warranty, unless he is invalidated on the ground of mistake
not have bought it without said part, he may demand summoned in the suit for eviction at the instance of
the rescission of the contract; but with the obligation the vendee. (1481a) NOT APPLICABLE:
to return the thing without other encumbrances that  The vendor should be summoned in the suit 1. If the burden or servitude is apparent, that is
those which it had when he acquired it. for eviction at the instance of the vendee made known and is continually kept in view

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by external signs that reveal the use and supposed that the buyer would not have purchased it  It is one which is hidden to the eyes and
enjoyment of the same had he known of the vice cannot be discovered by ordinarily careful
2. If the non-apparent burden or servitude is OBJECT – recission of the contract inspection or examination
registered NOTE: if the object is to procure the return of a part NOTE: there is no warranty if the defect is patent or
3. If the vendee had knowledge of the of the purchase price paid by the vendee, the remedy visible
encumbrance, whether registered or not is known as accion quanti minoris or estimatoris
WHERE DEFECT PATENT OR MADE
PRESCRIPTIVE PERIOD: action for recission or REDHIBITION VICE OR DEFECT – is a defect KNOWN
damages must be brought within 1 year from the in the article sold against which defect the seller is  Defect which is not obvious but of which the
execution of the deed of sale. bound to warrant seller tells the buyer or which the buyer
 When the period has already elapsed, the NOTE: the vice or defect must constitute an knows or should have known
vendee may only bring an action for imperfection, a defect in its nature, of certain  If the seller successfully uses art to conceal
damages within 1 year from the date of the importance; and a minor defect does not give rise to the defects, the seller is liable
discovery of the non-apparent burden or redhibition GR: there is no implied warranty against hidden
servitude  Mere absence of certain quality not defects in the sale of second-hand goods
redhibitory defect XCPT: if the seller has shown to have made
SUBSECTION 2. - WARRANTY AGAINST misrepresentation or acted in bad faith
HIDDEN DEFECTS OF , OR ENCUMBRANCES REQS FOR WARRANTY AGAINST HIDDEN
UPON, THE THING SOLD DEFECTS NOTE: The seller may bind himself against patent or
1. The defect must be important or serious obvious defecs if the intent to do so is clearly evident,
Article 1561. The vendor shall be responsible for 2. It must be hidden hence, the seller cannot allege as a defense that
warranty against the hidden defects which the thing 3. It must exist at the time of the sale inspection would have disclosed the defect or that the
sold may have, should they render it unfit for the use 4. The vendee must give notice f the defect to buyer relied on his own judgment
for which it is intended, or should they diminish its the vendor within a reasonable time
fitness for such use to such an extent that, had the 5. The action for recission or reduction of the Article 1562. In a sale of goods, there is an implied
vendee been aware thereof, he would not have price must be brought within the proper warranty or condition as to the quality or fitness of
acquired it or would have given a lower price for it; period – 6 months from the delivery of the the goods, as follows:
but said vendor shall not be answerable for patent thing sold or within 40 days from the date of
defects or those which may be visible, or for those the delivery in case of animals (1) Where the buyer, expressly or by implication,
which are not visible if the vendee is an expert who, 6. There must be no waiver of warranty on the makes known to the seller the particular purpose for
by reason of his trade or profession, should have part of the vendee which the goods are acquired, and it appears that the
known them. (1484a) buyer relies on the seller's skill or judgment (whether
he be the grower or manufacturer or not), there is an
REDHIBITION – is the avoidance of a sale on WHEN DEFECT IMPORTANT implied warranty that the goods shall be reasonably
account of some vice or defect in the thing sold, 1. When it renders the thing sold unfit for the fit for such purpose;
which renders its use impossible, or is so use for which it is needed
inconvenient and imperfect that it must be supposed 2. If it diminishes its fitness for such use to (2) Where the goods are brought by description from
that the buyer would not have purchased it had he such an extent that the vendee would not a seller who deals in goods of that description
known of the vice have acquired it had he been aware or would (whether he be the grower or manufacturer or not),
have given a lower price for it there is an implied warranty that the goods shall be of
REDHIBITION ACTION – is an action instituted merchantable quality. (n)
to avoid a sale on account of some vice or defect in WHEN DEFECT HIDDEN
the thing sold which renders its use impossible, or is  If it was known and could have not been IMPLIED WARRANTIES OF QUALITY
so inconvenient and imperfect that it must be known to the vendee

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 The purpose of holding the seller on his NOTE: Goods may be unmerchantible not because
implied warranties is to promote high of any defect in their physical condition but because Article 1564. An implied warranty or condition as to
standard in business and to discourage sharp of some other circumstances. the quality or fitness for a particular purpose may be
dealings E.g., annexed by the usage of trade. (n)
1. their infringement of trademarks of
GR: There is no implied warranty as to the quality others renders them unsaleable EFFECT OF USAGE OF TRADE
or fitness for any particular purpose of goods under a 2. other goods other than food which  The usage is relied on for the purpose of
contract of sale is the use of them is dangerous or showing the intention of the parties. If there
XCPT: injurious in ways not to be is no usage, the parties would naturally
1. The buyer, expressly or by implication, expected from the goods of its kind express their intention
manifests to the seller the particular purpose – JOHNSON’s baby powder  In order to bind both parties, the usage must
for which the goods are required be known to both, or if unknown to one, the
2. The buyer relies upon the seller’s skill or  the requirement of merchantable quality other must be justified in assuming
judgment carries with it no implication that the goods knowledge to the other
shall be saleable in a particular market
PARTICULAR PURPOSE OF GOODS – It is not Article 1565. In the case of a contract of sale by
somepurpose necessarily distinct from a general WARRANTY OF MERCHANTABILITY v sample, if the seller is a dealer in goods of that kind,
purpose WARRANTY OF FITNESS there is an implied warranty that the goods shall be
e.g., general purpose for which all food is free from any defect rendering them unmerchantable
bought is to be eaten, and this would also be the WARRANTY OF WARRANTY OF which would not be apparent on reasonable
particular purpose in a specific instance MERCHANTABILITY FITNESS examination of the sample. (n)
 Where an article is capable of being applied Warranty that the goods Warranty that the goods
to a variety of purpose, the buyer must are reasonably fit for the are suitable for the GR: The buyer is entitled, in case of COS to sell by
particularize the specific purpose he has in general purpose for special purpose of the sample, is that the goods be like the sample, so he has
view which they are sold buyer which will not be no right to have the goods merchantable if the sample
satisfied by mere fitness which he has inspected is not
TEST – It is whether the buyer justifiably relied for general purposes WHY? Because a buyer is denied implied warranty
upon the seller’s judgment that the goods furnished who has inspected the goods which he buys
would fulfill the desired purpose, or whether relying Article 1563. In the case of contract of sale of a
on his own judgment, the buyer ordered or bought specified article under its patent or other trade name, WHERE THE SAMPLE IS SUBJECT TO
what is frequently called “a known, described, and there is no warranty as to its fitness for any particular LATENT DEFECT – the buyer is entitled not
definite article” purpose, unless there is a stipulation to the contrary. simple to goods like the sample, but to goods like
(n) those which the sample seems to represent that is
IMPLIED WARRANTY OF SALE UNDER A PATENT OR TRADE NAME merchantable goods of that kind and character
MERCHANTABILITY - where goods are bought  This article limits the application of article
by description, the seller impliedly warrants that the 1562 which is the buyer makes known to the
goods are of merchantable quality seller the particular purpose for which the Article 1566. The vendor is responsible to the vendee
goods are desired for any hidden faults or defects in the thing sold, even
Merchantability - requires identity between what is  There is an implied warranty of fitness for a though he was not aware thereof.
described in the contract and what is tendered particular purpose (usage different from the
JUDICIAL SYNONYMS: salable or saleable, ordinary uses the article was made to meet) This provision shall not apply if the contrary has been
standard, average quality of goods under a particular where a buyer relied upon the seller’s stipulated, and the vendor was not aware of the
description judgment rather that the patent or trade hidden faults or defects in the thing sold. (1485)
name

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RESPONSIBILITY OF THE VENDOR FOR The vendee has the option either to: If the vendor acted in bad faith, he shall pay damages
HIDDEN DEFECTS 1. Withdraw from the contract (accion to the vendee. (1488a)
redhibitoria)
GR: The ignorance of the vendor does not relieve 2. Demand a proportionate reduction of the
him from liability to the vendee for any hidden price (accion quanti minoris) with a right to EFFECT OF LOSS OF DEFECTIVE THING
defects damages in either case SOLD
XCPT: if it is provided in their contract, where the  The vendor is obliged to return the price
vendor acted in good faith that he was unaware of the Article 1568. If the thing sold should be lost in paid less the value of the thing at the time of
existence of hidden fault or defect consequence of the hidden faults, and the vendor was its loss in case there is hidden defects
aware of them, he shall bear the loss, and shall be  The difference between the price paid for
if the vendee is aware of the defect he cannot later obliged to return the price and refund the expenses of the thing sold and the value at the time of
complain thereof. He is deemed to have willfully and the contract, with damages. If he was not aware of the loss, represents the damage suffered by
voluntarily assumed the risk attendant to the sale them, he shall only return the price and interest the vendee and is at the same time the
thereon, and reimburse the expenses of the contract amount with which the vendor enriched at
CAVEAT EMPTOR – let the buyer beware; only which the vendee might have paid. (1487a) the expense of the vendee
applicable to sheriff’s sales, sales of animals, and tax
sales, double sales of property where the issue is who EFFECTS OF THING SOLD ON ACCOUNT OF Article 1570. The preceding articles of this
between the two has a better right – because there is HIDDEN DEFECTS Subsection shall be applicable to judicial sales,
no warranty of title or quality on the part of the seller except that the judgment debtor shall not be liable for
in such sales VENDOR IS AWARE VENDOR NOT damages. (1489a)
OF HIDDEN AWARE OF HIDDEN
CAVEAT VENDITOR - let the seller beware. It DEFECTS DEFECTS WARRANTY IN JUDICIAL SALES
was adopted in accordance with which “the vendor is If the thing sold was lost, The vendor is obliged to  In a judicial sale, it is not really the sheriff
liable to the vendee for any hidden defects in the the vendor shall bear the return: who sells but the judgment debtor.
thing sold, even though he was not awarethereof. loss because he acted in  The buyer can avail of the alternative
 The doctrine is based on the principle that a bad faith. The vendee has remedies, but the judgment debtor is not
sound price warrants a sound article the right to recover: liable for damages since, he is only for to
a. The price paid a. The price paid sell
WHEN THE DEFECT MUST BE PRESENT b. The expenses of b. Interest thereon  The publicity surrounding a judicial sale and
a. Upon delivery or manufacture of the product the contract in the determination of the price precludes
b. The product left the seller’s control c. damages c. Expenses of the the existence of bad faith on his part
c. Product was sold to the purchaser contract if paid
d. The product reached the consumer without by the vendee. RIGHT OF THE PURCHASER IN JUDICIAL
substantial change in the condition it was NOTE: he is not made SALES
sold liable for damages  What is sold is not the property advertised,
because he is not guilty but simply the interest of the debtor in the
Article 1567. In the cases of articles 1561, 1562, of bad faith property
1564, 1565 and 1566, the vendee may elect between  Where a judicial sale is voided or set aside
withdrawing from the contract and demanding a Article 1569. If the thing sold had any hidden fault at without fault of the purchaser, the latter is
proportionate reduction of the price, with damages in the time of the sale, and should thereafter be lost by a entitled to reimbursement of the purchase
either case. (1486a) fortuitous event or through the fault of the vendee, money paid by him subject to set-off for
the latter may demand of the vendor the price which benefits enjoyed while he had possession of
ALTERNATIVE REMEDIES OF THE BUYER he paid, less the value which the thing had when it the property
TO ENFORCE WARRANTY was lost.

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GR: a judicial sale can only be set aside upon the  When 2 or more animals have been sold at stated in the contract, and they are found to be unfit
return to the buyer of the purchase price with simple the same time and the redhibitory defect is therefor. (1494a)
interest and other expenses incurred by him one, or some of them but not all:
WHEN SALE OF ANIMALS VOID
Article 1571. Actions arising from the provisions of GR: the redhibition will not affect the others  Animals suffering from contagious diseases
the preceding ten articles shall be barred after six without it. It is immaterial whether the price and those found unfit for the use or service
months, from the delivery of the thing sold. (1490) has been fixed or lump sum for all animals stated
PRESCRIPTION OF ACTIONS IN CASES OF or separate price for each  The sale of such animals is void as against
IMPLIED WARRANTY public interest and not merely subject to
XCPT: when it can be shown by the recission or reduction of the price
ACTION FOR RECISSION OR REDUCTION vendee that he would not have purchased the  It is to be governed by the rules relating to
OF THE PURCHASE PRICE - 6 months from the sound ones without those which are nullity of contracts
date of delivery t the vendee of the things sold or defective. It is presumed when a team, yoke,
when it isplace in his control or possession pair or set is bought Article 1576. If the hidden defect of animals, even in
 Although the article provides only for case a professional inspection has been made, should
ACTION FOR QUASI-DELICT OR redhitory actions, it does not bar the right of be of such a nature that expert knowledge is not
NEGLIGENCE – 4 years the vedee to bring an action quanti minoris sufficient to discover it, the defect shall be considered
as redhibitory.
NOTE: Article 1571 applies only to implied Article 1573. The provisions of the preceding article But if the veterinarian, through ignorance or bad faith
warranty with respect to the sale of animals shall in like should fail to discover or disclose it, he shall be liable
manner be applicable to the sale of other things. for damages. (1495)
PRESCRIPTION OF ACTIONS IN CASES OF (1492)
EXPRESS WARRANTY WHAT CONSTITUTES REDHIBITORY
Article 1574. There is no warranty against hidden DEFECT OF ANIMALS?
ACTION FOR RECISSION - 4 years; unless defects of animals sold at fairs or at public auctions,  To be considered redhibitory, the defect
otherwise stated or of live stock sold as condemned. (1493a) must not only be hidden. It must be of such
nature that expert knowledge is not
Article 1572. If two or more animals are sold SALE OF ANIMALS AT FAIRS OR AT PUBLIC sufficient to discover it.
together, whether for a lump sum or for a separate AUCTIONS OR AS CONDEMNED
price for each of them, the redhibitory defect of one Article 1577. The redhibitory action, based on the
shall only give rise to its redhibition, and not that of  This article is based on the assumption that faults or defects of animals, must be brought within
the others; unless it should appear that the vendee the defects must have been clearly known to forty days from the date of their delivery to the
would not have purchased the sound animal or the buyer vendee.
animals without the defective one.  Sale of animals as condemned precludes all
idea of warranty against hidden defects. This action can only be exercised with respect to
The latter case shall be presumed when a team, yoke Such animals are bought not because of their faults and defects which are determined by law or by
pair, or set is bought, even if a separate price has quality or capacity to work local customs. (1496a)
been fixed for each one of the animals composing the
same. (1491) LIMITATION OF ACTION IN SALE OF
Article 1575. The sale of animals suffering from ANIMALS
SALE OF TWO OR MORE ANIMALS contagious diseases shall be void.  The redhibitory action based on the faults of
TOGETHER animals shall be barred unless brought
A contract of sale of animals shall also be void if the within 40 days from the date of their
use or service for which they are acquired has been delivery to the vendee

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 If the defects are patent, there is no warranty


against such defects although there exists a  The vendee has the same right to bring at his PERTINENT RULES
redhibitory vice option, ether a redhibitory action or an 1. In a COS, the vendor is not required to
action quanyti minoris. The action must be deliver the thing sold until the price is paid
Article 1578. If the animal should die within three brought within 4 days from the date of the nor the vendee to pay the price before the
days after its purchase, the vendor shall be liable if delivery of the animals to the vendee thing is delivered in absence of an
the disease which cause the death existed at the time agreement to the contrary
of the contract. (1497a) Article 1581. The form of sale of large cattle shall be 2. If stipulated, the vendee is bound to accept
governed by special laws. (n) delivery and to pay the price at the time and
RESPONSIBILITY OF VENDOR WHERE  The special law governing the sale of larg place designated
ANIMAL DIES cattle is ACT No. 4117, now found in Sec 3. If there is no stipulation, the vendee is
 If the animal sold is suffering from any 511 to 536 of the RAC, providing for the bound to pay at the time and place of
disease at the time of the sale, the vendor is registration, branding, conveyance and delivery
liable should it die of said disease within 3 slaughter of large cattle 4. In the absence of stipulation as to the place
days from the date of the sale (not of  The sale must appear in a public document of delivery, it shall be made wherever the
delivery) thing might be at the moment the contract
 If the death occurs after 3 days or the defect was perfected
is patent r visible, he is not liable CHAPTER 5 5. If only the time for delivery of the thing sold
 If the loss is caused by a fortuitous event or OBLIGATIONS OF THE VENDEE has been fixed in the contract, the vendee is
by the fault of the vendee, and the animal required to pay even before the thing is
has vices, article 1569 should apply Article 1582. The vendee is bound to accept delivery delivered to him; if only the time for
and to pay the price of the thing sold at the time and payment of the price as been fixed, the
place stipulated in the contract. vendee is entitled to delivery even before the
Article 1579. If the sale be rescinded, the animal price is paid by him
shall be returned in the condition in which it was sold If the time and place should not have been stipulated,
and delivered, the vendee being answerable for any the payment must be made at the time and place of
injury due to his negligence, and not arising from the the delivery of the thing sold. (1500a) LIABILITY OF VENDEE FOR OBLIGATIONS
redhibitory fault or defect. (1498) OF COMPANY BOUGHT OUT
PRINCIPAL OBLIGATIONS OF VENDEE  In some cases, when one company buys out
LIABILITY OF BUYER IN CASE OF ANIMAL 1. To accept delivery of the thing sold another and continues the business of the
IS RESCINDED 2. To pay the price of the thing sold at the time latter company, the buyer may be said to
 If the vendee avails himself of the remedies, and place stipulated in the contract assume the obligations of the company
the vendee must return the animal in the 3. To bear the expenses for the execution and bought out when said obligations are not of
condition in which it was sold and delivered. registration of the sale and putting the goods considerable amount or value, especially
 In case of injury to his negligence, the in a deliverable state, if such is the when incurred in the ordinary course of
vendee shall be responsible but this would stipulation trade and when the business of the latter
be no obstacle to the recission of the company is continued
contract NOTE: a grace period granted the vendee in case of  When said obligations are of extraordinary
failure to pay the amount due is a right and not an value and the company was brought out not
Article 1580. In the sale of animals with redhibitory obligation.’’ to continue its business but to stop its
defects, the vendee shall also enjoy the right operation in order to eliminate competition,
mentioned in article 1567; but he must make use GR: An agreement to extend the time of payment in it cannot be said that the vendee assumed all
thereof within the same period which has been fixed order to be valid , must be for a definite time, or can the obligations of the rival company
for the exercise of the redhibitory action. (1499) readily be determined  CBA are not enforceable against the
transferee of an enterprise. Labor contracts
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are in personae and thus, binding only not deemed to have accepted them unless and until he the seller refused, the buyer may rescind the
between the parties has had a reasonable opportunity of examining them contract
for the purpose of ascertaining whether they are in  The right to examine may be waived, even if
conformity with the contract if there is no stipulation not express
Article 1583. Unless otherwise agreed, the buyer of to the contrary.
goods is not bound to accept delivery thereof by Article 1585. The buyer is deemed to have accepted
installments. Unless otherwise agreed, when the seller tenders the goods when he intimates to the seller that he has
delivery of goods to the buyer, he is bound, on accepted them, or when the goods have been
Where there is a contract of sale of goods to be request, to afford the buyer a reasonable opportunity delivered to him, and he does any act in relation to
delivered by stated instalments, which are to be of examining the goods for the purpose of them which is inconsistent with the ownership of the
separately paid for, and the seller makes defective ascertaining whether they are in conformity with the seller, or when, after the lapse of a reasonable time,
deliveries in respect of one or more instalments, or contract. he retains the goods without intimating to the seller
the buyer neglects or refuses without just cause to that he has rejected them. (n)
take delivery of or pay for one or more instalments, it Where goods are delivered to a carrier by the seller,
depends in each case on the terms of the contract and in accordance with an order from or agreement with MODES OF MANIFESTING ACCEPTANCE
the circumstances of the case, whether the breach of the buyer, upon the terms that the goods shall not be 1. EXPRESS ACCEPTANCE – takes place
contract is so material as to justify the injured party delivered by the carrier to the buyer until he has paid when the buyer, after delivery of the goods,
in refusing to proceed further and suing for damages the price, whether such terms are indicated by intimates to the seller, verbally or in writing
for breach of the entire contract, or whether the marking the goods with the words "collect on that he has accepted them
breach is severable, giving rise to a claim for delivery," or otherwise, the buyer is not entitled to 2. IMPLIED ACCEPTANCE – when the
compensation but not to a right to treat the whole examine the goods before the payment of the price, in buyer, after delivery of goods, does any act
contract as broken. (n) the absence of agreement or usage of trade permitting inconsistent with the seller’s ownership, as
such examination. (n) when he sells or attempts to sell the goods,
GR: In an ordinary COS, the buyer is not bound to or he uses, or makes alteration in them in a
receive delivery of the goods in installments  The ownership of the goods shall be manner proper only for an owner
 He is entitled to delivery of all the goods at transferred only upon actual delivery subject  When the buyer, after the lapse of a
the same time and, is bound to receive to a reasonable opportunity of examining reasonable time, retais the goods
delivery of all at the same time them to determine if they are in conformity without intimating his rejection
 A buyer has no right to pay the price in with the contract  The retention of the goods is a
installments  The right of examination is a condition strong evidence that the buyer has
 Neither he be required to make partial precedent to the transfer of ownership unless accepted ownership of goods
payments there is stipulation to the contrary
XCPT: when agreed upo  Although the titke passes to the buyer by the DELIVERY AND ACCEPTANCE, SEPARATE
mere delivery to the carrier, the buyer unless ACTS
 If the seller makes defective, partial or the goods are sent C.O.D. has the right to  Delivery and acceptance are two distinct and
incomplete deliveries, the party injured may examie the goods before paying. In this separate acts of different parties
sue for damages for breach of entire contract case, the right to examine is a condition  Delivery is an act of the vendor. Thus, one
if the breach is so material precendent to paying the price after of the obligations of the vendor is the
 Where the breach is severable, it will merely ownership passed delivery of the thing sold, the vendee has
give rise to a claim for compensation for the  The buyer does not have absolute right f nothing to do with it
particular breach examination since the seller is bound to  Acceptance is an obligation on the part of
afford the buyer a reasonable opportunity of the vendee. Acceptance cannot be regarded
Article 1584. Where goods are delivered to the examining the goods only “upon request” , if as a condition to complete delivery
buyer, which he has not previously examined, he is

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 There may be actual receipt without any notifies the seller that he refuses to accept them. If he (2) Should the thing sold and delivered produce fruits
acceptance and there may be acceptance voluntarily constitutes himself a depositary thereof, or income;
without actual receipt he shall be liable as such. (n) (3) Should he be in default, from the time of judicial
or extrajudicial demand for the payment of the price.
Article 1586. In the absence of express or implied (1501a)
agreement of the parties, acceptance of the goods by WHERE BUYER’S REFUSAL TO ACCEPT
the buyer shall not discharge the seller from liability JUSTIFIED LIABILITY OF VENDEE FOR INTEREST
in damages or other legal remedy for breach of any WHERE PAYMENT IS MADE AFTER
promise or warranty in the contract of sale. But, if,  he is in the position of a bailee who has had DELIVERY
after acceptance of the goods, the buyer fails to give goods thrust upon him without his assent.  the delivery and payment were not made
notice to the seller of the breach in any promise of He has the obligation to take reasonable care simultaneously but the thing sold was
warranty within a reasonable time after the buyer of the goods, no obligation to return delivered, first followed by the payment of
knows, or ought to know of such breach, the seller  After notice that the goods have not been the price after the lapse of a certain period of
shall not be liable therefor. (n) and will not be accepted, the seller must time
have the burden of taking delivery of said  the vendee is liable to pay interest from the
ACCEPTANCE, NOT A BAR TO ACTION FOR goods delivery of the thing until the payment of the
DAMAGES  The risk remains at the seller, and the buyer price
ACCEPTANCE - assents to receive delivery as is not liable as a depositary
transferring possession or ownership in the goods;  Should the seller, when noyified to take INTEREST
but does not carry with it the additional agreement delivery of the goods fails to do so, the  the rate stipulated governs, the stipulation
that the property in the goods shall be taken in full buyer may resell the goods may be oral
satisfaction of all obligations  if the parties failed to fix the rate, the legal
Article 1588. If there is no stipulation as specified in rate of interest shall be due
 Unless otherwise agreed, acceptance of te the first paragraph of article 1523, when the buyer's
goods by the buyer does not discharge the refusal to accept the goods is without just cause, the FRUITS OR INCOME BY VENDEE FROM
seller from liability in damages or other title thereto passes to him from the moment they are THING SOLD
legal remedy placed at his disposal. (n) 2 Conditions:
a. that the thing sol has been delivered
NOTICE TO SELLER OF BREACH OF WHERE BUYER’S REFUSAL TO ACCEPT b. that it produces fruits or income
PROMISE OR WARRANTY WORNGFUL  if the vendee would not be bound to pay
interest for the use f the money, the principle
 The above article requires the buyer, in GR: The delivery of the goods to a carrier is deemed of bilateralism would no longer exist
order to hold the seller liable for breach of to be a delivery of the goods to the buyer even if the
promise or warranty, buyer refuses to accept goods without just cause NOTE: if the vendee incurs delay in the payment,
PURPOSE: to protect the seller against belated  The title passes to him, s the risk of loss is the interest due from the time of judicial or
claims which prevent him from making prompt borne by him extrajudicial demand by the vendor is starting point
investigation to determine the cause and extent of his  Ownership passes by operation of law after for the commencement of default or delay in the part
liability and also to enable him to take any other such inspection of the vendee
immediate steps that his interest may require
Article 1590. Should the vendee be disturbed in the
Article 1587. Unless otherwise agreed, where goods Article 1589. The vendee shall owe interest for the possession or ownership of the thing acquired, or
are delivered to the buyer, and he refuses to accept period between the delivery of the thing and the should he have reasonable grounds to fear such
them, having the right so to do, he is not bound to payment of the price, in the following three cases: disturbance, by a vindicatory action or a foreclosure
return them to the seller, but it is sufficient if he (1) Should it have been so stipulated; of mortgage, he may suspend the payment of the

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price until the vendor has caused the disturbance or rescission of the sale. a subsidiary one limited to cases of recission for
danger to cease, unless the latter gives security for lesion as enumerated.
the return of the price in a proper case, or it has been Should such ground not exist, the provisions of
stipulated that, notwithstanding any such article 1191 shall be observed. (1503) PRESCRIPTIVE PERIOD: within 10 yeas from
contingency, the vendee shall be bound to make the the time the right of action accrues
payment. A mere act of trespass shall not authorize RIGHT OF VENDOR TO RESCIND SALE OF
the suspension of the payment of the price. (1502a) IMMOVABLE PROPERTY  A seller cannot unilaterally and
 There has been delivery but the vendee has extrajudicially rescind a contract of sale of
RIGHT OF THE VENDEE TO SUSPEND not yet paid the price immovable property where there is no
PAYMENT PRICE  Applicable to both cash sales and to sales in express stipulation authorizing him XCPT
When vendee has right: installments 1592
a. if the vendee is disturbed in the possession  Recission is allowed only where the breach NOTE: judicial action for recission is not necessary
or ownership of the thing bought is substantial and fundamental to the where the contract provides for automatic recission
b. if he has a well-grounded fear that his fulfillment of the obligation
possession or ownership would be disturbed 1. Once a demand for recission by suot or
by a vindicatory action or foreclosure Article 1592. In the sale of immovable property, notarial act is made, 1592, the court may not
mortgage even though it may have been stipulated that upon grant the vendee a new term unless he is in
NOTE: the vendee is only entitled to retain the price failure to pay the price at the time agreed upon the good faith
that has not been pad to the vendor. He is not entitled rescission of the contract shall of right take place, the 2. The right of automatic recission is subject to
to recover what has alreadt been paid vendee may pay, even after the expiration of the a waiver
period, as long as no demand for rescission of the 3. Written notice of cancellation must be
When vendee has no right: contract has been made upon him either judicially or given. It must be notarized, and if not it will
a. if the vendor gives security for the return of by a notarial act. After the demand, the court may not be defective. Formal notice ordering the
the price in a proper case grant him a new term. (1504a) buyer to vacate is illegal.
b. if it has been stipulated that notwithstanding 4. Recission of sale is only permitted when the
any such contingency, the vendee must RULE WHERE AUTOMATIC RECISSION OF breach is substantial
make payment SALE OF IMMOVABLE PROPERTY
c. if the vendor has caused the disturbance or STIPULATED WHEN ARTICLE 1592 IS NOT APPLICABLE
danger to cease 1. Sale on installment of real estate –
d. if the disturbance is a mere act of trespass GR: the vendor may sue for recission of the contract contemplates an absolute sale
e. if the vendee has fully paid the price should the vendee fail to pay the agreed price 2. Contract to sell/conditional sale of real
estate
RIGHT OF VENDEE TO DEMAND RECISSION XCPT: the sale of real property is subject to the 3. Cases covered by RA No. 6552
 The vendee has no cause of action for stipualations agreed upon by the parties and to the
rescission before final judgment because the provisions of 1592 which speaks of non-payment of Article 1593. With respect to movable property, the
vendor will be a victim of machinations the purchase price as a resolutory condition rescission of the sale shall of right take place in the
between vendee and third person  The mere failure to fulfill contract does not interest of the vendor, if the vendee, upon the
 It is recission where the disturbance is operate ipso facto as its recission expiration of the period fixed for the delivery of the
caused by the existence of a non-apparent  A judicial or notarial act is necessary before thing, should not have appeared to receive it, or,
servitude a valid recission can take place, whether or having appeared, he should not have tendered the
not automatic recission has been stipulated price at the same time, unless a longer period has
Article 1591. Should the vendor have reasonable NOTE: in Articles 1191 and 1592, the recission is a been stipulated for its payment. (1505)
grounds to fear the loss of immovable property sold principal action which seeks the resolution or
and its price, he may immediately sue for the cancellation of the contract, while 1381, the action is

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RULE WHERE AUTOMATIC RECISSION OF Article 1595. Where, under a contract of sale, the NOTE: the seller cannot maintain an action for the
ALE OF MOVABLE PROPERTY STIPULATED ownership of the goods has passed to the buyer and price if the ownership in the goods has not passed to
 In sale of real property, the vendor must he wrongfully neglects or refuses to pay for the goods the buyer,
make a demand for recission before he can according to the terms of the contract of sale, the a. Unless the price is payable on a certain ay
have the right to rescind the contract seller may maintain an action against him for the b. Unless the goods cannot readily be resold
 In case of personal property (not yet price of the goods. for a certain price
delivered), the vendor can rescind the
contract, as a matter of right, if the vendee, Where, under a contract of sale, the price is payable DIFFERENT TIMES FIXED FOR PAYMENT
without any valid cause does not: on a certain day, irrespective of delivery or of AND DELIVERY
a. Accept delivery transfer of title and the buyer wrongfully neglects or  Act which is to be performed first is
b. Pay the price unless a credit period for refuses to pay such price, the seller may maintain an absolutely due on that day, while the
its payment has been stipulated action for the price although the ownership in the performance is to take place n a later day is
goods has not passed. But it shall be a defense to not due, unless, as a condition precedent, the
REASON FOR THE RULE WITH RESPECT TO such an action that the seller at any time before the prior performance has been rendered
MOVABLE PROPERTY judgment in such action has manifested an inability
 Personal properties are not capable of to perform the contract of sale on his part or an Article 1596. Where the buyer wrongfully neglects
maintaining a stable price in the market. intention not to perform it. or refuses to accept and pay for the goods, the seller
Their prices are so changeable that any may maintain an action against him for damages for
delay in their disposal might cause the Although the ownership in the goods has not passed, nonacceptance.
vendor a great prejudice if they cannot readily be resold for a reasonable price,
and if the provisions of article 1596, fourth The measure of damages is the estimated loss directly
CHAPTER 6 paragraph, are not applicable, the seller may offer to and naturally resulting in the ordinary course of
Actions for Breach of Contract of Sale of Goods deliver the goods to the buyer, and, if the buyer events from the buyer's breach of contract.
refuses to receive them, may notify the buyer that the
Article 1594. Actions for breach of the contract of goods are thereafter held by the seller as bailee for Where there is an available market for the goods in
sale of goods shall be governed particularly by the the buyer. Thereafter the seller may treat the goods as question, the measure of damages is, in the absence
provisions of this Chapter, and as to matters not the buyer's and may maintain an action for the price. of special circumstances showing proximate damage
specifically provided for herein, by other applicable (n) of a different amount, the difference between the
provisions of this Title. (n) contract price and the market or current price at the
THREE CASES WHEN AN ACTION FOR THE time or times when the goods ought to have been
GOODS - include all chattels personal but not things PRICE CAN BE MAINTAINED accepted, or, if no time was fixed for acceptance,
in action or money of legal tender in the Philippines, 1. When the ownership of the goods has passed then at the time of the refusal to accept.
includes growing fruits or crops to the buyer and he wrongfully neglects or
refuses to pay for the price If, while labor or expense of material amount is
ACTIONS AVAILABLE 2. When the price is payable on a certain day necessary on the part of the seller to enable him to
1. Action by the seller for payment of the price and the buyer wrongfully neglects or refuses fulfill his obligations under the contract of sale, the
2. Action by the seller for damages for non- to pay such price, irrespective of delivery or buyer repudiates the contract or notifies the seller to
acceptance of the goods of transfer of the title proceed no further therewith, the buyer shall be liable
3. Action by the seller for recission of the 3. When the goods cannot readily be resold for to the seller for labor performed or expenses made
contract for breach thereof a for a reasonable price and the buyer before receiving notice of the buyer's repudiation or
4. Acton by the buyer for specific performance wrongfully refuses to acceot them even countermand. The profit the seller would have made
5. Action by the buyer for recission or before the ownership in the goods has if the contract or the sale had been fully performed
damages for breach of warranty passed shall be considered in awarding the damages. (n)

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perform his obligations thereunder, or has committed (3) Refuse to accept the goods, and maintain an
SELLER’S RIGHT OF ACTION FOR a breach thereof, the seller may totally rescind the action against the seller for damages for the breach of
DAMAGES contract of sale by giving notice of his election so to warranty;
1. If the buyer without lawful cause neglects or do to the buyer. (n)
refuses to accept and pay for the goods he (4) Rescind the contract of sale and refuse to receive
agreed to buy, the seller may maintain an SELLER’S RIGHT OF RECISSION BEFORE the goods or if the goods have already been received,
action against him for damages for non- DELIVERY return them or offer to return them to the seller and
acceptance CASES WHERE: recover the price or any part thereof which has been
2. In an executor contract, where the 1. The buyer has repudiated the contract of sale paid.
ownership I the goods has not passed, and 2. When the buyer has manifested his inability
the seller cannot maintain an action to to perform his obligations hereunder When the buyer has claimed and been granted a
recover the price, the seller’s remedy will 3. When the buyer has committed a breach of remedy in anyone of these ways, no other remedy can
also be an action for damages the contract of sale thereafter be granted, without prejudice to the
3. If the goods are not yet identified at the time provisions of the second paragraph of article 1191.
of the contract pr subsequently, the seller’s Article 1598. Where the seller has broken a contract
right is necessarily confined to an action for to deliver specific or ascertained goods, a court may, Where the goods have been delivered to the buyer, he
damages on the application of the buyer, direct that the cannot rescind the sale if he knew of the breach of
contract shall be performed specifically, without warranty when he accepted the goods without protest,
MEASURE OF DAMAGES FOR NON- giving the seller the option of retaining the goods on or if he fails to notify the seller within a reasonable
ACCEPTANCE payment of damages. The judgment or decree may be time of the election to rescind, or if he fails to return
1. The measure of damage is the estimated loss unconditional, or upon such terms and conditions as or to offer to return the goods to the seller in
directly and naturally resulting from the to damages, payment of the price and otherwise, as substantially as good condition as they were in at the
buyer’s breach of contract the court may deem just. (n) time the ownership was transferred to the buyer. But
FORMULA: the difference between the if deterioration or injury of the goods is due to the
contract price (amount buyer failed to pay) BUYER’S RIGHT TO SPECIFIC breach or warranty, such deterioration or injury shall
and the market value or current price (value PERFORMACE not prevent the buyer from returning or offering to
which the seller has left upon his hands)  This article applies only where the goods to return the goods to the seller and rescinding the sale.
2. If there is no available market in which the be delivered are specific or ascertained
goods can be sold at the time, the seller is  The right of the injured party to demand Where the buyer is entitled to rescind the sale and
entitled to the full amount of the damage specific performance cannot be defeated by elects to do so, he shall cease to be liable for the price
which he has really sustained by a breach of the guilty party’s choice to rescind the upon returning or offering to return the goods. If the
the contract contract price or any part thereof has already been paid, the
seller shall be liable to repay so much thereof as has
MEASURE OF DAMAGES FOR REPUDATION Article 1599. Where there is a breach of warranty by been paid, concurrently with the return of the goods,
OR COUNTERMAND the seller, the buyer may, at his election: or immediately after an offer to return the goods in
1. The labor performed and expenses incurred exchange for repayment of the price.
for materials before receiving notice of the (1) Accept or keep the goods and set up against the
buyer’s repudiation seller, the breach of warranty by way of recoupment Where the buyer is entitled to rescind the sale and
2. The profit he would have realized if the sale in diminution or extinction of the price; elects to do so, if the seller refuses to accept an offer
had been fully performed of the buyer to return the goods, the buyer shall
(2) Accept or keep the goods and maintain an action thereafter be deemed to hold the goods as bailee for
Article 1597. Where the goods have not been against the seller for damages for the breach of the seller, but subject to a lien to secure the payment
delivered to the buyer, and the buyer has repudiated warranty; of any portion of the price which has been paid, and
the contract of sale, or has manifested his inability to with the remedies for the enforcement of such lien

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allowed to an unpaid seller by article 1526. 1. If the buyer accepted the goods knowing of are conventional redemption and legal
the breach of warranty without protest redemption
(5) In the case of breach of warranty of quality, such 2. If he fails to notify the seller within a
loss, in the absence of special circumstances showing reasonavle time of his election to rescind SECTION 1. – CONVENTIONAL
proximate damage of a greater amount, is the 3. If he fails to return or offer y return the REDEMPTION
difference between the value of the goods at the time goods in substantially as good condition as
of delivery to the buyer and the value they would they were in at the time of the transfer of Article 1601. Conventional redemption shall take
have had if they had answered to the warranty. (n) ownership to him. place when the vendor reserves the right to
repurchase the thing sold, with the obligation to
RIGHTS AND OBLIGATIONS OF BUYER IN comply with the provisions of article 1616 and other
NOTE: this article applies both to implied warranties CASE OF RECISSION stipulations which may have been agreed upon.
and to express warranties, whether of quality or of (1507)
title 1. The buyer shall cease to be liable for the
 The remedies are alternative. Once a remedy price, his only obligation being to return the CONVENTIONAL REDEMPTION - is the right
has been granted to the buyer, no other goods which the vendor reserves to himself, to reacquire the
remedy can thereafter be exercised or 2. If he has paid the price or any part thereof, property sold provided he returns to the vendee the
granted he may recover it from the seller price of the sale, the expenses of the contract, any
 XCPT, when after the buyer has chosed 3. He has the right to hold the goods as bailee other legitimate payments made therefor and the
fulfillment, its should become impossible – for the seller should the latter refuse the necessary and useful expenses made on the thing
recission return of the goods sold, and fulfills other stipulations which may have
4. He has the right to have a lien on the good been agrees upon
THEORY OF RECOUPMENT – seller’s damages for any portion of the price already paid
are cut down to an amount which will compensate which lien he may enforce as if he were an  Both real and personal property may be the
him for the value of what he has given unpaid seller subject matter of pacto de retro sale or sales
with right to repurchase
ACTION OR COUNTERCLAIM FOR
DAMAGES CHAPTER 7 NATURE
 Acceptance with knowledge of the breach of EXTINGUISHMENT OF SALE 1. Purely contractual because it is a right
warranty does preclude recission but it does created, not mandated of the law, but by
not preclude a right to recoupment or Article 1600. Sales are extinguished by the same virtue of an express contract
damages causes as all other obligations, by those stated in the 2. It is an accidental stipulation and,
preceding articles of this Title, and by conventional therefore, its nullity cannot affect the sale
RECOUPMENT v COUNTER CLAIM or legal redemption. (1506) itself since the latter might be entered into
without said stipulation
 By means of counterclaim, both sides of the CAUSES FOR EXTINGUISHMENT OF SALE 3. It is a real right when registered, because it
contract are enforced in the same litigation. 1. Common – those causes which are also the binds third persons
The buyer does not seek to avoid his means of extinguishing all other contracts 4. It is potestative because it depends upon the
obligation under the contract but seeks to like payment, loss of the thin, condonation, will of the vendor
enforce the seller’s obligation and to deduct etc. 5. It is a resolutory condition because when
from his liability for the price of the 2. Special - those causes which are recognized exercised, the right of ownership acquired
warranty by the law on sales by the vendee is extinguished
3. Extra-special – those causes which are  In a pacto de retro sale, the title or
WHEN RECISSION BY THE BUYER NOT given special discussion by the CC and these ownership of the property sold is
ALLOWED immediately vested in the vendee a

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retro , subject only to a resolutory RIGHT TO REDEEM v RIGHT TO requisites prescribed by law for a mortgage, but
condition of repurchase by the vendor a REPURCHASE shows the intention of the parties to make the
retro property subject of the contract denominated as a
6. It is not an obligation but a power or RIGHT TO REDEEM RIGHT TO contract of sale, as security for a debt, and contains
privilege that the vendor has reserved for REPURCHASE nothing impossible or contrary to law
himself
7. It is reserved at the moment of the Is by force of law; the Repurchase of foreclosed PACTO DE RETRO v MORTGAGE
perfection of the contract for if the right to purchaser at public property, after
repurchase is agreed upon afterwards, there auction is bound to redemption period, PACTO DE RETRO MORTGAGE
is only a promise to sell which produces accept redemption imposes no such Ownership is Ownership is not
different rights and effects and is governed obligation immediately transferred transferred but the
by 1479 but the ownership is property is merely
8. The person entitled to exercise the right of Article 1602. The contract shall be presumed to be subject to the condition subject to a charge or
redemption is the owner of the property an equitable mortgage, in any of the following cases: that the seller might lien as security for the
sold recover the ownership compliance of a principal
9. It gives rise to reciprocal obligation that of (1) When the price of a sale with right to repurchase within a certain period of obligation, usually a loan
returning the price of sale and other is unusually inadequate; time
expenses, on the part of the vendor; and that If the seller does not Mortgagor does not lose
of delivering the property and executing a repurchase the property his interest but merely
deed of sale on the part of the vendee (2) When the vendor remains in possession as lessee
upon the very day named subjects the property to
or otherwise;
I the contract, he loses all foreclosure and public
OPTION TO BUY v RIGHT OF REPURCHASE interest thereon title will sale
(3) When upon or after the expiration of the right to vest upon the buyer by
OPTION TO BUY RIGHT OF repurchase another instrument extending the period operation of law
REPURCHASE of redemption or granting a new period is executed; There is no obligation Duty of the mortgagee to
Different instrument Not a right granted the resting upon the foreclose the mortgage if
vendor by the vendee in (4) When the purchaser retains for himself a part of purchaser to foreclose. he wishes to secure a
a subsequent instrument, the purchase price; Neither does the vendor perfect title, and after the
but a right reserved by hve any right to redeem maturity of the debt
the vendor in the same (5) When the vendor binds himself to pay the taxes the property after the secured by the mortgage
instrument of sale as one on the thing sold; maturity of the debt and before foreclosure,
of the stipulations of the the mortgagor has a right
contract (6) In any other case where it may be fairly inferred to redeem
that the real intention of the parties is that the
NOTE: A deed of absolute sale and an option to but transaction shall secure the payment of a debt or the  A sale with pacto de retro transfers the
together, cannot be considered as evidencing a performance of any other obligation. legal title to the vendee a retro.
contract of sale with pacto de retro.  The sole right of the vendor is that of
 An agreement to repurchase becomes a redemption
In any of the foregoing cases, any money, fruits, or
promise to sell when made after an
absolute sale because if there is no such other benefit to be received by the vendee as rent or
2 REQS FOR PRESUMPTION OF EQUITABLE
agreement, the purchaser acquires the otherwise shall be considered as interest which shall
MORTGAGE
be subject to the usury laws. (n)
thing sold absolutely 1. The parties entered into a contract
denominated as a COS with right to
EQUITABLE MORTGAGE – is one which lacks
the proper formalities, form or words, or other
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repurchase or purporting to be an absolute CIRCUMSTANCES WHERE IT IS 1. Adequate price


sale CONSIDERED AS EM 2. Immediate delivery of the land to the vendee
2. Their intention was to secure an existing 1. The vendor remained in possession of the and has been improving the property to the
debt by way of mortgage of the property property exclusion of the vendor
2. The property was not transferred to the 3. Religious payment of taxes by the vendee
NOTE: inadequacy is not sufficient to set aside a supposed vendee for taxation purposes 4. Neglect of the vendor to pay the taxes
sale unless it is grossly iadequate or purely shocking 3. The supposed vendor continued to pay 5. The vendor’s inaction to redeem the
to the conscience monthly interests property for a period of 8 years
 Where the vedor remains in physical 4. Debt continued to pile up
possession of the land sold as lessee, the 5. The vendor remained undisturbed in EFFECT OF EM
contract should be treated as an EM possession of the parcel of lang  The supposed vendee (creditor) has the right
6. Price is inadequate to recover the amount loaned
“it is agreed that the vendor shall have the right to  EM is only valid as between the immediate
possess, use, and build on the property during the parties and not to subsequent registered
period of redemption” – loan guaranteed by PRICE mortgage
mortgage  In a COS with pacto de retro, the price
usually is less than in absolute sale, because NOTE: it is incorrect for the court to declare the
A contract should be construed as a the former, the vendor expects to reacquire property as mortgagee’s upon failure of the
mortgage or a loan instead of pacto de retro or redeem the property sold, or else he may mortgagor to pay his obligation, in effect it would be
sale when its terms are ambiguous or when sell his right to redeem and thus recover the pactum commissorium – void
other circumstances rather than any of the loss he claims suffered by reason of the  The proper remedy to enforce a transaction
specific cases in 1-5 inadequacy of price is to foreclose the mortgage and sell the
property at a public auction
Vendor in urgent need of money - a pacto de retro Article 1603. In case of doubt, a contract purporting
sale may be deemed an EM where it appears that it to be a sale with right to repurchase shall be Article 1605. In the cases referred to in articles 1602
was executed due to the urgent necessity for money construed as an equitable mortgage. (n) and 1604, the apparent vendor may ask for the
of the vendor reformation of the instrument. (n)
Article 1604. The provisions of article 1602 shall
Automatic appropriation by vendee of property also apply to a contract purporting to be an absolute REFORMATION – is a remedy granted by law by
sold stipulated - the stipulation in pacto de sale that sale. (n) means of which a written instrument is made or
the ownership would automatically pass when no construed so as to express or conform the real
redemption was effected is void. (pactum intention of the parties when such intention is not
PRESUMPTION IN CASE OF DOUBT
commissorium) expressed in the instrument
 EM is favored by law, even if only one of
the circumstances mentioned in 1602 is  There has been a meeting of the minds
NOTE: delay in transferring title is not one of the between the parties, but the written
present
instances enumerated by law in which EM can be instrument purporting to embody their
Why? Because in pacto de retro sales, with the
presumed agreement does not express their true
stringent and onerous effects that accompany them,
Escalation of purchase price every month intention
are not favored
EM No meeting of the minds- remedy is annulment
 When there is no debt, there can be no
Vendor borrowed from vendee money used
mortgage, because there is nothing to secure,
in buying property sold – EM Article 1606. The right referred to in article 1601, in
there ca be no security.
A test to determine whether a conveyance is the absence of an express agreement, shall last four
a sale or merely a security for the payment years from the date of the contract.
MANIFESTATION OF A GENUINE SALE
of a loan is the continued existence of a debt
WITH RIGHT TO REPURCHASE
on the part of the alleged mortgagor
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Should there be an agreement, the period cannot EFFECT OF EXTENSION the vendee, even if in the second contract no mention
exceed ten years. a. After expiration of period of redemption should have been made of the right to repurchase,
– void, there is nothing to extend without prejudice to the provisions of the Mortgage
However, the vendor may still exercise the right to b. Before expiration of the period of Law and the Land Registration Law with respect to
repurchase within thirty days from the time final redemption - the extension including the third persons. (1510)
judgment was rendered in a civil action on the basis original term shall not extend beyond 10
that the contract was a true sale with right to years, otherwise void NATURE OF RIGHT TO REDEEM
repurchase. (1508a) 1. A right, not an obligation – consignation is
WHY IS THERE A LIMIT not required to preserve the right
 This article refers to conventional  Because a long term of redemption renders 2. A real right – xcpt: when vendor a retro
redemption. It does not apply where the the tenure of the property uncertain and cannot exercise his right against a
contract is not one of sale with right to redounds to its detriment subsequent transferee for value and in GF if
repurchase his right is not properly registered or
 For CR to take place, the vendor should Article 1607. In case of real property, the annotated
reserve, in no uncertain terms, the right to consolidation of ownership in the vendee by virtue of
repurchase the thing sold. the failure of the vendor to comply with the Article 1609. The vendee is subrogated to the
 Right to redeem must be expressly stipulated provisions of article 1616 shall not be recorded in the vendor's rights and actions. (1511)
in the COS Registry of Property without a judicial order, after the
 If there is no agreement granting vendor the vendor has been duly heard. (n) SUBROGATION – transfers to the person
right to redeem – absolute sale subrogated the credit with all the rights thereto
 No agreement as to the period of redemption JUDICIAL ORDER FOR RECORDING OF
– it shall be 4 years from the date of the CONSOLIDATION OF OWNERSHIP Article 1610. The creditors of the vendor cannot
contract make use of the right of redemption against the
 They can agree not exceeding 10 years, if NECESSITY – if the real property is involved and vendee, until after they have exhausted the property
exceed, vendor still has 10 years the vendor failed to redeem, the vendee’s title of the vendor. (1512)
 When there has been already a final becomes irrevocable by operation of law but the
judgment, the vendor has 3 days to exercise consolidation of ownership in the vendee shall not be  The right to redeem being property, it is
the right to repurchase recorded in the ROP without judicial order and until answerable for the debts of the vendor
after the vendor has been declared duly heard. provided the vendor’s properties are firt
WHEN 1606 PAR 3 NOT APPLICABLE exhausted
1. Contract found to be an absolute sale PURPOSE – to prevent the interposition of buyers in  All kinds of creditors XCPT: exist a
2. sale known and admitted by vendor as pacto GF while such determination is being made mortgage or antichresis
de retro
3. Party abandoned position that transaction an FAILURE OF THE VENDEE TO COMPLY – Article 1611. In a sale with a right to repurchase, the
EM after judicial declaration of transaction does not impair such title and ownership. The only vendee of a part of an undivided immovable who
as a pacto de retro sale effect is that the absolute ownership of the vendee a acquires the whole thereof in the case of article 498,
retro cannot be recorded may compel the vendor to redeem the whole
RECKONING PERIOD property, if the latter wishes to make use of the right
1. Under pars 1 and 2, the reckoning point is ACTION TO CONSOLIDATE OWNERSHIP of redemption. (1513)
from the date of the contract (from which  Consolidation shall be effected through an
the contract produces its effects) ordinary civil action cognizable by RTC Article 1612. If several persons, jointly and in the
2. Under par 3, the reckoning point is from the same contract, should sell an undivided immovable
time the judgment becomes final Article 1608. The vendor may bring his action with a right of repurchase, none of them may exercise
against every possessor whose right is derived from

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this right for more than his respective share. partitioned among them. Useful – increase the value of the thing or
create improvements thereon
The same rule shall apply if the person who sold an But if the inheritance has been divided, and the thing  Possessor in GF
immovable alone has left several heirs, in which case sold has been awarded to one of the heirs, the action  If not reimbursed, the vendee may
each of the latter may only redeem the part which he for redemption may be instituted against him for the retain the possession until reimbursemet
may have acquired. (1514) whole. (1517)
NOTE: the vendor a retro is not given an option to
 a vendor a retro can exercise the right to require the vendee to remove the useful
Article 1613. In the case of the preceding article, the
redeem against the heirs of the vendee a improvements
vendee may demand of all the vendors or co-heirs
that they come to an agreement upon the repurchase retro with respect only to their respective
shares, ether the thing be undivided or it has OFFER TO REDEEM AND TENDER OF
of the whole thing sold; and should they fail to do so,
been partitioned among them PAYMENT GENERALLY REQUIRED
the vendee cannot be compelled to consent to a
 however, if by partition the entire property a. The mere declaration of the vendor of his
partial redemption. (1515)
has been adjudicated to one of the heirs, the intention to exercise the right of repurchase
vendor can exercise the right t redeem is not sufficient to preserve the right of
 the purpose of the above articles is to
against said heir for the whole redemption. The law requires that the offer
discourage co-ownership which is
must be bona fide one and accompanied by
recognized as undesirable, since it does not
Article 1616. The vendor cannot avail himself of the an actual and simultaneous tender of
encourage the improvement of the property
right of repurchase without returning to the vendee payment or consignation of the full amount
co-owned
the price of the sale, and in addition: agreed for repurchase
REDEMPTION IN JOINT SALE BY CO-
TENDER OF PAYMENT NOT NECESSARY
OWNERS/ CO-HEIRS OF UNDIVIDED (1) The expenses of the contract, and any other
 When the vendee has already flatly refused
IMMOVABLE legitimate payments made by reason of the sale;
to convey, as vendee will also refuse the
1. the co-owners, can exercise such right only
tender of payment
as regards their respective share (2) The necessary and useful expenses made on the
2. the co-heirs can exercise the right of thing sold. (1518) CONSIGNATION OF PRICE GENERALLY
redemption only for the respective portions
REQUIRED
they have inherited OBLIGATION OF VENDOR A RETRO IN  it is not a legal reqs for the vendor to make
3. the vendee a retro can refuse partial CASE OF REDEMPTION consignation or judicial deposit of the price
redemption; he may require all the vendors  He must return to the vendee: of the offer or tender is refused
or all heirs to redeem the entire property r to 1. Price – it speaks of the “price of the sale”  where the right of the vendor to repurchase
agree to its redemption by any one of them and not the value of the thing. had been judicially declared to exist, it fixes
2. Expenses of contract and other legitimate the relation as to be debtor and creditor
Article 1614. Each one of the co-owners of an expenses – if pad by the vendee. They need
undivided immovable who may have sold his share not be paid at the very time of the exercise Article 1617. If at the time of the execution of the
separately, may independently exercise the right of of the right since they are unknown amounts sale there should be on the land, visible or growing
repurchase as regards his own share, and the vendee 3. Necessary and useful expenses - fruits, there shall be no reimbursement for or
cannot compel him to redeem the whole property. Necessary – incurred for the preservation of prorating of those existing at the time of redemption,
(1516) the thing or those which seek to prevent the if no indemnity was paid by the purchaser when the
waste, deterioration or loss of the thing sale was executed.
Article 1615. If the vendee should leave several  Not ordinary and simple because these
heirs, the action for redemption cannot be brought are incident to the enjoyment of the
against each of them except for his own share, Should there have been no fruits at the time of the
thing by the vendee sale and some exist at the time of redemption, they
whether the thing be undivided, or it has been

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shall be prorated between the redemptioner and the  The vendor has the right to receive the  LR is in the nature of privilege created
vendee, giving the latter the part corresponding to the property in the same condition in which it partly for reason of public policy and for
time he possessed the land in the last year, counted was at the time of the sale benefit and convenience the redemptioner to
from the anniversary of the date of the sale. (1519a) afford him way out of what might be
SECTION 2. – LEGAL REDEMPTION disagreeable or inconvenient association into
 this article applies only when the parties which he has been thrust
have not provided for any sharing Article 1619. Legal redemption is the right to be
arrangement with respect to fruits existing at subrogated, upon the same terms and conditions INSTANCES OF LEGAL REDEMPTION
the time of redemption stipulated in the contract, in the place of one who 1. CC, 1620, 16212, 1634 and 1088
 only natural and industrial fruits. acquires a thing by purchase or dation in payment, or
 Civil fruits belong to the vendee by any other transaction whereby ownership is Article 1088. Should any of the heirs sell his
transmitted by onerous title. (1521a) hereditary rights to a stranger before the partition,
1. If there were fruits at the time of the sale and any or all of the co-heirs may be subrogated to the
the vendee paid for them, he must be  The right applies to both movable and rights of the purchaser by reimbursing him for the
reimbursed at the time of redemption as the immovable property price of the sale, provided they do so within the
payment forms part of the purchase price period of one month from the time they were notified
2. If no indemnity was paid by the vendee NOTE: legal redemption may take place not only in in writing of the sale by the vendor. (1067a)
for the fruits, there shall be no purchase or dation in payment but in any other  Refers to sale of hereditary rights, and not to
reimbursement for those existing at the time transfer of ownership by onerous title specific properties, for the payment of the
of redemption  It cannot take place in barter and in the debts of the decedent’s estate
3. If the property had no fruits at the time of transmission of property by hereditary title
the sale and some exist at the time of  The right is also not available where there is 2. Other special laws
redemption, they shall be apportioned only a mortage or lease
proportionately between the redemptioner a. RA 7160, Sec. 261
and he vendee, giving the latter a share im DATION IN PAYMENT - is the transmission of  Redemption by owner of real property
proportion to the time he possessed he the ownership of a thing by the debtor to the creditor sold for delinquent taxes. The period is
property during the last year counted from as the accepted equivalent of the performance of within 1 year from the date of sale
the anniversary of the sate f the sale to obligation
compensate the vendee for his expense b. Com. Act No. 141 [Public Land Law], sec
BASIS AND NATURE OF LR 119
Article 1618. The vendor who recovers the thing sold  The source of right of LR proceeds from the  Repurchase by homesteader of
shall receive it free from all charges or mortgages law homestead sold under the Public Land
constituted by the vendee, but he shall respect the  The concept of LR may be converted into Act. The period is 5 years
leases which the latter may have executed in good one of CR.
faith, and in accordance with the custom of the place  The right of LR is not predicated on c. ROC, Rule 39, Sec. 30
where the land is situated. (1520) proprietary tight but on a bare statutory  Redemption by judgment debtor or
privilege to be exercised only by the person redemptioner of real property sold in
RIGHT OF THE VENDOR TO RECOVER name in the statute execution. The period is 12 months
THING SOLD FROM CHARGES
 The vendee a retro may alienate, encumber, ROC, Rule 39, Sec. 30 d. ROC, Rule 68, Sec. 3
or perform other acts of ownership over the  The property sold subject to redemption may  Redemption by mortgagor after
thing sold. All acts done by him are also be redeemed by the judgment debtor or his mortgaged property has been judicially
revocable successor-in-interest in the whole or any part foreclosed and sold. The period is 90
of the property

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days but before confirmation of sale by 3. The sale must be to a third person or PURPOSE:
the court stranger  The purpose of the law in establishing the
4. The sale must be partitioned right of legal redemption between co-owners
e. Act No. 3135, Sec. 6 5. The right must be exercised within the is to reduce the number of participants until
 In all cases of extrajudicial foreclosure period provided in 1623 the community is done away with, as being
sale, the mortgagor may redeem the 6. The vendee must be reimbursed for the price a hindrance t the development and better
property within 1 yr from the date of of the sale administration of the property
registration of the sale
BY WHOM AND AGAINST WHOM RIGHT Article 1621. The owners of adjoining lands shall
f. RA No. 3844, [Code of Agrarian Reform], MAY BE EXERCISED also have the right of redemption when a piece of
Sec. 12 1. A co-onwer has the legal right to sell, rural land, the area of which does not exceed one
 Redemption by an agricultural lessee of assign, or mortgage his ideal share in the hectare, is alienated, unless the grantee does not own
landholding sold by the landowner. The property held in common. The right to any rural land.
period is 180 days from notice in redeem is invoked only after the shares of
writing which shall be served by the the other co-owners are sold to a 3rd party This right is not applicable to adjacent lands which
vendee on all lessees affected and the 2. Co-owners have no right of LR against each are separated by brooks, drains, ravines, roads and
DAR upon the registration of the sale other other apparent servitudes for the benefit of other
 This right has priority over any other 3. Should any of the heirs sell his hereditary estates.
right of redemption, like the right of right to a stranger before partitiom any or all
redemption of a co-owner under article of the co-heirs may be subrogated to the
If two or more adjoining owners desire to exercise
1620 rights of the purchaser by reimbursing him
the right of redemption at the same time, the owner of
the purchase price, it must be one 1 month
the adjoining land of smaller area shall be preferred;
Article 1620. A co-owner of a thing may exercise the from the rime of notification
and should both lands have the same area, the one
right of redemption in case the shares of all the other 4. Right of LR laso applies to those who
who first requested the redemption. (1523a)
co-owners or of any of them, are sold to a third subsequently acquire their respective shares
person. If the price of the alienation is grossly while the community subsits
RIGHT OF LEGAL REDEMPTION OF
excessive, the redemptioner shall pay only a
ADJACENT OWNERS OF RURAL LANDS
reasonable one. WHEN RIGHT CANNOT BE INVOKED
1. Thing owned in common partitioned
REQS:
Should two or more co-owners desire to exercise the 2. Shares of all co-onwers sod – LR may only
1. Both the land of the one exercising the right
right of redemption, they may only do so in be exercised by the co-owner who did not
of redemption and the land sought to be
proportion to the share they may respectively have in part with his pro indiviso share
redeemed must be rural
the thing owned in common. (1522a) 3. Thin owned in common had been offered for
2. The lands must be adjacent
sale by all co-owners
3. There must be an alienation
RIGHT OF LEGAL REDEMPTION OF CO- 4. The piece of rural land alienated must not
OWNER PRICE OF REDEMPTION
exceed 1 hectare
 The right of legal redemption among co- 1. Reasonable price – the law requires the
5. The grantee or vendee must already own any
owners presupposes, of course, the existence redemption to pay only a reasonable price if
other rural land
of a co-ownership at the time the the price of the alienation is grossly
6. The rural land sold must not be separated by
conveyance is made excessive.
brooks, drains, ravines, roads and other
REQS FOR THE RIGHT TO EXIST  The redemptioner is not excused from the
apparent servitudes from the adjoining lands
1. There must be co-ownership of a thing duty to make proper tender of the price
2. There must be alienation of all or any of the NOTE: the lands mentioned in par 2 are not really
shares of the other co-owners 2. Price stated ij the deed of sale –
adjacent
3. Amount actually paid by the buyer –
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 When the land exceeds 1 hectare, the If the re-sale has been perfected, the owner of the URBAN v RURAL
adjacent owners are not given the right of adjoining land shall have a right of redemption, also
LR because this may lead to the create of at a reasonable price. URBAN RURAL
big landed estates Belong to the city or Pertains to the country
 The right cannot be exercised against a When two or more owners of adjoining lands wish to town
vendee if he is also an adjacent owner’ exercise the right of pre-emption or redemption, the use for dwelling, Use for agricultural,
 Last par refers to a situation where the owner whose intended use of the land in question industry or commerce fishing or timber
vendee of a piece of rural land is not an appears best justified shall be preferred. (n) exploitation
adjoining owner
RIGHTS OF PRE-EMPTION AND LEGAL TO SPECULATE - to enter into a business
RURAL – relating to or constituting tenement in REDEMPTION OF ADJACENT OWNERS OF transacation or venture from which the profits or
land adopted and used for agricultural or pastoral URBAN LANDS return are conjectural because the undrtakin s outside
purposes  Article 1622 recognizes 2 rights: the ordinary course of business
 Regardless of site, it is principally used for 1. Pre-emption – is the act or right of
the purpose of obtaining products from the purchasing before others. It is exercised PURPOSE: to discourage speculation in real estate
soil as opposed to urban lands – residence before the sale or resale against the would- and the consequent aggravation of the housin
be vendor problems in centers of population
NOTE: the use of property for agricultural purposes 2. Redemption – which is exercised after the
is essential in order that the same may be sale has been perfected against the vendee. Article 1623. The right of legal pre-emption or
characterized as rural land for purposes of LR in The recognition of the right of redemption redemption shall not be exercised except within thirty
1621. will result in the recission of the sale days from the notice in writing by the prospective
REQS: vendor, or by the vendor, as the case may be. The
2 OR MORE ADJACENT OWNERS OF RURAL 1. The piece of land is urban deed of sale shall not be recorded in the Registry of
LANDS 2. The one exercising the right must be an Property, unless accompanied by an affidavit of the
 The law gives preference to the owner of the adjacent owner vendor that he has given written notice thereof to all
adjoining land of smaller area 3. The pierce of land sold must be so small and possible redemptioners.
 But if both have same area, to the one who so situated that a major portion thereof
first requested the redemption cannot be used for any practical purpose The right of redemption of co-owners excludes that
within a reasonable time of adjoining owners. (1524a)
PURPOSE – to encourage the maximum 4. Such land was bought by its owner merely
development and utilization of agricultural lands for speculation  1623 stresses the need for notice in writing
1. To benefit adjacent owners and public weal 5. It is about to be resold, or that its resale has in the 3 species of legal redemotion
as well been perfected  The law attaches more importance to the
2. To avoid difficulties in cultivation
necessity to put an end to tenancy in
3. To protect agriculture 2 OR MORE ADJOINING OWNERS common than to the purpose of encouraging
 The law prefers him whose intended use of development of agriculture
Article 1622. Whenever a piece of urban land which the land appears best justified
is so small and so situated that a major portion
PERIOD FOR EXERCISE OF RIGHT
thereof cannot be used for any practical purpose URBAN – it refers to the character of the community 1. Absolute and non-extendible -
within a reasonable time, having been bought merely or vicinity in which it is found. Even if the land is 2. A condition precedent - the 30 day period is
for speculation, is about to be re-sold, the owner of somehow dedicated to agriculture, it is still urban in not a prescriptive period but is more a reqs
any adjoining land has a right of pre-emption at a contemplation of 1622, if it is located within the or condition precedent. It is a period set by
reasonable price. center of population or the more or less populated law to restrict the riht of the payor
portion of a city or twn exercising the riht of LR.

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enforcement or satisfaction of the credit to RENUNCIATION - is the abandonment of a right


NOTE: the period of 30 days is counted from the the same extent as the assignor could without a transfer to another
notice in writing given by the prospective vendor or
by the vendor, as the case may be, and not only by NOTE: where the assignment is on account of pure AGENCY –involves representation, not transmission
the vendee liberality in the part of the assignor, the rules on wherein the agent acts for the principal
 The seller of an undivided interest is in the donation would be pertinent
best position to know who are his co-owners  Where valuable consideration is involved, SUBSTITUTION – is the change of the previous
that under the law must be notified of the the assignment partakes f the nature of a debtor by a new debtor with the credit remaining in
sale COS the same creditor
Notice must be in writing.
 Notice of perfected sale and actual execution NATURE OF ASSIGNMENT OF CREDIT SUBROGARTION – is the change in person of the
and delivery of the deed of sale 1. Consensual creditor with his credit being transferred to the new
 Notice must be given by the vendor 2. Bilateral creditor
3. Onerous
HOW RIGHT EXERCISED 4. Commutative or aleatory DACTION IN PAYMENT - is the alienation of
1. Consignation by the court – the property to the creditor in satisfaction of a debt in
redemptioner may go to court directly, and  The assignment involves no transfer of money.
practically make the offer to repurchase ownership but merely effects the transfer of
through it rights which the assignor has at the time of In an assignment of credit, the consent of the
NOTE: consignation is not required to preserve the the assignee creditor to the assignment is NOT necessary
right of redemption as a mere tender of payment is  As a consequence of the assignment, the 3rd Conventional subrogation requires an
enough if made in time party (assignee) steps into the shoes of the agreement among the parties concerned and
original creditor (assignor) as a subrogee of gives rise to a new contractual relation
2. Tender of price – the legal redemptioner is the latter among the parties
only required to pay a reasonable price  Consideration is not always a requisite.
 Title is transferred but possession NEED Article 1625. An assignment of a credit, right or
NOT be delivered action shall produce no effect as against third
CHAPTER 8 persons, unless it appears in a public instrument, or
ASSIGNMENT OF CREDITS AND OTHER NOTE: it may be done gratuitously or onerously the instrument is recorded in the Registry of Property
INCORPOREAL RIGHTS  If onerous, whatever may be the legal cause, in case the assignment involves real property. (1526)
it is really a sale. The subject matter is the
Article 1624. An assignment of creditors and other credit or right assigned; the consideration is BINDING EFFECT
incorporeal rights shall be perfected in accordance the price paid for the credit or right; and the 1. As between parties – the assignment is valid
with the provisions of article 1475. (n) consent is the agreement of the arties to the although it appears only in a private
assignment of the credit or right at the document so lon as the law does not require
ASSIGNMENT OF CREDIT – is a contract by agreed price a specific form
which the owner (assignor/creditor) of a credit and 2. As to thir persons – the assignment must
other incorporeal rights transfers, either onerously or PERFECTION OF CONTRACT FOR appear in a PI, and in case it involves real
gratuitously, to another (assignee) his rights and ASSIGNMENT OF CREDIT property, it is indispensable hat it be
actions against 3rd persons (debtor)  The contract for the assignment or transfer recorded in ROP
 Process of transferring the right of the of credit and other incorporeal rights is  The act of assignment cannot operate to
assignor to the assignee who would then be perfected from the moment the parties agree efface liens or restrictions burdening the
allowed to proceed against the debtor for the upon the credit or right assigned and upon right assigned
the price given if neither has been delivred

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Article 1626. The debtor who, before having effects of a dation in payment which may 2. If there is no stipulation:
knowledge of the assignment, pays his creditor shall extinguish the obligation a. For 1 year from the assignment of the
be released from the obligation. (1527) credit when the period for payment of
1. When a creditor assigns his credit, he the credit has expired; or
NOTE: consent of debtor to assignment NOT warrants only the b. For one year after is maturity, when
required a. Exisy=tence such period for payment has not yet
 The law speaks of notice to the debtor which b. Legality of the credit at the perfection expired
is to inform the latter that from the date of of the contract
the assignment he should make payment to  He is not even liable for the warranty if the REASONS FOR THE RULE
the assignee and not to the original debtor credit had been sold a doubtful 1. To prevent fraud which may be committed
2. There is no warranty as to the solvency of by feigning the solvency of the debtor at the
Payment before notice – the law holds him the debtor unless it is expressly stipulated or time of the assignment when in fact he is
exonerated. The assignee has a right of action against unless the insolvency was already existing insolvent
the assignor, the original creditor and of the public knowledge at the time of 2. To oblige the assignee to exert efforts in the
the assignment recovery of the credit and thereby avoid by
Payment after, or before notice but debtor had his oversight, the assignor may suffer
knowledge of assignment - not valid as against the LIABILITIES OF THE ASSIGNOR OF CREDIT
assignee. The debtor is not released from his 1. GF is limited only to the price received and Article 1630. One who sells an inheritance without
obligation. BF, he has to pay again to the expenses of the contact enumerating the things of which it is composed, shall
2. If BF, liable not only for the payment of the only be answerable for his character as an heir.
Article 1627. The assignment of a credit includes all price and all expenses, but also for damages (1531)
the accessory rights, such as a guaranty, mortgage,  This article refers to the sale of successional
pledge or preference. (1528) Who is an assignor in bf? He is one who has right or the right to an inheritance before
knowledge of any of the circumstances mentioned partition
Article 1628. The vendor in good faith shall be  An inheritance may be sold either with
responsible for the existence and legality of the credit Article 1629. In case the assignor in good faith specification of the properties to be alienated or
at the time of the sale, unless it should have been sold should have made himself responsible for the without enumerating the things comprising it,
as doubtful; but not for the solvency of the debtor, solvency of the debtor, and the contracting parties that is to say the hereditary rights only
unless it has been so expressly stipulated or unless should not have agreed upon the duration of the  The law PROHIBITS the sale of a future
the insolvency was prior to the sale and of common liability, it shall last for one year only, from the time inheritance,
knowledge. of the assignment if the period had already expired.
Warranties of the seller – warrants only the fact of
Even in these cases he shall only be liable for the If the credit should be payable within a term or his heirship but he does not warrant the objects which
price received and for the expenses specified in No. 1 period which has not yet expired, the liability shall make up his inheritance
of article 1616. cease one year after the maturity. (1530a)  The sale is sort of aleatory because the
 The provision does not apply if the assignor assignee bears the risk that the estate may
acted in BF not be sufficient to pay the obligations of the
The vendor in bad faith shall always be answerable
deceased
for the payment of all expenses, and for damages.
(1529) In case the assignor has expressly
warranted the solvency of the debtor of GR: heir can sell his interest in an inheritance before
the assignor’s liability shall be: partition
WARRANTIES OF THE ASSIGNOR OF XCPT: any such sale must be deemed subject to the
CREDIT result of the administration proceedings and any
 An assignment credit which is in the nature 1. if there is a stipulation, then for the term or
period fixed pending litigation
of sale of personal property produces the
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 If they have been sold, he must deliver the Article 1635. From the provisions of the preceding
SALE OF HEREDITARY RIGHTS v WAIVER price paid article shall be excepted the assignments or sales
OF HEREDITARY RIGHT made:
Article 1633. The vendee shall, on his part,
SALE OF WAIVER OF reimburse the vendor for all that the latter may have (1) To a co-heir or co-owner of the right assigned;
HEREDITARY HEREDITARY paid for the debts of and charges on the estate and
RIGHTS RIGHT satisfy the credits he may have against the same, (2) To a creditor in payment of his credit;
unless there is an agreement to the contrary. (1534)
Presumes the existence a mode of extinction of
of a contract of deed of ownership where there is Article 1634. When a credit or other incorporeal (3) To the possessor of a tenement or piece of land
sale between the parties an abdication or right in litigation is sold, the debtor shall have a right which is subject to the right in litigation assigned.
intentional to extinguish it by reimbursing the assignee for the (1536)
relinquishment of a price the latter paid therefor, the judicial costs
known right incurred by him, and the interest on the price from  Under both 1634 and 1635 the debtor,
the day on which the same was paid. cannot redeem if the credit or other
incorporeal right is not in litigation when the
Article 1631. One who sells for a lump sum the
A credit or other incorporeal right shall be considered same is sold
whole of certain rights, rents, or products, shall
comply by answering for the legitimacy of the whole in litigation from the time the complaint concerning
in general; but he shall not be obliged to warrant each the same is answered. XCPTION to 1634
1. Sale to a co-heir or co-owner – this
of the various parts of which it may be composed,
The debtor may exercise his right within thirty days exception is based on the desire to do away
except in the case of eviction from the whole or the
from the date the assignee demands payment from with co-ownership
part of greater value. (1532a)
him. (1535)
Example: Jose is indebted to Joyce and Jade in the
SALE OF WHOLE OF CERTAIN RIGHTS,
 1634 is an instance of legal redemption amount of 10k. for failure to pay, Joyce sues Jose.
RENTS, OR PRODUCTS
 The subject matter is the totality of such
REQS: If Joyce transfers her credit to Jade during the
rights, rents, or products
pendency of litigation. Jose cannot redeem
 The vendor warrants only the legitimacy of 1. There must be a sale or assignment of a
the whole and not the various parts of which credit
2. There must be a pending litigation at the tme 2. Sale to a creditor – dation in payment
it may be composed
 Vendor is not liable for eviction unless it of the assignment
 The complaint by the assignor must have Example: Ana owes Banana 10k, and banana owes
involves whole or greater part
been filed and answered by the creditor canine 8k. if banana assigns his credit against Ana to
before the sale of the credit canine then subject of the litigation, Ana has no right
Article 1632. Should the vendor have profited by
3. The debtor must pay the assignee of LR
some of the fruits or received anything from the
inheritance sold, he shall pay the vendee thereof, if a. The price paid by him
b. The judicial costs incurred by him the 3. Sale to the possessor of property in
the contrary has not been stipulated. (1533)
interest on the price from the date of question - assignee is moved by a desire to
payment preserve the property and not to speculate at
 Unless otherwise stipulated, the fruits of an
4. The right must be exercised by the debtor the expense of the debtor
inheritance are included in the sale.
 If the vendor merely received the fruits, he within 30 days from the date the assignee
demands payment from him (judicially or Example: a vendee of a property subject to a
must deliver them to the vendee mortgage acquires the mortgage credit of the assignor
 If they have been consumed, he must extra judicially)
against the vendor
reimburse

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CHAPTER 9  Goods fo not include things or choses in  The contract of barter is perfected from the
GENERAL PROVISIONS action or negotiable documents moment there is a meeting of minds upon
the things promised by each party in
Article 1636. In the preceding articles in this Title Chose in action – is any claim or right which may be consideration of the other
governing the sale of goods, unless the context or pleaded in a suit at law, such as a claim of reparation  It is consummated from the time of mutual
subject matter otherwise requires: for a tort or quasi-delict, or right acquired under a delivery by the contracting parties of things
contract they promised
(1) "Document of title to goods" includes any bill of
lading, dock warrant, "quedan," or warehouse receipt Ascertained goods – goods that are identified and Article 1639. If one of the contracting parties, having
or order for the delivery of goods, or any other agreed upon as forming the subject matter of the received the thing promised him in barter, should
document used in the ordinary course of business in bargain prove that it did not belong to the person who gave it,
the sale or transfer of goods, as proof of the  Specific – identified and agreed upon at the he cannot be compelled to deliver that which he
possession or control of the goods, or authorizing or time the contract of sale is made offered in exchange, but he shall be entitled to
purporting to authorize the possessor of the document  If identification takes place afterwards, the damages. (1539a)
to transfer or receive, either by indorsement or by goods are specified but not specific
delivery, goods represented by such document.  Existing goods – owned or possessed by the Article 1640. One who loses by eviction the thing
seller after the making of the contract to sell received in barter may recover that which he gave in
"Goods" includes all chattels personal but not things cannot be specific exchange with a right to damages, or he may only
in action or money of legal tender in the Philippines. demand an indemnity for damages. However, he can
The term includes growing fruits or crops. Article 1637. The provisions of this Title are subject only make use of the right to recover the thing which
to the rules laid down by the Mortgage Law and the he has delivered while the same remains in the
"Order" relating to documents of title means an order Land Registration Law with regard to immovable possession of the other party, and without prejudice
by indorsement on the documents. property. (1537a) to the rights acquired in good faith in the meantime
by a third person. (1540a)
"Quality of goods" includes their state or condition. BARTER OR EXCHANGE  Each contracting party warrants to the other
TITLE VII, ARTS 1638-1641 that he has right to transfer ownership of the
"Specific goods" means goods identified and agreed thing exchanged
upon at the time a contract of sale is made. Article 1638. By the contract of barter or exchange  In case of eviction, the injured party is
one of the parties binds himself to give one thing in given the option either to recover the
An antecedent or pre-existing claim, whether for consideration of the other's promise to give another property he has given in exchange with
money or not, constitutes "value" where goods or thing. (1538a) damages or only claim an indemnity for
documents of title are taken either in satisfaction damages
thereof or as security therefor. BARTER – similar to sale the only difference is that
instead of paying a price in money, another thing is Article 1641. As to all matters not specifically
(2) A person is insolvent within the meaning of this given in lieu thereof provided for in this Title, barter shall be governed by
Title who either has ceased to pay his debts in the  It is a contract where one person transfers the provisions of the preceding Title relating to sales.
ordinary course of business or cannot pay his debts as the ownership of non-fungible things to (1541a)
they become due, whether insolvency proceedings another with the obligation on the part of the  Barter is a mutual sale.
have been commenced or not. latter to give things of the same kind,
quantity, and quality
(3) Goods are in a "deliverable state" within the
meaning of this Title when they are in such a state PERFECTION AND CONSUMMATION OF
that the buyer would, under the contract, be bound to THE CONTRACT
take delivery of them. (n)

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ACT No. 3952 then, and in that case, the provisions of this section provisions or materials in bulk, for cash or on credit,
THE BULK SALES LAW (as amended) shall not apply. before receiving from the vendee, mortgagee, or his,
or its agent or representative any part of the purchase
AN ACT TO REGULATE THE SALE, WHEN SALE OR TRANSFER IN BULK price thereof, or any promissory note, memorandum,
TRANSFER, MORTGAGE OR ASSIGNMENT SALE TRANSFER, MORTGAGE, OR or other evidence therefor, to deliver to such vendee,
OF GOODS, WARES, MERCHANDISE, ASSIGNMENT mortgagee, or agent, or if the vendee, mortgagee, or
PROVISIONS OR MATERIALS, IN BULK, 1. Of a stock of goods, wares, merchandise, agent be a corporation, then to the president, vice-
AND PRESCRIBING PENALTIES FOR THE provisions or materials otherwise than in the president, treasurer, secretary or manager of said
VIOLATION OF THE PROVISIONS THEREOF ordinary course of trade and the regular corporation, or, if such vendee or mortgagee be a
prosecution of the business partnership firm, then to a member thereof, a written
2. Of all or substantially all, of the business or statement, sworn to substantially as hereinafter
Section 1. This Act shall be known as "The Bulk
trade provided, of the names and addresses of all creditors
Sales Law."
3. Of all or substantially all, of the fixtures and to whom said vendor or mortgagor may be indebted,
PURPOSE: to prevent the defrauding of creditors by
equipment used in the business of the together with the amount of indebtedness due or
the secret sale or disposal or mortgage in bulk of all
vendor mortgagor transferor or assignor owing, or to become due or owing by said vendor or
or substantially all of a merchant’s stock of goods
mortgagor to each of said creditors, which statement
WHEN SALE OR TRANSFER IN BULK NOT shall be verified by an oath to the following effect:
SCHEME: the general scheme of the law is to
declare such bulk sales fraudulent and void as to COVERED
1. If the sale or transfer is in the ordinary PHILIPPINE ISLANDS
creditors of the vendor, or presumptively so, unless
specified formalities are observed course of trade and the regular prosecution PROVINCE OR CITY OF _________________}
of the business of the vendor
2. If it is made by one who produces and Before me, the undersigned authority, personally
CONSTITUTIONALITY
delivers a written waiver of te provisions of
 The bulk sales law is constitutional. It does appeared __________________ (vendor, mortgagor,
the Bulk Sales Act from his creditors agent or representative, as the case may be), bearing
not deprive persons of their property without
3. If it is made by an executor, administrator, cedula No. ____________ issued at ___________ on
due process of law nor do they deny such
person the equal protection of the law receiver, assignee in insolvency, or public the day of _____________ who, by me being first
officer, acting under judicial process duly sworn, upon his oath, deposes and states that the
4. If it refers to properties exempt from
Sec. 2. Sale and transfer in bulk. — Any sale, foregoing statement contains the names of all of the
attachment or execution creditors of ________________ (vendor, or
transfer, mortgage or assignment of a stock of goods,
wares, merchandise, provisions, or materials mortgagor) together with their addresses, and that the
MERCHANDISE – things usually bought and sold amount set opposite each of said respective names, is
otherwise than in the ordinary course of trade and the
in trade by merchants. Something that is sold the amount now due and owing, and which shall
regular prosecution of the business of the vendor,
everyday, and is constantly going out of the store and become due and owing by _____________ (vendor
mortgagor, transferor, or assignor, or sale, transfer,
being replaced by other goods or mortgagor) to such creditors, and that there are no
mortgage or assignment of all, or substantially all, of
the business or trade theretofore conducted by the creditors holding claims due or which shall become
FIXTURES – articles of merchandise usually due, for or on account of goods, wares, merchandise,
vendor, mortgagor, transferor, or assignor, or of all,
possessed and annexed to the premises occupied by provisions or materials purchased upon credit or on
or substantially all, of the fixtures and equipment
merchants to enable them better to store, handle, and account of money borrowed, to carry on the business
used in and about the business of the vendor,
display their wares and which are commonly known of which said goods, wares, merchandise, provisions
mortgagor, transferor, or assignor, shall be deemed to
as trade fixtures or materials are a part, other than as set forth in said
be a sale and transfer in bulk, in contemplation of this
Act: Provided, however, That if such vendor, statement.
Sec. 3. Statement of creditors. — It shall be the duty
mortgagor, transferor or assignor, produces and
of every person who shall sell, mortgage, transfer, or
delivers a written waiver of the provisions of this Act ______________________
from his creditors as shown by verified statements, assign any stock of goods, wares, merchandise,

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Subscribed and sworn to before me this 1. It requires the vendor, etc. to deliver to the execution, attachment, garnishment, or by a
_______ day of ______, 19___, at ________ vendee, etc. sworn written statement of the proceeding in equity
names and addresses of all creditors to
whom said vendor, etc. may be indebted Sec. 6. Any vendor, transferor, mortgagor or assignor
together with the amount of indebtedness of any stock of goods, wares, merchandise,
Sec. 4. Fraudulent and void sale, transfer or due or to become due provisions or materials, in bulk, or any person acting
mortgage. — Whenever any person shall sell, 2. It requires the vendor, etc. at least 10 days for, or on behalf of any such vendor, transferor,
mortgage, transfer, or assign any stock of goods, before the sales, etc. to make a full detailed mortgagor, or assignor, who shall knowingly or
wares, merchandise, provisions or materials, in bulk, inventory showing the quantity and cost willfully make, or deliver or cause to be made or
for cash or on credit, and shall receive any part of the price of the goods and to notify every delivered, a statement, as provided for in section
purchase price, or any promissory note, or other creditor of the price, terms and conditions of three hereof, which shall not include the names of all
evidence of indebtedness for said purchase price or the sale such creditors, with the correct amount due and to
advance upon mortgage, without having first become due to each of them, or shall contain any
delivered to the vendee or mortgagee or to his or its NOTE: it also contemplates persons who were false or untrue statement, shall be deemed to have
agent or representative, the sworn statement provided creditors of the seller at he time of the sale though violated the provisions of this Act.
for in section three hereof, and without applying the their claims had not been reduced to judgment, or
purchase or mortgage money of the said property to were not due. Sec. 7. It shall be unlawful for any person, firm or
the pro rata payment of the bona fide claim or claims  Creditors whose claims came into existence corporation, as owner of any stock of goods, wares,
of the creditors of the vendor or mortgagor, as shown subsequent to the sale are not entitled to the merchandise, provisions or materials, in bulk, to
upon such sworn statement, he shall be deemed to benefits of the statute transfer title to the same without consideration or for
have violated this Act, and any such sale, transfer or a nominal consideration only.
mortgage shall be fraudulent and void. EFFECTS OF FALSE STATEMENTS
 If the buyer is without knowledge he will be ACTS PUNISHED BY LAW
Sec. 5. Inventory. — It shall be the duty of every protected 1. Knowingly nad willfully making or
 If the vendee has knowledge of the false delivering a statement as required by the act
vendor, transferor, mortgagor, or assignor, at least ten
statement, the vendee accepts it as his peil which does not include the names of all the
days before the sale, transfer or execution of a
 If the list omits to name certain creditors creditors of the vendor, etc. with the correct
mortgage upon any stock of goods, wares,
who are not notified, the sale is void as to amount due and to become due or which
merchandise, provisions or materials, in bulk, to
make a full detailed inventory thereof and to preserve such creditors who are not notified, the sale contains any false or untrue statement
the same showing the quantity and, so far as is is void as to such creditors, whether that 2. Transferring title to any stock of good,
omission was fraudulent or not wares, merchandise, provisions or materials
possible with the exercise of reasonable diligence, the
 An innocent purchaser for value from the sold in bulk without consideration or for a
cost price to the vendor, transferor, mortgagor or
original purchaser is protected nominal consideration only
assignor of each article to be included in the sale,
transfer or mortgage, and notify every creditor whose
name and address is set forth in the verified statement EFFECT OF VIOLATION OF LAW ON Sec. 8. Nothing in this Act contained shall apply to
of the vendor, transferor, mortgagor, or assignor, at TRANSFER executors, administrators, receivers, assignees in
1. As between the parties – the law does not insolvency, or public officers, acting under judicial
least ten days before transferring possession thereof,
in any way affect the validity of the transfer process.
personally or by registered mail, of the price, terms
2. As against creditors – a purchaser in
conditions of the sale, transfer, mortgage, or
violation of the law acquires no right in the Sec. 9. The sworn statement containing the names
assignment.
property purchased as against the creditors and addresses of all creditors of the vendor or
of the seller
 The law protects or benefits the creditors as mortgagor provided for in section three of this Act,
REMEDY OF CREDITOR: one against the goods shall be registered in the Bureau of Commerce. For
follows
to subject them to the payment of a debt, such as the registration of each such sworn statement a fee of

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five pesos shall be charged to the vendor or


mortgagor of the stock of goods, wares, merchandise,
provisions or materials, in bulk.

Sec. 10. The provisions of this Act shall be


administered by the Director of the Bureau of
Commerce and Industry, who is hereby empowered,
with the approval of the Department Head, to
prescribe and adopt from time to time such rules and
regulations as may be deemed necessary for the
proper and efficient enforcement of the provisions of
this Act.

Sec. 11. Any person violating any provision of this


Act shall, upon conviction thereof, be punished by
imprisonment not less than six months, nor more than
five years, or fined in sum not exceeding five
thousand pesos, or both such imprisonment and fine,
in the discretion of the court.

Sec. 12. This Act shall take effect on its approval.


Approved: 01 December 1972

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PART II 3. Lease of service – involves an obligation on  In a lease of chattels, the lessor loses
LEASE the part of the housekeeper, laborer or complete control over the chattel leased
TITLE VIII, ARTS. 1642-1699, 1713-1731 employer, or common carrier to do or though the lessee would be responsible to
prform a service for the head of a family, the lessor should he make bad use thereof
CHAPTER I master, employer or passenger or shipper of
GENERAL PROVISIONS goods in consideration of compensation OWNERSHIP OF THING – lessor need not be the
owner of the thin leased as long as he can transmit its
Article 1642. The contract of lease may be of things, NOTE: the 2nd and 3rd kinds of lease cover enjoyment or use to the lessee since ownership is not
or of work and service. (1542) household service, contract of labor, contract of piece being transferred
of work and common carriers  Lessee himself may lease the property to
CONTRACT OF LEASE – is an agreement another (sublease
whereby one person (lessor) binds himself to grant CHARACTERISTICS
temporarily the enjoyment or use of a thin or to 1. Consensual CONSIDERATION – the cause of COL of things
render some work or service to another (lessee) who 2. Bilateral must be a price certain generally called “rent” or
undertakes to pay rent, compensation or price 3. Onerous rental” in money or its equivalent (products, fruits or
therefor 4. Commutative other useful things)
 Essentially it is not a personal in character 5. Nominate
because the rights and obligations are 6. Principal “Price certain” – price of the rent has been
transmissible to the heirs of the lessor or determined by the parties or at least capable of
lessee ELEMENTS determination
1. Consent of the contracting parties  During the period fixed in the contract
GR: Lease is a personal right 2. Object certain which is the subject matter of where there is stipulated rent, the lessor
XCPT: in the case of lease of real estate recorded in the contract CANNOT increase the rental without the
the Registry of Property which makes it binding upon 3. Cause of the obligation which is established consent of the lease, neither can the court
third persons, like a purchaser – Real right
Article 1643. In the lease of things, one of the parties PERIOD – may be definite or indefinite. In any case,
NOTE: in the absence of registration, the purchaser binds himself to give to another the enjoyment or use the period is temporary, not perpetual
may terminate the lease, save when there is a of a thing for a price certain, and for a period which
stipulation in the COS or when the purchaser knows may be definite or indefinite. However, no lease for a. Period is definite or fixed
of the existence of the lease, actual knowledge being more than ninety-nine years shall be valid. (1543a)  The longest is 99 years because it is an
equivalent to registration unsound economic policy to allow
ESSENCE: transmission of the temporary enjoyment ownership and enjoyment to be
KINDS OF LEASE ACCORDING TO SUBJECT or use by the lessee of a thing for a certain period in separated for a very long time.
MATTER consideration of the undertaking to pay rent therefor, b. Period fixed more than 99 years
1. Lease of thins - whether real or personal,  The object of the lease must be within the  the lease should be considered as
involving an obligation on the part of the commerce of men, otherwise void having expired after the end of the said
lessor to deliver the thing which is the object  Lease of property which belongs to public term
and the correlative right of the lessee to the domain (road) is void ab initio c. term is fixed but it is indefinite
peaceful and adequate enjoyment NOTE: the lease of a bldg naturally inclused the  the court may fix the duration
2. Lease of work – refers to contract of peace lease of the lot on which it stands, an the rentals of a d. no term fixed
of work, it involves an obligation on the part bldg include those of the land  1682 applies for leases of rural lands,
on theIC to execute a piece of work for the and 1687, for leases of urban lands
employer in consideration of a certain price SUBJECT MATTER – applies to lease of things, e. Verbal contract “for as long as the lessees
whether movable or immovable are doing business and as long as they can
pay rent”
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 Held to be a lease from month to month CONDITIONAL SALES OF GOODS only by


under 1687 and not one of indefinite  A lease of personality with option to buy is an exception, that
duration, terminable without necessity installment sale and not lease is when it
of a special notice upon the expiration involves land
of any month LEASE v COMMODATUM and it is for
f. Lease of things during the lifetime of one LEASE v COMMODATUM more than 1
of the parties – indefinite period. A lease No transfer of Transfer of No transfer of year or is
for such time as the lessor or the lessee may ownership ownership ownership reistered
please, is one for lie, ending upon the death Onerous Cause Essentially Covers real and Object In extrajudicial
of either party gratuitous; if there personal deposit only,
is a price or rent property movable thing
ESTOPPEL AGAINST LESSEE the contract ceases may be the
 A lessee is stopped from asserting title to the to be commadatum object
thing leased as against the lessor, or to deny the Not Nature Personal in Renting out of Purpose Safekeeping
lessor’s title, or to assert a better titke or right of essentially character. Death of the thing for a
possession not only in himself, but also in some personal in either bailor or consideration
3rd person character, bailee ends the Only upon When demand At will
right may be commodatum expiration of for the thing
LEASE v SALE transmitted to the contract can be made
heirs Onerous Consideration Gratuitous
LEASE v SALE Consensual Perfection of Real contract,
There is no Transfer of Ownership is LEASE v MUTUUM the Contract perfected only
transfer of ownership transferred by mere
ownership upon delivery LEASE v MUTUUM delivery of the
because the thing
rights of the Lessor does not Transfer of Lender loses
lessee are lose ownership ownership ownership LEASE OF CHATTELS v EMPLOYMENT
limited to the Lessor and Relationship Obligor and LEASE OF v EMPLOYMENT
use and lessee between the oblige CHATTELS
enjoyment of parties Lessor and Relationship ER-EE
the thing leased If what is Applicability Not iverned by lessee between
Transfer is Extent of Transfer is leased is real of SF SF parties
temporary transfer permanent property for Lessor loss Control or The employer
Lessor need not Who may Seller must be more than 1 control or management retains control or
be the owner convey the the owner at the year, the SF management over the management over
property time the must be over the chattel his chattel
property is complied chattel leased
delivered Covers real and Object Covers Lessor has no Control or Employer
The price of the Significance of Usually the personal personal control or supervision exercises control
object price of object selling price is property property only supervision over the over the employee
distinguished mentioned over the lessee lessee or
from rent is LEASE v DEPOSIT employee
usually not LEASE v DEPOSIT
mentioned A real right Nature Real right

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SERVICE AS DRIVER UNDER BOUNDARY Work or Consideration Presumed to be involved separate ad distinct from
SCHEME – the relation is that o ER-EE and not service must be for a price or that of the partners is
lessor and lessee for a price or consideration formed
consideration Work or service is The partners perform
Article 1644. In the lease of work or service, one of Will of both Extinguishment Will of one is dependent upon the ends acts conducive to their
the parties binds himself to execute a piece of work parties sufficient of purposes of the lessee own business purposes
or to render to the other some service for a price necessary Must be for a price or Partners share in profits
certain, but the relation of principal and agent does Two persons – Persons Three persons compensation and losses
not exist between them. (1544a) lessor and involved – principal, Will of both parties is Will on one partner is
lessee agent, 3rd necessary to extinguish sufficient
 In lease of work, the object is the execution of a persosn relationship
piece of work for an employer by an independent Borne by the Risk of loss Borne by the IC is personally liable Partner generally not
contractor IC before delivery principal since with 3rd persons liable
 In lease of service, the object is the performance the agent Ministerial duty Discretionary power
of some service or an employer by HH or merely acts as
laborer, or for a passenger or owner of goods by representative COMPENSATION
a common carrier IC personalky Liability as to GR: agent not a. When there is an agreement – lessee must
liaabe for his third persons liable to 3rd be compelled to pay the agreed price
LEASE OF SERVICE v AGENCY contracts with persons b. Where the agreement may be implied – I
LEASE OF v AGENCY 3r persons give that you may do
SERVICE XCPT: when c. No rate or amount fixed in the contract –
the agent the court in case of disagreement shall
It is based on Basis of It is based on expressly binds determine a reasonable and equitable
employment contract representation himself or compensation according to usages and
exceeds the customs of the place
Lessor does not Agent enters limit of his
enter into into juridical authority Article 1645. Consumable goods cannot be the
juridical acts in acts in behalf Lessor is only Powers Agent subject matter of a contract of lease, except when
behalf of the of the principal limited to possessed exercises they are merely to be exhibited or when they are
lessee ministerial discretionary accessory to an industrial establishment. (1545a)
Principal Type of Preparatory duties power
contract contract contract the  Consumable goods may be the object of
purpose is for LEASE OF WORK OR SERVICE v lease when they are melrely to be exhibited
the agent to PARTNERSHIP or when they are accessory to an industrial
enter into other establishment
contract which LEASE OF WORK OR PARTNERSHIP
he is SERVICE
authorized to No principle of A partner is an agent of
enter representation the partnership hence,
The lessor Work to be The agent representation exist
performs a done executes a Lessor performs a Partners enter into
material act juridical act for material facts for the transactions for
and in behald benefit of the employer realization of profits
of the principal Only two persons are A juridical personality

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estate, the father or guardian as to the property of the GR: a lessee cannot assign the ease without the
CHAPTER 2 minor or ward, and the manager without special consent of the lessor
LEASE OF RURAL AND URBAN LANDS power. (1548a)
SECTION 1. – GENERAL PROVISIONS XCPT: If there is stipulation to the contrary
 There is a requirement because every lease  In an assignment the personality of the
Article 1646. The persons disqualified to buy of real estate may be recorded, and if lessee disappears; there arises a new
referred to in articles 1490 and 1491, are also recorded, creates a real riht bindin upo 3rd juridical relation between the lessor and the
disqualified to become lessees of the things persons, hence it is an act of strict ownership assignee who is converted into a new lessee.
mentioned therein. (n)  If it is not to be recorded, the lease is valid Here is in effect novaton by:
even without SPA 1. substitution the person of the debtor
PERSONS DISQUALIFIED TO BECOME and novation cannot take effect without
LESSEES Article 1648. Every lease of real estate may be the consent of the debtor
1. A husband and a wife and common law recorded in the Registry of Property. Unless a lease is 2. Changing the object or principal
sposes cannot lease to each other their recorded, it shall not be binding upon third persons. condition
separate properties (1549a) 3. Subrogating a third person in the rights
Xcpt: of the creditor
a. If separation of property was agreed  Its purpose is to notify strangers to the
upon iun the marriage settlements transaction WHEN ASSIGNMENT EXISTS
b. If there has been judicial separation of  It is intended to protect the lessee who  When the lessee made an absolute transfer
property cannot be ousted by the buyer if the lease is of his leasehold rights in a contract, and he
 To prevent commission of fraud or prejudice recorded has disassociated himself from the original
to3rd persons  If the purchaser has actual knowledge of the contract of lease.
 To prevent the stronger spouse from unduly existence of the lease, which knowledge is
influencing the weaker spouse equivalent to registration, he is bound by the Article 1650. When in the contract of lease of things
 To avoid indirect donations lease there is no express prohibition, the lessee may sublet
NOTE: lease od personal or movable property the thing leased, in whole or in part, without
2. Relative inacapacity of the uardia, aent, cannot be reistered. To be binding against 3rd person, prejudice to his responsibility for the performance of
executors, public officials, justices the parties must execute PI the contract toward the lessor. (1550)

LEASE OF PROPERTY BY ALIENS EFFECT OF ACTUAL NOTICE OF  A lessee may sublease in the absence of
 They can lease real or immovable property UNREGISTERED LEASE BY PURCHASER express prohibition
 Since the residence of aliens is temporary  Where the contract of lease entered into by  A violation of the prohibition, would entitle
they maybe rante temporary rihts sucha s the lessee with the former owner was not the lessor to rescind the contract, or
lease contract recorded, said contract cannot bind a indemnification for damages
 Under PD 471, the maximum period purchaser of the property  If prohibition is merely implied, sublease is
allowable for the duration of leases of  When the purchaser of the land at the time allowed
private lands to aliens is 25 years, renewable of the purchase has full knowledge that the NOTE: there are two leases and two distinct juridical
for another period of 25 years upon mutual land has been leased to a 3rd person, he is relations
agreement bound to respect said lease, though not 1. Between lessor and lessee
entered into he certificate of sale 2. Between sublessor and the sublesee
Article 1647. If a lease is to be recorded in the  The sublessee generally does not have any
Registry of Property, the following persons cannot Article 1649. The lessee cannot assign the lease direct action against the lessor
constitute the same without proper authority: the without the consent of the lessor, unless there is a  Sublessor is the one directly liable to the
husband with respect to the wife's paraphernal real stipulation to the contrary. (n) sublessee

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GR: the sublessee can only held liable directly to the thing, that the lessee shall enjoy the legal
NOTE: as the existence of the sublease depends sublessor and peaceful possession of the thing, and
upon the lease, the sublease is terminated upon the XCPT: the lessor may bring an action directly that the thing is fit for the use for which it is
recission of the lease contract against the sublessee if he does not use ad preserve intended and free from any hidden fault or
 A sublease cannot have a term longer than the thing leased I accordance with the agreement defect
that of the lease on which it is dependent between the lessor and the lessee  Liability for the warranty is not equivalent
to liability in damages
SUBLEASE v ASSIGNMENT OF LEASE Article 1652. The sublessee is subsidiarily liable to
SUBLEASE v ASSIGNMENT the lessor for any rent due from the lessee. However, SECTION2. – RIGHTS AND OBLIGATIONS OF
OF LEASE the sublessee shall not be responsible beyond the THE LESSOR AND THE LESSEE
amount of rent due from him, in accordance with the
2 leases and 2 Number of There is only terms of the sublease, at the time of the extra-judicial Article 1654. The lessor is obliged:
distinct juridical one juridical demand by the lessor.
juridical relations relationsjip that (1) To deliver the thing which is the object of the
relationships created of the lessor and Payments of rent in advance by the sublessee shall be contract in such a condition as to render it fit for the
although the assignee, deemed not to have been made, so far as the lessor's use intended;
immediately who is claim is concerned, unless said payments were
connected and converted into a effected in virtue of the custom of the place. (1552a) (2) To make on the same during the lease all the
related to each lessee necessary repairs in order to keep it suitable for the
other  The purpose is to prevent a situation where use to which it has been devoted, unless there is a
The personality As to The personality the lessee collects rents from the sublessee stipulation to the contrary;
of the lessee personality of of the lessee but does not pay his rents to the lessor
does not lessee disappears  The liability of the sublessee is limited to the (3) To maintain the lessee in the peaceful and
disappear amount of rent due from him to the adequate enjoyment of the lease for the entire
The lessee does Transfer of The lessee sublessor under the terms of the sublease duration of the contract. (1554a)
not transmit rights and transmits  Future rents cannot be recovered
absolutely his obligations absolutely to the  Liability is subsidiary, he is liable to the
 The above article enumerates the 3 principal
rights and assignee lessor only for the rents the lessee failed to
obligations to obligations of the lessor
pay the lessor
sublessee  In addition, he cannot alter the form of the
thing leased
The sublessee, Right of action The assignee ACCION DIRECTA – a direct action against the  His failure to fulfill. Will render him liable
generally does against lessor has a direct lssor may bring against the sublessee who misuses
for damages
not have any action against the subleased property
direct action the lessor
DELIVERY - may be actual or constructive
against the Article 1653. The provisions governing warranty,  The thing must be in a condition fit for the
lessor contained in the Title on Sales, shall be applicable to use intended
the contract of lease.
NECESSARY REPAIRS – if the lessor fails, the
Article 1651. Without prejudice to his obligation In the cases where the return of the price is required, lessee may suspend the payment of rent or avail
toward the sublessor, the sublessee is bound to the reduction shall be made in proportion to the time himself of the other remedies
lessor for all acts which refer to the use and during which the lessee enjoyed the thing. (1553)  Lessor is not liable for repairs caused by the
preservation of the thing leased in the manner lessee himself
stipulated between the lessor and the lessee. (1551)  In a lease contract, the lessor likewise  The lessee may agree to do the repairs and
warrants that he has a right to lease the relieve the lessor
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 The obligation to make repairs is very contrary. (n) Article 1659. If the lessor or the lessee should not
different from reconstruction in case of total comply with the obligations set forth in articles 1654
loss Article 1657. The lessee is obliged: and 1657, the aggrieved party may ask for the
rescission of the contract and indemnification for
KEEPING LESSEE IN PEACEFUL AND (1) To pay the price of the lease according to the damages, or only the latter, allowing the contract to
ADEQUATE ENJOYMENT – the warranty of the terms stipulated; remain in force. (1556)
lessor is that the lessee shall not disturbed in his Upon non payment by the lessee, the lessor
legal, NOT physical possession may elect to treat the contract rescinded and
 Lessor is not liable for physical trespass, but (2) To use the thing leased as a diligent father of a
thereby determibe the right of the lessee to
family, devoting it to the use stipulated; and in the
is liable when his non-payment of the real continue in possession; (unlawful detainer
absence of stipulation, to that which may be inferred
estate tax results in the eviction of the lessee action)
from the nature of the thing leased, according to the
The lessee cannot refuse to pay the rent then
custom of the place;
declare the lease rescinded
RIGHT OF FIRST REFUSAL A lessor may seek recission of a lease
 when a lease contract contains a right of first (3) To pay expenses for the deed of lease. (1555) contract and ejectment of the lessee
refusal, the lessor is under a legal duty to the simultaneously in a single action for
lessee not to sell to anybody a any price PAYMENT OF THE AGREED PRICE – arises unlawful detainer
until after he has made an offer to sell to the only when the thing leased has been delivered for
latter at a certain price and the lessee has purposes stipulated in the contract NOTE: recission will not be permitted for a slight pr
failed to accept  Only the lessor has the right to fix the rent causal breach of contract
 when violated – it may be rescinded of may  The lessor has the right to terminate the
be subject of an action for specific ;ease upon termination as well as to increase Article 1660. If a dwelling place or any other
performance the rent in case of renewal building intended for human habitation is in such a
condition that its use brings imminent and serious
Article 1655. If the thing leased is totally destroyed PROPER USE OF THE THING LEASED – the danger to life or health, the lessee may terminate the
by a fortuitous event, the lease is extinguished. If the lessee must exercise the diligence of a good father of lease at once by notifying the lessor, even if at the
destruction is partial, the lessee may choose between a family time the contract was perfected the former knew of
a proportional reduction of the rent and a rescission a. The use of the thing for an illegal purpose the dangerous condition or waived the right to
of the lease. (n) entitles the lessor to terminate the contract rescind the lease on account of this condition. (n)
1. Total destruction – the lease is extinguished,  Self explanatory
because of the absence of object of the contract PAYMENT OF EXPENSES FOR DEED OF
2. Partial destruction – lessee is given the option LEASE - by agreement, the obligation may be Article 1661. The lessor cannot alter the form of the
to either: assumed by the lessor thing leased in such a way as to impair the use to
a. Reduce proportionately the rent – retroactive which the thing is devoted under the terms of the
to the date the partial destruction occurred Article 1658. The lessee may suspend the payment of lease. (1557a)
b. Recission of the lease – the general rule is the rent in case the lessor fails to make the necessary
that it will not be granted for slight or trivial repairs or to maintain the lessee in peaceful and ALTERATION – modification in such a way that
causes adequate enjoyment of the property leased. (n) would destroy the substance of the thing leased
 Once communicated, cannot change 1. Repairs - the lessee may suspend payment from 1. By the lessor – the lessor can alter the form
the time demand is made upon the lessor and the of the lease provided there is no impairment
Article 1656. The lessor of a business or industrial latter fals to perform his obligation in the use to which the thing is devoted
establishment may continue engaging in the same 2. Eviction - the lessee is released from the under the terms of the lease
business or industry to which the lessee devotes the obligation to pay rents from the time he is
thing leased, unless there is a stipulation to the unlawfully dispossessed

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2. By the lessee - the lessee may alter so long NOTE: recision may be availed if the mainpurpose  The lessor may maintain anaction to recover
as the value of the property is not impaired of the lease is to provide a dwelling palce ad the title (accion reinvendicatoria) or to establish
by the alteration property becomes uninhabitable his better right of possession (accion
 If repairs are not urgent, the lessor is liale publiciana)
Article 1662. If during the lease it should become for damages suffered by the lessee
necessary to make some urgent repairs upon the thing Article 1665. The lessee shall return the thing leased,
leased, which cannot be deferred until the termination Article 1663. The lessee is obliged to bring to the upon the termination of the lease, as he received it,
of the lease, the lessee is obliged to tolerate the work, knowledge of the proprietor, within the shortest save what has been lost or impaired by the lapse of
although it may be very annoying to him, and possible time, every usurpation or untoward act time, or by ordinary wear and tear, or from an
although during the same, he may be deprived of a which any third person may have committed or may inevitable cause. (1561a)
part of the premises. be openly preparing to carry out upon the thing The lessee is not liable for loss or deprictation due to:
leased. 1. Lapse of time
If the repairs last more than forty days the rent shall 2. Ordinary wear and tear
be reduced in proportion to the time - including the He is also obliged to advise the owner, with the same 3. Inevitable cause or fortuiotos event
first forty days - and the part of the property of which urgency, of the need of all repairs included in No. 2
the lessee has been deprived. of article 1654. Article 1666. In the absence of a statement
concerning the condition of the thing at the time the
In both cases the lessee shall be liable for the lease was constituted, the law presumes that the
When the work is of such a nature that the portion
which the lessee and his family need for their damages which, through his negligence, may be lessee received it in good condition, unless there is
dwelling becomes uninhabitable, he may rescind the suffered by the proprietor. proof to the contrary. (1562)
contract if the main purpose of the lease is to provide  Self explanatory
If the lessor fails to make urgent repairs, the lessee, in
a dwelling place for the lessee. (1558a)
order to avoid an imminent danger, may order the Article 1667. The lessee is responsible for the
repairs at the lessor's cost. (1559a) deterioration or loss of the thing leased, unless he
RULE IN CASE OF URGENT REPAIRS
 The purpose of the notice is to enable the proves that it took place without his fault. This
 The lessor has the obligation to make
necessary repairs and the lessee is obliged owner to maintain his civil possession, by burden of proof on the lessee does not apply when
suit if necessary the destruction is due to earthquake, flood, storm or
to notify the lessor of the urgency of such
repair other natural calamity. (1563a)
 The lessee is obliged to tolerate the work Article 1664. The lessor is not obliged to answer for  Self explanatory
although it may be very annoying to him a mere act of trespass which a third person may cause
and though during the same time he may be on the use of the thing leased; but the lessee shall Article 1668. The lessee is liable for any
deprived of a part of the premises. If repairs have a direct action against the intruder. deterioration caused by members of his household
last for less than 40 days and by guests and visitors. (1564a)
40 days or more - the lessee can ask for the There is a mere act of trespass when the third person  There is no need of proving that he was
reduction of the rent in proportion to the time claims no right whatever. (1560a) negligent in selecting and supervising his
including the first 40 days and the part of the household helpers
property which he is deprived 2 KINDS OF TRESPASS
1. Mere act of trespass (disturbance in fact) – Article 1669. If the lease was made for a determinate
Less than 40 days - the lessee cannot ask for the lessor is not liable to the lessee, the time, it ceases upon the day fixed, without the need
reduction in the absence of a provision in the contract lessee shall have a direct action against the of a demand. (1565)
giving him such right usurper  Notice to vacate constitutes an express act
2. Trespass in law (disturbance in law) – the by the lessor that he no longer consents to
real party in interest is the lessor who the renewal
becomes liable to the lessee

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 There is an implied renewal when the lessee Article 1672. In case of an implied new lease, the MONTH TO MONTH – is a definite period, may
continues in possession after the expiration obligations contracted by a third person for the be terminated at the end of any month. It expires
of the time fixed in the contract with the security of the principal contract shall cease with everymonth
acquiesced of the lessor respect to the new lease. (1567)  The unlawful holding shall be counted from
 The renewal of the lease is in effect a the date the demand to vacate was given
Article 1670. If at the end of the contract the lessee novation of the original contract of lease
should continue enjoying the thing leased for fifteen EJECTMENT ON THE GROUND OF
days with the acquiescence of the lessor, and unless a rticle 1673. The lessor may judicially eject the lessee NONPAYMENT 2 REQS:
notice to the contrary by either party has previously for any of the following causes: 1. There must be failure to pay rent or to
been given, it is understood that there is an implied comply with the condition of the lease
new lease, not for the period of the original contract, (1) When the period agreed upon, or that which is 2. There must be demand both to pay or to
but for the time established in articles 1682 and 1687. fixed for the duration of leases under articles 1682 comply and vacate within the periods
The other terms of the original contract shall be and 1687, has expired; specified, 15 days for land and 5 days for
revived. (1566a) buildings
(2) Lack of payment of the price stipulated;
REQS: *read rent control act of 2009 Republic Act No. 9653
1. The lessee continues enjoying the thing
leased for at least 15 ays (3) Violation of any of the conditions agreed upon in Article 1674. In ejectment cases where an appeal is
2. The continuation of the occupation by the the contract; taken the remedy granted in article 539, second
lessee is with the acquiesce of the lessor paragraph, shall also apply, if the higher court is
3. The lessor has not previously given a notice (4) When the lessee devotes the thing leased to any satisfied that the lessee's appeal is frivolous or
to vacate use or service not stipulated which causes the dilatory, or that the lessor's appeal is prima facie
THERE IS NO IMPLIED RENEWAL deterioration thereof; or if he does not observe the meritorious. The period of ten days referred to in said
1. When there is stipulation against implied requirement in No. 2 of article 1657, as regards the article shall be counted from the time the appeal is
renewal use thereof. perfected. (n)
2. When the original lease is invalid  The remedy is intended to put an end to the
3. When the acceptance of rentals beyond The ejectment of tenants of agricultural lands is present state of the law which unjustly
original term governed by special laws. (1569a) allows the lessee to continue inpossession
4. When the acceptance of rentals less than
during an appeal
amounts stipulated  In ejectment proceedings, the only issue is
5. Nonpayment of rental the legality of the possessor’s physical Article 1675. Except in cases stated in article 1673,
possession (de facto) and not de jure the lessee shall have a right to make use of the
Article 1671. If the lessee continues enjoying the  The summary action for unlawful detainer periods established in articles 1682 and 1687. (1570)
thing after the expiration of the contract, over the should be filed with the proper MTC within
lessor's objection, the former shall be subject to the 1 year after the occurrence of the unlawful
responsibilities of a possessor in bad faith. (n) deprivation or withholding of possession
Article 1676. The purchaser of a piece of land which
 The remedy of the lessor is to bring an  Beyong 1 year, accion publiciana ka na
is under a lease that is not recorded in the Registry of
action of unlawful detainer
Property may terminate the lease, save when there is
NOTE: demand is not needed when the period of the
a stipulation to the contrary in the contract of sale, or
DAMAGES RECOVERABLE IN FE AND UD lease has expired. Notice is to be served only when
when the purchaser knows of the existence of the
1. Fair rental value recoverable action is due to lessee’s nonpayment of rentls
lease.
2. Amount recoverable in concept of actual
damages
If the buyer makes use of this right, the lessee may
demand that he be allowed to gather the fruits of the
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harvest which corresponds to the current agricultural though the principal thing may suffer damage
year and that the vendor indemnify him for damages thereby. He shall not, however, cause any more SECTION 3. – SPECIAL PROVISIONS FOR
suffered. impairment upon the property leased than is LEASE OF RURAL LANDS
necessary.
If the sale is fictitious, for the purpose of Article 1680. The lessee shall have no right to a
extinguishing the lease, the supposed vendee cannot With regard to ornamental expenses, the lessee shall reduction of the rent on account of the sterility of the
make use of the right granted in the first paragraph of not be entitled to any reimbursement, but he may land leased, or by reason of the loss of fruits due to
this article. The sale is presumed to be fictitious if at remove the ornamental objects, provided no damage ordinary fortuitous events; but he shall have such
the time the supposed vendee demands the is caused to the principal thing, and the lessor does right in case of the loss of more than one-half of the
termination of the lease, the sale is not recorded in not choose to retain them by paying their value at the fruits through extraordinary and unforeseen fortuitous
the Registry of Property. (1571a) time the lease is extinguished. (n) events, save always when there is a specific
 It applies only to lease for a fixed term and stipulation to the contrary.
not to those from month to month USEFUL IMPROVEMENTS
REQS FOR REIMBURSEMENT Extraordinary fortuitous events are understood to be:
NOTE: the purchaser of a piece of land under an 1. The lessee should make useful fire, war, pestilence, unusual flood, locusts,
unrecorded lease may terminate the lease unless: improvements in GF earthquake, or others which are uncommon, and
2. The improvements must be suitable to the which the contracting parties could not have
1. There is stipulation in the COS he must use for which the lease is intended reasonably foreseen. (1575)
3. The form and substance of the property
respect existing lease
leased should not be altered Article 1681. Neither does the lessee have any right
2. He knows of the existing lease
to a reduction of the rent if the fruits are lost after
3. The property is sold fictitiously just to RIGHT OF THE LESSEE IN CASE OF USEFUL they have been separated from their stalk, root or
terminate the lease IMPRIVEMENT trunk. (1576)
 A purchaser with full knowledge f the 1. To remove the improvement should the
existence of an unrecorded lease is bound to lessor refuse to reimburse REQUISITES
respect it because actual knowledge is 2. To be reimbursed by ½ of the value of the 1. The land leased is rural
improvements at the time of the termination 2. More than ½ of the fruits have been lost
equivalent to registration
of the lease 3. The loss occurred through extraordinary and
RIGHTS OF LESSEE IN CASE OF unforeseen fortuitous event
Article 1677. The purchaser in a sale with the right ORNAMENTAL EXPENSES
of redemption cannot make use of the power to eject 4. There is no specific stipulation that the
 The lessee has no right of reimbursement, lessee is nevertheless not entitled to
the lessee until the end of the period for the but he may remove them, provided
redemption. (1572) reduction
a. No dames caused to the principal thing
 He may however, make use of the power to b. Lessor does not choose to retain them
oust the lessee of any of the rounds for LESSEE NOT ENTITLED TO REDUCTION:
by paying their value at the time of the 1. On account of the sterility of the land leased
ejectment is present lease 2. By reason of the loss of the fruots due to
rdinary FE. Regardless of the extent of the
Article 1678. If the lessee makes, in good faith, Article 1679. If nothing has been stipulated loss
useful improvements which are suitable to the use for concerning the place and the time for the payment of 3. By reason of the loss of less than ½ of the
which the lease is intended, without altering the form the lease, the provisions or article 1251 shall be fruits even though extraordinary and
or substance of the property leased, the lessor upon observed as regards the place; and with respect to the unforeseen events
the termination of the lease shall pay the lessee one- time, the custom of the place shall be followed. 4. By reason of the loss of the fruits through
half of the value of the improvements at that time. (1574) extraordinary but unforeseen evenets,
Should the lessor refuse to reimburse said amount,  Self explanatory regardless of extent of loss
the lessee may remove the improvements, even
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5. By reasons of the loss of more than ½ of the 2. The incoming lessee and lessor shall permit
fruits through extraordinary and unforeseen the outgoing lessee to gather or harvest and
events, where there is a specific stipulation utilize the fruits produced
to the contrary
6. Where the loss of the fruits occurred after Article 1684. Land tenancy on shares shall be
they have already gathered regardless of the governed by special laws, the stipulations of
extent of loss the parties, the provisions on partnership and
by the customs of the place. (1579a)
Article 1682. The lease of a piece of rural
land, when its duration has not been fixed, is Article 1685. The tenant on shares cannot be
understood to have been for all the time ejected except in cases specified by law. (n)
necessary for the gathering of the fruits which
the whole estate leased may yield in one year,
or which it may yield once, although two or
more years have to elapse for the purpose.
(1577a)

DURATION OF THE RURAL LEASE


1. The duration is that fixed in the COL
2. In the absence of stipulation, duration is
fixed by law:
a. At the time necessary to gather the
fruits which ordinarily would cover 1
year in case of agricultural crops
b. More than 1 year in case the land may
yield only once and 2 or more years
may have elapse for the purpose

Article 1683. The outgoing lessee shall allow


the incoming lessee or the lessor the use of
the premises and other means necessary for
the preparatory labor for the following year;
and, reciprocally, the incoming lessee or the
lessor is under obligation to permit the
outgoing lessee to do whatever may be
necessary for the gathering or harvesting and
utilization of the fruits, all in accordance with
the custom of the place. (1578a)

1. The outgoing lessee shall allow the


incoming lessee or lessor to make the
necessary work preparatory for the crop the
following year

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