Professional Documents
Culture Documents
CHAPTER 5
Obligations of the Vendee 2. Where separate price has been fixed for each
installment: it depends in each case on the terms
ARTICLE 1582. The vendee is bound to accept delivery of the contract and the circumstances of the case
and to pay the price of the thing sold at the time and place whether the breach thereof is severable or not.
stipulated in the contract. 3. Where breach effects whole contract: The injured
If the time and place should not have been party may sue for damages for breach of the
stipulated, the payment must be made at the time and place entire contract if the breach is so material as to
of the delivery of the thing sold. affect the contract as a whole
(See page 167 for example) 4. Where breach divisible: Give rise to a claim for
compensation for the particular breach but not a
Principal Obligations of vendee: right to treat the whole contract broken,
1. Accept delivery
2. Pay the price ARTICLE 1584. Where goods are delivered to the buyer,
3. To bear the expenses for the execution & which he has not previously examined, he is not deemed to
registration of the sale and putting goods in a have accepted them unless and until he has had a
deliverable state, if such is the stipulation reasonable opportunity of examining them for the purpose
of ascertaining whether they are in conformity with the
Pertinent Rules: contract if there is no stipulation to the contrary.
1. In a contract of sale, the vendor is not required to Unless otherwise agreed, when the seller tenders
deliver the thing sold until the price is paid nor the delivery of goods to the buyer, he is bound, on request, to
vendee to pay the price before the thing is afford the buyer a reasonable opportunity of examining the
delivered in the absence of an agreement to the goods for the purpose of ascertaining whether they are in
contrary conformity with the contract.
Where goods are delivered to
2. If stipulated, then the vendee is bound to accept a carrier by the seller, in accordance with an order from or
delivery and to pay the price at the time and place agreement with the buyer, upon the terms that the goods
designated; shall not be delivered by the carrier to the buyer until he has
3. If there is no stipulation as to the time and place of paid the price, whether such terms are indicated by marking
payment and delivery, the vendee is bound to pay the goods with the words "collect on delivery," or otherwise,
at the time and place of delivery; the buyer is not entitled to examine the goods before the
4. In the absence also of stipulation, as to the place of payment of the price, in the absence of agreement or usage
delivery, it shall be made wherever the thing might of trade permitting such examination.
be at the moment the contract was perfected;
5. If only the time for delivery of the thing sold has Acceptance: assent to become owner of the specific goods
been fixed in the contract, the vendee is required to when delivery of them is offered to the buyer.
pay even before the thing is delivered to him. 1. Actual delivery contemplated
-Ownership of the goods shall be transferred only
ARTICLE 1583. Unless otherwise agreed, the buyer of upon actual delivery subject to a reasonable
goods is not bound to accept delivery thereof by opportunity of examining them to determine if they
installments. are in conformity with the contract
Where there is a contract of sale of goods to be -Right of examination or inspection is thus a
delivered by stated instalments, which are to be separately condition precedent to the transfer of ownership
paid for, and the seller makes defective deliveries in respect unless there is a stipulation to the contrary
of one or more instalments, or the buyer neglects or refuses 2. Goods delivered C.O.D/ not C.O.D
without just cause to take delivery of or pay for one or more - C.O.D, buyer has the right to examine the
instalments, it depends in each case on the terms of the goods before paying. Right to examine the
contract and the circumstances of the case, whether the goods is a condition precedent to paying
breach of contract is so material as to justify the injured price after ownership has passed
party in refusing to proceed further and suing for damages - C.O.D sale, the buyer is allowed to examine
for breach of the entire contract, or whether the breach is the goods before payment of the price should
severable, giving rise to a claim for compensation but not to it have been so agreed upon or if it permitted
a right to treat the whole contract as broken. by usage
(See page 169 for example) NOTE:
Buyer does not have absolute right of examination
Rules governing delivery in installments: since the seller is bound to afford the buyer a
1. GR: The buyer is not bound to receive delivery of reasonable opportunity of examining the goods only
goods in installments. Similarly, a buyer has no “on request”
right to pay the price in installments. Neither can If seller refused to allow inspection, to ascertain
he be required to make partial payments whether they are in conformity with the contract, the
Exceptions: By agreement, however, goods may buyers may rescind the contract and recover the
be deliverable by installments or the price payable price or any part of it that he has paid
in installments.
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Right of inspection may be given up by the buyer the seller, but it is sufficient if he notifies the seller that he
by stipulation refuses to accept them. If he voluntarily constitutes himself
a depositary thereof, he shall be liable as such.
ARTICLE 1585. The buyer is deemed to have accepted the
goods when he intimates to the seller that he has accepted Where buyer’s refusal to accept justified
them, or when the goods have been delivered to him, and 1) Duty of the buyer to take care of goods w/o
he does any act in relation to them which is inconsistent obligation to return – If the goods have been sent to
with the ownership of the seller, or when, after the lapse of the buyer and he rightfully refuses to accept them,
a reasonable time, he retains the goods without intimating as in the case where the goods are not of the kind
to the seller that he has rejected them. and quality agreed upon, he is in the position of a
bailee who is in possession of the goods thrust
Modes of manifesting acceptance: upon him w/o his assent.
1. Express acceptance takes place when the buyer 2) Duty of seller to take delivery of goods: After notice
after delivery of the goods intimates to the seller, that goods have not and will not be accepted, the
verbally or in writing, that he has accepted them. seller must have the burden of taking delivery of the
2. Implied acceptance takes place: said goods.
a. When the buyer, after the delivery of goods, 3) Seller’s risk of loss: While the goods remain in the
does any act inconsistent with the seller’s buyer’s possession under these circumstances,
ownership, as when he sells or attempts to they are, of course at seller’s risk. But the buyer is
sell the goods, or he uses or make alteration not deemed and is not liable as a depositary,
in them in a manner only for an owner; unless he voluntarily constitutes himself as such.
b. When the buyer, after the lapse of a 4) Right of buyer to resell goods: Should the seller
reasonable time without intimating his when notified to take delivery of the goods, fail to
rejection. do so; the buyer may resell the goods.
Delivery and acceptance, separate acts ARTICLE 1588. If there is no stipulation as specified in
a. Acceptance, not a condition to complete delivery the first paragraph of article 1523, when the buyer's refusal
– The seller must comply with his obligation to to accept the goods is without just cause, the title thereto
deliver although there is no acceptance yet by passes to him from the moment they are placed at his
the buyer disposal.
b. Acceptance and actual receipt do not imply the
other – Acceptance of the buyer may precede Note:
actual delivery. There may be an actual receipt Under this article, the buyer’s refusal to accept the
w/o any acceptance and there may be goods is w/o a just cause while under Art 1587, the
acceptance w/o any receipt. refusal is with a right to do so.
ARTICLE 1586. In the absence of express or implied ARTICLE 1589. The vendee shall owe interest for the
agreement of the parties, acceptance of the goods by the period between the delivery of the thing and the payment of
buyer shall not discharge the seller from liability in damages the price, in the following three cases:
or other legal remedy for breach of any promise or warranty (1) Should it have been so stipulated;
in the contract of sale. But, if, after acceptance of the (2) Should the thing sold and delivered produce fruits or
goods, the buyer fails to give notice to the seller of the income;
breach in any promise of warranty within a reasonable time (3) Should he be in default, from the time of judicial or
after the buyer knows, or ought to know of such breach, the extrajudicial demand for the payment of the price.
seller shall not be liable therefor.
Note:
NOTE: This article presupposes that the delivery of the
Acceptance of the goods by the buyer does not thing sold and the payment of the price were not
discharge the seller from liability in damages or made simultaneously but the thing sold was
other legal remedy for breach of any promise or delivered first followed by the payment of the price
warranty in the contract of sale after the lapse of a certain period of time.
Requires buyer, in order to hold the seller for Vendee is liable to pay interest from the delivery of
breach of promise or warranty, to give notice to the thing until payment of the price
the seller of any such breach within a reasonable Fruits or income received by the vendee from thing
time sold, two conditions must exist:
Purpose is to protect the seller against belated a) Thing sold has been delivered
claims b) It produces fruits or income.
If the vendee would not be bound to pay interest
ARTICLE 1587. Unless otherwise agreed, where goods are for the use of the money, which he should have
delivered to the buyer, and he refuses to accept them, paid, the principle of bilaterality which characterize
having the right so to do, he is not bound to return them to a contact of sale would no longer exist
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If the vendee incurs in delay in the payment of the ARTICLE 1592. In the sale of immovable property, even
agreed price, the interest is due from the time of though it may have been stipulated that upon failure to pay
judicial or extrajudicial demand by the vendor for the price at the time agreed upon the rescission of the
the payment of the price. contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for
ARTICLE 1590. Should the vendee be disturbed in the rescission of the contract has been made upon him either
possession or ownership of the thing acquired, or should he judicially or by a notarial act. After the demand, the court
have reasonable grounds to fear such disturbance, by a may not grant him a new term.
vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has NOTE:
caused the disturbance or danger to cease, unless the latter GR: the vendor may sue for rescission of the
gives security for the return of the price in a proper case, or contract should vendee fail to pay the agreed price
it has been stipulated that, notwithstanding any such The sale of real property, however, is subject to
contingency, the vendee shall be bound to make the the stipulations agreed upon by the parties and to
payment. A mere act of trespass shall not authorize the the provisions of Art 1592.
suspension of the payment of the price. Before the demand of the rescission of the
contract (not payment of the price) has been made
When vendee can suspend payment of the price: by the vendor, the vendee may still pay the price
1) If he is disturbed in the possession or ownership even after the expiration of the stipulated period
of the thing bought for payment and notwithstanding a stipulation that
2) If he has a well-grounded fear that his possession failure to pay the price on the stipulated date ipso
or ownership would be disturbed by a vindicatory facto resolves the sale
action or foreclosure of mortgage Right to rescind is not absolute and the court may
Note: Under Art 1590, the vendee has no cause of action extend the period for payment
for rescission before final judgment, the reason being that Once a demand for rescission by suit or notarial
otherwise, the vendor might become the victim of collision act is made however, under Art 1592, the court
(ie., secret agreement or cooperation for a fraudulent may not grant a new term
purpose) between the vendee and the third person. But the Art 1592 does not apply on: a. To sales on
remedy of the buyer is rescission, not suspension of installments of real property; b. A mere promise to
payment, where the disturbance is caused by the existence sell (executory contract to sell) where the title
of non-payment servitude. remains with the vendor until full payment of the
price. In other words, the vendee in such cases
When vendee cannot suspend payment of the price: may no longer pay the price after the expiration of
1) If the vendor gives security for the return of the the time agreed upon although no demand has yet
price in a proper case; been made upon him by suit or notarial act.
2) If it has been stipulated that notwithstanding any
such contingency the vendee must make payment ARTICLE 1593. With respect to movable property, the
3) If the vendor has caused the disturbance or rescission of the sale shall of right take place in the interest
danger to cease of the vendor, if the vendee, upon the expiration of the
4) If the disturbance is a mere act of trespass period fixed for the delivery of the thing, should not have
5) If the vendee has fully paid the price appeared to receive it, or, having appeared, he should not
NOTE: There is a mere act of trespass when the third have tendered the price at the same time, unless a longer
person claims no right whatever. The vendor is not liable period has been stipulated for its payment.
therefor. The vendee has a direct action against intruder. (See page 181 for example)
‘NOTE:
ARTICLE 1591. Should the vendor have reasonable In the case of personal property (which has not yet
grounds to fear the loss of immovable property sold and its been delivered to the vendee), the vendor can
price, he may immediately sue for the rescission of the sale. rescind the contract, as a matter of right, if the
Should such ground not exist, the provisions of vendee, without any valid cause, does not: a.
article 1191 shall be observed. accept delivery; or b. pay the price unless credit
period for its payment is stipulated.
NOTE: The mere failure of the vendee to comply with the
This article refers only to a sale of real property terms of the contract, however, does not rescind
where vendor has good reasons to fear the loss of the same. It is necessary that the vendor should
the property and its price. take some affirmative action indicating his intention
It contemplates a situation where there has been to rescind.
delivery of the immovable property but the vendee Reason for the difference is that personal
has not yet paid the price. properties are not capable of maintaining a stable
It is applicable to both cash sales and to sales in price in the market. Their prices are so changeable
installments
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that any delay in their disposal cause the vendor 3) When goods cannot readily be resold for a
great prejudice reasonable price and the buyer wrongfully refuses
In the case of real property which has more or less to accept them even before ownership in the
stable price in the market and the delay that might goods has passed, if the provisions of Art 1596,
result form the requirement imposed on the vendor 4th paragraph are not applicable
to demand rescission before being entitled to NOTE:
rescind the contract will not in any way prove Seller cannot maintain an action for the price if the
detrimental to the interest of the vendor. ownership in the goods has not passed to the
buyer, unless the price is payable on a certain day
CHAPTER 6 Actions for Breach of Contract of Sale of or unless the goods cannot readily be resold for a
Goods certain price and the provisions of Art 1596, 4th par
are not applicable
ARTICLE 1594. Actions for breach of the contract of sale of Art 1588, the tiles to the goods passes to the
goods shall be governed particularly by the provisions of buyer from the moment they are placed at his
this Chapter, and as to matters not specifically provided for disposal when his refusal to accept them is w/o
herein, by other applicable provisions of this Title. just cause. The seller, may therefore bring an
action for the price upon wrongful refusal of the
“Goods” includes all chattels personal but not things in buyer to accept.
action or money of legal tender; includes growing fruits or
crops. ARTICLE 1596. Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller may
Actions available for breach of the contract: maintain an action against him for damages for
1) Action by the seller for payment of the price nonacceptance.
2) Action by the seller for damages for non- The measure of damages is the estimated loss directly
acceptance of the goods and naturally resulting in the ordinary course of events from
3) Action by the seller for rescission of the contract the buyer's breach of contract.
4) Action by the buyer for specific performance Where there is an available market for the goods
5) Action by the buyer for rescission or damages for in question, the measure of damages is, in the absence of
breach of warranty special circumstances showing proximate damage of a
different amount, the difference between the contract price
ARTICLE 1595. Where, under a contract of sale, the and the market or current price at the time or times when
ownership of the goods has passed to the buyer and he the goods ought to have been accepted, or, if no time was
wrongfully neglects or refuses to pay for the goods fixed for acceptance, then at the time of the refusal to
according to the terms of the contract of sale, the seller may accept.
maintain an action against him for the price of the goods. If, while labor or expense of material amount is
Where, under a contract of sale, the price is payable necessary on the part of the seller to enable him to fulfill his
on a certain day, irrespective of delivery or of transfer of title obligations under the contract of sale, the buyer repudiates
and the buyer wrongfully neglects or refuses to pay such the contract or notifies the seller to proceed no further
price, the seller may maintain an action for the price therewith, the buyer shall be liable to the seller for labor
although the ownership in the goods has not passed. But it performed or expenses made before receiving notice of the
shall be a defense to such an action that the seller at any buyer's repudiation or countermand. The profit the seller
time before the judgment in such action has manifested an would have made if the contract or the sale had been fully
inability to perform the contract of sale on his part or an performed shall be considered in awarding the damages.
intention not to perform it. See page 189 for example
Although the ownership in the goods has not passed, if
they cannot readily be resold for a reasonable price, and if Seller’s right of action for damages:
the provisions of article 1596, fourth paragraph, are not 1) If the buyer w/o lawful cause neglects or refuses to
applicable, the seller may offer to deliver the goods to the accept and pay for the goods he agreed to buy, the
buyer, and, if the buyer refuses to receive them, may notify seller may maintain an action against him for
the buyer that the goods are thereafter held by the seller as damages for nonacceptance
bailee for the buyer. Thereafter the seller may treat the 2) In an executory contract, where the ownership in
goods as the buyer's and may maintain an action for the the goods has not passed and the seller cannot
price. maintain an action to the price, the seller’s remedy
See page 186 for example will also be an action for damages
Seller’s right of action for the price: 3) If the goods are not yet identified at the time of the
1) When the ownership of the goods has passed to contract or subsequently, the seller’s right is
the buyer and he wrongfully neglects or refuses to necessarily confined to an action for damages.
pay for the price
2) When price is payable on a certain day and the
buyer wrongfully neglects or refuses to pay such
price, irrespective of delivery or of transfer of title
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Measure of damages for nonacceptance of goods NOTE:
1) Difference between contract price, that is the This article apples only where the goods to be
amount of the obligation which the buyer failed to delivered are specific or ascertained.
fulfill and the market price or current price, that is, In reciprocal obligations, it is the injured party
the value of the goods which the seller has left who has right to choose between fulfillment
upon his hands. This follows the GR that damages and rescission w/ the payment of damages in
comprehended not only the actual loss suffered either case.
but also unrealized profit. Consequently, the right of the injured party to
2) If there is no available market in which the goods demand specific performance cannot be
can be sold at the time, the seller is “entitled to the defeated by the guilty party’s choice to rescind
full amount of damage which he has really the contract.
sustained by a breach of the contract This is also the rule in this article which grants
3) Seller is allowed under special circumstances to the buyers, as a matter of right, the remedy
proximate damages of greater amount than the of specific performance in case the seller
diff between the contract price and market price should violate his obligation to make delivery
when such damages may be reasonably attributed The seller cannot retain the goods on payment
to the non-performance of the obligation of damages because damages are imposed by
law to insure fulfillment of contract and not to
Measure of damages for repudiation or countermand: substitute for it.
1) The labor performed and expenses incurred for
material before receiving notice of the buyer’s ARTICLE 1599. Where there is a breach of warranty by the
repudiation seller, the buyer may, at his election:
2) Profit he would have realized if the sale had been (1) Accept or keep the goods and set up against the seller,
fully performed the breach of warranty by way of recoupment in diminution
or extinction of the price;
ARTICLE 1597. Where the goods have not been (2) Accept or keep the goods and maintain an action
delivered to the buyer, and the buyer has repudiated the against the seller for damages for the breach of warranty;
contract of sale, or has manifested his inability to perform (3) Refuse to accept the goods, and maintain an action
his obligations thereunder, or has committed a breach against the seller for damages for the breach of warranty;
thereof, the seller may totally rescind the contract of sale by (4) Rescind the contract of sale and refuse to receive the
giving notice of his election so to do to the buyer. goods or if the goods have already been received, return
them or offer to return them to the seller and recover the
Seller’s right of rescission before delivery: price or any part thereof which has been paid.
1) When the buyer has repudiated the contract of When the buyer has claimed and been granted a remedy in
sale; anyone of these ways, no other remedy can thereafter be
2) When the buyer has manifested his inability to granted, without prejudice to the provisions of the second
perform his obligations thereunder paragraph of article 1191.
3) When the buyer has committed a breach of the Where the goods have been delivered to the
contract of sale. buyer, he cannot rescind the sale if he knew of the breach
of warranty when he accepted the goods without protest, or
NOTE: if he fails to notify the seller within a reasonable time of the
The right granted to the seller follows the GR in election to rescind, or if he fails to return or to offer to return
reciprocal obligations that a party to a contract the goods to the seller in substantially as good condition as
injured by nonfulfillment, may rescind the contract they were in at the time the ownership was transferred to
and at the same time ask for damages. It should be the buyer. But if deterioration or injury of the goods is due to
noted that the seller is required to give notice of his the breach or warranty, such deterioration or injury shall not
election to seek rescission prevent the buyer from returning or offering to return the
If the goods have been delivered, the seller may goods to the seller and rescinding the sale.
recover the value of what he has given Where the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the price upon
ARTICLE 1598. Where the seller has broken a contract returning or offering to return the goods. If the price or any
to deliver specific or ascertained goods, a court may, on the part thereof has already been paid, the seller shall be liable
application of the buyer, direct that the contract shall be to repay so much thereof as has been paid, concurrently
performed specifically, without giving the seller the option of with the return of the goods, or immediately after an offer to
retaining the goods on payment of damages. The judgment return the goods in exchange for repayment of the price.
or decree may be unconditional, or upon such terms and Where the buyer is entitled to rescind the sale and
conditions as to damages, payment of the price and elects to do so, if the seller refuses to accept an offer of the
otherwise, as the court may deem just. buyer to return the goods, the buyer shall thereafter be
deemed to hold the goods as bailee for the seller, but
subject to a lien to secure the payment of any portion of the
price which has been paid, and with the remedies for the
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enforcement of such lien allowed to an unpaid seller by Chapter 7 Extinguishment of Sale
article 1526.
(5) In the case of breach of warranty of quality, ARTICLE 1600. Sales are extinguished by the same causes
such loss, in the absence of special circumstances showing as all other obligations, by those stated in the preceding
proximate damage of a greater amount, is the difference articles of this Title, and by conventional or legal
between the value of the goods at the time of delivery to the redemption.
buyer and the value they would have had if they had
answered to the warranty. Causes:
(SEE PAGE 194 FOR EXAMPLE) 1. Common or those causes which are also means
of extinguishing all other contracts like payment,
Remedy of buyer for breach of warranty by seller: loss of the thing, condonation, etc.
1) Accept the goods and set up the seller’s breach to 2. Special or those whose causes which are
reduce or extinguish the price (RECOUPMENT) recognized by law of sales
2) Accept the goods and maintain an action for 3. Extra-special: Conventional and Legal
damages for the breach of the warranty Redemption
(COUNTERCLAIM FOR DAMAGES)
3) Refuse to accept the goods and maintain an action SECTION 1
Conventional Redemption
for damages for the breach of warranty (ACTION)
4) Rescind the contract of sale by returning or offering ARTICLE 1601. Conventional redemption shall take place
the return of the goods and recover the price when the vendor reserves the right to repurchase the thing
(RESCISSION) sold, with the obligation to comply with the provisions of
article 1616 and other stipulations which may have been
When rescission by the buyer not allowed: agreed upon.
a) If the buyer accepted the goods knowing
of the breach of warranty without protest Conventional redemption is the right which the vendor
b) If he fails to notify the seller within a reserves to himself, to reacquire the property sold provided
reasonable time of his election to rescind he reimburses the vendee of the price, the expenses of the
c) If he fails to return or offer to return the contract, any other legitimate payments made therefor and
goods in substantially as good condition the necessary and useful expenses made on the thing sold
as they were in at the time of the transfer and fulfills other stipulations which may have been agreed
of ownership to him. But where the injury upon
to the goods was caused by the very Note:
defect against which the seller Both real and personal property may be the
warranted, the buyer may still rescind subject matter of sales with right to repurchase
the sale although there are certain articles which are
applicable only to immovable.
Rights and obligations of buyer in case of rescission Stipulation is done @ the perfection of sales
a) In case of rescission, the buyer shall cease to be Not a right given by the vendee (Right reserved by
liable for the price, his only obligation being to the vendor)
return the goods;
b) If he has paid the price or any part thereof, he may ARTICLE 1602. The contract shall be presumed to be an
recover from the seller; equitable mortgage, in any of the following cases:
c) He has also the right to hold the goods as bailee (1) When the price of a sale with right to repurchase is
for the seller should the latter refuse to return of unusually inadequate;
(2) When the vendor remains in
the goods possession as lessee or otherwise;
d) He has the right to have lien on the goods for any (3) When upon or after the expiration of the right to
portion if the price already paid which lien he may repurchase another instrument extending the period of
enforce as if he were an unpaid seller redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;
(5) When the vendor binds himself to pay the taxes on the
thing sold;
(6) In any other case where it may be fairly inferred that the
real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any
other obligation.
In any of the foregoing cases, any money, fruits, or other
benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the
usury laws.
See page 200 for examples
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If the parties really intended a mortgage but
Equitable mortgage is one which, although it lacks the the instrument states that the property is sold
proper formalities of a mortgage, shows the intention of the absolutely or with a right of repurchase, the
parties to make the property subject of the contract as a same may be reformed or corrected so that
security for the fulfillment of an obligation. the contract should appear to be a mortgage
and not a pacto de retro or absolute sale
NOTE:
In equitable mortgage, it is void if the property ARTICLE 1606. The right referred to in article 1601, in the
transferred immediately to the creditor without absence of an express agreement, shall last four years from
going through the proper process of auction the date of the contract.
(pactum commissorium-prohibited by law) Should there be an agreement, the period cannot
Ask for reformation, loan w/ collateral exceed ten years.
Equitable mortgage has to go the process of However, the vendor may still exercise the right to
foreclosure in case of non-payment of loan repurchase within thirty days from the time final judgment
Art 1602 provide safeguard and restrictions was rendered in a civil action on the basis that the contract
against evils of sales with right of repurchase was a true sale with right to repurchase.
commonly called pacto de retro sale. See page 204 for examples
Contract of sale with pacto de retro sale, the price
is usually less than in absolute sales for the Period to exercise right of redemption
reason that in the former, the vendor expects to 1. No agreement/ granting right – No right of
reacquire or redeem the property sold, or else he redemption since the sale should be considered
may sell his right to redeem and thus recover the an absolute sale
loss he claims suffered by reason of the 2. Agreement to the right of redemption but there is
inadequacy of price. no stipulation as to which repurchase should be
made: period of redemption shall be 4 years from
ARTICLE 1603. In case of doubt, a contract purporting to the date of the contract
be a sale with right to repurchase shall be construed as an 3. Definite period of redemption agreed upon – Right
equitable mortgage. (n) to redeemed must be exercised within the period
fixed provided it does not exceed 10 yrs
ARTICLE 1604. The provisions of article 1602 shall also 4. Period of agreed upon exceeds 10 years – the
apply to a contract purporting to be an absolute sale. vendor a retro has 10 years from the execution of
Presumption in case of doubt the contract to exercise the right of redemption
1. Doubt resolved in favor of equitable mortgage – 5. Final judgment by rendered that contract pacto de
Whether the sale is absolute or pacto de retro, it retro –From the time final judgment was rendered
shall be presumed to be an equitable mortgage, if in a civil action on the basis that the contract was
any cases mentioned in Art 1602 is present. In a true sale with right to repurchase, the vendor
case of doubt, a contract purporting to be a sale has a retro 30 days withìin which to exercise the
with right to repurchase shall still be regarded as right to repurchase
an equitable mortgage.
ARTICLE 1607. In case of real property, the
2. Presumption, an exception to GR: Art 1603 is an consolidation of ownership in the vendee by virtue of
exception to the rule that doubts affecting an the failure of the vendor to comply with the provisions
onerous contract shall be settled in favor of the of article 1616 shall not be recorded in the Registry of
greatest reciprocity of interests. An equitable Property without a judicial order, after the vendor has
mortgage effects a lesser transmission of rights been duly heard. (n)
than a contract of sale, since the debtor does not
surrender all rights to his property but simply NOTE:
concurs upon the creditor the right to collect what If real property is involved and the vendor
is owing from the value of the thing given as failed to redeem within period agreed upon,
security. the vendee’s title becomes irrevocable.
However, the consolidation if ownership in
ARTICLE 1605. In the cases referred to in articles 1602 and the vendee sha
1604, the apparent vendor may ask for the reformation of ll not be recorded in the Registry of Property
the instrument. w/o judicial order and until after the vendor
See page 203 for examples has been duly heard.
REASON: transaction may not be a genuine
REFORMATION – remedy in equity by means of which a pacto de retro but only an equitable
written instrument is made or construed so as to express or mortgage. Requirement provides additional
conform to the real intention of the parties when such protection to debtors.
intention is not expressed in the instrument
NOTE:
8
ARTICLE 1608. The vendor may bring his action against of the latter may only redeem the part which he may have
every possessor whose right is derived from the vendee, acquired.
even if in the second contract no mention should have been
made of the right to repurchase, without prejudice to the ARTICLE 1613. In the case of the preceding article,
provisions of the Mortgage Law and the Land Registration the vendee may demand of all the vendors or co-heirs that
Law with respect to third persons. (1510) they come to an agreement upon the repurchase of the
See page 207 for example whole thing sold; and should they fail to do so, the vendee
cannot be compelled to consent to a partial redemption.
NOTE: See page 210 for examples
Right to repurchase is of a real character
and should not be considered personal Redemption in joint by co-owners/co-heirs of undivided
The vendor a retro cannot exercise his right immovable
of redemption against a subsequent 1. Co-owners of an undivided immovable sold by
transferee for value and good faith if his right them jointly or collectively and in the same
is not properly registered or annotated. contract w/ the right to repurchase, can exercise
such right only as regards their respective shares
ARTICLE 1609. The vendee is subrogated to the vendor's 2. Co-heirs of the vendor of an undivided immovable,
rights and actions. (1511) can exercise the right of redemption only for the
respective portions they have inherited.
Subrogation transfers to the person subrogated the 3. The vendee a retro can refuse partial redemption.
credit with all the rights thereto appertaining He may require all the vendors or all the heirs to
redeem the entire property or to agree to its
ARTICLE 1610. The creditors of the vendor cannot make redemption by any one of them. The right is given
use of the right of redemption against the vendee, until after to the vendee in line with the object of the law to
they have exhausted the property of the vendor. put an end to co-ownership whenever possible
4. Under Art. 1620, the right of a co-owner who
ARTICLE 1611. In a sale with a right to repurchase, the chooses not to redeem accrues to the benefit of
vendee of a part of an undivided immovable who acquires the others. The extent of the share of the
the whole thereof in the case of article 498, may compel the redeeming co-owner of the redeeming co-owner is
vendor to redeem the whole property, if the latter wishes to not taken into account except as provided in the
make use of the right of redemption. second par.
See page 209 for examples
Effect of redemption by co-owner of entire property
PURPOSE: To discourage co-ownership which is Under Art 1612, a co-owner cannot redeem
undesirable since it does not encourage the improvement of more than his share in the co-ownership. The
the property co-owned redemption by a co-owner of the property in
its entirely, shouldering the expenses
Partition of the property – Co-owner may demand the therefor, does not make him the owner of all
partition of the thing owned in common, insofar as his share of it. In other words, it does not put to end the
is concerned. existing state of co-ownership.
A. If a thing is essentially indivisible it may be Art 1613, does not provide for a mode of
allotted to the co-owner who shall indemnify the terminating a co-ownership nor does the fact
others that the redeeming co-owner has succeeded
B. If the co-owners cannot agree that the thing be in securing title over a parcel of land in his
allotted to one of them, it shall be sold and its name terminate the existing co-ownership.
proceeds distributed Registration of property is not a means of
acquiring ownership. It operates as a mere
Redemption of the whole property : In either case, notice of existing title, if there is one.
the vendee, who acquired the whole of an undivided
immovable a part of which is subject to a right to ARTICLE 1614. Each one of the co-owners of an undivided
repurchase, has a right to demand that the vendor a retro, immovable who may have sold his share separately, may
who likes to exercise his right of redemption, redeem the independently exercise the right of repurchase as regards
whole property. his own share, and the vendee cannot compel him to
redeem the whole property. (1516)
ARTICLE 1612. If several persons, jointly and in the same See page 211 for examples
contract, should sell an undivided immovable with a right of
repurchase, none of them may exercise this right for more Redemption in separate sales by co-owners of undivided
than his respective share. immovable
The same rule shall apply if the person who sold an If the sale was made separately and independently, it
immovable alone has left several heirs, in which case each would be unjust to require the co-owners, to come to
an agreement with regard to the repurchase of the
9
thing sold, and certainly, it would be worst to deprive the land in the last year, counted from the anniversary of
them of their right in case they fail to agree. the date of the sale.
See page 215 for examples
SUBSECTION 1 Warranty in Case of Eviction By prescription, one acquires ownership and other real
rights through the lapse of time in the manner and under the
ARTICLE 1548. Eviction shall take place whenever by a conditions prescribed by law. In the same way, rights and
final judgment based on a right prior to the sale or an act actions are lost by prescription.
imputable to the vendor, the vendee is deprived of the 1. Completed before sale –
whole or of a part of the thing purchased. The vendee may lose the thing purchased
The vendor shall answer for the eviction even to a third person who has acquired title
though nothing has been said in the contract on the subject. thereto by prescription
The contracting parties, however, may increase, When prescription has commenced to run
diminish, or suppress this legal obligation of the vendor. against the vendor and was already
(1475a) completed before the sale, the vendee can
See page 137 for examples enforce the warranty against eviction
In this case, the deprivation is based on a
“Eviction”: the judicial process whereby vendee is deprived right prior to the sale and an act imputable
of the whole or part of the thing purchased by virtue of a to the vendor
final judgment based on a right prior to sale or an act 2. Completed after sale
imputable to the vendor. Even if prescription has started before the
sale but has reached the limit prescribed
Essential elements of eviction: by law after the sale, the vendor is not
a. Vendee is deprived in whole or in part of the thing liable for eviction
purchased Reason: Vendee could easily interrupt the
b. He is so deprived by virtue of a final judgment running of the prescriptive period by
c. Judgment is based on a right prior to the sale or bringing necessary action
an act imputable to the vendor Note: If the property sold, is land
d. Vendor was summoned in the suit for eviction at registered under Torrens system
the instance of the vendee (ownership of land is not subject to
e. There is no waiver on the part of the vendee prescription) then Art 1550 will have no
Note: Absence of any of these requisites, a breach of application.
warranty against eviction under Article 1547 cannot be
declared. ARTICLE 1551. If the property is sold for nonpayment of
taxes due and not made known to the vendee before the
Warranty against eviction refers to trespass in law sale, the vendor is liable for eviction.
Trespass in fact does not give rise to the
application of the doctrine of the eviction Note: It is required that at the time of sale, the nonpayment
There is a mere act of trespass when the of taxes was not known to the vendee.
trespasser claims no right whatever. The vendor is
not liable therefor. In such case, the vendee has a ARTICLE 1552. The judgment debtor is also responsible for
direct action against trespasser in the same way eviction in judicial sales, unless it is otherwise decreed in
as the lessee has such right the judgment. (n)
The disturbance referred to in the case of eviction
is a disturbance in law which requires that a Note:
person go to the courts of justice claiming the Judgment debtor is responsible for eviction and
thing sold, or part thereof, and giving reasons. If hidden defects, even in judicial sales, unless
final judgment is rendered depriving the vendee of otherwise decreed in judgment
the thing sold or any part thereof, the doctrine of Based on the general principle that a person may
eviction becomes applicable. not enrich himself at the expense of another
If the purchaser of real property sold on execution
ARTICLE 1549. The vendee need not appeal from the be evicted therefrom because the judgment debtor
decision in order that the vendor may become liable for had no right to the property sold, the purchaser is
eviction. entitled to recover the price paid with interest.
13
If the sale was effected by the judgment creditor, other encumbrances that those which it had when he
the latter should not be permitted to retain acquired it.
proceeds of the sale, at the expense of the He may exercise this right of action, instead of
purchaser. enforcing the vendor's liability for eviction.
ARTICLE 1553. Any stipulation exempting the vendor from The same rule shall be observed when two or
the obligation to answer for eviction shall be void, if he more things have been jointly sold for a lump sum, or for a
acted in bad faith. (1476) separate price for each of them, if it should clearly appear
1. Effect of vendor’s bad faith – consists of knowing that the vendee would not have purchased one without the
beforehand at the tome of sale of the presence of other.
the fact giving rise to eviction; if the vendor after See page 145 for example
selling his property sold it again to another Note:
purchaser, he cannot, even by stipulation be This article contemplates of partial eviction while
exempt from warranty against eviction. Article 1554 treats of total eviction.
2. Effect of vendee’s bad faith – proceeded with the It states that if there is partial eviction, the vendee
sale with the assumption of the risk of eviction and has the option either to enforce the vendor’s
therefore, is not entitled to warranty against eviction liability for eviction (Art 1555) or to demand
nor to right to recover damages. recession of the contract
In case the vendee is totally evicted from the thing
ARTICLE 1554. If the vendee has renounced the right to sold, he cannot avail the remedy of recession
warranty in case of eviction, and eviction should take place, because this remedy contemplates that the one
the vendor shall only pay the value which the thing sold had demanding it is able to return whatever he has
at the time of the eviction. Should the vendee have made received under the contract.
the waiver with knowledge of the risks of eviction and The above rule is applicable:
assumed its consequences, the vendor shall not be liable. 1. When the vendee is deprived of a part of the
Two kinds of waiver: thing sold if such part is of such importance
1. Consciente – waiver is voluntarily made by the to the whole that he would not have bought
vendee without the knowledge and assumption of the thing without said part
the risks of eviction 2. When two or more things are jointly sold
2. Intencionada – waiver is made by the vendee with whether for a lump sum or for a separate
knowledge of the risk of eviction and assumption price for each, and the vendee would not
of its consequences. have purchased one without the other.
ARTICLE 1555. When the warranty has been agreed upon ARTICLE 1557. The warranty cannot be enforced until a
or nothing has been stipulated on this point, in case eviction final judgment has been rendered, whereby the vendee
occurs, the vendee shall have the right to demand of the loses the thing acquired or a part thereof.
vendor: Essential elements for the enforcement of warranty in
(1) The return of the value which the thing sold had at the case of eviction:
time of the eviction, be it greater or less than the price of the 1. Deprivation in whole or in part of the thing sold
sale; 2. Existence of final judgment
(2) The income or fruits, if he has been ordered to deliver
them to the party who won the suit against him; ARTICLE 1558. The vendor shall not be obliged to make
(3) The costs of the suit which caused the eviction, and, in a good the proper warranty, unless he is summoned in the
proper case, those of the suit brought against the vendor for suit for eviction at the instance of the vendee.
the warranty; Another essential requisite before a vendor may
(4) The expenses of the contract, if the vendee has paid be legally liable for eviction is that he should be
them; summoned in the suit for eviction at the instance
(5) The damages and interests, and ornamental expenses, of the vendee.
if the sale was made in bad faith. To give him an opportunity to show that the action
Note: interposed against the vendee is unjust and to
The above article specify in detail the rights and defend his title that he has transferred
liabilities of the vendor and the vendee in the Absence of such summons, the vendor is not
event of eviction takes place “when the warranty bound his warranty.
has been agreed upon or nothing has been
stipulated, that is, in the absence of waiver of ARTICLE 1559. The defendant vendee shall ask, within the
eviction by the vendee. time fixed in the Rules of Court for answering the complaint,
that the vendor be made a co-defendant.
ARTICLE 1556. Should the vendee lose, by reason of the Notification required by this article refers to case
eviction, a part of the thing sold of such importance, in where the vendee is the defendant in a suit
relation to the whole, that he would not have bought it instituted to deprive him of the thing purchased.
without said part, he may demand the rescission of the
contract; but with the obligation to return the thing without
14
ARTICLE 1560. If the immovable sold should be is intended, or should they diminish its fitness for such use
encumbered with any non-apparent burden or servitude, not to such an extent that, had the vendee been aware thereof,
mentioned in the agreement, of such a nature that it must he would not have acquired it or would have given a lower
be presumed that the vendee would not have acquired it price for it; but said vendor shall not be answerable for
had he been aware thereof, he may ask for the rescission of patent defects or those which may be visible, or for those
the contract, unless he should prefer the appropriate which are not visible if the vendee is an expert who, by
indemnity. Neither right can be exercised if the non- reason of his trade or profession, should have known them.
apparent burden or servitude is recorded in the Registry of See page 150 for example
Property, unless there is an express warranty that the thing Requisites for warranty against hidden defects:
is free from all burdens and encumbrances. a) Defect must be important or serious
Within one year, to be computed from the b) Must be hidden
execution of the deed, the vendee may bring the action for c) Must exist at the time of the sale
rescission, or sue for damages. d) Vendee must give notice of the defect to the
One year having elapsed, he may only bring an vendor within reasonable time
action for damages within an equal period, to be counted e) Actions for rescission of the price must be brought
from the date on which he discovered the burden or within the proper period- 6 months from the
servitude. (1483a) delivery sold of the thing sold or within 40 days
Note: from the date of the delivery in case of animals
The vendee may still rescind the contract and ask f) Must be no waiver of warranty on the part of the
for indemnity, if the thing sold should be vendee
encumbered with any non-apparent burden or
servitude not mentioned in the agreement of such Note:
nature that the vendee would not have acquired it Defect is important if: it renders the thing sold unfit
had he been aware thereof. for the use for which it is intended or if it
Servitude/Easement: an encumbrance imposed diminishes its fitness for such use to such an
upon an immovable for the benefit of another extent that the vendee would not have acquired it
immovable belonging to a different owner. had he been aware thereof or would have given a
Lack of knowledge on the part of the vendor is not lower price for it
a defense. Contract can still be invalidated on the Defect is hidden or latent if it was not known and
ground of mistake. could not have been known to the vendee.
Art 1560 cannot be exercised in the ff: Vendor’s liability for warranty cannot be enforced
1. If the burden or servitude is apparent, that is, although defect is hidden if vendee is an expert,
“made known and is continually kept in view who by reason of his trade or profession should
by external signs that reveal the use and have known it.
enjoyment of the same
2. If the non-apparent burden or servitude is ARTICLE 1562. In a sale of goods, there is an implied
registered warranty or condition as to the quality or fitness of the
3. If the vendee had knowledge of the goods, as follows:
encumbrance whether it is registered or not. (1) Where the buyer, expressly or by implication,
Registration of the non-apparent burden or makes known to the seller the particular purpose for which
servitude in the Registry of Property operates as a the goods are acquired, and it appears that the buyer relies
constructive notice to the vendee. Hence, vendor is on the seller's skill or judgment (whether he be the grower
relieved from liability unless there is an express or manufacturer or not), there is an implied warranty that
warranty that the immovable is free from any such the goods shall be reasonably fit for such purpose;
burden or encumbrance. (2) Where the goods are brought by description
If burden is known to vendee, there is no warranty. from a seller who deals in goods of that description
When action must be brought (whether he be the grower or manufacturer or not), there is
a) Action for rescission or damages must be an implied warranty that the goods shall be of merchantable
brought 1 year from the execution of the quality. (n)
deed of sale.
b) If period has already elapsed, the vendee Note:
may only bring an action for damages Quality of goods includes their state or condition
within 1 year from the date if the discovery Purpose of holding the seller on his implied
of the non-apparent burden or servitude. warranties is to promote high standard in business
and to discourage unfair dealings.
SUBSECTION 2 Implied warranty of fitness: a.) buyer expressly or
Warranty Against Hidden Defects of or Encumbrances by implication, manifests to the seller the particular
Upon the Thing Sold purpose for which the goods are acquired and b.)
ARTICLE 1561. The vendor shall be responsible for buyer relies upon the seller’s skill or judgment
warranty against the hidden defects which the thing sold whether he be the grower or manufacturer of not –
may have, should they render it unfit for the use for which it
15
there is an implied warranty that the goods are those which the sample seems to represent, that
reasonably fit for such purpose is, merchantable goods of that kind and character.
Implied warrant of merchantability: Where goods
are bought by description, the seller impliedly ARTICLE 1566. The vendor is responsible to the vendee for
warrants that the goods are merchantable quality. any hidden faults or defects in the thing sold, even though
Warranty of merchantability: a warranty that goods he was not aware thereof.
are reasonably fit for the general purpose for This provision shall not apply if the contrary has
which they are sold been stipulated, and the vendor was not aware of the
Warranty of fitness: warranty that the goods are hidden faults or defects in the thing sold.
suitable for the special purpose of the buyer which
will not be satisfied by mere fitness for general Note:
purposes. Ignorance of the vendor does not relieve him from
liability to the vendee for any hidden faults or
ARTICLE 1563. In the case of contract of sale of a specified defects in the thing sold. In other words, good faith
article under its patent or other trade name, there is no cannot be availed of as a defense by the vendor
warranty as to its fitness for any particular purpose, unless However, parties may provide otherwise in their
there is a stipulation to the contrary. contract provided the vendor acted in good faith,
See page 152 for example that is, he was unaware if the existence of the
Note: hidden fault or defect.
Under Art 1562(1) the buyer makes known to the
seller the particular purpose for which the goods ARTICLE 1567. In the cases of articles 1561, 1562, 1564,
are desired. Article 1563 limits the application of 1565 and 1566, the vendee may elect between withdrawing
Article 1562 from the contract and demanding a proportionate reduction
There is an implied warranty of fitness for a of the price, with damages in either case.
particular purpose where the buyer relied upon the Vendee has the option either:
seller’s judgment rather than the patent or trade o To withdraw from the contract (known as
name. accion redhibitoria); or
o Demand proportionate reduction of the
ARTICLE 1564. An implied warranty or condition as to the price, with a right to damages in either
quality or fitness for a particular purpose may be annexed case (known as accion quanti minoris)
by the usage of trade. Same right is given to the vendee in the sale of
A warranty as to the quality or fitness for a animals with redhibitory defects.
particular purpose may be attached to a contract
containing no express provision in regard to ARTICLE 1568. If the thing sold should be lost in
warranty, though in the absence of usage, no consequence of the hidden faults, and the vendor was
warranty would be implied. The usage is relied on aware of them, he shall bear the loss, and shall be obliged
for the purpose of showing the intention of the to return the price and refund the expenses of the contract,
parties. with damages. If he was not aware of them, he shall only
If there is no usage, the parties would naturally return the price and interest thereon, and reimburse the
express their intention. expenses of the contract which the vendee might have paid.
a) Vendor is aware of the hidden defects – vendee
ARTICLE 1565. In the case of a contract of sale by sample, has the right to recover: price paid, expenses of
if the seller is a dealer in goods of that kind, there is an the contract, and damages.
implied warranty that the goods shall be free from any b) Vendor not aware of hidden defects – shall be
defect rendering them unmerchantable which would not be obliged only to return: price, interest thereon, and
apparent on reasonable examination of the sample. expenses of the contract if paid by the vendee.
Not liable for damages because he is not guilty of
Merchantability of goods sold by sample: bad faith.
GR: All the buyer is entitled to, in case of a sale or
contract to sell by sample, is that the goods be like ARTICLE 1569. If the thing sold had any hidden fault at the
the sample. So he has no right to have the goods time of the sale, and should thereafter be lost by a fortuitous
merchantable if the sample which he has event or through the fault of the vendee, the latter may
inspected is not. demand of the vendor the price which he paid, less the
Where the defect in the goods is such a character value which the thing had when it was lost.
that inspection will not reveal it, so in the case of a If the vendor acted in bad faith, he shall pay
sale by sample, if the sample is subject to a latent damages to the vendee.
defect, and the buyer reasonably relies in the See page 156 for examples
seller’s skill or judgment, the buyer is entitled not Note:
simply to goods like the sample, but to goods like Under this article, the vendor is still made liable on
his warranty
16
Difference between the price paid for the thing and However, if the veterinarian failed to discover it
the value at the time of the loss, represents the through his ignorance, or failed to disclose it to the
damage suffered by its vendee and is at the same vendee through bad faith, he shall be liable for
time the amount to which the vendor enriched damages.
himself at the expense of the vendee. If the
vendor acted in bad faith, shall also be liable for ARTICLE 1577. The redhibitory action, based on the faults
damages. or defects of animals, must be brought within forty days
from the date of their delivery to the vendee.
ARTICLE 1570. The preceding articles of this Subsection This action can only be exercised with respect to
shall be applicable to judicial sales, except that the faults and defects which are determined by law or by local
judgment debtor shall not be liable for damages. customs.
ARTICLE 1571. Actions arising from the provisions of the ARTICLE 1578. If the animal should die within three days
preceding ten articles shall be barred after six months, from after its purchase, the vendor shall be liable if the disease
the delivery of the thing sold. which cause the death existed at the time of the contract.
Action for recession of the contract or reduction of
the purchase price prescribes 6 months form the Note:
date of delivery that means action shall be barred If the animal sold is suffering form any disease at
unless brought within the said period. the time of sale, the vendor is liable should it die of
said disease within 3 days from the date of the
ARTICLE 1572. If two or more animals are sold together, sale (not date of delivery).
whether for a lump sum or for a separate price for each of If death occurs after 3 days, he is not liable
them, the redhibitory defect of one shall only give rise to its If loss is caused by a fortuitous event or by the
redhibition, and not that of the others; unless it should fault of the vendee, and the animal has vices art
appear that the vendee would not have purchased the 1567 should be applied.
sound animal or animals without the defective one.
The latter case shall be presumed when a team, ARTICLE 1579. If the sale be rescinded, the animal shall be
yoke pair, or set is bought, even if a separate price has returned in the condition in which it was sold and delivered,
been fixed for each one of the animals composing the the vendee being answerable for any injury due to his
same. negligence, and not arising from the redhibitory fault or
See page 158 for example defect.