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POINTERS IN SALES: 6) Remedies of Seller (for movables and

1) Obligations of the Seller immovables)
2) Types of Delivery 7) Remedies of Buyer (for movables and
3) Rule on Double Sale immovables)
4) Purchaser in good faith 8) Recto Law
5) Obligations of the buyer 9) Maceda Law
10)Warranties (Express & Implied)

OBLIGATIONS OF THE SELLER

 To preserve the subject matter
Article 1163,CC. Every person obliged to give something is also obliged to take care of it with the
proper diligence of a good father of a family, unless the law or the stipulation of the parties
requires another standard of care.

When a sale covers a specifi c or determinate object, upon perfection and even prior to delivery, and
although the seller still owns the subject matter, he is already obliged to take care of the subject matter
with the diligence of a good father of a family; otherwise, he becomes liable to the buyer for breach of
such obligation, as when the thing deteriorates or is lost through seller’s fault.

 To deliver the subject matter and transfer the ownership

Article 1495,CC. The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale.

General Rule, ownership of the thing sold is acquired upon its delivery, actual or constructive, to
the buyer.
Exceptions:
1. Express reservation of ownership
Article 1478. The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
2. Contract to sell
3. Sale on acceptance / trial / approval / satisfaction
Article 1502. When goods are delivered to the buyer "on sale or return" to give the
buyer an option to return the goods instead of paying the price, the ownership passes to
the buyer on delivery, but he may revest the ownership in the seller by returning or
tendering the goods within the time fixed in the contract, or, if no time has been fixed,
within a reasonable time. (n)
When goods are delivered to the buyer on approval or on trial or on satisfaction, or
other similar terms, the ownership therein passes to the buyer:
(1) When he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
(2) If he does not signify his approval or acceptance to the seller, but retains the goods
without giving notice of rejection, then if a time has been fixed for the return of the
goods, on the expiration of such time, and, if no time has been fixed, on the expiration
of a reasonable time. What is a reasonable time is a question of fact. (n)

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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 To deliver the fruits and accessories

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

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

Accessions - the fruits of a thing, or addition to, or improvements upon, a thing

Accessories - anything attached to a principal thing for its completion, ornament, or better use.

 To warrant the subject matter

Article 1495,CC. The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale.

CONDITIONS AND WARRANTIES

Condition - an uncertain event or contingency on the happening of which the obligation or right of the
contract depends

Warranty - a statement or representation made by the seller contemporaneously and as a part of the
contract of sale, having reference to the character, quality, or title of the goods, and by which he
promises or undertakes to insure that certain facts are or shall be as he then represents.

 Express Warranties – any affirmation of fact or promise by the seller to the thing, inducing the
buyer to purchase the same if the buyer purchases the thing relying thereon.
Requisites:
(a) It must be an affirmation of fact or any promise by the seller relating to the subject
matter of the sale;
(b) The natural tendency of such affirmation or promise is to induce the buyer to
purchase the thing; and
(c) The buyer purchases the thing relying on such affirmation or promise thereon.

An affirmation of the value of the thing, or any statement purporting to be a statement of the seller’s
opinion only, shall not be construed as a warranty, unless the seller made such affirmation or statement
as an expert and it was relied upon by the buyer.
Article 1341, CC. A mere expression of an opinion does not signify fraud, unless made by an expert and
the other party has relied on the former's special knowledge.

 Implied Warranties - those which by the law constitute part of every contract of sale, whether
or not the parties were aware of them, and whether or not the parties intended them. It is a
natural, and not an essential element of a contract, deemed incorporated in the contract of sale.

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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Examples of Implied Warranties

o Warranty that a seller has a right to sell

Since warranty goes into the issue of performance of obligation, the warranty of the seller “that he has a
right to sell” refers only to the transfer of ownership at the point of consummation, and not to any
representation as to ownership and the capacity to transfer the same at the point of perfection.

Not applicable to sheriff, auctioneer, mortagagee, pledge (apply principle of caveat emptor – let the
buyer beware because the purchaser acquires no better title than the judgment debtor has)

o Warranty against Eviction

There is an implied warranty on the part of the seller that when the ownership is to pass, the buyer shall
from that time have and enjoy the legal and peaceful possession of the thing. The vendor shall answer
for the eviction even though nothing has been said in the contract on the subject.

Elements:
(a) Purchaser has been deprived of, or evicted from, the whole or part of the thing sold;
(b) Eviction is by a final judgment;
(c) Basis of judgment is by virtue of a right prior to the sale made by the seller; and
(d) Seller has been summoned and made co-defendant in the suit for eviction at the instance of the
buyer.

o Warranty against non-apparent servitudes

Under Article 1560 of the Civil Code, the warranty shall apply only when the following conditions are
present:
(a) The immovable sold is encumbered with any non-apparent burden or servitude, not mentioned in
the agreement; and
(b) The nature of such non-apparent burden or servitude is such that it must presumed that the buyer
would not have acquired it had he been aware thereof.

When Warranty Not Applicable

The warranty does not apply:
(a) If the servitude is mentioned in the agreement;
(b) If the non-apparent burden or servitude is recorded in the Registry of Deeds, unless there is an
express warranty that the thing is free from all burdens and encumbrances.

The buyer may either bring an action for rescission or sue for damages only if he does so within one (1)
year computed from the execution of the deed.

o Warranty against hidden defects

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

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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Requisites for Breach of Warranty

(a) Defect must be hidden;
(b) Defect must exist at the time the sale was made;
(c) Defect must ordinarily have been excluded from the contract;
(d) Defect, must be important (render the thing unfit or considerably decreases fitness);
(e) Action must be instituted within the statute of limitations.

General Rule: Article 1566, CC. The vendor is responsible to the vendee for any hidden faults or defects
in the thing sold, even though he was not aware thereof.
Exception: Article 1566, CC, par.2. This provision shall not apply if the contrary has been stipulated, and
the vendor was not aware of the hidden faults or defects in the thing sold.

Caveat Emptor - let the buyer beware

Caveat Venditor – let the seller beware

o Warranty against redhibitory defects on an animals

Article 1576,CC. If the hidden defect of animals, even in case a professional inspection has been made,
should be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be
considered as redhibitory.
But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be
liable for damages.

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

There is no warranty against hidden defects of animals sold at fair, or public auctions, or of livestock sod
as condemned.

Warranty as to Fitness and Quality –

Article 1562, CC. In a sale of goods, there is an implied warranty or condition as to the quality or fitness
of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the
particular purpose for which the goods are acquired, and it appears that the buyer relies
on the seller's skill or judgment (whether he be the grower or manufacturer or not),
there is an implied warranty that the goods shall be reasonably fit for such purpose;
(2) Where the goods are brought by description from a seller who deals in goods of that
description (whether he be the grower or manufacturer or not), there is an implied
warranty that the goods shall be of merchantable quality.

TYPES OF DELIVERY
 Actual or real Delivery –
Article 1497,CC. The thing sold shall be understood as delivered, when it is placed in the control
and possession of the vendee.

 Constructive Delivery – delivery is represented by other signs or acts indicative thereof

 Execution of public instrument –

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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Article 1498,CC. When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot clearly be inferred.

With regard to movable property, its delivery may also be made by the delivery of the
keys of the place or depository where it is stored or kept.

 Traditio Symbolica - to effect delivery, parties use a token or symbol to represent the
thing delivered
 Tradition Longa Manu – delivery of a thing by mere agreement, seller points the
property without actually delivering it
 Tradition Brevi Manu - before the sale, the would-be buyer was already in possession of
the would-be subject matter of the sale, say as a lessee, and pursuant to sale, he would
now hold possession in the concept of an owner
 Tradition Constitutum Possessorium - takes effect when at the time of the perfection of
the sale, the seller held possession of the subject matter in the concept of owner, and
pursuant to the contract, the seller continues to hold physical possession thereof no
longer in the concept of an owner, but as a lessee or any other form of possession other
than in the concept of owner
 Quasi – Tradition - placing of titles of ownership in the possession of the buyer, or the
use by the buyer of his rights, with the seller’s consent
Article 1501. With respect to incorporeal property, the provisions of the first paragraph
of article 1498 shall govern. In any other case wherein said provisions are not applicable,
the placing of the titles of ownership in the possession of the vendee or the use by the
vendee of his rights, with the vendor's consent, shall be understood as a delivery
 Tradition by Operation of Law
Article 1434. When a person who is not the owner of a thing sells or alienates and
delivers it, and later the seller or grantor acquires title thereto, such title passes by
operation of law to the buyer or grantee.

RULE ON DOUBLE SALE

Article 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the person who presents the oldest title, provided there
is good faith.

Requisites:
1. Two or more transactions must constitute valid sales
2. They must pertain exactly to the same object or subject matter
3. They must be bought from the same or immediate seller
4. Two or more buyers who are at odds over the rightful ownership of the subject matter must
represent conflicting interests.

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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In case of movable property, buyer in good faith who is able to effect registration of his purchase is
preferred over the other. The ownership is deemed to be transferred to the vendee who has first taken
possession of it in good faith. Prior possession and good faith must concur. Apply primus tempore,
portior jure – first in time, stronger in right.

In case of immovable or real property

a. To the vendee who first registered or recorded his deed of sale in good faith with the proper
Registry of Property even if the other buyer who did not register his sale is in possession
b. If there is no inscription or recording, the ownership shall pertain to the vendee who first took
possession of the property in good faith
c. If the vendees have taken in possession of the property at the same time and both in good faith,
the ownership shall pertain to the one who represents the oldest title, provided there is good
faith.

PURCHASER IN GOOD FAITH

Definition:
One who buys the property of another without the notice that some other person has a right to or
interest in such property and pays a full and fair price for the same at the time of such purchase or
before he has notice of the claim or interest of some other person in the property.

Mere registration of deed of sale is not enough. Good faith is a mandatory requirement. Additionally,
the possession in good faith must continue until the vendee’s contract had ripen to ownership by
tradition or registration.

OBLIGATIONS OF THE BUYER

 To pay the price

Buyer is obliged to pay for the price at the time and place stipulated in the contract.
Article 1240,CC. Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.

Non-payment of the consideration in the sale does not prove simulation, at most, it gives the
seller the right to sue for collection. Generally, in a sale, payment of the price is a resolutory
condition and the remedy of the seller is to exact fulfillment or, in case of substantial breach, to
rescind the contract.
Article 1191,CC. The power to rescind obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired
the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

 to accept delivery of the thing bought

the buyer is deemed to have accepted the goods when he intimates to the seller that he has
accepted them, or when the goods have beedn delivered to him, and he does any act in relation

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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to them which is inconsistent with the ownership of the seller, or when after the lapse of a
reasonable time, he retains the goods without intimating to the seller that he has rejected them.

REMEDIES OF SELLER (FOR MOVABLES AND IMMOVABLES)

In case of Movables (in General)–

 automatic rescission
Article 1593,CC. With respect to movable property, the rescission of the sale shall of right take
place in the interest of the vendor, if the vendee, upon the expiration of the period fixed for the
delivery of the thing, should not have appeared to receive it, or, having appeared, he should not
have tendered the price at the same time, unless a longer period has been stipulated for its
payment.
In case of Sale of Goods
a. Non-Payment of Price by Buyer
 Ownership Transferred to Buyer — Where the ownership of the goods has passed to the buyer
who wrongfully neglects or refuses to pay for them according to the terms of the contract, the
seller may maintain an action against him for the price of the goods, i.e., an action for specifi c
performance.
 No Transfer of Ownership to Buyer — When the ownership in the goods has not passed, if they
cannot readily be resold for a reasonable price, the seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are
thereafter held by the seller as bailee for the buyer; thereafter, the seller may treat the goods as
the buyer’s and may maintain an action for the price.
 When Price Payable on Certain Day — Where the price is payable on a certain day, irrespective
of delivery or of transfer of title, and the buyer wrongfully neglects or refuses to pay such price,
the seller may maintain an action for the price although the ownership in the goods has not
passed.
b. When Buyer Wrongfully Neglects/Refuses to Accept Goods
Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain
an action against him for damages for non-acceptance, in accordance with the following rules:
a. Damages shall cover the estimated loss directly and naturally resulting in the ordinary course of
events from the buyer’s breach of contract;
b. Where there is an available market for the goods in question, in the absence of special
circumstances showing proximate damage of a different amount, the measure of damages is the
difference between the contract price and market or current price at the time or times when the
goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of
the refusal to accept;
c. If the buyer repudiates the contract or notifies the seller to proceed no further, buyer shall be
liable for labor performed or expenses of material amount is necessary on the part of the seller
to enable him to fulfill his obligations under the sale made before receiving notice of the buyer’s
repudiation or countermand; and
d. The profits the seller would have made if the contract or the sale had been fully performed shall
be considered in awarding damages

Unpaid Seller
Article 1525. The seller of goods is deemed to be an unpaid seller within the meaning of this Title:
(1) When the whole of the price has not been paid or tendered;

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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(2) When a bill of exchange or other negotiable instrument has been received as
conditional payment, and the condition on which it was received has been broken by
reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise.
In articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of lading has
been indorsed, or a consignor or agent who has himself paid, or is directly responsible for the price, or
any other person who is in the position of a seller.

Remedies of an Unpaid Seller

Possessory Lien
When it may be exercised:
Article 1527. Subject to the provisions of this Title, the unpaid seller of goods who is in
possession of them is entitled to retain possession of them until payment or tender of the
price in the following cases, namely:
(1) Where the goods have been sold without any stipulation as to credit;
(2) Where the goods have been sold on credit, but the term of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding that he is in possession of the goods
as agent or bailee for the buyer.
When unpaid seller loses his lien:
Article 1529. The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the ownership in the goods or the right to
the possession thereof;
(2) When the buyer or his agent lawfully obtains possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that
he has obtained judgment or decree for the price of the goods.
Stoppage of goods in transit
Requisites:
1. Seller must be unpaid
2. Buyer must be insolvent
3. Goods must be in transit
4. Seller must either actually take possession of the goods sold or give notice of his claim
to the carrier or other person in possession of the goods
When goods are considered / no longer in transit:
Article 1531, CC. Goods are in transit within the meaning of the preceding article:
a. From the time when they are delivered to a carrier by land, water, or air, or other
bailee for the purpose of transmission to the buyer, until the buyer, or his agent in
that behalf, takes delivery of them from such carrier or other bailee;
b. If the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to receive them back.
Goods are no longer in transit within the meaning of the preceding article:
i. If the buyer, or his agent in that behalf, obtains delivery of the goods before their
arrival at the appointed destination;
ii. If, after the arrival of the goods at the appointed destination, the carrier or other
bailee acknowledges to the buyer or his agent that he holds the goods on his behalf
and continues in possession of them as bailee for the buyer or his agent; and it is

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immaterial that further destination for the goods may have been indicated by the
buyer;
iii. If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or
his agent in that behalf.
2. If the goods are delivered to a ship, freight train, truck, or airplane chartered by the
buyer, it is a question depending on the circumstances of the particular case,
whether they are in the possession of the carrier as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or his agent in that behalf, the
remainder of the goods may be stopped in transitu, unless such part delivery has been under
such circumstances as to show an agreement with the buyer to give up possession of the whole
of the goods.
Special right of Resale
When right can be exercised:
a. The goods are of perishable nature;
b. Where the seller has been expressly reserved in case the buyer should make
default; or
c. Where the buyer has been in default in the payment of the price for an
unreasonable time
Effect of having exercised the right: when the unpaid seller has exercised his right of resale, he
shall not thereafter be liable to the original buyer upon the sale or for any profit made by such
resale, but may recover from the buyer damages for any loss occasioned by the breach of the
sale.
Special right of rescission
When right can be exercised:
a. Where the right to rescind on default has been expressly reserved
b. Where the buyer has been in default for an unreasonable time

The special rights to resell and rescind can be availed of by the unpaid seller only when two prior rights
of possessory lien or stoppage in transit have been exercised by the unpaid seller.

In case of Immovables
1. When there is anticipatory breach
Article 1591, par1, CC. Should the vendor have reasonable grounds to fear the loss of
immovable property sold and its price, he may immediately sue for the rescission of the sale.
2. Failure of Buyer to Pay Price
Article 1592, CC. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either judicially or by a notarial
act. After the demand, the court may not grant him a new term.

The seller has the option to rescind the sale upon judicial or notarial demand.
Applies only to conditional sales of real property, does not cover contracts to sell.

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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REMEDIES OF BUYER (FOR MOVABLES AND IMMOVABLES)

In case of Movables
a.In case of Failure of seller to deliver
 Seek action for specific performance to direct that the contract shall be performed specifically,
without giving the seller the option of retaining the goods on payment of damages.
b.In case of breach of seller’s warranty
Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
1) Accept or keep the goods and set up against the seller, the breach of warranty by way of
recoupment in diminution or extinction of the price;
2) Accept or keep the goods and maintain an action against the seller for damages for the
breach of warranty;
3) Refuse to accept the goods, and maintain an action against the seller for damages for
the breach of warranty;
4) Rescind the contract of sale and refuse to receive the goods or if the goods have already
been received, return them or offer to return them to the seller and recover the price or
any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no
other remedy can thereafter be granted, without prejudice to the provisions of the
second paragraph of article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he
knew of the breach of warranty when he accepted the goods without protest, or if he
fails to notify the seller within a reasonable time of the election to rescind, or if he fails
to return or to offer to return the goods to the seller in substantially as good condition
as they were in at the time the ownership was transferred to the buyer. But if
deterioration or injury of the goods is due to the breach or warranty, such deterioration
or injury shall not prevent the buyer from returning or offering to return the goods to
the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be
liable for the price upon returning or offering to return the goods. If the price or any
part thereof has already been paid, the seller shall be liable to repay so much thereof as
has been paid, concurrently with the return of the goods, or immediately after an offer
to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to
accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed
to hold the goods as bailee for the seller, but subject to a lien to secure the payment of
any portion of the price which has been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid seller by article 1526.
5) In the case of breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the difference
between the value of the goods at the time of delivery to the buyer and the value they
would have had if they had answered to the warranty.

In case of Immovables
a.In case of Suspension of Payment
Article 1590,CC. Should the vendee be disturbed in the possession or ownership of the thing
acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or
a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused

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the disturbance or danger to cease, unless the latter gives security for the return of the price in a
proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall
be bound to make the payment. A mere act of trespass shall not authorize the suspension of the
payment of the price.
b.In case of subdivision or condominium projects
Section 23, PD957 (Regulating The Sale Of Subdivision Lots And Condominiums, Providing
Penalties For Violations Thereof) . Non-Forfeiture of Payments. No installment payment made by a
buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when the buyer, after due notice to the owner or
developer, desists from further payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and within the time limit for
complying with the same. Such buyer may, at his option, be reimbursed the total amount paid
including amortization interests but excluding delinquency interests, with interest thereon at the
legal rate.
c.Right to grace period stipulated
When a grace period is provided for in the contract of sale, it should be construed as a right, not an
obligation of the debtor, and when unconditionally conferred, the grace period is effective without
further need of demand either calling for the payment of the obligation or for honoring the right.

RECTO LAW (Act. No. 4122 / Installment Sales Law)

Provides for remedies of vendor in sale of personal property by installments

The Recto Law comprises Articles 1484 to 1486 of the Civil Code. It was added to the Civil Code to
prevent abuses in the foreclosure of chattel mortgages, such as when mortgagee-creditors foreclosed
mortgaged property, bought them at a low price (on purpose,) then prosecuted the mortgagor-debtors
to recover the deficiencies. It was meant to remedy the abuses committed in connection with the
foreclosure of chattel mortgages and to prevent mortgagees from seizing the mortgaged property,
buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a defi ciency
judgment. The invariable result of such a procedure was that the mortgagor found himself minus the
property and still owing practically the full amount of his original indebtedness.

Requisites to apply Recto Law:

A. Contract of sale
B. Personal property
C. Payable in installments
D. In the case of the second and third remedies, that there has been a failure to pay two or more
installments

Article 1484,CC. In a contract of sale of personal property the price of which is payable in installments,
the vendor may exercise any of the following remedies:
1. Exact fulfillment of the obligation, should the vendee fail to pay;
2. Cancel the sale, should the vendee's failure to pay cover two or more installments;
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should
the vendee's failure to pay cover two or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void.

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

 N o t e s o n S A L E S ( A t t y . L y d i a B u n d a c ) | 12
Alcazar, JMM.

Art. 1484 does not apply to:

 Sale of personal property payable on straight terms (partly in cash and partly in one term only)
 Sale or mortgage or real estate
 Action for replevin

MACEDA LAW (RA 6552 / Sales of Real Estate in Installment)

Governs the sale or finding of real estate on installment payment. It is an expression of public policy to
protect buyers of real estate on installments against onerous and oppressive conditions.

Requisites:
 Transactions or contracts involving the sale or financing of real estate on installment payments,
including residential condominium apartments
 Buyer default in payment of succeeding installments.

Transactions excluded in the coverage:

a. Sales covering industrial lots;
b. Sales covering commercial buildings (and commercial lots by implication); and
c. Sales to tenants under agrarian reform laws.

Application of Maceda Law:

a. At Least Two (2) Years Installments Paid
Where the buyer has paid at least two (2) years of installments, he is entitled to the following
rights in case he defaults in the payments of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace period
earned by him, which is fixed at the rate of one (1) month grace period for every one (1) year of
installment payments;
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to 50% of the total payments made and, after five (5) years
of installments, an additional 5% every year but not to exceed 90% of the total payments made.

The actual cancellation of the contract shall take place after thirty (30) days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer.

b. Less Than Two (2) Years Installments Paid

In case where less than two (2) years of installments were paid, the buyer shall still be entitled to
a grace period of sixty (60) days from the date the installment became due. If the buyer fails to
pay the installments due at the expiration of the grace period, the seller may cancel the contract
after thirty (30) days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act.

Other Rights Granted to Buyer

In addition, the Maceda Law provides for the following rights to the buyer:
(a) To sell his rights or assign the same to another person or to reinstate the contract by updating the
account during the grace period and before actual cancellation of the contract. The deed of sale
assignment shall be done by notarial act.

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014

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Alcazar, JMM.

(b) To pay in advance any installment or the full unpaid balance of the purchase price any time without
interest and to have such full payment of the purchase price annotated in the certificate of title covering
the property.

Maceda Law cannot be availed of the developer.

References: Pineda (2010) and Villanueva (2009) 1st semester. SY 2013-2014