Sales Lecture 1 -Ownership is not to vest in the buyer until the happening of

the condition
THE LAW ON SALES
CONTRACT OF CONTRACT TO
Art. 1458 SALE SELL
Title over the property passes Ownership is retained by the
By the contract of sale one of the contracting parties obligates
to the buyer upon delivery seller whether or not there is
himself to transfer the ownership of and to deliver a unless there is a contrary delivery. Ownership passes to
determinate thing, and the other to pay therefor a price certain agreement buyer only upon full payment
in money. of price.

STAGES OF A CONTRACT OF SALE

1. Preparation

-also known as conception or generation

CONTRACT OF CONTRACT TO
-the period of negotiation and bargaining, ending at the
SALE SELL
moment of agreement of the parties
Non-payment of the purchase The payment in full is a
price is a negative resolutory positive suspensive condition,
2. Perfection
condition, meaning, the sale meaning, if the price is not
becomes ineffective upon the paid, the obligation to deliver
-also known as the birth of the contract
happening of such condition and to transfer ownership
(non-payment) does not become effective
3. Consummation
After delivery of the object, Whether there is delivery or
the seller loses ownership not, the seller retains the
- otherwise called the death of the contract
over it ownership of the object
- the fulfilment or performance of the terms agreed upon in the
contract
Art. 1479
CHARACTERISTICS
-A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable (bilateral reciprocal
 Bilateral
contract)
 Consensual
 Commutative – the thing sold is equivalent to the -An accepted unilateral promise to buy or to sell a determinate
price paid and vice versa thing for a price certain is binding upon the promissor if the
 Onerous – the thing sold is conveyed in consideration promise is supported by a consideration distinct from the
of the purchase price price.
 Principal
 Nominate OPTION CONTRACT

ABSOLUTE SALE - a privilege existing in one person, for which he had paid a
consideration, which gives him the right to buy a certain
- No condition is imposed and ownership passes to the vendee merchandise or property from another person at any time
upon delivery of the thing subject of the sale within the agreed period at a fixed rate

- Neither a stipulation in the deed that title to the property sold - separate and distinct contract from the contract where the
is reserved in the seller until full payment of the price, nor one parties may enter into upon the consummation of the option
giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period Art. 1482

CONDITIONAL SALE Whenever earnest money is given in a contract of sale, it shall

be considered as part of the price and as proof of he perfection
-Subject to a certain contingency or condition of the contract.

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 EARNEST MONEY
Part of the purchase price
When it is given, the buyer is
bound to pay the balance of
the agreed purchase price
If the sale does not
materialize, the earnest
money paid must be returned,
unless a contrary agreement
had been stipulated
OPTION MONEY -house of prostitution
A distinct consideration for
an option contract which Illicit per Accidens
fives the buyer a specific
period within which to -illegal only because there is a law prohibiting it
purchase the thing
Even if option money is paid -sale of parcel of land to a disqualified alien
by the would-be-buyer, he is
not bound to buy the thing
If the buyer decides not to
buy the thing he cannot Art. XII, 1987 Constitution
recover the option money he
paid as consideration for the Sec. 7. Save in cases of hereditary succession, no private
option contract lands shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands
of the public domain.

Sec. 8. Notwithstanding the provisions of Section 7 of this

Sales Lecture 2 Article, a natural-born citizen of the Philippines who has lost
his Philippine citizenship may be a transferee of private lands,
The Law on Sales subject to limitations provided by law.
Art. 1459 Art. 1459
The thing must be licit and the vendor must have a right to The thing must be licit and the vendor must have a right to
transfer the ownership thereof at the time it is delivered. transfer the ownership thereof at the time it is delivered.
Art. 1347 At the time of perfection of the contract, the seller need not be
the owner of the thing or right sold.
All things which are not outside the commerce of men,
including future things, may b the objet of a contract. All At the time of delivery, he must be the owner of the object of
rights which are not intransmissible may also be the object of the contract of sale.
contracts.
Art. 1460
TRANSMISSIBLE RIGHTS
 A thing is determinate when it is particularly
 Right to usufruct designated or physical segregated from all other of
 Right to inheritance already acquired, but not future the same class.
inheritance  The requisite that a thing be determinate is satisfied if
at the time the contract is entered into, the thing is
INTRANSMISSIBLE RIGHTS
capable of being made determinate without the
 Right to suffrage necessity of a new or further agreement between the
 Right to support parties
 Marital rights
Art. 1461
Can services be the object of sale?
 Things having a potential existence may be the object
No. Services are not determinate things and no transfer of of the contract of sale.
ownership is available in services.  The efficacy of the sale of a mere hope or expectancy
is deemed subject to the condition that the thing will
CLASSIFICATION OF ILLICIT THINGS come into existence.
 The sale of a vain hope or expectancy is void.
Illicit per Se
Emptio Rei Speratae
-by its nature, it is heinous, immoral, and wrongful

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 - The purchase of an expected thing subject to the condition SALE AGENCY
that the thing will come into existence The buyer cannot return the The agent returns the
goods/property when the sale goods/property if he was not
If the contract of sale is made dependent upon the existence of is defective. able to sell the same.
the thing such that if it did not come into existence, the The seller warrants the The agent does not make any
contract is not effective, and the buyer will have no obligation goods/property sold. warranty as long as he acts
to pay the price within his authority and in the
name of the principal.
Emptio Spei The seller has full freedom to The agent must follow the
enter into any terms and instructions of the principal.
-The purchase of a hope or expectancy conditions on the contract of
sale.
If the contracting parties intended the contract of sale to exist
at all events, whether or not the expected thing will come into
existence such that the buyer will have to pay the purchase PRIMORDIAL TEST
price, the contract becomes aleatory in nature
Art. 1470
Art. 1466
 Gross inadequacy of price does not affect a contract
In construing a contract containing provisions characteristic of of sale, except as it may indicate a defect in the
both the contract of sale and of the contract of agency to sell, consent, or that the parties really intended a donation
the essential clauses of the whole instrument shall be or some other act or contract.
considered.
General Rule
QUIROGA V. PARSONS HARDWARE CO.
Gross inadequacy of price does not affect a contract
Facts: of sale

The defendant was granted by the plaintiff of the exclusive Exceptions

right to sell as an “agent” Quiroga Beds in the Visayas at the
invoice price in Manila. The agreement was for the defendant
to pay for the bed with a discount from 20% to 25% as
commission on the sales.
The defendant shall pay the plaintiff whether the beds are sold
or not. The plaintiff claims that the defendant is his “agent”
while defendant says he was merely a purchaser.
Issue:
Is there a contract of sale or a contract of agency to sell?
1. If consent is vitiated such as by fraud, mistake,
violence, intimidation, or undue influence;
2. If the parties intended a donation or some other act or
contract; or
3. If the price is so low as to be “shocking to the
conscience”, the sale shall be set aside.
Art. 1477
The ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.

Ruling: Art. 1478

There is a contract of sale in the instant case. The plaintiff was The parties may stipulate that ownership in the thing shall not
under obligation to supply the bed and the defendant was pass to the purchaser until he has fully paid the price.
under obligation to pay the price regardless of whether or not
KINDS OF DELIVERY
he sold the beds.
1. Actual or real delivery
If it were an agency, the agent receives the thing for
- When the thing is placed in the control and position
the purpose of selling it, and does not pay the price. He merely
of the vendee
delivers the price he realized from the sale of the thing to a
2. Constructive or legal delivery
third person. He returns the thing, if he failed to sell it. The
- When delivery is effected not by actually transferring
fact that “discount” or so-called commission has been given is
the possession of the thing but by legal formalities or
immaterial.
by symbolic tradition

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CONSTRUCTIVE DELIVERY - Should fungible things be sold for a price fixed
according to weight, number, or measure, the risk
1. Tradicion Symbolica shall not be imputed to the vendee until they have
- Delivery of certain symbols or things representing the been weighed, counted, or measured and delivered,
thing being delivered unless the latter has incurred in delay.
- Keys or titles
2. Tradicion Instrumental Res Perit Domino
- Delivery of the instrument of conveyance to the
grantee by the grantor - Owner bears the loss
3. Tradicion Longa Manu - In the absence of a perfected contract between the
- Delivery through pointing of the thing (movable) supposed parties, the loss, destruction, or
within sight, by the grantor to the grantee but at the deterioration of the thing shall be borne by the owner
time of the transaction, the thing could not be placed by virtue of this principle
yet in the hands of the grantee, or on order be
delivered to his house or designated place
4. Tradicion Brevi Manu
- Delivery through the grantee’s continuation of is
possession over which the thing delivered but now Consequences of loss or deterioration
under the title or ownership
5. Tradicion Constitutum Possessorium Before the perfection Vendor
- owner’s continuous possession of he property he had At the time of perfection Vendor
sold o another person, and his present possession
(The contract is inexistent
thereof is no longer that of an owner but under the
because the object did not
capacity like that of a lessee exist. It follows that the
6. Tradicion by operation of law contract will have no legal
- Delivery of the things by operation of law such as effect.)
intestate succession where inheritance is transferred
to the heir upon death of the decedent
After the perfection of the contract but before delivery of the
Transfer of possession does not necessarily mean transfer of thing to the vendee
ownership.
Due to the fault of the vendor Vendor
RIGHT OF FIRST REFUSAL Due to the fault of the vendor Vendee
Seller (a) was in delay, Vendor
- A contractual grant, not of the sale of the property, (b) assumed the loss or
but of the first priority to buy the property in the deterioration by stipulation,
event the owner sells the same or
(c) he promised to deliver the
- When the lease contains the right of first refusal, the
thing two or more persons
lessor has the legal duty to the lessee not to sell the who do not have the same
leased property to anyone at any price until after the interest over the thing
lessor has made an offer to sell the property to the
lessee an the lessee has failed to accept it
Art. 1484
Art. 1480
In a contract of sale of personal property the price of
- Any injury to or benefit from the thing sold, after the which is payable in installments, the vendor may exercise any
contract has been perfected, from the moment of the of the following remedies:
perfection of the contract to the time of delivery,
shall be governed by Articles 1163 to 1165, and (1) Exact fulfillment of the obligation, should the vendee fail
1262. to pay;
- This rule shall apply to the sale of fungible things,
(2) Cancel the sale, should the vendee's failure to pay cover
made independently and for a single price, or without
two or more installments;
consideration of their weight, number, or measure.

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(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.
 The three remedies are alternative, not cumulative
 The election of one remedy is a waiver of the right to
resort to the other remedies.
Art. 1485
The preceding article shall be applied to contracts
purporting to be leases of personal property with option to
buy, when the lessor has deprived the lessee of the possession
or enjoyment of the thing.
Art. 1486
In the case referred to in two preceding articles, a
stipulation that the installments or rents paid shall not be
returned to the vendee or lessee shall be valid insofar as the
same may not be unconscionable under the circumstances.
Sales Lecture 3
CAPACITY TO BUY OR SELL
Art. 1489
All persons who are authorized in this Code to
obligate themselves, may enter into a contract of sale, saving
the modifications contained in the following articles.
Where necessaries are those sold and delivered to a
minor or other person without capacity to act, he must pay a
reasonable price therefor. Necessaries are those referred to in
Article 290.
KINDS OF INCAPACITY
Absolute Incapacity
- A person cannot bind himself in any contract
- Minority, insanity, imbecility, etc. ( Art. 38)
Relative Incapacity
- A person cannot buy a certain property because of a
special prohibition
- Arts. 1490-1491
Art. 1490
The husband and the wife cannot sell property to each other,
except:
(1) When a separation of property was agreed upon in the
marriage settlements; or
(2) When there has been a judicial separation or property
under Article 191.
Rationale behind the Prohibition
(1)Prevent the stronger spouse from exploiting the weaker
spouse;
(2)Prevent donations disguised as sales; and
(3)Protect third persons, especially creditors, against fraud
through the transfer of properties of one spouse to the other to
evade payment of obligations
Donations In Marriage Settlement
Do not exceed one-fifth of the donor’s present property (Arts.
82 and 84, Family Code)
Persons Qualified to Question the Sale
 The validity of the sale can only questioned by
persons who bear relationship with the seller in such
a manner that their rights or interests are adversely
affected by the sale.
 The heirs of either spouse and creditors whose credit
existed before the transfer may challenge the validity
of the sale.
When spouses are allowed to sell or lease properties to each
other
(1)They have chosen absolute separation of property as their
property regime;
(2)They have obtained a judicial separation of the property in
accordance with Articles 134 and 135 of the Family Code
Sale of Conjugal Property
- The absence of the consent of one spouse in the sale
of a conjugal property renders the sale null and void
- When consent is vitiated, the sale is voidable
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Art. 1491.
The following persons cannot acquire by purchase, even at a
public or judicial auction, either in person or through the
mediation of another:
(1) The guardian, the property of the person or persons who
may be under his guardianship (voidable);
(2) Agents, the property whose administration or sale may
have been entrusted to them, unless the consent of the
principal has been given (voidable);
(3) Executors and administrators, the property of the estate
under administration (voidable);
(4) Public officers and employees, the property of the State or
of any subdivision thereof, or of any government-owned or
controlled corporation, or institution, the administration of
which has been intrusted to them; this provision shall apply to
judges and government experts who, in any manner
whatsoever, take part in the sale (void);
(5) Justices, judges, prosecuting attorneys, clerks of superior
and inferior courts, and other officers and employees
connected with the administration of justice, the property and
rights in litigation or levied upon an execution before the court
within whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the act of
acquiring by assignment and shall apply to lawyers, with
respect to the property and rights which may be the object of
any litigation in which they may take part by virtue of their
profession (void);
(6) Any others specially disqualified by law (void).
Other Persons Especially Disqualified by Law
(1) The officer conducting the execution of a judgment cannot
be a purchaser, or be interested directly or indirectly in any
purchase at an execution sale;
(2) An unpaid seller who stopped the goods in transitu is
prohibited from buying the goods either directly or indirectly
in the resale of said goods at a public or private sale which he
may initiate; and
(3) In a sale by auction, the seller cannot bid unless notice has
been given that such sale by auction is subject to a right to bid
on behalf of the seller.
EFFECTS OF THE CONTRACT WHEN THE THING SOLD
HAS BEEN LOST
Art. 1493
If at the time the contract of sale is perfected, the
thing which is the object of the contract has been entirely lost,
the contract shall be without any effect.
But if the thing should have been lost in part only, the
vendee may choose between withdrawing from the contract
and demanding the remaining part, paying its price in
proportion to the total sum agreed upon.
Loss
A thing is considered lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence is
unknown or it cannot be recovered (Art. 1189, par. 2)
Art. 1494
Where the parties purport a sale of specific goods, and the
goods without the knowledge of the seller have perished in
part or have wholly or in a material part so deteriorated in
quality as to be substantially changed in character, the buyer
may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof
as have not deteriorated, and as binding the buyer to pay the
agreed price for the goods in which the ownership will pass, if
the sale was divisible.
OBLIGATIONS OF THE VENDOR
Art. 1495
The vendor is bound to transfer the ownership of and deliver,
as well as warrant the thing which is the object of the sale.
Art. 1496
The ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from
the vendor to the vendee.
DELIVERY OF THE THING SOLD
Art. 1497
The thing sold shall be understood as delivered, when it is
placed in the control and possession of the vendee.
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Art. 1498
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.
Art. 1499
The delivery of movable property may likewise be made by
the mere consent or agreement of the contracting parties, if the
thing sold cannot be transferred to the possession of the
vendee at the time of the sale, or if the latter already had it in
his possession for any other reason.
Art. 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 of
delivery, but he may revert 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.
- one who purchased a property of another without knowledge
that some other person or persons have any right to or any
interest in such property, and who paid a full and fair price for
it, at the time of the purchase or before he has notice of the
claim of the latter
“for value”
Buyer must pay a valuable consideration
“value”
- Antecedent or pre-existing claim, whether for money or not,
where goods are taken either in satisfaction thereof or as a
security therefor (Art. 1636)
RATIONALE
The reasons why the buyer in good faith acquires a good title:
a. A voidable contract is valid until annulled;
and
b. Where one of two innocent parties must suffer, he
who placed the offender in a position to do wrong
must be the one who should suffer
Art. 1521

When goods are delivered to the buyer on approval or  Place of Delivery

on trial or on satisfaction, or other similar terms, the
ownership therein passes to the buyer: The following, in order of enumeration, shall be the place of
delivery of he goods purchased:
(1) When he signifies his approval or acceptance to the seller
or does any other act adopting the transaction; 1. The place stipulated upon if any stipulation has been
made;
(2) If he does not signify his approval or acceptance to the 2. The place determined by usage of trade;
seller, but retains the goods without giving notice of rejection, 3. The seller’s place of business; or
then if a time has been fixed for the return of the goods, on the 4. The seller’s place of residence.
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 Rule for Specific Goods
question of fact.
If specific goods are involved in the sale, the place where they
are found shall be the place of delivery, in the absence of any
agreement or applicable usage of trade
Sales Lecture 4
Waiver
Art. 1506. Where the seller of goods has a voidable title
thereto, but his title has not been avoided at the time of the If the goods were accepted by the buyer in some other place
sale, the buyer acquires a good title to the goods, provided he not specified in the contract, the latter is deemed to have
buys them in good faith, for value, and without notice of the waived his right to receive the goods at the proper place of
seller's defect of title delivery

Purchaser in Good Faith Time and Manner of Delivery

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 1. If there is a specific date and time agreed upon for the
delivery, this shall be controlling
2. If none, the delivery must be made within a
reasonable time
Reasonable Time
What is reasonable time will depend upon the circumstances
attending the particular transaction, such as the character of
the goods, their purpose, ability of the seller to manufacture,
facilities of the transportation, distance of the place of
delivery, and the usual course of business
Goods in Possession of Third Person
 The seller is not discharged from his responsibility
where the goods are in the possession of a third
person, unless and until the third person
acknowledged to the buyer that he holds the goods in
behalf of the said buyer.
 The third person acts as a bailee for the buyer.
 Until then, the seller must take time and exert efforts
to cause the delivery of the goods to the buyer as long
as the buyer manifested his readiness to accept and to
pay for the price of the goods.
Expenses
Expenses incurred to put the goods into a deliverable state
shall be borne by the seller, unless otherwise agreed upon.
Goods in Deliverable State
Goods are in deliverable state if they are in such condition that
they satisfy the specifications agreed upon in the contract and
the buyer would, under the contract, be bound to accept or
take delivery of them
Art. 1522
Where the seller delivers to the buyer a quantity of
goods less than the contracted to sell, the buyer may reject
them, but if the buyer accepts or retains the goods so
delivered, knowing that the seller is not going to perform the
contract in full, he must pay for them at the contract rate. If,
however, the buyer has used or disposed of the goods
delivered before he knows that the seller is not going to
perform his contract in full, the buyer shall not be liable for
more than the fair value to him of the goods so received.
Lesser Goods Delivered
1. Buyer may reject the goods delivered and he shall have no
liability; or
2. The buyer may accept what has been delivered, but he will
pay at the contract price, if he knew that the seller is not going
to deliver all the goods contracted for.
(Larger Goods Delivered)
Where the seller delivers to the buyer a quantity of
goods larger than he contracted to sell, the buyer may accept
the goods included in the contract and reject the rest. If the
buyer accepts the whole of the goods so delivered he must pay
for them at the contract rate.
(Mixed Goods Delivered)
Where the seller delivers to the buyer the goods he
contracted to sell mixed with goods of a different description
not included in the contract, the buyer may accept the goods
which are in accordance with the contract and reject the rest.
In the preceding two paragraphs, if the subject matter
is indivisible, the buyer may reject the whole of the goods.
The provisions of this article are subject to any usage
of trade, special agreement, or course of dealing between the
parties.
Usage of Trade
- Any practice or method of dealing having such regularity of
observance in a place, vocation, or trade as to justify an
expectation that it will be observed with respect to the
transaction in question
Special Agreement
- Any stipulation of the parties which will govern their
relationship in case of lesser or larger delivery of
goods.
- It must be made in good faith
Course of Dealing
- A sequence of previous acts and conduct between the parties
to a particular transaction which is fairly to be regarded as
establishing a common basis of understanding for interpreting
their expressions and other conduct
Art. 1523
This Article applies only to cases where the buyer has agreed
to the shipment of the goods by the seller through a carrier for
the purpose of transmission to the buyer.
GENERAL RULE
Delivery to the carrier is delivery to the buyer
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EXCEPTIONS - Seller shall bear all expenses until goods are delivered where
they are to be FOB at the point of shipment or at the point of
1. Where the seller reserves his right of ownership over the destination and determines the time when property passes
goods until certain conditions have been fulfilled;
FOB CIF
2. When delivery is directed by the seller to the place of
If the sale is FOB at the place In CIF contract, the buyer is
destination, to himself or his agent; of shipment, the buyer must to pay a fixed price for which
pay the freight, provided the the seller furnishes the goods,
3. When the bill of lading is deliverable to the buyer, but the seller complies his part of the pays the freight and insurance
seller retains the possession of the bill of lading; contract. to the point of delivery.

Bill of Lading
If the sale is FOB at the place
- A detailed document issued by a carrier to acknowledge the of destination, the freight
receipt of cargo for shipment must be paid by the seller.

4. When the parties have a different intention as when the

parties did not intend to have the goods delivered to the buyer
through the carrier.
Seller’s Exercise of Due Diligence
 After the delivery of the goods by the seller through
the carrier, unless otherwise authorized by the buyer
himself, the seller has still the following duties to
fulfill to avoid liability:
(1)He must enter into a contract of carriage with the carrier in
behalf of the buyer as may be necessary and reasonable for the
protection and safe carriage of the goods.
If the seller failed to do so, and the goods are lost or
damaged, the seller is liable for damages for his lack of
diligence.
(2)He must notify the buyer of the necessity of insuring the
goods during the transit if it is usual under the circumstances
that insurance should be taken.
Otherwise, the seller bears the risk of loss unless the
buyer had already the need information to cause the insurance
of the goods as when he used to do so in similar pas
transactions with the seller.
CLASSIFICATION OF DELIVERY OF GOODS
TO THE CARRIER
Cost, Insurance, and Freight (CIF)
- CIF contract of sale is one were the buyer pays a fixed price
which the seller furnishes the goods, pays the freight and
insurance to the point of delivery, and all risks while the goods
are in transit are for the account of the buyer
Free on Board (FOB)
Art. 1524
The vendor shall not be bound to deliver the thing sold, if the
vendee has not paid him the price, or if no period for the
payment has been fixed in the contract.
Art. 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;
(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.
Unpaid Seller
The term unpaid seller used in Arts. 1525 to 1535
includes the following:
1. Agent of the seller;
2. Consignor or agent who has himself paid the price or
is responsible for the price; or
3. Any other person in the position of the seller.
RIGHTS AND REMEDIES OF AN UNPAID SELLER
1. Possessory Lien. Right to retain the goods as
security for the payment of the price while he
remains in possession of them.
2. Stoppage in transitu. Right to stopping the goods
while they are in transit in case of insolvency of the
buyer so that the seller can resume his possession of
the goods. Insolvency may be existing at the time of
or after the transaction.
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 3. Right to resell the goods when the same are of
perishable nature; if resale is agreed upon in case of
default; or when the buyer is in default in the payment for
an unreasonable length of time provided the seller himself
does not buy the goods.
4. Right to rescind the sale if this right is reserved, the
buyer has defaulted in the payment for an unreasonable
length of time.
Art. 1526
- provides for an additional right. This is the right of
the seller in case title to the goods has not yet passed
to the buyer, in which case, he still retains the
ownership over the goods.
- Though he has no possessory lien, he being the
possessor can withhold the delivery of the goods to
the prospective buyer.
Art. 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.
Art. 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.
Art. 1530
Subject to the provisions of this Title, when the buyer of
goods is or becomes insolvent, the unpaid seller who has
parted with the possession of the goods has the right of
stopping them in transitu, that is to say, he may resume
possession of the goods at any time while they are in transit,
and he will then become entitled to the same rights in regard
to the goods as he would have had if he had never parted with
the possession.
Double Sale
Art. 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.
Principle of Prius Tempore, Prius Jure
- First in time, stronger in right
Buyer in Good Faith
- One who buys the property of another without 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
Applicability of Art. 1544
Requisites:
1. The vendor has an existing right over the property
and power of disposal;
2. There are at least to sales executed by the same
vendor;
3. The sales involve the same property; and
4. There are two or more vendees of the same property
sold
10

Sales Lecture 5
CONDITIONS AND WARRANTIES
Art. 1547
In a contract of sale, unless a contrary intention appears, there
is:
(1) An implied warranty on the part of the seller that he has a
right to sell the thing at the time when the ownership is to
pass, and that the buyer shall from that time have and enjoy
the legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from any
hidden faults or defects, or any charge or encumbrance not
declared or known to the buyer.
*Innocent purchaser for value must be respected
WARRANTY IN CASE OF EVICTION
Art. 1548
Eviction shall take place whenever by a final
judgment based on a right prior to the sale or an act imputable
to the vendor, the vendee is deprived of the whole or of a part
of the thing purchased.
The vendor shall answer for the eviction even though
nothing has been said in the contract on the subject.
The contracting parties, however, may increase,
diminish, or suppress this legal obligation of the vendor
Eviction
-A judicial process by virtue of which, the vendee is deprived
of the ownership of the whole or part of the thing purchased
by final judgment or by an act imputable to the vendor
Requisites of Warranty against Eviction
1. The vendor was summoned in the suit for eviction at the
instance of the vendee or by the vendor’s voluntary
appearance in the very case where the vendee is a defendant;
2. A final judgment is rendered in the case where the judgment
consists in the deprivation of the vendor’s ownership or
possession over the whole or part of he property;
3. The judgment is in favor of the plaintiff and s base on a
right prior to the sale or even after the sale if the cause of
eviction is due to an act or acts imputable to the vendor; and
4. The vendee has not waived the vendor’s warranty.
Constructive Eviction
When the lessee’s peaceful possession is disturbed by
government authorities for the purpose of repair and
rehabilitation of the building under lease
Prescriptive Period
 Implied warranty should be enforced within six
months from delivery by the last vendor
 Buyer in bad faith cannot invoke the right of
warranty against eviction
Buyer in bad faith – aware of the existence of the fact which is
the cause of eviction
WARRANTY AGAINST HIDDEN DEFECTS
Art. 1561
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
Requisites
1. The defect must be important or grave;
2. The defect must be hidden;
3. The defect must be present at the time of the
execution of sale;
4. There is no waiver of the warranty against hidden
defects; and
5. The action for rescission or reduction of price must
be filed within the prescriptive period.
Redhibitory Action
 Action based on the redhibitory defaults or defects of
animals which are determined by law or by local
customs
 Prescriptive period – 40 days from date of delivery
11
WARRANTY OF FITNESS FOR PARTICULAR PURPOSE
GR: no implied warranty of fitness for particular purpose
XPN:
1. Where the buyer, expressly or by implication, makes
known to the seller the particular purpose for which
the goods are acquired, and
2. It appears that the buyer relies on the seller's skill or
judgment (whether he be the grower or manufacturer
or not)
WARRANTY OF MECHANTABILITY
`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
Sales Lecture 6
OBLIGATIONS OF THE VENDEE
SIMULTANEITY OF ACTS
Art. 1582. The vendee is bound to accept delivery and to pay
the price of the thing sold at the time and place stipulated in
the contract.
Exception
Art. 1582. If the time and place should not have been
stipulated, the payment must be made at the time and place of
the delivery of the thing sold.
BUYER’S RIGHT TO EXAMINE GOODS
Art. 1584
(a)Delivery without previous examination
Where goods are delivered to the buyer, which he has not
previously examined, he is not deemed to have accepted them
unless and until he has had a reasonable opportunity of
examining them for the purpose of ascertaining whether they
are in conformity with the contract if there is no stipulation to
the contrary.
(b) Tender of delivery by the seller
Unless otherwise agreed, when the seller tenders delivery of
goods to the buyer, he is bound, on request, to afford the buyer
a reasonable opportunity of examining the goods for the
purpose of ascertaining whether they are in conformity with
the contract.
When is the right of examination not allowed to the buyer?
(1) When there is an express stipulation that the buyer shall
not examine the goods (Art. 1584, par. 1)
(2) When the goods are delivered on “collect on delivery”
basis, the buyer cannot examine the goods unless he pays the
price.
XPN:
Buyer does not need to pay first the price if there is a contrary
agreement by the parties or the examination is permitted by
usage of trade (Art. 1584, par. 2) at the place of delivery.
WHEN THE BUYER IS DEEMED TO HAVE ACCEPTED
THE GOODS
Art. 1585
1. When he communicates with the seller expressly
manifesting his acceptance thereof;
2. When he performs an act in relation to the goods
inconsistent with the ownership of the seller
(continuous possession and use of goods or reselling
of goods); or
3. When, after the lapse of a reasonable time following
the delivery, he retains the goods without complaining to
the seller or without intimating that he has rejected them.
EFFECT OF ACCEPTANCE OF GOODS
Art. 1586
 If there is no agreement to the contrary, the mere
acceptance of goods by the buyer does not
necessarily discharge the seller from liability for the
breach of any promise or warranty
 However, to make the seller liable, the buyer must
notify the seller within reasonable time about the
breach of promise or warranty
JUSTIFIABLE REFUSAL TO ACCEPT DELIVERY
Art. 1588
1. Buyer has no duty to return the goods to the seller, but he
must notify the seller of his refusal to accept the goods (more
practical option); or
12
2. Buyer may constitute himself as depositary of the goods,
but he will be liable for damages if he does not fulfill the
duties of a depositary as required by law (Arts. 1792-1991).
(Second option will impose grater burdens upon the buyer)
RISK OF LOSS
First option – seller
Having been told by the non-acceptance of the goods by the
buyer, the seller has the duty to immediately take the goods
back.
Second option – buyer
For choosing to assume the role of a depositary, buyer shall be
liable for the loss of the goods.
UNJUSTIFIABLE REFUSAL TO ACCEPT GOODS
When the buyer, without just cause, refuses to accept the
goods, the title or ownership to the goods passes to him form
the time the goods were placed at his disposal.
Consequently, the risk of loss is borne by the buyer.
Exceptions
 Even if the refusal is without a valid case, the
ownership shall not pass to the buyer if:
a. There is a contrary agreement; or
b. The seller reserves the ownership as security for the
payment of the price.
WHEN CAN THE VENDEE SUSPEND THE PAYMENT
OF THE PRICE?
Art. 1590
a. When he is disturbed in the possession or ownership
of the thing bought; or
b. When he has a well-grounded fear that his possession
or ownership would be disturbed by a vindicatory
action or foreclosure of mortgage
(Applicable only when ownership is already transferred to
the vendee)
LENGTH OF SUSPENSION OF PAYMENT
Only while the danger or disturbance lasts.
When vendee cannot suspend payment despite the presence of
a disturbance
1. When the vendor has given security for the return of
the proper in a proper case;
2. When the parties have stipulated that despite the
presence of disturbance, the vendee will pay the
price; or
3. When the vendor has succeeded in eliminating the
danger or disturbance.
OTHER GROUNDS FOR SUSPENSION
OF PAYMENT
The two grounds for suspension of payment in Art. 1590 are
not exclusive.
Other ground: non-compliance by the vendor of the conditions
imposed in the contract of sale
Art. 1592
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.
 Art. 1592 does not apply to contract to sell or
promise to sell where the title remains with the
vendor until full payment of the price (installment)
 It applies only to a conditional sale of real property
where title passes to the vendee upon the delivery of
the thing sold which is usually effected through the
execution of a public document.
MACEDA LAW
 AN ACT TO PROVIDE PROTECTION TO
BUYERS OF REAL ESTATE ON INSTALLMENT
PAYMENTS. (Rep. Act No. 6552)
 "Realty Installment Buyer Act"
Section 2
It is hereby declared a public policy to protect buyers of real
estate on installment payments against onerous and oppressive
conditions.
Section 3. In all transactions or contracts involving the sale or
financing of real estate on installment payments, including
residential condominium apartments but excluding industrial
lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by
Republic Act Numbered Sixty-three hundred eighty-nine,
13
where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in
the payment of succeeding instalments
(a) To pay, without additional interest, the unpaid installments
due within the total grace period earned by him which is
hereby fixed at the rate of one month grace period for every
one year of installment payments made: Provided, That this
right shall be exercised by the buyer only once in every five
years of the life of the contract and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the
buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments
made, and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the
total payments made:
2. Action for damages due to wrongful neglect and
refusal to accept and pay for the goods (Art. 1596)
3. Action for rescission if the buyer has repudiated the
contract or has manifested his inability to perform the
obligation (Art. 1597)
If the breach is on the part of the seller, the buyer may pursue
any one of the following actions:
1. Action for specific performance when the vendor has
failed to deliver the goods (Art. 1598)
2. Action for damages for breach of warranty but
accepting the goods (Art. 1599)
3. Action for rescission for breach of warranty where
the vendee may validly refuse acceptance of the
goods, or even if the goods are had already been
received, he may return them. (Art. 1599, par. 4)

 Provided, That the actual cancellation of the contract EXTINGUISHMENT OF SALE

shall take place after thirty days from receipt by the
buyer of the notice of cancellation or the demand for Art. 1600. Sales are extinguished by the same causes as all
rescission of the contract by a notarial act and upon other obligations, by those stated in the preceding articles of
full payment of the cash surrender value to the buyer. this Title, and by conventional or legal redemption.
 Down payments, deposits or options on the contract
ORDINARY CAUSES
shall be included in the computation of the total
number of installment payments made. 1. Payment
2. Loss of the thing
Take Note
3. Novation
An automatic cancellation clause is void as it is contrary to 4. Merger of rights of creditor and debtor
Maceda Law. 5. Rescission
6. Fulfilment of resolutory condition
Section 4. 7. Prescription
8. Analogous Causes (Art. 1231)
In case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less than SPECIAL CAUSES
sixty days from the date the installment became due.
1. Conventional Redemption
If the buyer fails to pay the installments due at the expiration 2. Legal Redemption
of the grace period, the seller may cancel the contract after
thirty days from receipt by the buyer of the notice of CONVENTIONAL REDEMPTION
cancellation or the demand for rescission of the contract by a
Art. 1601. Conventional redemption shall take place when the
notarial act.
vendor reserves the right to repurchase the thing sold, with the
Sales Lecture 7 obligation to comply with the provisions of Article 1616 and
other stipulations which may have been agreed upon.
ACTIONS FOR BREACH OF CONTRACT OF SALE OF
GOODS  Unless agreed upon, conventional redemption will
have no basis to spring from.
Actions available to the vendor when there is breach of  It is called Contract of Sale with Pacto de Retro
contract of sale on the part of the vendee
Requisites
1. Action for payment of the price of the goods (Art.
1595) The vendor shall:

14
 1. Reserve the right to repurchase the thing sold; foreclose secure a perfect title on the
2. Return the price of the sale; property
3. Shoulder the expenses of the contract and any other 3. Vendor has no more right Mortgagor may redeem
legitimate payments made by the buyer by reason of to redeem the property after before the foreclosure sale or
the maturity date of the right even after, within one year
the sale;
to redeem from registration of the sale
4. Pay the value of the necessary and useful expenses in case of extrajudicial
made on the thing incurred by the buyer; and foreclosure. In judicial
5. Comply with other stipulations agreed upon. foreclosure, redemption may
be made before the
Characteristics of Conventional Redemption confirmation of the sale by
the court.
1. It begins to exist at the time of perfection of the contract. If 4. Vendee may alienate the Mortgagee cannot alienate
stipulated upon after the sale had been consummated, it property subject to a the property
becomes a mere promise to sell subject to different rights and resolutory condition of
consequences (Diamante v. Court of Appeals) repurchase
5. Vendee becomes Mortgagee cannot become
2. It is an accidental stipulation because it is a right created by automatically the owner of automatically the owner of
the parties in the contract of sale. the property in case of the property in case of the
vendor’s failure to redeem failure of the mortgagor to
Its nullity does not affect the sale itself. pay his obligation.
Foreclosure sale is needed
3. It is reciprocal when the right to redeem is exercised. The where the mortgagee may bid
in a public sale
vendor shall return the price and, in addition, shall comply
6. Vendee is entitled to be Mortgagee is not entitled to
with the requirements of Art. 1616. Then, the vendee shall reimbursed for the necessary reimbursement for the
return the property. and useful expenses improvements he made

4. It gives rise to real right when property is registered,

because it affects third persons. EQUITABLE MORTGAGE

5. It is potestative, because its exercise depends upon the sole
will of the vendor.
6. It is a resolutory condition , because when it is fulfilled,
the ownership of the vendee over the thing is extinguished.
SUBJECT MATTER
Applicable to both real and personal property
- Lacks the proper formalities, form of words, or other
requisites prescribed by law for a mortgage, but shows the
intention of the contracting parties to make the property
subject of the contract as a security of a debt and contains
nothing impossible or contrary to law
Art. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:

Sale with Pacto de Retro (1) When the price of a sale with right to repurchase is
vs. Absolute Sale unusually inadequate;

There is no difference between them, except that in the case of (2) When the vendor remains in possession as lessee or
sale with pacto de retro, the ownership of the purchaser is otherwise;
subject of a resolutory condition that the vendor shall exercise
(3) When upon or after the expiration of the right to
his right of redemption within the period agreed upon.
repurchase another instrument extending the period of
redemption or granting a new period is executed;
SALE WITH PACTO MORTGAGE
DE RETRO (4) When the purchaser retains for himself a part of the
1. If the vendor does not If mortgagor fails to pay his purchase price;
repurchase within the time mortgage obligations on time,
agreed upon, ownership over he does not lose his interest (5) When the vendor binds himself to pay the taxes on the
the property is consolidated over the property thing sold;
in the vendee
2. There is no obligation on The mortgagee must
the part of the vendee to foreclose if he wants to
15
(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.
Presence of only one of the conditions in Art. 1602 is
sufficient to create a presumption of equitable mortgage
Art. 1603. In case of doubt, a contract purporting to be a sale
with right to repurchase shall be construed as an equitable
mortgage.
Art. 1604. The provisions of Article 1602 shall also apply to a
contract purporting to be an absolute sale.
Presumption of Equitable Mortgage
For Arts. 1602 and 1604 to apply, the following requisites
must concur:
1. The parties entered into a contract denominated as a
contract of sale; and
2. Their intention was to secure an existing debt by way
of an equitable mortgage.
When the price of a sale with right to repurchase is
unusually inadequate
The inadequacy of price must be so gross and
unconscionable that the mind revolts at it and such that a
reasonable man would neither directly or indirectly be
likely to consent to.
Art. 1605. In the cases referred to in Articles 1602 and 1604,
the apparent vendor may ask for the reformation of the
instrument.
Art. 1606
 The right referred to in Article 1601, in the absence
of an express agreement, shall last four years from
the date of the contract.
 Should there be an agreement, the period cannot
exceed ten years.
 However, the vendor may still exercise the right to
repurchase within thirty days from the time final
judgment was rendered in a civil action on the basis
that the contract was a true sale with right to
repurchase.
Art. 1612.
 If several persons, jointly and in the same contract,
should sell an undivided immovable with a right of
repurchase, none of them may exercise this right for
more than his respective share.
 The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case
each of the latter may only redeem the part which he
may have acquired.
Art. 1613
In the case of the preceding article, the vendee may demand
of all the vendors or co-heirs that they come to an agreement
upon the purchase of the whole thing sold; and should they fail
to do so, the vendee cannot be compelled to consent to a
partial redemption.
Art. 1614
Each one of the co-owners of an undivided immovable who
may have sold his share separately, may independently
exercise the right of repurchase as regards his own share, and
the vendee cannot compel him to redeem the whole property
Art. 1616.
The vendor cannot avail himself of the right of repurchase
without returning to the vendee the price of the sale, and in
addition:
(1) The expenses of the contract, and any other legitimate
payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold.
LEGAL REDEMPTION
Art. 1619
Legal redemption is the right to be subrogated, upon the same
terms and conditions stipulated in the contract, in the place of
one who acquires a thing by purchase or dation in payment, or
by any other transaction whereby ownership is transmitted by
onerous title.
APPLICABILITY
Only against the vendee or transferee who acquired the
property through:
1. purchase;
2. Dation in payment (dacion en pago); or
16
 3. Any other transaction whereby ownershp is transmitted the vendor that he has given written notice thereof to all
by onerous title. possible redemptioners.

Dation in Payment

 Special form of payment whereby the property of the

debtor is alienated to the creditor in satisfaction of the
former’s debt in money.
 It is governed by the law on sales (Art. 1245)

Art. 1620.

A co-owner of a thing may exercise the right of redemption in

case the shares of all the other co-owners or of any of them,
are sold to a third person. If the price of the alienation is
grossly excessive, the redemptioner shall pay only a
reasonable one.

Should two or more co-owners desire to exercise the right of

redemption, they may only do so in proportion to the share
they may respectively have in the thing owned in common.

CO-OWNERSHIP

 Ownership of an undivided thing or right which

belongs to different persons

Remember

 When all the co-owners have sold their share, none of

them can redeem from the purchaser. Art. 1620
applies only if one or some of he co-owners, but
not all, have sold their shares in the property they
used to own in common.

Requisites for Applicability of Art. 1620

1. There must be a pre-existing co-ownership;

(The redemptioner must be a co-owner at the time another co-

owner sells his undivided share. Whether the redemptioner
remains to be a co-owner after exercising the legal redemption
is not material for purposes of the law.)

2. The sale made of an undivided share in the property owned

in common must be made to a third person; and

3. The sale must be executed before there has been a partition.

Art. 1623 The right of legal pre-emption or redemption shall

not be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as the
case may be. The deed of sale shall not be recorded in the
Registry of Property, unless accompanied by an affidavit of

17