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Sales PDF
Civil Law
SUMMER REVIEWER
—Adviser: Dean Cynthia del Castillo Head: Joy Ponsaran, Eleanor Mateo; Understudy: Joy Tajan, John Paul Lim;
Subject Head: Patricia Marie Regina Roque; Pledgees: Melina Rose Gutierrez, Kristine Margret Malang—
Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007
v. but never by one party to the 2. offer floated with a without acceptance,
contract period extinguished when
4. Jurisprudence: Manner of payment must period has ended and
be agreed upon (Marnelego v. Banco maybe withdrawn at will
Filipino Savings and Mortgage Bank) by offeror; right to
withdraw must not be
II. EFFECT OF GROSS INADEQUACY OF PRICE arbitrary otherwise,
liable to damage under
NOTE: Mere inadequacy of the price does not affect Art 19, 20, 21 of Civil
the validity of the sale, except (1) When there is Code
fraud, mistake, or undue influence indicative of a 3. offer floated w/ extinguished by
defect in consent is present, (2)When it shows that condition happening/non-
the parties really intended a donation or some other happening of condition
act or contract. 4. offer floated without continues to be valid
period/without condition depending upon
III. EFFECT WHERE PRICE IS SIMULATED circumstances of time,
1. The act may be shown to have been in reality place and person
a donation, or some other act or contract 5. offer is floated and original offer is
2. If not and neither party had any intention there destroyed, there is a
whatsoever that the amount will be paid is counter-offer new offer; can not go
(absolutely simulated): the sale is void back to original offer
3. If there is a real price but what is stated in the 6. offer is floated no authority of offeror
contract is not the one intended to be paid to modify offer
(only relatively simulated): the contract of 7. offer accepted proceed to perfected
sale is valid but subject to reformation absolutely stage
Art. 1474. Where the price cannot be determined III. OPTION CONTRACT - a contract granting
in accordance with the preceding articles, or in an exclusive right in one person, for which he
any other manner, the contract is inefficacious. has paid a separate consideration, to buy a
However, if the thing or any part thereof has been certain object within an agreed period
delivered to and appropriated by the buyer he 1. no presumption of consideration, needs
must pay a reasonable price therefore. What is a to be proven
reasonable price is a question of fact dependent 2. characteristics of Option Contract:
on the circumstances of each particular case. a. not the contract of sale by itself,
separate and distinc
CH. 5 - FORMATION OF A CONTRACT OF SALE b. nominate
c. principal; but can be attached
I. 3 STAGES IN LIFE OF A CONTRACT OF SALE to other principal contracts
1. Policitacion/Negotiation Stage - offer is d. onerous
floated, acceptance is floated but they do e. commutative
not meet; the time when parties indicate f. unilateral – versus contract of
their interest but no concurrence of offer and sale which is bilateral
acceptance.
2. Perfection - concurrence of all requisites; San Miguel Philippines v Cojuangco
meeting of the minds. consideration in an option contract may be anything
3. Consummation - parties QuickTime™ perform
and a their of value, unlike in sale where it must be price certain
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respective undertakings
are needed to see this picture. in money
Money given Part of the purchase agent (contains essential terms of the
as distinct price contract)
consideration for an 2. When there has been partial
option contract performance/execution (seller delivers with
Applies to a sale not Given only when intent to transfer title/receives price)
perfected there is already a 3. When there has been failure to object to
sale presentation of evidence (oral)
Not required to buy When given, buyer is 4. When sales are effected through electronic
bound to pay the commerce
balance
CH. 7 - CONSUMMATION STAGE/PERFORMANCE
Art. 1483. Subject to the provisions of the Statute STAGE
of Frauds and of any other applicable statute, a
contract of sale may be made in writing, or by NOTE: Stage where parties both comply with their
word of mouth, or partly in writing and partly by obligation. Nature of diligence required: diligence of a
word of mouth, or may be inferred from the good father of the family unless other requirement is
conduct of the parties. (n) stipulated
Consequence: Seller will be guilty of breach if thing is
lost through his fault
FORM OF SALES
III. Different forms of Constructive Delivery - 4. Such capacity should subsist for a
Constructive delivery has same legal effect reasonable time after execution of instrument
as actual or physical delivery (reasonable time depends on circumstances
of persons, places and things)
Ten Forty Realty vs. Cruz, 10 Sept. 2003
Gives rise only to a prima facie presumption of
delivery which is destroyed when actual delivery is V. Delivery of Fruits and Accessions/
not effected because of a legal impediment Accessories - Right to fruits and
accessions/accessories accrue from time
1. Traditio Longa Manu sale is perfected but no real right over it until
− Delivery of thing by mere agreement; when it is delivered
SELLER points to the property without need
of actually delivering VI. Delivery Through Carrier - General Rule:
Where the seller is authorized or required to
2. Traditio Brevi Manu send the goods to the buyer, delivery to the
− Before contract of sale, the would be buyer carrier is delivery to the buyer.
was already in possession of the would be Exceptions: a contrary intention appears or
subject matter of sale (ex: as lessee) implied reservation of ownership under pars.
1,2,3 of Art. 1503
3. Symbolic delivery
− As to movables – ex: delivery of the keys 1. FAS – FREE ALONG SIDE - When
to a car goods delivered alongside the ship, there is
already delivery to the buyer (twin effects
4. Constitutum possessarium deemed fulfilled)
− When at the time of the perfection of the
contract of sale, seller had possession of the 2. FOB - FREE ON BOARD - Shipment –
subject matter in the concept of owner and when goods are delivered at ship at point of
pursuant to the contract, seller continues to shipment; delivery to carrier by placing goods
hold physical possession no longer in the on vessel is delivery to buyer
concept of an owner but as a lessee or any − Destination – when goods reach the port
other form of possession other than in the even if not disembarked yet from the vessel,
concept of owner. there is delivery to the buyer
ii. When delivered and does 2. Two or more sales transactions must
any act inconsistent with pertain to the same object or subject
ownership of seller matter;
iii. Retains without intimating 3. Two or more buyers at odds over the
to seller that he has rightful ownership of the subject matter
rejected must each represent conflicting interests;
and
3. Sale of Goods on installment 4. Two or more buyers must each have
a. Goods must be delivered in full, bought from the very same seller.
except when stipulated
b. When not examined by buyer – not accepted Consolidated Rural Bank (Cagayan Valley_ vs.
until examined or at least had reasonable CA [Jan. 17, 2005]
time to examine If not all the elements are present for Art.
1544 to aply, the priniciple of prior tempore, potior
4. Acceptance of goods in general, absent contrary jure or simply “he who is first in time is preferred in
express stipulation, does not discharge seller right” should apply. Undisputably, he is a purchaser
from liability in case of breach of warranties in good faith because at the time he bought the real
(unless no notice or failure to give it within property, there was still no sale to as a second
reasonable time) vendee.
5. When buyer has a right to refuse goods, no II. RULES ACCORDING TO 1544:
need to return; shall be considered as 1. MOVABLE
depositary; unless there is stipulation to the a. Owner is first to posses in good faith
contrary
2. IMMOVABLE
a. First to register in good faith
Art. 1544. If the same thing should have been b. No inscription, first to possess in
sold to different vendees, the ownership shall be good faith
transferred to the person who may have first c. No inscription and no possession in
taken possession thereof in good faith, if it good faith – Person who presents
should be movable property. oldest title in good faith
d. Good Faith - one who buys property
Should it be immovable property, the ownership without notice that another person
shall belong to the person acquiring it who in has a right or interest in such
good faith first recorded it in the Registry of property; one who has paid price
Property. before notice that another has claim
or interest
Should there be no inscription, the ownership
III. LIS PENDENS – notice that subject matter is
shall pertain to the person who in good faith was
in litigation
first in the possession; and, in the absence
thereof, to the person who presents the oldest
IV. ADVERSE CLAIM – notice that somebody is
title, provided there is good faith. (1473)
claiming better right
bailee has direct obligation acquires right to notify bailee so II. EXCEPTIONS TO THE RULE ON THE EFFECT
to holder as if directly dealt that he acquires obligation of OF SALE OF A DEFINITE PORTION OBY A CO-
with him bailee to hold goods for him OWNER
1. Subject matter is indivisible in nature or by
intent;
2. Sale of a particular portion of a property is
SALE BY NON-OWNER OR BY ONE HAVING with consent of other co-owners;
VOIDABLE TITLE 3. Co-owner sells 1 of 2 commonly-owned
See Articles 1475, 1477, 1505, 1506 lands and does not turn over ½ of the
proceeds, other co-owner, by law and equity,
I. SALE BY NON-OWNER has exclusive claim over remaining land.
1. PERFECTION STAGE
a. Sale by owner – VALID
b. Sale by non-owner – VALID; III. RULES ON LEGAL EFFECTS OF SALE BY A
c. Reason why both sales are valid: NON-OWNER
ownership is necessary only at time GENERAL RULE: Sale by non-owner, buyer
when transfer title to goods; at acquires no better title than seller had.
perfection stage, no obligation on EXCEPTIONS:
part of seller to transfer ownership 1. Owner by his conduct is precluded
d. Law on estoppel further bolsters it: from denying seller’s authority
title passes by operation of law to (ESTOPPEL)
grantee when person who is not 2. Contrary is provided for in recording
owner of the goods sold delivers it laws (PD 1529)
and later onQuickTime™
acquires and title
a thereto 3. Sale is made under statutory power
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needed to see annul is of sale or under order of a
improper; there is already a court of competent jurisdiction
perfected contract 4. Sale is made in a merchant’s store in
accordance with code of commerce
2. CONSUMMATION STAGE and special laws
a. Contract of sale is valid because it
has passed perfected stage, despite
seller not being the owner or seller IV. SALE BY SELLER WITH VOIDABLE TITLE
having no authority to sell 1. PERFECTION STAGE
a. Valid sale – buyer acquires title of goods
2. Right to retain; cannot be availed when seller why special? there are things which seller cannot
does not have custody do in ordinary sale:
3. Exercisable only in following circumstances:
a. goods sold without stipulation as to credit 1. ownership is with buyer but seller can
b. goods sold on credit but term of credit sell goods
has expired 2. title accorded to buyer is destroyed
c. buyer becomes insolvent even without court intervention
d. When part of goods delivered, may still
exercise right on goods undelivered
IV. Special Right to Rescind
Instances when possessory lien lost: 1. Expressly stipulated
1. seller delivers goods to carrier for 2. Buyer is in default for unreasonable time
transmission to buyer without reserving 3. Notice needed to be given by seller to buyer
ownership in goods or right to possess them
2. buyer or his agent lawfully obtains why special? – ownership of goods already with
possession of goods buyer but seller may still rescind; ownership is
3. waiver destroyed even without court intervention but in
4. loses lien when he parts with goods (still has ordinary sale, need to go to court to destroy transfer
stoppage in transitu) of ownership
5. notice by seller to buyer not essential
Remedies of Buyer
II. Stoppage In Transitu When Seller fails to deliver, buyer may seek
− Goods are in transit SPECIFIC PERFORMANCE WITHOUT GIVING
− Requisites when goods are in transit SELLER OPTION TO RETAIN GOODS ON
1. From the time goods are delivered to PAYMENT OF DAMAGES
carrier for purpose of transmission to
buyer
2. Goods rejected by buyer and carrier SALE OF MOVABLES ON INSTALLMENT
continues to possess them
Remedies of Unpaid Seller (1484)
When goods no longer in transit 1. Exact fulfillment should the buyer fail to pay.
1. Reached point of destination 2. Cancel the sale if buyer fails to pay 2 or more
2. Before reaching destination, buyer obtains installments.
delivery of the goods 3. Foreclose on chattel mortgage if buyer fails to
3. Goods are supposed to have been delivered pay 2 or more installments
to buyer but carrier refused
4. Shown by seller that buyer is insolvent Incidents:
(failure to pay when debts become due ) 1. If buyer chooses foreclosure, no further
action against buyer to recover any unpaid
balance of the price
How is right exercised 2. When is the law applicable? Sale on
1. Obtain actual possession of goods movables by installment
2. Give notice of claim to carrier / bailee in o Sale on installment: payment by
possession thereof several partial payments in small
3. Notice by seller to buyer is not required; amount
notice to carrier is essential
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4. Rationale of the law: Buyer is lulled into
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thinking that he could afford because of
small amounts per installment and
III. Special Right to Resell the Goods at the same time remedy abuse of
1. goods are perishable commercial houses
2. stipulated the right of resale in case buyer 5. Nature of remedies: alternative and not
defaults in payment cumulative
3. buyer in default for unreasonable time 6. Coverage: sale and financing transaction
4. notice by seller to buyer not essential and contracts of lease with option to
purchase
7. Action : Judicial and Extrajudicial
o To pay in advance any installment or the 4. when breached, seller is liable for damages
full balance of price anytime without
interest Implied Warranties
o Have full payment annotated in certificate Deemed included in all contracts of sale whether
of title parties are actually aware or not, whether they were
intended or not; by operation of law
REMEDY OF RESCISSION IN CONTRACTS
COVERING IMMOVABLES 1. warranty that seller has a right to sell
See Articles 1191, 1592 o refers to consummation stage since in
consummation stage, it is where
o Nature: Judicial ownership is transferred by tradition
o Extra judicial Rescission o not applicable to sheriff, auctioneer,
a. allowed if stipulated; burden to sue shifts mortgagee, pledge
to party who does not like rescission
b. court still has final say as to propriety of 2. warranty against eviction
rescission a. implied, unless contrary provision appears in
c. Forfeiture of amounts valid being in contract
nature of penal clause b. when ownership is transferred, buyer shall
o Contract of Sale – Rescission is Applicable enjoy the legal and peaceful possession of
o Contract to Sell – Rescission not Applicable the thing
Non–payment of purchase price would c. Requisites of breach of warranty against
automatically cancel even without further eviction:
action for rescission - buyer is evicted in whole or in part
Except: If subject matter is residential from the subject matter of sale
lots, law on rescission applies when - there is a final judgement
there is substantial breach. Maceda law - basis of eviction is a right prior to
applies. sale or an act imputable to vendor
- seller has been summoned in the
CONDITION and WARRANTIES suit for eviction at the instance of
See Articles 1545-1547 buyer; or made 3rd party defendant
through 3rd party complaint brought
I. Condition by buyer
1. When a contract contains a condition, the non
happening of which would not constitute a breach Vendor’s liability shall consists of (Total
but extinguishes the obligation Eviction)(VICED)
2. However, if party to the sales contract has 1. Value of the thing at the time of eviction;
promised that the condition should happen or be 2. Income or fruits if he has been ordered to deliver
performed, the non-performance of which may be the to the party who won the suit
treated by parties as breach 3. Cost of the suit
4. Expenses of the contract; and
II. Warranties 5. Damages and interests if the sale was in bad
A statement or representation made by the seller faith
contemporaneously and as a part of the contract of
sale, having reference tot eh character, quality, or Partial Eviction
title of the goods, and by which he promises or 1. to enforce vendor’s liability for eviction
undertakes to insure that certain facts are or shall be
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2. to demand rescission of contract.
c. applies to judicial sale; judgment c. seller is aware – seller should return price
debtor responsible for eviction unless and refund expenses of contract with
otherwise decreed in judgment damages
d. vendor not liable for eviction if d. seller is not aware - seller should return
adverse possession had been price and interest and refund expenses ( no
commenced before sale but damages )
prescriptive period is completed after e. buyer may elect between withdrawing from
transfer contract or demanding proportionate
e. Rights of buyer when deprived of reduction of price with damages in either
only part of the subject matter but case
would not have bought such part if f. applicable to judicial sale except that
not in relation for the whole: judgment debtor not liable for damages
1. Rescission g. action to prescribe 6 months from delivery of
2. Mutual restitution subject matter
2. Goods are bought by description from seller 1. Accept goods and set up breach of warranty
who deals in goods of that description by way of recoupment in diminution or
3. in case of sale of specified article under its extinction of the price.
patent or trade name, no warranty unless 2. Accept goods and maintain action against
there is a stipulation to the contrary seller for damages
4. measure of damage: difference between value 3. Refuse to accept goods and maintain action
of goods at time of delivery and value they against seller for damages
would have had if they had answered to the 4. Rescind contract of sale and refuse to receive
warranty goods/return them when already received.
e. This refers to cases involving a may compel the vendor to redeem the
transaction where one of the parties whole thing
contests or denies that the true 2. When an undivided thing is sold by co-
agreement is one of sale with the owners / co-heirs, vendors a retro may
right to repurchase; not to cases only exercise his right over his respective
where the transaction is conclusively share; vendee a retro may demand that
a pacto de retro sale. they must come to an agreement first
f. Example: Where a buyer a retro and may not be compelled to consent to
honestly believed that he entered a partial redemption
merely into an equitable mortgage, 3. When rights of co-owners over an
not a pacto de retro transaction, and undivided thing is sold as regards to their
because of such belief he had not own share – vendee retro cannot compel
redeemed within the proper period. one to redeem the whole property
4. Should one of the co-heirs/co-owners
NOTE: When period has expired and seller allowed succeed in redeeming the property –
the period of redemption to expire – seller is at fault such vendor a retro shall be considered
for not having exercised his rights so should not be as trustee with respect to the share of
granted a new period the other co-owners/co-heirs.
1. transfers the right to collect the full value a. Payment to the original creditor is
of the credit, even if he paid a price less valid and debtor shall be released
than such value from his obligation
2. transfers all the accessory rights (e.g. 2. After Notice
guaranty, mortgage, pledge, preference) a. Payment to the original creditor is
3. debtor can set up against the assignee not valid as against the assignee
all the defenses he could have set up b. He may be made to pay again by
against the assignor the assignee
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