Article 1597.

When seller may rescind contract in case there is no delivery yet

1. When buyer repudiated the contract

2. When the buyer has manifested his inability to perform his obligations

3. When the buyer has committed a breach of the contract

* Notice must be given to the buyer to totally rescind the contract.

* If the goods have been delivered the seller may recover the value of what he has given.

EX: Miguel and Chaco entered into a contract of sale, Miguel the buyer express his inability to pay the
obligation. By this, Chaco the seller has the right to rescind the contract. As a seller he is required to give
notice of his election to seek rescission.

Article 1598. Remedy of buyer in Contract to deliver specific goods: Specific Performance w/o giving
the seller option to retain the goods on payment of damages.

This article applies only where the goods to be delivered are specific or ascertained. In reciprocal
obligations, it is the injured party who has a right to choose between fulfilment and rescission with the
payment of damages in either case.

EX: A and B entered into a contract of sale, B being the seller violate his obligation to make the delivery
to A. In this case A has the right to choose between fulfilment of the obligation or rescission with
damages in either case.

Article 1599. Remedies of buyer when seller commits breach of warranty.

1. Recoupment—whereby the buyer accepts the goods but he sets up against the seller the reduction or
extinction of the purchase price.

2. Action for damages—whereby the buyer may (a) accept the goods but w/ damages or (b) refuse to
accept the goods for the breach of warranty but also with damages.

3. Rescission—whereby the buyer seeks the cancellation of the sale and as a consequence there will be
restoration on both sides.

**Situations when buyer cannot choose or elect rescission (KNR)

1. If he knows of the breach of warranty when he accepted the goods w/o protest

2. If he fails to notify the seller w/in a reasonable time of the election to rescind

3. If he fails to return or offer to return the goods to the seller in substantially the same condition as
they were at the time the ownership was transferred to him.
EX: Paul sold his car with a malfunction engine to Dennis amounting to ₱350,000. Upon delivery to
Dennis the car cannot start and cannot be used because of the engine problem. Dennis has the right of
action for damages or rescission against the seller.

Extinguishment of Sales
Art. 1600- Causes for Extinguishing Sales

1. Ordinary Causes—causes which extinguish ordinary contracts such as:

a. Payment

b. Loss of the things

c. Novation

d. Merger of rights of creditor and debtor

e. Rescission

f. Fulfillment of resolutory condition

g. Prescription

2. Special Causes—refer to conventional redemption and legal redemption

EX: Maria sold his brand new laptop to Mario. Upon delivery to Mario he paid Maria cash amounting to
₱50,000.

CONVENTIONAL REDEMPTION.

Art. 1601. Requisites REV-CR

a. The vendor reserves the right to repurchase the thing sold
b. He shall shoulder the expenses of the contract and other legitimate payments made by the buyer.
c. He shall pay the value of the necessary and useful expenses made on the thing incurred by the buyer
d. He shall comply with other stipulations agreed upon.
e. He shall return the price of the sale

Characteristics of Conventional Redemption [EAR RPR]

a. It begins to exist at the time of the perfection of the contract. (It becomes a mere promise to sell if stipulated upon
after the sale had been consummated)
b. It is an accidental stipulation because it is a right created by the parties
c. It is reciprocal when the right to redeem is exercised. (both vendor and vendee has obligations with each other)
d. It gives rise to a real right when properly registered because it affects third persons.
e. It is potestative as its exercise depends upon the sole will of the vendor.
f. It is a resolutory condition because when it is fulfilled, the ownership of the vendee over the thing is extinguished
PACTO DE RETRO SALE vs. MORTGAGE
PACTO DE RETRO SALE
Ownership is consolidated in the vendee if vendor
does not repurchase w/in time agreed upon
No obligation on the part of the vendee to foreclose
Vendor has no more right to redeem after expiration
of period to redeem
Vendee may alienate property
Vendee becomes automatically the owner in case of
vendor’s failure to redeem
Vendee is entitled to reimbursement for necessary
and useful expenses
MORTGAGE
Failure of mortgagor to pay his obligations on time
does not deprive him of his interest in the property
Mortgagee must foreclose if he wants to secure a
perfect title
Mortgagor may redeem before foreclosure and even
after, w/in one year from registration of the sale in
extra-judicial foreclosure. In judicial foreclosure
redemption may be made before confirmation of the
sale by the court.
Mortgagee cannot alienate property
Mortgagee does not automatically become owner,
there must be foreclosure sale first
Mortgagee is not entitled to reimbursement for
improvements he made

EX: Jim sold his parcel of land to Jeff amounting to ₱750,000 with the right to repurchase 3 years from
the date of sale. The vendor reserves the land to himself to reacquire the property sold provided he
reimburses the vendee of the price, the expenses of the contract, and any other legitimate payments
made therefor and the necessary and useful expenses on the thing sold.