Contracts.

Essential Elements – Status

Part One. Modified True or False.

1. Mistake as to the qualifications of one of the parties vitiates consent.
Ø FALSE. It will only vitiate consent when such qualification or identity have been the principal cause of the
contract. (Art. 1331)

2. A mere expression of an opinion does not signify fraud.

Ø FALSE. This is not absolute. It will only signify fraud when it is made by an expert and the other party has
relied on the expert’s special knowledge. (Art. 1341)

3. In contracts of pure beneficence, the cause is the liberality of the benefactor.

Ø TRUE. (ART. 1350)

4. There is violence when in order to wrest consent, serious or irresistible force is employed.
Ø TRUE. (ART. 1335)

5. A contract where consent is given through fraud is voidable.

Ø TRUE. ART. 1330: A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.

6. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential
requisites for their validity are present.
Ø FALSE. ART. 1356 provides an exception: However, when the law requires that a contract be in some form
in order that it may be valid or enforceable, or that a contract be proved in a certain way, the requirement
is absolute and indispensable.
è Three exceptions: form may be required by law for validity and enforceability
è Contract of sale of parcel of land = is it required to be in public instrument? YES, to bind third person
for greater efficacy.
è Sale of immovable is required to be in writing to be enforceable (Statute of Fraud)

7. The contract is void if the cause is not stated in the contract.

Ø FALSE.
Ø ART. 1354: Although the cause is not stated, it is presumed that it exists and is lawful, unless the debtor
proves the contrary.
è It is presumed that CAUSE EXISTS

8. The particular motives of the parties in entering into a contract are different from the cause thereof.
Ø TRUE. ART. 1351.

9. A contract may be voidable even though there may have been no damage to the contracting parties.
Ø TRUE.
Ø Article 1390: The following contracts are voidable or annullable, even though there may have been no
damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of
ratification.
è What’s the reason behind this?
è Vitiated consent does not mean that there is no consent = may consent pero napilitan lang
è Vices of consent = fraud, mistake, intimidation, violence or undue influence.
è Voidable contract = where one of the parties is incapable of giving consent

10. The action or defense for the declaration of the inexistence of a contract prescribes in 10 years.
Ø FALSE. The action or defense for the declaration of the inexistence of a contract does not prescribe. (ART.
1410)
è If the contract is void = it does not necessarily that the action will prosper; laches may set in or
estoppel
è
Part Two. Multiple Choice. Choose the best answer.

1. The elements of a contract without which a contract would not exist are known as:
a. Accidental elements
b. Natural elements
c. Civil elements
d. Essential elements – those without which, the contract cannot exist (consent, object, and
consideration)

2. Mistake in three of the following will make a contract voidable. Which one will not?
a. Mistake as to the substance of the thing which is the object of the contract
b. Mistake as to the principal conditions which principally moved one or both parties to enter into the
contract
c. Mistake as to the identity or qualifications of one of the parties, which identity or qualifications have
been the principal cause of the contract.
d. Simple mistake of account.
- Article 1331. In order that mistake may invalidate consent, it should refer to the substance of the
thing which is the object of the contract, or to those conditions which have principally moved one
or both parties to enter into the contract.
- Mistake as to the identity or qualifications of one of the parties will vitiate consent only when
suchidentity or qualifications have been the principal cause of the contract.
- A simple mistake of account shall give rise to its correction.
è Not all mistake will make the contract voidable

3. It is present when one of the contracting parties is compelled by a reasonable and well-grounded fear of an
imminent and grave evil upon his person or property, or upon the person or property of his spouse,
descendants, and ascendants to give his consent:
a. Violence c. Intimidation
b. Physical coercion d. Mistake
- Art. 1335. There is intimidation when one of the contracting parties is compelled by a reasonable
and well-grounded fear of an imminent and grave evil upon his person or property, or upon the
person or property of his spouse, descendants or ascendants, to give his consent.
To determine the degree of intimidation, the age, sex and condition of the person shall be borne in
mind.

4. Elements that accompany certain contracts unless set aside or suppressed by the parties are known as:
a. Natural elements
b. Accidental elements – those which are agreed upon by the parties and which cannot exists without
being stipulated. (interest rate)
c. Essential elements
d. Original elements

5. One of the following is not an accidental element of contract:

a. Terms of payment
b. Rate of interest
c. Place of delivery
d. Warranty against eviction

6. One of the following is not incapacitated to give his consent.

a. Insane persons
b. Deaf-mutes who do not know how to write
c. Deaf-mutes who know how to read
d. Unemancipated minors
- Article 1327. The following cannot give consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write
7. A contract entered into by an incapacitated person is:
a. Void c. Rescissible
b. Voidable d. Unenforceable

8. The following are the vices of consent, except:

a. Violence c. Mistake
b. Intimidation d. Due influence
- Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable

9. Mistake in three of the following will make a contract voidable. Which one will not?
a. Mistake as to the substance of the thing which is the object of the contract
b. Mistake as to the principal conditions which principally moved one or both parties to enter into the
contract
c. Mistake as to the identity or qualifications of one of the parties, which identity or qualifications have been
the principal cause of the contract.
d. Simple mistake of account.

10. It involves the employment of serious or irresistible force to obtain consent.

a. Intimidation c. Violence
b. Threat d. Moral coercion
- Article 1335. There is violence when in order to wrest consent, serious or irresistible force is
employed.

11. The following are rescissible contracts, except:

a) Entered into by guardian whenever ward suffers damage more than ¼ of value of property.
b) Agreed upon in representation of absentees, if absentee suffers lesion by more than ¼ of value of property.
c) Contracts where fraud is committed on creditor (accion pauliana).
d) Contracts entered into by minors.
- Article 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by
more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding
number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due
them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.
à Status of the contract: Unenforceable, not voidable. When both parties are incapacitated or their consent
are vitiated, the status of the contract is unenforceable.

12. The following are the requisites before a contract entered into in fraud of creditors may be rescinded, except:
a) There must be credit existing prior to the celebration of the contract.
b) There must be fraud, or at least, the intent to commit fraud to the prejudice of the creditor seeking
rescission.
c) The creditor cannot in any legal manner collect his credit (subsidiary character of rescission)
d) The object of the contract must be legally in the possession of a 3rd person in good faith.
- How to determine whether a contract is entered into in fraud of creditors?
1. There must be an intention to defraud creditors.
2. There must be a pre-existing obligation at the time it was entered into.
- Note: Even if the contract was entered into before the obligation arose, it is still in fraud of creditors when
the purpose is really to defraud creditors. 3. The existence of fraud or bad faith on the part of the debtor
 which can either be presumed or proven; and 4. The creditors cannot recover their credits in any other
manner.

13. Which of the following expresses a correct principle of law? Choose the best answer.
a) Failure to disclose facts when there is a duty to reveal them, does not constitute fraud.
b) Violence or intimidation does not render a contract annullable if employed not by a contracting party but by
a third person.
c) A threat to enforce one’s claim through competent authority, if the claim is legal or just, does not vitiate
consent.
d) Absolute simulation of a contract always results in a void contract.
- Article 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not
prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real agreement.
14. Aligada orally offered to sell his two-hectare rice land to Balane for P 10Million. The offer was orally accepted.
By agreement, the land was to be delivered (through execution of a notarized Deed of Sale) and the price was
to be paid exactly one-month from their oral agreement. Which statement is most accurate?
a) If Aligada refuses to deliver the land on the agreed date despite payment by Balane, the latter may not
successfully sue Aligada because the contract is oral.
b) If Aligada refused to deliver the land, Balane may successfully sue for fulfillment of the obligation even if he
has not tendered payment of the purchase price.
c) The contract between the parties is rescissible.
d) The contract between the parties is subject to ratification by the parties.
à Issue: Whether the property is movable or immovable
àWhy not A? = There is part performance, but statute of frauds will not apply.
àDoctrine of Performance = Statue of Frauds apply only to wholly executory contract; it does not apply to t
hose partial executory contract.
àWhy not B? = No part performance. Unenforceable contract.
àWhy not C? = the contract is unenforceable and not rescissible
àD is the answer = The premise is that the contract is unenforceable which is subject to ratification.

15. Which of the following contracts is void?

a) An oral sale of a parcel of land.
b) A sale of land by an agent in a public instrument where his authority from the principal is oral.
c) A donation of a wrist watch worth P 4,500.00.
d) A relatively simulated contract.
- Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void.

à Statute of Fraud does not make a contract void; it merely makes the contract void
àWhy not C? = because a donation is not a contract but may be governed by the rules on contract, when it is
onerous donation. Assuming that this is an onerous donation, it will not be void contract. There is no contract
that is void simply because of the value.
àWhy not D? =
àB is the answer = absolutely void; ART. 1874.

Part Three Instruction : State the status of the contract, as a rule, under the following circumstances:
1. Those undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due them.
Ø RESCISSIBLE

2. The purchaser of a private agricultural land is a former Filipino citizen.

Ø VOID
è Constitution prohibits alien from acquiring private land AS A RULE
è BUT, if the purchaser is an alien, he can also be a transferee provided he is a
FORMER NATURAL-BORN FILIPINO citizen
3. Contracts with a false cause.
Ø VOID

4. Contract where the consideration is in Chinese Yuan.

Ø VALID

5. Oral sale of an immovable for P450.00.

Ø UNENFORCEABLE
è Statute of fraud = sale of immovable must always be in writing (absolute; no
exceptions regardless of the amount)

6. Sale of large cattles in a private instrument.

Ø VOID

7. The guardian sold the property of his ward valued at P100t to another person for the
price of P70t.
Ø RESCCISIBBLE
è Suffers lesion by more than ¼ of the value of the thing.
è If the guardian was the one who entered into contract = is an action for rescission
prosper?

8. A Deed of Absolute Sale which does not contain a provision as to the price.
Ø VALID

9. Oral sale of a bag where it was agreed that the bag will he delivered after 18 months
and payment will be upon delivery.
Ø UNEFORCEABLE

10. Lease involving a car for three years.

Ø VALID.

Part Four
1. With the intention of raising money to buy a gun which he would use in killing X, his mortal enemy, S sold his
only car for P100,000.00 cash to B who knew nothing of the intention of S in selling the car. After the sale, S
was able to buy a gun complete with all the papers required by law. B, on the other hand, was able to
register the car in his name at the Land Transportation Office. What is the status of the sale?
Ø The sale is valid. As a rule, motive does not affect the validity of a contract since motive is different
from cause and the illegality of motive does not affect the validity of the contract. (Art. 1351)
EXCEPTION: If motive predominates the purpose of the party to enter into a contract such as do
defraud his creditors, then the sale will not be valid.
è Particular motives are different from the cause = even if the motives are illegal or unlawful, since they
are not essential elements of contract, it does not affect its validity.
è When would a contract like a Deed of Sale be improperly notarized? = nagpapanotarize pero di
nagaappear sa notary public
è Spouses Aguinaldo vs. Torres
è Contract improperly notarized = the contract is VALID.

2. On March 13, 2008, Ariel entered into a Deed of Absolute Sale (DAS) with Noel where the former sold his
titled lot in Quezon City with an area of three hundred (300) square meters to the latter for the price of
P300,000.00. The prevailing market value of the lot was P3,000.00 per square meter. On March 20, 2008,
they executed another “Agreement to Buy Back/Redeem Property” where Ariel was given an option to
repurchase the property on or before March 20, 210 for the same price. Ariel, however, remained in actual
possession of the lot. Since Noel did not pay the taxes, Ariel paid the real property taxes to avoid a
delinquency sale.
 On March 21, 2010, Ariel sent a letter to Noel, attaching thereto a manager’s check for P300,000.00
manifesting that he is redeeming the property. Noel rejected the redemption claiming that the DAS was a true
and valid sale representing the true intent of the parties. Ariel filed a suit for the nullification of the DAS or the
reformation of said agreement to that of a Loan with Real Estate Mortgage. He claims the DAS and the
redemption agreement constitute an equitable mortgage. Noel however claims it is a valid sale with pacto de
retro and Ariel clearly failed to redeem the property.

As the RTC judge, decide the case with reasons.

Ø In favor of Ariel – If noel cannot prove to court that this is not good faith sale with right of repurchase
because of the presumption that inadequate and remains in possession.
Ø If the price is grossly inadequate, the presumption arose that there is an equitable mortgage
(disputable presumption)
Ø Reformation is a remedy

3. Lino entered into a contract to sell with Ramon, undertaking to convey to the latter one of the five lots he
owns, without specifying which lot it was, for the price of P1 million. Later, the parties could not agree which
of five lots he owned Lino undertook to sell to Ramon. What is the standing of the contract?
Ø Void. Under Art. 1409(6): The following contracts are inexistent or void from the beginning: those
where the intention of the parties relative to the principal object of the contract cannot be ascertained.
è No meeting of the minds as to the object of the contract (ART. 1378: If doubts are cast upon the
principal object of the contract in such a wat that it cannot be known what may have been the
intention or willf of the parties, the contract shall be null and void)

4. X was the owner of a 10,000 square meter property. X married Y and out of their union, A, B and C were
born. After the death of Y, X married Z and they begot as children, D, E and F. After the death of X, the
children of the first and second marriages executed an extrajudicial partition of the aforestated property on
May 1, 1970. D, E and F were given a one thousand square meter portion of the property. They were minors
at the time of the execution of the document. D was 17 year old, E was 14 and F was 12; and they were
made to believe by A, B and C that unless they sign the document they will not get any share. Z was not
present then. In January 1974, D, E and F filed an action in court to nullify the suit alleging they discovered
the fraud only in 1973.
a) Can the minority of D, E and F be a basis to nullify the partition? Explain your answer.
Ø Article 1391. The action for annulment shall be brought within four years. This period shall begin:
In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same. And when the action refers to
contracts entered into by minors or other incapacitated persons, from the time the guardianship
ceases.
Ø D and E - their minority can be a basis to nullify the partition. Art. 1381. F - cannot bring an action
yet; no cause of action

b) How about fraud? Explain your answer.

5. Eduardo borrowed P50,000.00 from Diego payable within 30 days. Eduardo failed to pay the debt on the due
date despite repeated demands from Diego. When the debt remained unpaid for 6 months, Diego asked his
counsel, Atty. Santos, to write a letter to Eduardo informing him that unless Eduardo assigns his lot to Diego,
Diego would be compelled to file a civil complaint against Eduardo for the collection of Diego’s claim.
Eduardo, afraid of the threat of a court action against him, was forced to sign a deed of assignment of his lot
in favor of Diego. What is the status of the assignment?
Ø The assignment is valid. Article 1335 provides that a threat to enforce one’s claim through competent
authority, if the claim is just or legal, does not vitiate consent.

6. Michael Fermin, without the authority of Pascual Lacas, owner of a car, sold the same car in the name of Mr.
Lacas to Atty. Buko. What is the status of the contract between Atty. Buko and Mr. Lacas ?
 Ø Unenforceable. Article 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers.

7. “X” came across an advertisement in the “Manila Daily Bulletin” about the rush sale of three slightly used
TOYOTA cars, Model 1989 for only P200,000 each. Finding the price to be very cheap and in order to be sure
that he gets one unit ahead of the others, “X” immediately phoned the advertiser “Y” and placed an order for
one car. “Y” accepted the order and promised to deliver the ordered unit on July 15, 1989. On the said date,
however, “Y” did not deliver the unit. “X” brings an action to compel “Y” to deliver the unit. Will such action
prosper? Give your reasons.
Ø This action will not prosper is there is a proper objection on the part of Y. But if oral evidence is
presented to prove the existence of the contract, and there is no proper objection on the part of Y,
then the action may prosper to prove the existence of the contract. As stated under the facts, the
contract is a sale of a movable property valued more than 500 pesos, hence covered by the Statute of
Frauds which require that the contract be in writing. In this case there is only a verbal contract.

8. Sergio is the registered owner of a 500-square meter land. His friend, Marcelo, who has long been interested
in the property, succeeded in persuading Sergio to sell it to him. On June 2, 2012, they agreed on the
purchase price of P600,000 and that Sergio would give Marcelo up to June 30, 2012 within which to raise the
amount. Marcelo, in a light tone usual between them, said that they should seal their agreement through a
case of Jack Daniels Black and P5,000 "pulutan" money which he immediately handed to Sergio and which the
latter accepted. The friends then sat down and drank the first bottle from the case of bourbon.

On June 15, 2013, Sergio learned of another buyer, Roberto, who was offering P800,000 in ready cash for the
land. When Roberto confirmed that he could pay in cash as soon as Sergio could get the documentation
ready, Sergio decided to withdraw his offer to Marcelo, hoping to just explain matters to his friend. Marcelo,
however, objected when the withdrawal was communicated to him, taking the position that they have a firm
and binding agreement that Sergio cannot simply walk away from because he has an option to buy that is
duly supported by a duly ·accepted valuable consideration.

Can Sergio claim that whatever they might have agreed upon cannot be enforced because any agreement
relating to the sale of real property must be supported by evidence in writing and they never reduced their
agreement to writing?
Ø Yes. There is already a perfected contract of sale. From the facts, “succeeded in persuading Sergio to
sell it to him” and given the period “until June 30, 2012” is only for the performance.
Ø The case of bourbon and P5,000 pulutan - can be considered only as to statute of frauds that this
should be in writing, but the party had already performed. “Decided to withdraw his offer” is not
accurate, because he did not withdraw from the offer, but from the contract of sale.

9. In 1950, the Bureau of Lands issued a Homestead patent to A. Three years later, A sold the homestead to B.
A died in 1990, and his heirs filed an action to recover the homestead from B on the ground that its sale by
their father to the latter is void under Section 118 of the Public Land Law. B contends, however, that the
heirs of A cannot recover the homestead from him anymore because their action has prescribed and that
furthermore, A was in pari delicto. Decide.

Ø As to prescription, it is not a good defense because the sale made within 3 years from the grant under the
Public Land Law is a void sale. Any alienation of the land under this law within the 5 year prohibitory period is
a void alienation. A contract which is null and void and an action to recover from such void contract does not
prescribe.
Ø However, into the second defense that the heirs cannot recover under the in pari delicto rule, as provided in
Art. 1416, that when a law declares a contract null and void but there is no inherent illegality (not illegal per
se) in the contract and the declaration of nullity by law is intended or designed to protect one of the parties to
that contract, that person in whose favor the law would so provide its nullity may recover what he sold to the
other party. The prohibition under the Public Land Law is intended to protect the grantee and his family
because if he sell or alienate the property within that period he would have nothing more to cultivate himself
and his family. That is why he would still have the right to recover the property as the contract is a void
contract and the in pari delicto rule is not applicable under the facts.

10. Simon owned a townhouse that he rented out to Shannon, a flight attendant with Soleil Philippine Airlines
(SPA). They had no written contract but merely agreed on a three (3)-year lease. Shannon had been using
the townhouse as her base in Manila and had been paying rentals for more than a year when she accepted a
 better job offer from Sing Airlines. This meant that Singapore was going to be her new base and so she
decided, without informing Simon, to sublease the townhouse to Sylvia, an office clerk in SPA.
(a) Can Simon compel Shannon to reduce the lease agreement into writing?
Ø Yes. Simon can compel Shannon. Article 1403. The following contracts are unenforceable,
unless they are ratified: (e) An agreement for the leasing (movable/immovable) for a longer
period than one year, or for the sale of real property or of an interest therein;
o Why unenforceable? = lease of an immovable regardless of period is not covered by the
statute of fraud à unenforceable
o ART. 1357: If the law requires a document or other special form, as in the acts and contracts
enumerated in the following article, the contracting parties may compel each other to observe
that form, once the contract has been perfected. This right may be exercised simultaneously
with the action upon contract.

Sales
[Definition – Rights & Obligations of the Vendor1]
[Follow the Outline]

Part ONE
Modified True or False. Consider the statement true only when it is absolutely true.
Explain ALL your answers.

1. The contract is one of barter if the value of the thing to be delivered by one party exceeds the value of the thing to be
delivered by the other party.
FALSE. There is barter when it is manifested in the intention of the parties or when the consideration is partly in money and partly in another
thing when the value of the thing given exceeds the amount of the money or its equivalent.
Art. 1468
If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of
the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds
the amount of the money or its equivalent; otherwise, it is a sale.

2. A sale of a right binds third persons if it is in a public instrument.

FALSE. The public instrument must also be registered before it can bind third persons.

3. The option money may be considered as part of the price.

TRUE. Though it is option money, it can be considered as part of the price as long as it is stipulated. Without stipulation, the option money
cannot be considered as partial payment because it is a consideration for the option and therefore not part of the price

4. In a conditional sale, ownership passes to the buyer upon delivery.

FALSE. In conditional sales, conditions are imposed by the seller before ownership will pass. Ownership automatically passes to the buyer
from the moment the condition happens. There is no need for another contract to be entered into.

5. An assignment of credit is a consensual contract.

TRUE. An assignment of credit is perfected in accordance with the provisions of Art. 1475, where the law provides that a contract of sale is
perfected at the moment there is meeting of the minds.
Article 1624. An assignment of creditors and other incorporeal rights shall be perfected in accordance with the
provisions of article 1475.
Article 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price.
6. There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen.
TRUE. Art. 1462.
Article 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be
manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods."

7. In order to transfer ownership, the vendor need not be the owner at the time of delivery.
True. Ownership is not an essential requisite. Yes. Ownership over the thing sold is not an
essential requisite for the sale to be valid. But if theseller does not own the thing, he may have a
problem on his obligation to transfer ownership. The problem would be whether or not the buyer
would acquire ownership over the thing sold if the person who sold the thing is not the owner.

8. 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.
True. Kinds of delivery of things as a consequence of sale known as “tradition” – under the law:
Constructive – by the execution of a public instrument if the contrary intention does not appear
on the document. By the mere execution of thepublic instrument that is equivalent to delivery.
Hence, ownership passes to the buyer.
Note: The execution of a public instrument may be equivalent to actual delivery if the contrary
intention does not appear on the DOS. Kasipwedeng notarized but it is clear in the contract
that ownership will not pass until full payment ofthe price then that is not equivalent to delivery. Theintention is clear.
9. The law of sales, whereby property is alienated to the creditor as an accepted mode of extinguishment of an obligation, shall govern dation in
payment.
False. It depends if the pre-existing obligation is in money whereby property is alienated to thecreditor. It is provided that the law on sales shallgovern
such transaction. It is specifically providedthat the pre-existing obligation must be in money. Ifnot in money and there is DIP, it will not be governed by
the law on sales but by the law onnovation because practically there is a change in the object of the contract.
Article 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales
10. A contract of sale is void when the object is neither particularly designated nor physical segregated from all others of the same class.
FALSE. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made
determinate without the necessity of a new or further agreement between the parties. (1460(2))

Article 1460. A thing is determinate when it is particularly designated or physical segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the
necessity of a new or further agreement between the parties.

11. 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.
Same lang to sa number 8 hays. True. Kinds of delivery of things as a consequence of sale known as “tradition” – under the law:
Constructive – by the execution of a public instrument if the contrary intention does not appear
on the document. By the mere execution of thepublic instrument that is equivalent to delivery.
Hence, ownership passes to the buyer.
Note: The execution of a public instrument may be equivalent to actual delivery if the contrary
intention does not appear on the DOS. Kasipwedeng notarized but it is clear in the contract
that ownership will not pass until full payment ofthe price then that is not equivalent to delivery. Theintention is clear.

12. The goods remain at the seller's risk until the ownership therein is transferred to the buyer.

FALSE. There are instances when ownership has already transferred to the buyer but the seller will still bear the risk; as when the seller is in
delay.

13. Where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner,
the buyer acquires no title to the goods.

FALSE. The buyer may acquire title provided that he bought it in good faith and for value.

14. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier,
whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer.

FALSE. It is only a general rule. Unless otherwise provided in Art. 1523, par. 2.

Article 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in
the cases provided for in article 1503, first, second and third paragraphs, or unless a contrary intent appears.

Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having
regard to the nature of the goods and the other circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in course of
transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.

Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which the seller knows or ought to know that it is usual
to insure, the seller must give such notice to the buyer as may enable him to insure them during their transit, and, if the seller fails to do so, the goods
shall be deemed to be at his risk during such transit. (n)

15. 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.
FALSE. Determine first if the thing sold was movable or immovable.
i. If movable, first who took possession in good faith has the better right.
ii. If immovable:
1. First to register the sale, in good faith; or
2. First to take possession, in good faith; or
3. Party who has oldest title, in good faith.

Part TWO
Multiple Choice. Choose the best answer.

1. When does the buyer of a thing has the right to the fruits of the thing bought?
a. From the time the fruits are delivered
b. From the time the obligation to deliver the thing bought arises.
c. From the time the sale is consummated.
d. From the time the thing bought is delivered
e. From the perfection of the contract.
 1537 should be considered in relation to 1164. Under 1164, the fruits shall
pertain to the creditor only from the time the obligation to deliver the thing arises.

Article 1537. 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.
Article 1164. 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
2. If a movable property is sold to two persons, ownership shall belong to the person:
a. who paid in good faith the purchase price in full
b. who in good faith first recorded it in the Registry of Property
c. who presents the oldest title
d. who have first taken possession in good faith

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.

3. It is a contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter into another contract at a future
time, upon the happening of certain events, or the fulfillment of certain conditions.
a. contract of adhesion c. contract of sale
b. contract of option d. auto-contract
not sure

4. In a contract of sale, a warranty against eviction is:

a. an essential element c. an accidental element
b. a natural element d. a formal requirement

5. This is a kind of symbolic delivery where the vendor remains in possession of the property sold, by virtue of the lease agreement with the
vendee.
a. tradition longa manu c. tradition constitutum possessorium
b. tradition brevi manu d. delivery to a common carrier

6. The delivery of movable property may 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. This mode of delivery is known as:

a. actual delivery
b. traditio constitutum possessorium
c. traditio longa manu
d. tradition brevi manu
e. formal delivery
Example 1: The thing was the subject matter of alease with a 3rd person until the expiration of the
lease, the thing cannot be delivered

7. In this kind of sale, 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.
a. Conditional sale
Conditions are imposed by the seller before ownership will pass. Normally, the condition is the full payment of the price.

b. Sale or return.
c. Sale on trial.
Ownership passes to the buyer when (1) he signifies his acceptance or does any other act adopting the transaction; (2) 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.

d. Contract to sell
It is considered a special kind of conditional sale, it is a peculiar kind of sale because despite the happening of the condition and actual
delivery, the buyer does not automatically acquire ownership. If condition happens, the right of the buyer is to compel the seller to execute a
final deed of sale. So ownership does not automatically pass.

e. Absolute sale
Seller does not reserve his title over the thing sold and thus, upon delivery of the thing, ownership passes regardless of whether or not the
buyer has paid.
8. 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. This is:

a. Estoppel in pais.
b. Estoppel by deed
c. Estoppel by record.
d. Equitable estoppel
e. None of the above

9. In this mode of delivery, the seller would remain in possession of the thing after the sale:

a. actual delivery

b. traditio constitutum possessorium

c. traditio longa manu

d. tradition brevi manu

e. formal delivery

10. Ownership passes upon delivery in :

a. Conditional sale
Conditions are imposed by the seller before ownership will pass.

b. Sale on trial
Ownership passes to the buyer when (1) he signifies his acceptance or does any other act adopting the transaction; (2) 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. (

c. Contract to sell
d. Absolute sale
Seller does not reserve his title over the thing sold and thus, upon delivery of the thing, ownership passes regardless of whether or not the
buyer has paid.

e. None of the above

Part THREE
Give direct and concise but complete answers.
Cite authorities, if any.

1. Merle offered to sell her automobile to Violy for P60,000.00. After inspecting the automobile, Violy offered to buy it for P50,000.00. This offer
was accepted by Merle. The next day, Merle offered to deliver the automobile, but Violy being short of funds, secured postponement of the
delivery, promising to pay the price “upon arrival of the steamer, Helena”. The steamer however never arrived because it was wrecked by a
typhoon and sank somewhere off the Coast of Samar.

1. Is there a perfected contract in this case? Why?

Yes. In this case, the contract involved is one of sale. Sale is not a real or a formal contract which would require delivery or
compliance with a certain form for its perfection; it is a consensual contract which is perfected at the moment there is meeting of the
minds.
In this case, there was meeting of the minds the moment the counter-offer or offer to buy was accepted. As such, there is a
perfected contract.
2. Is the promise to pay made by Violy conditional or with a term? Why?
The promise to pay is with a term, and the term hererefers to the date of payment, which Violy fixes on thedate of the arrival of the
steamer, Helena.
3. Can Merle compel Violy to pay the purchase price and to accept the automobile? Why?
Yes, since contract is perfected already. Merle cancompel Violy to pay the purchase price and accept theautomobile on the date,
which is to be fixed again afterthe original date of payment set on the arrival of
steamer Helena didn’t materialize because it waswrecked and sank due to the typhoon

2. Mr. and Mrs. X migrated to the US with all their children. As they had no intention of coming back, they offered their house and lot for sale to
their neighbors, Mr. and Mrs. A (the buyers) who agreed to buy the property for ₱8 Million. Because Mr. and Mrs. A needed to obtain a loan
from a bank first, and since the sellers were in a hurry to migrate, the latter told the buyers that they could already occupy the house, renovate
it as it was already in a state of disrepair, and pay only when their loan is approved and released. While waiting for the loan approval, the
buyers spent ₱1 Million in repairing the house. A month later, a person carrying an authenticated special power of attorney from the sellers
demanding that the buyers either immediately pay for the property in full now or vacate it and pay damages for having made improvements on
the property without a sale having been perfected.
 a.) What are the buyers’ options or legal rights with respect to the expenses they incurred in improving the property under the
circumstances? (3%)
The buyers here may be deemed possessors or builders in good faith because they were made to believe that they were allowed to
make repairs or renovation by the sellers themselves. As builders in good faith, they have the right to seek reimbursement for the value
of the improvements in case the owner decides to appropriate them. They cannot be asked to remove the improvements because that is
not one of the options given by law to the landowner in case the builder is in good faith.

b.) Can the buyers be made to immediately vacate on the ground that the sale was not perfected? Explain briefly. (3%)
No, the buyers cannot be made to vacate on the ground that the sale was not perfected for the fact of the matter is that a contract of sale
is consensual and is perfected by mere consent. (Article 1315, Civil Code) In this case, there was an agreement to deliver a determinate
thing for a price certain in money. When the owners made an offer to sell their property to Mr. and Mrs. A and the latter accepted the
offer, there was already a meeting of the minds between the parties resulting in the perfection of the contract of sale.
3. State the basic difference (only in their legal effects) –
(a) Between a contract to sell, on the one hand, and a contract of sale, on the other;
(b) Between a conditional sale, on the one hand, and an absolute sale, on the other hand.
contract to sell vs. contract of sale (both absolute and conditional): contract to sell is a special kind of conditional sale where ownership does not
automatically pass upon fulfillment of the condition which is usually the full payment of the purchase price. It will only give the buyer the right to demand
the execution of a deed of sale or to compel the seller to sell and the seller is now bound to sell. Ownership transfers upon execution of the deed of sale.
The premise is that the buyer is already in possession of the property even before execution of the deed of sale.
Whereas a conditional sale, ownership automatically transfers to the buyer upon fulfillment of the condition, without need of a new agreement or to
execute a new contract
In absolute sale, ownership transfers upon delivery, actual or constructive, even if no total payment yet. If no payment happened, the buyer becomes a
debtor as far as the price is concerned. The remedy for the seller is rescission and not reconveyance of the property since the property already belongs
to the buyer.

4. Arthur gave Richard a receipt which states:

“Receipt

Received from Richard as down payment

for my 1995 Toyota Corolla with
plate no. XYZ-123……………………… P50,000.00.
Balance payable: 12/30/01……… P50,000.00

September 15, 2001

(Sgd.) Arturo”

Does this receipt evidence a contract to sell? Why?

No. there is nothing in the receipt that would indicate that the seller reserved ownership. In a contract where the seller did not reserve ownership, it is an
absolute sale. In a contract to sell, you have to impose as a condition for the transfer of ownership, the full payment of the price.
Would action for recovery possession prosper? No. Because Richard is the owner. The action should be rescission.

5. Nante, a registered owner of a parcel of land in Quezon City, sold the property to Monica under a deed of sale which reads as follows:

“That for and in consideration of the sum of P500,000.00, value to be paid and delivered to me, and
receipt of which shall be acknowledged by me to the full satisfaction of Monica, referred to as Vendee, I hereby
sell, transfer, cede, convey, and assign, as by these presents, I do have sold, transferred, ceded, conveyed and
assigned a parcel of land covered by TCT No. 2468 in favor of the Vendee.”

After delivery of the initial payment of P100,000.00, Monica immediately took possession of the property. Five (5) months after, Monica failed
to pay the remaining balance of the purchase price. Nante filed an action for the recovery of possession of the property. Nante alleged that the
agreement was one to sell, which was not consummated as the full contract price was not paid. Is the contention of Nante tenable? Why?

No. No. It does not pertain to a CTS because in aCTS ownership is reserved by the seller despite
delivery to the buyer. The buyer does not acquire ownership. This is an Absolute Sale. In this case, Monica immediately took possession of the property.

6. A granted B the exclusive right to sell his brand of Maong pants in Isabela, the price for his merchandise payable 60 days from delivery, and
promising B a commission of 20% on all sales. After the delivery of the merchandise to B but before he could sell any of them, B’s store in
Isabela was completely burned without his fault, together with all of A’s pants. Must B pay A for his lost pants? Why?
From the wordings of the problem you may have an idea that this is an agency to sell. If this is an
ATS, the fact that the agent has not yet sold the maong pants when they were burned will not result
in a liability on his part, there being no negligence on his part because with the delivery of the thing
from the principal to the agent, ownership does not pass. Under the principle in the Civil Code – res
perit domino – it will be the seller (owner) who will bear the loss. But if this transaction is sale then
with the delivery of the maong pants to B, ownership passed to B because he did not reserve ownership over the pants despite the fact that the other
party has not paid the price. So when thepants were burned, it would now be B as the owner who will bear the loss.
SA: This is exactly the case of Quiroga vs. Parsons. Article 1466 – in construing a contract containing provisions characteristics of both a COS and ATS,
you have to go into the essential clauses
of the whole instrument. In this problem, one of the clauses “B has to pay the price within 30 days”.
That would make the contract COS and not ATS because in 30 days from delivery, whether or not B
has already sold those pants to other persons, he is already obliged to pay a price. That is not an
ATS. Being a COS, therefore, after having been delivered, ownership passed to the buyer and hence under res perit domino rule, the buyer bear the
loss.

7. In 1972, Luciano de la Cruz sold to Chua Chung Chun, a Chinese citizen, a parcel of land in Binondo. Chua died in 1990, leaving behind his wife and three
children, one of whom, Julian, is a naturalized Filipino citizen. Six years after Chua’s death, the heirs executed an extrajudicial settlement of estate, and the
parcel of land was allocated to Julian. In 2007, Luciano filed suit to recover the land he sold to Chua, alleging that the sale was void because it contravened
the Constitution which prohibits the sale of private lands to aliens. Julian moved to dismiss the suit on grounds of pari delicto, laches and acquisitive
prescription. Decide the case with reasons.

An alien is prohibited under the Constitution from acquiring private lands. EXCEPT: when acquired through (1) succession; or (2) sale of residential land
to a former natural born Filipino citizen.

A sale in violation of the prohibition is void. As such, the seller may recover the land. However, if at the time the action to recover was filed, the land was already
transferred to a Filipino, the action will no longer prosper.

8. Rica petitioned for the annulment of her ten-year old marriage to Richard. Richard hired Atty. Cruz to represent him in the proceedings. In
payment for Atty. Cruz's acceptance and legal fees, Richard conveyed to Atty. Cruz a parcel of land in Taguig that he recently purchased with
his lotto winnings. The transfer documents were duly signed and Atty. Cruz immediately took possession by fencing off the property's entire
perimeter.

Desperately needing money to pay for his mounting legal fees and his other needs and despite the transfer to Atty. Cruz, Richard offered the
same parcel of land for sale to the spouses Garcia. After inspection of the land, the spouses considered it a good investment and purchased it
from Richard. Immediately after the sale, the spouses Garcia commenced the construction of a three-story building over the land, but they
were prevented from doing this by Atty. Cruz who claimed he has a better right in light of the prior conveyance in his favor.

Is Atty. Cruz’s claim correct?

Atty. Cruz is not correct. First contract with Atty. Cruz is a dation in payment. Second contract is a sale. Double sale applicable despite dation since it is
governed by law on sales. However, 1544 requires that both sales are valid.
Dation in payment – valid transaction? No. Void. 1491: a lawyer cannot in anyway acquire by purchase (law on sales is applicable on dation in payment)
a thing which is the subject matter of an action. There was annulment of marriage, the parcel of land is one of the properties which would be considered
in settlement of conjugal properties.
Property acquired through his lotto winnings, if the marriage is solemnized under the Family Code, and no marriage settlement was entered
into, absolute community of property. As such, lotto winnings are considered community property, consequently, the land is community property. As
such, sale of such without the consent of the wife is void.

9. “X” came across an advertisement in the “Manila Daily Bulletin” about the rush sale of three slightly used TOYOTA cars, Model 1989 for only
P200.000 each. Finding the price to be very cheap and in order to be sure that he gets one unit ahead of the others, “X” immediately phoned
the advertises “Y” and place an order for one car. “Y” accepted the order and promised to deliver the order unit on July 15, 1989. On the said
date, however, “Y” did not deliver the unit. “X” brings an action to compel “Y” to deliver the unit. Will such action prosper? Give your
reasons.

WON the action will prosper goes into perfection, which may also be subject to formalities required by law. Since the subject matter is a movable, and
price is more than P500, it is unenforceable since it is not written. The action will not prosper, if there is proper objection.
10. May a person sell something that does not belong to him? Explain.
Yes. There are two aspects: validity of the contract of sale and ability to transfer ownership.
VALIDITY OF THE CONTRACT: the seller need not be the owner, he may be a liquidator, executor, administrator, sheriff, or a notary (in case of
pledge).
This is different from a pledge or mortgage which requires the pledger or mortgagor to be the absolute owner of the thing.
Yes. Ownership over the thing sold is not an essential requisite for the sale to be valid. But if the seller does not own the thing, he may have a problem
on his obligation to transfer ownership. The problem would be whether or not the buyer would acquire ownership over the thing sold if the person who
sold the thing is not the owner.

11. Rod, the owner of an FX taxi, found in his vehicle an envelope containing TCT No. 65432 over a lot registered in Cesar’s name. Posing as
Cesar, Rod forged Cesar’s signature on a Deed of Sale in Rod’s favor. Rod registered the said document with the Register of Deeds, and
obtained a new title in his name. After a year, he sold the lot to Don, a buyer in good faith and for value, who also registered lot in his name.

a. Did Rod acquire title to the land? Explain.

No, Rod did not acquire title to the land. The inscription in the registry, to be effective, must be made in good faith. The defense of
indefeasibility of a Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw. A holder in bad
faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield for frauds
b. Discuss the rights of Don, if any, over the property.

It is a well-known rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the face of the Torrens
Certificate of Title and to dispense with the need to inquire further, except when the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry (Naawan Community Rural Bank v. Court of Appeals,
G.R. No. 128573, January 13, 2003).
In the given problem, the property was already registered in the name of Rod when he bought the same from the latter. Thus, Don could be considered
as a buyer in good faith and for value. However, since Rod did not actually sell any property to him, Don has no right to retain ownership over the
property. He has only the right to recover the purchase price plus damages.

12. Donna pledged a set of diamond ring and earrings to Jane for ₱200,000.00. She was made to sign an agreement that if she cannot pay her
debt within six months, Jane could immediately appropriate the jewelry for herself. After six months, Donna failed to pay. Jane then displayed
the earrings and ring set in her jewelry shop located in a mall. A buyer, Juana, bought the jewelry set for ₱300,000.00.

b.) Can Donna redeem the jewelry set form Juana by paying the amount she owed Jane to Juana? Explain with legal basis.

No. Donna should pay 300, 000.00 which Juana paid in jewelry shop. Article 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot
obtain its return without reimbursing the price paid therefor.

In this case, there is already a public sale and Juana bought it in good faith, hence Donna should reimburse Juana to recover the movable.

13. Mahinhin lost her diamond ring when the bus she was riding on was held up by a band of brigands who divested the passengers of all their
money and valuables. The ring found its way to the Pasanglaan pawnshop, where one of the robbers had pawned it. The pawnshop, in due
time, foreclosed the pledge and sold the ring at public auction to Mayaman, the highest bidder.

Three years after the loss, Mahinhin was able to trace the ring to Mayaman and demanded that the latter give the ring back to her. Mayaman
refused, saying that he had acquired the ring in good faith.

Who was the better right to the ring? Explain.

Mahinhin lost her diamond ring when the bus she was riding was held up by a band of brigands who divested the passengers of all their money and
valuables. The ring found its way to the Pasanglaan pawnshop, where one of the robbers had pawned it. The pawnshop, in due time, foreclosed the
pledge and sold the ring at public auction to Mayaman, the highest bidder.
Three years after the loss, Mahinhin was able to trace the ring to Mayaman and demanded that the latter give the ring back to her. Mayaman refused,
saying that he had acquired the ring in good faith.

14. D sold a second-hand car to E for P150,000.00. The agreement between D and E was that half of the purchase price, or P75,000.00, shall be
paid upon delivery of the car to E and the balance of P75,000.00 shall be paid in five equal monthly installments of P15,000.00 each. The car
was delivered to E, and E paid the amount of P75,000.00 to D. Less than one month thereafter, the car was stolen from E’s garage with no
fault on E’s part and was never recovered. Is E legally bound to pay the said unpaid balance of P75,000.00? Explain your answer.
Yes. This case involves an absolute sale and there was already delivery. As such, ownership already passed to the buyer. Applying the res perit domino
doctrine, the buyer bears the loss since he is already the owner at the time of loss. He can be compelled to pay the unpaid balance.

15. If the same thing should have been sold to different vendees, to whom shall the ownership be transferred?

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

16. JV, owner of a parcel of land, sold it to PP. But the deed of sale was not registered. One year later, JV sold the parcel again to RR, who
succeeded to register the deed and to obtain a transfer certificate of title over the property in his own name.

Who has better right over the parcel of land, RR or PP? Why? Explain the legal basis for your answer?

It depends on whether or not RR is an innocent purchaser for value. Under the Torrens System, a deed or instrument operated only as a contract
between the parties and as evidence of authority to the Register of Deeds to make the registration. It is the registration of the deed or the instrument that
is the operative act that conveys or affects the land. (Sec. 51, P.D. No. 1529).

In cases of double sale of titled land, it is a well-settled rule that the buyer who first registers the sale in good faith acquires a better right to the land.
(Art. 1544, Civil Code).

Persons dealing with property covered by Torrens title are not required to go beyond what appears on its
face. (Orquiola v. CA 386 SCRA 301, [2002]; Domingo v. Races, 401 SCRA 197, [2003]). Thus, absent any showing that RR knew about, or ought to
have known the prior sale of the land to PP or that he acted in bad faith, and being first to register the sale, RR acquired a good and a clean title to the
property as against PP.

17. Knowing that the car had a hidden crack in the engine, X sold it to Y without informing the latter about it. In any event, the deed of sale
expressly stipulated that X was not liable for hidden defects. Does Y have the right to demand from X a reimbursement of what he spent to
repair the engine plus damages?

No. should determine whether the vendor was aware ofthe defects or he was not aware. Again, if he was aware, damages may be recovered. If he was
notaware, he may not be held liable for damages
unless he can only be held liable for interest.

Article 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof.

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.

In this case the waiver is void because the vendor was aware of hidden defects.

Sales
Rights & Obligations of the Vendee – Redemption1
Part ONE. Modified True or False.

1. If the place of payment should not have been stipulated, the payment must be made at the place of the delivery of
the thing sold.
Ø FALSE. 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. 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.
Ø Incomplete statement; it should be “AT THE TIME AND PLACE”

2. Where goods are delivered to the buyer, 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.
Ø FALSE.
Ø Art. 1584. 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. 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.

Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with
the buyer, upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid
the price, whether such terms are indicated by marking the goods with the words "collect on delivery," or
otherwise, the buyer is not entitled to examine the goods before the payment of the price, in the absence
of agreement or usage of trade permitting such examination.

3. Acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal
remedy for breach of any promise or warranty in the contract of sale.
Ø FALSE.
Ø Art. 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the
buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any
promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer fails to give
 notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer
knows, or ought to know of such breach, the seller shall not be liable therefor.

4. The Maceda Law can only be invoked if the buyer had paid at least two years of installments before default.
Ø FALSE. Even if he has only paid for a month, there will be rights already for such buyer under the
Maceda Law. If he has paid at least 2 years, he will have better rights.

5. Down payments, deposits or options in a sale covered by the Maceda Law, shall be included in the computation of
the total number of installment payments made.
Ø TRUE.

6. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller's opinion
only, shall be construed as a warranty.
Ø FALSE, it will be considered a warranty when the seller made such affirmation or statement as an expert
and it was relied upon by the buyer.
Ø Art. 1546: Any affirmation of fact or any promise by the seller relating to the thing is an express warranty
if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if
the buyer purchase the thing relying thereon. No affirmation of the value of the thing, nor any statement
purporting to be a statement of the seller's opinion only, shall be construed as a warranty, unless the seller
made such affirmation or statement as an expert and it was relied upon by the buyer.

7. For the vendor to be held liable for breach of warranty against eviction, the final judgment must be based on a
right prior to the sale.
Ø FALSE, judgment may also be based on an act imputable to the vendor.
Ø 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.

8. When adverse possession had been commenced before the sale but the prescriptive period is completed after the
transfer, the vendor shall not be liable for eviction.
Ø TRUE. Art.1550: When adverse possession had been commenced before the sale but the prescriptive
period is completed after the transfer, the vendor shall not be liable for eviction.

9. If the property is sold for nonpayment of taxes due, the vendor is liable for eviction.
Ø FALSE. Art. 1551. If the property is sold for nonpayment of taxes due and not made known to the vendee
before the sale, the vendor is liable for eviction

10. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void.
Ø FALSE. Art. 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall
be void, if he acted in bad faith.

11. The seller of goods is deemed to be an unpaid seller when the whole of the price has not been paid.
Ø TRUE. 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;
12. The seller of goods is deemed to be an unpaid seller when a bill of exchange or other negotiable instrument has
been received as conditional payment.
Ø FALSE. ART. 1525: The seller of goods is deemed to be an unpaid seller within the meaning of this Title:
(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.

13. The unpaid seller may exercise his right of stoppage in transitu by obtaining actual possession of the goods.
Ø TRUE.
Ø 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.
Ø Art. 1531. Goods are in transit within the meaning of the preceding article: (1) 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;
(2) 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: (1) If the buyer, or his agent in
that behalf, obtains delivery of the goods before their arrival at the appointed destination; (2) 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 immaterial that further destination for the goods may have been indicated by the
buyer; (3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in
that behalf.

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
Ø Art. 1532. The unpaid seller may exercise his right of stoppage in transitu either by obtaining actual
possession of the goods or by giving notice of his claim to the carrier or other bailee in whose possession
the goods are. Such notice may be given either to the person in actual possession of the goods or to his
principal. In the latter case the notice, to be effectual, must be given at such time and under such
circumstances that the principal, by the exercise of reasonable diligence, may prevent a delivery to the
buyer.
When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the
goods, he must redeliver the goods to, or according to the directions of, the seller. The expenses of such
delivery must be borne by the seller. If, however, a negotiable document of title representing the goods
has been issued by the carrier or other bailee, he shall not obliged to deliver or justified in delivering the
goods to the seller unless such document is first surrendered for cancellation

14. The remedies of the unpaid seller of goods can no longer be invoked if ownership in the goods have passed
already to the buyer.
 Ø FALSE, there are exceptions.
Ø Art. 1526. Subject to the provisions of this Title, notwithstanding that the ownership in the goods may
have passed to the buyer, the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with
the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.

Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his
other remedies a right of withholding delivery similar to and coextensive with his rights of lien and
stoppage in transitu where the ownership has passed to the buyer

15. It is not essential to the validity of a resale that notice of the time and place of such resale should be given by the
seller to the original buyer.
Ø TRUE. Art. 1533 (4), express provision.

16. Legal redemption shall take place when the vendor reserves the right to repurchase the thing sold.
Ø FALSE.
Ø Art. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the
thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which
may have been agreed upon.
Ø 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.

17. 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 only.
Ø FALSE. 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.

18. The contract shall be presumed to be a sale with a right to repurchase when the price in a mortgage is unusually
inadequate.
Ø FALSE.
Ø Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period
of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.
19. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable
mortgage.
Ø TRUE. Art. 1603, express provision.

20. The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have
exhausted the property of the vendor.
Ø TRUE. ART. 1610, express provision.

Part TWO. Multiple Choice. Choose the best answer.

1. The buyer is deemed to have accepted the goods when:

a. he intimates to the seller that he has accepted them
b. when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with
the ownership of the seller
c. when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has
rejected them
d. all of the above à Art. 1585, express provision (a,b,c)
e. none of the above

2. The Realty Installment Buyer Act may apply to:

a. a sale of industrial lots
b. a sale of commercial buildings
c. sales to tenants
d. all of the above
e. none of the above
Ø Maceda Law/Realty Installment Buyer Act applies to:
a. object - residential realty on installments
b. realty - house and lots, condominiums (not immovables)
c. installment - not "on credit"

3. The cash surrender value is a minimum of:

a. 20% of the total payments made
b. 30% of the total payments made
c. 40% of the total payments made
d. 50% of the total payments made
e. 92% of the total payments made
Ø CASH SURRENDER VALUE: minimum of 50% of all payments (including downpayment) plus 5%
after five years (55% after 7 years of payment), and 5% for every additional year thereafter upto a
maximum of 90% (or 14 years of instalment).

4. The redhibitory action, based on the faults or defects of animals, must be brought within:
a. forty days from the date of their delivery to the vendee.
b. forty days from the date of the contract
 c. six months from the date of their delivery to the vendee.
d. six months from the date of the contract
e. one year from the date of the contract
Ø Art. 1577. The redhibitory action, based on the faults or defects of animals, must be brought within forty
days from the date of their delivery to the vendee.This action can only be exercised with respect to faults
and defects which are determined by law or by local custom.

5. There is no implied warranty as to hidden defects/quality in the following, except:

a. “as is, where is” sales
b. sale of second hand articles
c. sale by virtue of authority in fact or law
d. animals sold at fairs or at public auctions
e. when validly suppressed by parties
Ø Art. 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the
judgment debtor shall not be liable for damages.
Ø Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of
live stock sold as condemned.

6. The term "seller" [unpaid] includes the following, except:

a. an agent of the seller to whom the bill of lading has been indorsed
b. a consignor or agent who has himself paid or is directly responsible for the price
c. creditor of the buyer
d. any other person who is in the position of a seller
e. none of the above
Ø 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.

7. 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, except:
a. Where it was so stipulated
b. Where the goods have been sold without any stipulation as to credit
c. Where the goods have been sold on credit, but the term of credit has expired
d. Where the buyer becomes insolvent
e. all of the above
f. none of the above
Ø 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.

The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or
bailee for the buyer.

8. That the buyer is insolvent is a requirement for the exercise of the:

a. A right to retain the goods
b. A right of stopping the goods in transitu
 c. A right of resale
d. A right to rescind the sale
e. A right to demand for the payment of the unpaid price
Ø Art. 1530. In possessory lien/right to retain goods: insolvency not required, although a ground

9. In conventional redemption, the period for redemption, in the absence of an express agreement, shall last:
a. one year from the date of the contract
b. four years from the date of the contract
c. one year from the registration of the contract
d. four years from the registration of the contract
e. none of the above
Ø 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.
10. In a sale of a parcel of land with a right to repurchase, there being no stipulation to the contrary, ownership passes to
the vendee upon:
a. the perfection of the sale
b. upon delivery
c. upon payment of the price
d. upon the lapse of the period to repurchase
e. upon the order of the court

Part THREE. Give direct and concise but complete answers. Cite authorities, if any.

1. By means of a public instrument, Mr. Nagbibili sold his mango plantation to Abenturero effective immediately.
They agreed that the delivery shall be effected six months from the execution of the deed of sale. When the said
period arrived, Abenturero demanded delivery in writing but Nagbibili dilly-dallied. It was not until a month
afterwards that Nagbibili finally gave the land to Abenturero. In the three weeks before delivery, Nagbibili sold
and delivered the entire produce of the mango plantation to Mr. Commerciante for P200,000.00. Commerciante
knew nothing of the contract between Nagbibili and Abenturero. Abenturero now seeks to recover from
Commerciante either the full value of the mangoes or a similar amount and quality of the mangoes sold.
Does Abenturero have this right against Commerciante? Explain.

Ø No, Abentuero does not have right to recover from Commerciante.Under the law particularly Art. 1567,
the buyer shall have the right to the fruits of the thing from the time of the perfection of the sale. In
relation to Art. 1164, the creditor shall be entitled to the fruits of the thing from the time the obligation to
deliver it arises. In their agreement the obligation to deliver will arise only after 6 months, therefore the
buyer will not be entitled to the fruits during the 6 months period. Though under the facts, Abenturero
already had the right to the fruits, Abenturero does not have the right to recover against Commerciante
because under Art. 1164, he will not have any real right over the thing until the actual delivery of the
thing to him. The only remedy of Abenturero is only against Nagbibili since, Commerciante had no
knowledge of such sale between Nagbibili and Abenturero.
Ø What if during the 6 month period, Nagbibili harvested the fruits and sold it to Commerciante, can
Abentuero recover these fruits or the value thereof?
 ANSWER: Abenturero does not have the right to the fruits because Abenturero shall only have the right
to the fruits of the thing from the time the obligation to deliver it arises. Under the facts, it was harvested
before the 6 month period and during such time Nagbibili is under no obligation to deliver the fruits.

2. Spouses Macario and Bonifacia Dakila entered into a contract to sell with Honorio Cruz over a parcel of
industrial land in Valenzuela, Bulacan for a price of Three Million Five Hundred Thousand Pesos
(P3,500,000.00). The spouses would give a downpayment of Five Hundred Thousand Pesos (P500,000.00) upon
the signing of the contract, while the balance would be paid for the next three (3) consecutive months in the
amount of One Million Pesos (P1,000,000.00) per month. The spouses paid the first two (2) installments but not
the last installment. After one (1) year, the spouses offered to pay the unpaid balance which Honorio refused to
accept.
The spouses filed a complaint for specific performance against Honorio invoking the application of the Maceda
Law. If you are the judge, how will you decide the case?
• I will rule in favor of Honorio. The invocation of the Maceda Law is misplaced. The law applies only to
sale or financing of realty on installment payments including residential units or residential condominium
apartments and does not apply to sales of industrial units or industrial lands like in the case presented.
Another reason why the Maceda law will not apply is that, the sale in the case at bar is not the sale on
installment as contemplated by the law. The sale on installment covered by the Maceda Law is one where
the price is paid or amortized over a certain period in equal installments. The sale to the Spouses Dakila
is not a sale on installment but more of a straight sale where a down payment is to be made and the
balance to be paid in a relatively short period of three months.

3. Priscilla purchased a condominium unit in Makati City from the Citiland Corporation for a price of P10 Million,
payable P3 Million down and the balance with interest thereon at 14% per annum payable in sixty (60) equal
monthly installments of P198,333.33. They executed a Deed of Conditional Sale in which it is stipulated that
should the vendee fail to pay three (3) successive installments, the sale shall be deemed automatically rescinded
without the necessity of judicial action and all payments made by the vendee shall be forfeited in favor of the
vendor by way of rental for the use and occupancy of the unit and as liquidated damages. For 46 months, Priscilla
paid the monthly installments religiously, but on the 47th and 48th months, she failed to pay. On the 49th month,
she tried to pay the installments due but the vendor refused to receive the payments tendered by her. The
following month, the vendor sent her a notice that it was rescinding the Deed of Conditional Sale pursuant to the
stipulation for automatic rescission, and demanded that she vacate the premises. She replied that the contract
cannot be rescinded without judicial demand or notarial act pursuant to Article 1592 of the Civil Code.

a. Is Article 1592 applicable? (3%)

Ø Article 1592 of the Civil Code does not apply to a conditional sale.In Valarao v. CA, 304 SCRA 155, the
Supreme Court held that Article 1592 applies only to a contract of sale and not to a Deed of
Conditional Sale where the seller has reserved title to the property until full payment of the purchase
price. The law applicable is the Maceda Law.
Ø 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

b. Can the vendor rescind the contract? (2%)

Ø No, because the object of sale is a residential unit and under the Maceda Law, there are two stipulations
that are declared void by this law. One of the stipulation is the stipulation providing for the automatic
rescission of the contract. Another void stipulation under the Maceda Law is known as the forfeiture
clause. In other words, the buyer is entitled to the Cash Surrender Value even if there is a forfeiture
clause. Such clause is a void clause under the Maceda Law.
 The vendor cannot rescind because under this Maceda Law, the buyer had already paid for at least two
years. The buyer is entitled to a grace period which is 1 month for every year. Under the facts Priscilla
had already paid for 46 months, and thus having completed paying 3 years she is entitled to a 3 months
grace period equivalent to 90 days. On the 49th installment offered to pay, she dafaulted on the 47th and
48th month hence, there is 60 days within which she did not pay which was well within the 90 day grace
period. Had she not offered to pay on the 49th month, rescission may be a remedy on the part of the seller.

Hence, rescission cannot be a remedy on the part of the seller. If rescission is a remedy, the seller is
obliged to return the cash surrender value to the buyer. There can be no valid rescission without the return
of this cash surrender value. If rescission is a remedy, the seller is obliged to return the cash surrender
value to the buyer. There can be no valid rescission without the return of this cash surrender value.

Ø If the price is to be paid in 15 years and buyer failed to pay on the 5th month of the first year, how long is
the grace period? He has a grace period of 60 days. Thereafter he was able to pay the 5th, 6th, 7th, and in
fact he was able to pay installments up to the 5th year. On the 5th month of the 5th year, he defaulted
again. How long is the grace period?
Answer: None. Under this law, the buyer can only avail of the grace period once in every 5 years of
installments.

4. X sold Y 100 sacks of rice that Y was to pick up from X’s rice mill on a particular date. Y did not, however,
appear on the agreed date to take delivery of the rice. After one week, X automatically rescinded the sale without
notarial notice to Y. Is the rescission valid?
Ø Yes, automatic rescission is allowed since, having the character of movables and consumables, rice can
easily deteriorate.

5. What are the so-called “Maceda” and “Recto” Laws in connection with sales on installments? Give the most
important features of each law. (5%)
Ø Maceda Law or Realty Installment Buyer Act (RA No. 6552)
- Essential Features:
1. Oject: is sale of residential realty on installments.
2. Realty: covers house and lot and condominium units, NOT immovales.
3. Installment: not “on credit”.
- Rights of the Buyer: if installments have not yet reached 2 years equivalent:
1. Pay without interest within 60 days;
2. The buyer may sell his interest;
3. He may assign his interest (by way of donation or dacion en pago);
4. Pay the entire balance
- After 2 years’ worth of installment, the buyer will have:
5. Grace period of minimum of 60 days, if the instalments already covers AT LEAST two years,
plus 1 month for every year after two years;
6. Seller has a right to rescind, but the seller should first give the CASH SURRENDER VALUE:
minimum of 50% of all payments (including downpayment) plus 5% after five years (55% after 7
years of payment), and 5% for every additional year thereafter upto a maximum of 90% (or 14
years of instalment).
- Stipulations which are VOID:
1. Automatic cancellation or rescission upon default of the buyer;
2. Stipulation as to interest or damages or penalty during the grace period.
Ø Recto Law
- Essential Features:
1.promulgated to protect the buyer
 2. pertains to the right of the buyer
3. if you analyze the law, it only provided 3 remedies
4. pertains to movable on installments
- Art. 1484. 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.
-R e m e d i e s a r e a l t e r n a t i v e : if the seller invoked one, he is no longer allowed to invoke any of
the two remaining remedies.
-If only one installment was not paid: the seller can only choose the first remedy, since the 2nd and 3rd
requires that there must be non-payment of two or more consecutive installments. Consecutive since the
law does not state that “the buyer failed to pay TWICE”
- Restitution of payments under the 2 nd option, cancellation of the sale :
1. The cancellation would entail mutual restitution by the parties;
2. The seller may retain a reasonable amount of the purchase price already paid as compensation
for the use of the thing;
3. The seller cannot retain ALL of the purchase price, EXCEPT: if there is a forfeiture clause,
which entitles him to the purchase price already paid at the time of cancellation. However, this
clause will not apply if the retention of ALL the purchase price would be unconscionable.
Note that under the MACEDA law, a forfeiture clause would not be valid.

6. A bought a truck from B payable in installment secured by a chattel mortgage executed by A on the truck. As
additional security, A’s brother, C, executed a real estate mortgage in favor of B. defaulted in the payment of
several installments. Consequently, B filed an action for replevin, repossessed the truck, and foreclosed the
chattel mortgage. an B proceed against the other properties of A and the real estate mortgage executed by C to
recover the deficiency, if any, after the chattel mortgage foreclosure sale? Explain.
Ø No. The sale in this case is that of a personal property in installment. As such, the Recto Law applies. As
such, the remedies being alternative under such law, since B already foreclosed the chattel mortgage, he
can no longer exact fulfillment of the obligation by foreclosing the real estate mortgage or by proceeding
against the other properties of A. If A would’ve foreclosed the real estate mortgage, the Recto Law would
not have applied since the mortgage foreclose is not on the thing sold. Accordingly, such foreclosure
would be in line with exacting fulfillment and he would’ve been entitled to a deficiency in the proceeds of
the foreclosure sale and the unpaid amount.

7. On January 2, 1980, A and B entered into a contract whereby A sold to B a parcel of land for and in consideration
of P10,000.00. A reserving to himself the right to repurchase the same. Because they were friends, no period was
agreed upon for the repurchase of the property.

1) Until when must A exercise his right of repurchase?

Ø The period is 4 years. Under the law, if there is a right of redemption but the parties failed to provide for
such a period, the law itself says that the right may be exercised only within 4 years. However, if the
parties stipulated as to the period within which the right may be exercised, the law provides that such
cannot exceed 10 years, and if it exceeds 10 years, the same will be reduce.
Ø 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

2) If A fails to redeem the property within the allowable period, what would you advise B to do for his better
protection?
 Ø To file an action for the consolidation of title

8. On July 14, 2004, Pedro executed in favor of Juan a Deed of Absolute Sale over a parcel of land covered by TCT
No. 6245. It appears in the Deed of Sale that Pedro received from Juan P120,000.00 as purchase price. However,
Pedro retained the owner’s duplicate of said title. Thereafter, Juan, as lessor, and Pedro, as lessee, executed a
contract of lease over the property for a period of one (1) year with a monthly rental of P1,000.00. Pedro, as
lessee, was also obligated to pay the realty taxes on the property during the period lease. Subsequently, Pedro
filed a complaint against Juan for the reformation of the Deed of Absolute Sale, alleging that the transaction
covered by the deed was an equitable mortgage. In his verified answer to the complaint, Juan alleged that the
property was sold to him under the Deed of Absolute Sale, and interposed counterclaims to recover possession of
the property and to compel Pedro to turn over to him the owner’s duplicate of title.

Resolve the case with reasons.

Ø The complaint of Pedro against Juan should be dismissed. The instances when a contract — regardless of
its nomenclature — may be presumed to be an equitable mortgage are enumerated in Article 1602 of the
Civil Code: “Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:

1. When the price of a sale with right to repurchase is unusually inadequate:

2. When the vendor remains in possession as lessee or otherwise;
3. When upon or after the expiration of the right to repurchase another instrument extending the period
of redemption or granting a new period is executed;
4. When the purchaser retains for himself a part of the purchase price;

5. When the vendor binds himself to pay the taxes on the thing sold;
6. In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
“In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.”Article 1604 states that
“the provisions of article 1602 shall also apply to a contract purporting to be an absolute sale.”

Ø For Articles 1602 and 1604 to apply, two 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
mortgage (Heirs of Balite v. Lim, G.R. No. 152168, December 10, 2004).In the given case, although
Pedro retained possession of the property as lessee after the execution of the Deed of Sale, there is no
showing that the intention of the parties was to secure an existing debt by way of mortgage. Hence, the
complaint of Pedro should be dismissed.

9. Antonio, Bart, and Carlos are brothers. They purchased from their parents specific portions of a parcel of land as
evidenced by three separate deeds of sale, each deed referring to a particular lot in metes and bounds. When the
deeds were presented for registration, the Register of Deeds could not issue separate certificates of title due to the
absence of a subdivision plan. The new title had to be issued, therefore, in the names of the brothers as co-owners
of the entire property. The situation has not changed up to now, but each of the brothers has been receiving
rentals exclusively from the lot actually purchased by him.
Antonio sells his lot to a third person, with notice to his brothers. To enable the buyer to secure a new title in his
name, the deed of sale was made to refer to an undivided interest in the property of the seller (Antonio), with the
metes and bounds of the lot sold being stated. Bart and Carlos reacted by signifying their exercise of their right
of redemption as co-owners. Antonio, in his behalf and in behalf of his buyer, contends that they are no longer
co-owners, although the title covering the property has remained in their names as such.
May Bart and Carlos still redeem the lot sold by Antonio? Explain.
 Ø No, because under the facts, they are no longer co-owners. A TCT is not conclusive as to the rights of the
parties to a certain property. Pwedeng apparently co - owners sila but in reality there has already been a
participation of the property, yun lang hindi pa naka-reflect sa TCT. In fact, a property may be registered
in a person who is not the owner kasi na - forge lang yung signature ng real owner. Thus, the requirement
of the law that the co-owner would have the right to redeem is not present therefore, there would be no
right of redemption.

10. Betty and Lydia were co-owners of a parcel of land. Last January 31, 2001, when she paid her real estate tax.
Betty discovered that Lydia had sold her share to Emma on November 10, 2000. The following day, Betty
offered to redeem her share, but the latter replied that Betty’s right to redeem has already prescribed. Is Emma
correct or not? Why? (5%)
Ø EMMA is not correct. Because the law provides 30 days from the time notice was given to the co-owner.
In this problem, the 30 days had not even started to run because no notice was given