U.P.

LAW BOC SPECIAL CONTRACTS CIVIL LAW

Contract of Sale Contract to sell

A. SALES Ownership is Ownership is only
transferred upon transferred upon full
delivery payment of price
1. General provisions Full payment is a
positive suspensive
Non-payment is a
Definition condition; hence non-
resolutory
payment would not give
condition
Contract of Sale rise to the obligation to
Article 1458, CC: By the contract of sale transfer ownership
one of the contracting parties obligates
himself to transfer the ownership and to Conditional
Contract to sell
deliver a determinate thing, and the other to Contract of Sale
pay therefor a price certain in money or its Sale is already
No perfected sale yet
equivalent. perfected
A subsequent buyer A subsequent buyer
Contract to Sell is presumed to be a is presumed to be a
Article 1478, CC: The parties may stipulate buyer in bad faith buyer in good faith
that ownership in the thing shall not pass to
the purchaser until he has fully paid the price
Essential requisites [Art. 1318,
Conditional Contract of Sale
CC]
Article 1461, CC: Things having a potential
1. Consent of contracting parties
existence may be the object of the contract
of sale.
Consent refers to seller’s consent to transfer
ownership of, and deliver, a determinate thing,
The efficacy of the sale of a mere hope or
and to buyer’s consent to pay the price certain.
expectancy is deemed subject to the
condition that the thing will come into
Being a consensual contract, the contract of
existence.
sale is perfected at the moment there is a
“meeting of the minds” upon the thing which is
The sale of a vain hope or expectancy is
the object of the contract and upon the
void.
price. [Art. 1475, CC]
Article 1462, CC: The goods which form the
Can there be sales without consent?
subject of a contract of sale may be either
1. Expropriation [Art. 1488, CC]
existing goods, owned or possessed by the
2. Ordinary Execution Sale [Rule 39, Sec. 15,
seller, or goods to be manufactured, raised,
Rules of Court]
or acquired by the seller after the perfection
3. Judicial Foreclosure Sale [Rule 68, Rules
of the contract of sale, in this Title called
of Court], and
“future goods.”
4. Extra-Judicial Foreclosure Sale [Act. 3135,
as amended]
There may be a contact of sale of goods,
whose acquisition by the seller depends
upon a contingency which may or may not
happen.

Article 1465, CC: Things subject to a

resolutory condition may be the object of the
contract of sale.

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U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

Special Case something in existence already

If the sale involves the conjugal property of belonging to the seller, and the title will
spouses, consent must be given by both. vest in the buyer the moment the thing
comes into existence. [Sibal v. Valdez,
2. Object certain which is the subject G.R. No. L-26278 (1927)]
matter of the contract
Sale of Things Having Potential
The things must be licit and the vendor must Existence
have a right to transfer the ownership thereof Emptio Rei Emptio Rei Spei
at the time it is delivered [Art. 1459]. Speratei Mere Hope Vain Hope
Sale of a Sale of a Sale of a
Requisites of a Valid Subject Matter [Arts. thing MERE HOPE VAIN HOPE
1459-1465, CC] expected or or or
a. Must be licit future thing expectancy expectancy
• Within the commerce of man General rule: Exception:
• When right is not intransmissible [Art. Valid
Valid Void
1347, CC] Example:
• It does not contemplate a future Example:
Sale of the Example:
inheritance, unless expressly Sale of a
grain a field Sale of a valid
authorized by law fake lottery
may grow in lottery ticket
• Example of illicit things per se (of its ticket
a given time
nature) and per accidens (due to Deals with a
provisions of law future thing Deals with a thing that
o Sale of animals if the use or that is currently exists – the hope or
service for which they are currently not expectancy
acquired has been stated in the in existence
contract, and they are found to Subject to
be unfit therefor [Art. 1575, CC] Not subject to any condition;
the condition
o Sale of animals suffering from The contract comes into
that the thing
contagious diseases [Art. existence immediately
will exist
1575, CC] Future thing
o Sale of future inheritance is is certain as
void [Art. 1347, CC] to itself, but
Sale of land in violation of uncertain as
Constitutional prohibition to quantity
against the transfer of lands to and quality
aliens. [Art. XII of Constitution] In case of doubt, the presumption is in favor
of emptio rei speratae since it is more in
b. Existing, Future, Contingent keeping with the commutative character of
• Existing goods owned or possessed by the contract.
the seller;
• Goods to be manufactured, raised, OR c. Determinate or Determinable
acquired by the seller – “Future Goods” Determinate
[Art. 1462, CC] When it is particularly designated or physically
• Things having potential existence may segregated from all others of the same class.
be the object of a contract of sale [Art. [Art. 1460, CC]
1461, CC]. A sale may be made of a
thing which, though not yet actually in Determinable
existence is reasonably certain to When it is capable of being made determinate
come into existence as the natural at the time the contract was entered into
increment or usual incident of

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U.P. LAW BOC SPECIAL CONTRACTS
without the necessity of a new or further
agreement between the parties. [Art. 1460, CC]
Failure to state the exact location of the land
does not make the subject matter
indeterminate, so long as it can be located.
[Camacho v. CA, G.R. No. 127520 (2007)]
3. Cause of the obligation which is
established
This refers to the “price certain in money or its
equivalent” [Art. 1458]. It does not include
goods or merchandise although they have their
own value in money.
However, the words “its equivalent” have been
interpreted to mean that payment need not be
in money, so that there can be a sale where the
thing given as token of payment has “been
assessed and evaluated and [its] price
equivalent in terms of money [has] been
determined.” [De Leon]
a. Requisites of a valid price
1. Certain or ascertainable at the time of
perfection
2. In money or its equivalent
• If price is partly in money and partly
in another thing: determine
manifest intention of the parties to
see whether it was barter or sale.
[Art. 1468, CC]
• If intention does not clearly appear,
it shall be considered a barter if the
value of the thing exceed the
amount of money or its equivalent.
[Art. 1468, CC]
3. Real
• When buyer has an intention to pay
and the seller has an expectation to
receive the price
• If simulated: Sale is VOID; BUT act
may be shown to have been a
donation or some other act or
contract. [Art. 1471, CC]
• If Price is false – when the real
consideration is not the price stated
in the contract:
o Sale is void
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CIVIL LAW
o UNLESS proved to be
founded on another true
and lawful price [Art. 1353,
CC]
b. How price is determined/when certain
1. Fixed by agreement of the parties and
cannot be left to the discretion of one of
the parties – BUT if such is accepted by
the other, sale is perfected. [Art. 1473,
CC]
2. Determination is left to the judgment of
a specified person.
General Rule: Price fixed by 3rd persons
designated by the parties is binding upon them
Exceptions:
• If 3rd person is unable or unwilling: Sale is
inefficacious unless parties subsequently
agree about the price.
• If 3rd person fixed the price in bad faith/by
mistake: Courts may fix price (but mere
error in judgment cannot serve as basis for
impugning price fixed)
• If 3rd person is prevented from fixing price
by fault of seller or buyer: Innocent party
may avail of remedies (rescission or
fulfillment of obligation, with damages)
• If 3rd person disregards specific
instructions/data/procedure, thereby fixing
an arbitrary price
• The price is made in reference to another
thing, or when the price fixed is the price of
the commodity on a definite day, or in a
particular exchange or market, or when the
amount fixed is above or below the price on
such day, exchange or market. [Art. 1472,
CC]
General Rule: When the price is not certain,
the contract is without effect and no obligation
arises from it.
Exception: When the thing is already
delivered, the buyer must pay a reasonable
price therefor. This exception only arises when
the means contemplated by the parties for
fixing the price have become ineffectual.
c. Inadequacy of price
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

The stipulation in a contract of sale which 3. Generally, the reasonable price is the
states that the consideration is “PhP1 and market price at the time and place fixed by
other valuable considerations” does not make the contract or by law for delivery of goods.
the contract void. Gross inadequacy of price
does not affect the contract of sale except that e. False price vs. simulated price
it may indicate a defect in consent. [Bagnas v. False Price Simulated Price
CA, G.R. No. L-38498 (1989)] Price stated in the
Price stated in the
contract is not
contract is not the
General Rule: Does not affect a contract of intended to be paid.
true price. Parties
sale’s validity. [Art. 1470, CC] Parties never
intended to be
intended to be
bound.
Exceptions: bound.
a. In Voluntary sales Effect: Void for lack
• Where low price indicates a vice of Effect: Binds the of
consent, sale may be annulled. parties to their real cause/consideration,
• Where price is so low to be shocking to the agreement when it but can be shown as
conscience (fraud, mistake, undue does not prejudice a donation or some
influence), then sale may be set aside 3rd persons and is other contract.
• Where price is simulated such as when the not intended for any Parties may recover
real intention was a donation or some other purpose contrary to from each other
contract. law, morals, public what they may have
• Where the parties did not intend to be policy, etc. given under the
bound at all, sale is void. contract.

b. In Involuntary sales f. Earnest money vs. option money

• A judicial or execution sale is one made by Earnest Money – paid in advance of the
a court with respect to the property of a purchase price agreed upon by the parties in a
debtor for the satisfaction of his contract of sale, given by the buyer to the
indebtedness. seller, to bind the latter to the bargain
• Rescissible contracts of sale - Inadequacy
of price is a ground for rescission of Option Money Earnest Money
conventional sale under Art. 1381 (a) and Separate and distinct
(b), CC. Part of purchase
consideration from the
price [Art. 1482, CC]
purchase price
d. When no price agreed Given only when
1. Sale is inefficacious [Art. 1474, CC] Given when sale is not
there is already a
2. But if the thing or part thereof has been yet perfected
sale
delivered and appropriated by the buyer, When given, the
he must pay a reasonable price therefore would-be-buyer is not
• What is a reasonable price is a required to buy, but
When given, the
question of fact dependent on the buyer is bound to pay
may even forfeit it
circumstances of each particular case. the balance
depending on the
[Art. 1474, CC] terms of the option
• The reasonableness of a price may be Grantee of option is
determined on the basis of a still undecided Buyer manifests his
company’s balance sheet showing the whether or not to buy earnest desire to buy
book value or fair market value of its or sell the property the property
shares. [Philippine Free Press v. CA, [Baviera]
G.R. No. 132864 (2005)] [Limson v. CA, G.R. No. 135929 (2001)]

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Perfection
1. Offer
The offer must be certain and the acceptance
absolute. [Art. 1319, CC]
The person making the offer may fix the time,
place, and manner of acceptance, all of which
must be complied with. [Art. 1321, CC]
An offer becomes ineffective upon the death,
civil interdiction, insanity, or insolvency of
either party before acceptance is conveyed.
[Art. 1323, CC]
When the offerer has allowed the offeree a
certain period to accept, the offer may be
withdrawn at any time before acceptance by
communicating such withdrawal, except when
the option is founded upon a consideration, as
something paid or promised. [Art. 1324, CC]
Unless it appears otherwise, business
advertisements of things for sale are not
definite offers, but mere invitations to make an
offer. [Art. 1325, CC]
2. Option contracts
Option
An accepted unilateral promise to buy or to sell
a determinate thing for a price certain is binding
upon the promissor if the promise is supported
by a consideration distinct from the price. [Art.
1479(2), CC; De Leon]
Separate Consideration
A consideration for an optional contract is just
as important as the consideration for any other
kind of contract. If there was no consideration
for the contract of option, then it cannot be
enforced any more than any other contract
where no consideration exists. [Enriquez dela
Cavada v. Diaz, G.R. No. 11668 (1918)]
The option is not the contract of sale itself. The
optionee has the right, but not the obligation, to
buy. Once the option is exercised timely, i.e.,
the offer is accepted before a breach of the
option, a bilateral promise to sell and to buy
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CIVIL LAW
ensues and both parties are then reciprocally
bound to comply with their respective
undertakings. [Ang Yu v. CA, G.R. No. 109125
(1994)]
The offeror is still free and has the right to
withdraw the offer:
• If the period is not itself founded upon or
supported by a consideration and
withdrawn before its acceptance,
• If an acceptance has been made, before
the offeror's coming to know of such fact,
by communicating that withdrawal to the
offeree.
Breach of contract
It will be a breach of contract when the offer
was withdrawn during the agreed period if the
period has separate consideration since the
contract of “option is deemed perfected.”
3. Right of first refusal
While the object might be made determinate,
the exercise of the right, however, would be
dependent not only on the grantor's eventual
intention to enter into a binding juridical relation
with another but also on terms, including the
price, that obviously are yet to be later firmed
up.
Even on the premise that such right of first
refusal has been decreed under a final
judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of
execution under a judgment that merely
recognizes its existence, nor would it sanction
an action for specific performance without
thereby negating the indispensable element of
consensuality in the perfection of contracts.
[Ang Yu v. CA, G.R. No. 109125 (1994)]
4. Mutual promise to buy and sell
The obligation is not to enter into a sale, but
rather to negotiate in good faith for the
possibility of entering into a sale. When the
promissor has in fact negotiated in good faith,
but the parties’ minds could not meet on the
price and the terms of payment, then promissor
has complied with his obligation [Villanueva].
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

BARTER = where the value of the thing given

Contract of sale distinguished as part of the consideration exceeds the
amount of money given or its equivalent
1. Donation
SALE = where the value of the thing given as
Sale Donation part of the consideration equals or is less than
Onerous Gratuitous the amount of money given
Requires consent and
must comply with the 3. Contract for a piece of work
Perfected by mere
formalities required by
consent Contract for a
law for its validity. [Art. Sale
745, CC] Piece of Work
The property sold Goods are
Goods are
is replaced by the Requires that there be manufactured or
manufactured for
equivalent a diminution of the procured in the
customer upon his
monetary estate of one party ordinary course of
special order
consideration; (donor) and the business
there is no enrichment of the other For the general
For a specific
diminution of the party’s estate (donee) market, whether on
customer
seller’s estate hand or not
Governed by Statute Not within Statute of
When the price of the contract of sale is of Frauds Frauds
simulated, the sale may be void but the act may
be shown to have been in reality a donation or When each product or system executed is
some other contract. [Art. 1471, CC] always UNIQUE and could not mass-produce
the product because of its very nature, such is
The donee must accept the donation a contract for a piece of work. [Commissioner
personally, or through an authorized person v. Engineering Equipment and Supply Co.,
with a special power for the purpose, or with a G.R. No. L-27044 (1975)]
general and sufficient power; otherwise, the
donation shall be void. [Art. 745, CC] 4. Dacion en pago

2. Barter Sale Dacion en pago

No pre-existing debt Pre-existing debt
Sale Barter Extinguishes the
Consideration is price in Consideration is Creates an obligation obligation (mode of
money or its equivalent another thing payment)
Price is more freely
Price is the value of
Rules to determine whether contract is sale agreed upon, fixed by
the thing given
or barter: the parties
a. Manifest intention of the parties: Even if the Payment is
acquisition of a thing is paid for by another received by the
Buyer has to pay the
object of greater value than the money debtor before
price
component, it may still be a sale and not a contract is
barter, when such was the intention of the perfected
parties
b. When intention does not appear and
consideration consists partly in money and
partly in another thing

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U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

5. Agency to sell Kinds of incapacity

1. Absolute [Art. 1327, 1397, 139, CC] - In
Sale Agency to sell the case of persons who cannot bind
Agent receives themselves
Buyer receives the 2. Relative - Married persons
good as goods of
goods as owner
the principal 3. Special disqualifications [Arts. 1491-
Agent delivers the 1492, CC]
Buyer pays the price price which he got
from his principal 1. Absolute incapacity
Buyer cannot return
Agent can’t return a. Minors [Art. 1327, CC]
the object sold as a
the goods b. Insane or Demented [Art. 1327, CC]
general rule
c. Deaf-mutes who do not know how to write
Seller warrants the Agent makes no [Art. 1327, CC]
thing sold warranty d. Civil Interdiction [Art. 38, CC]
Not unilaterally Essentially e. Judicially-declared Incompetents [Art. 39,
revocable revocable CC]
• Prodigal
6. Lease • Imbeciles
• Absence & presumption of death
Sale Lease • Persons not of unsound mind but by
Ownership reason of age, disease, weak mind,
No transfer of
transferred by and other similar causes, cannot take
ownership
delivery care of themselves and manage their
Permanent Temporary property without outside aid (Easy prey
Seller must be for deceit and exploitation)
Lessor need not be
owner at time of
owner General Rule: Contracts entered into by a
delivery
minor and other incapacitated persons are
voidable.
In the lease of things, one of the parties binds
himself to give to another the enjoyment or use
Exception: Where necessaries are sold and
of a thing for a price certain, and for a period
delivered to him (without parent or guardian),
which may be definite or indefinite. However,
he must pay a reasonable price therefor.
no lease for more than ninety-nine years shall
be valid. [Art. 1643, CC] • Such contract is VALID
• But the minor has the right to recover any
excess above a reasonable value paid by
2. Parties him.

General Rule: Any person who has capacity to 2. Relative incapacity

act may enter into a contract of sale.
[Villanueva] 1. Husband and wife [Art. 1490, CC]
General Rule: Cannot sell property to each
As a general rule, all persons, whether natural other
or juridical, who can bind themselves have also
legal capacity to buy and sell. [De Leon] Exceptions:
• Separation of property in marriage
a. Capacity of Parties settlement, OR
• Judicial separation of property.

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U.P. LAW BOC SPECIAL CONTRACTS
Sale by husband in favor of a concubine after
he had abandoned his family and left conjugal
home where his wife and children lived and
from whence they derived their support, is void.
[Ching v. Goyanko, Jr., G.R. No. 165879
(2006)]
Reason for this rule: Such prohibition is for
the protection of third persons who, relying
upon supposed property of either spouse,
enters into a contract with either of them only
to find out that the property relied upon was
transferred to the other spouse. [De Leon]
2. Alienage [Art. 39, CC]
General Rule: Aliens are disqualified from
purchasing or acquiring real property.
Exception: If acquisition is through hereditary
succession
3. Trusteeship [Art. 39, CC]
3. Special disqualifications
Such is grounded on public policy
considerations which disallow the transactions
entered into by them (directly or indirectly) in
view of the fiduciary relationship involved or
the peculiar control exercised by these
individuals over the properties or rights
covered. [Mananquil v. Villegas (1990)]
1. Agents – Cannot purchase or acquire
property whose administration or sale was
entrusted to them, except if principal gives
consent
2. Guardian – Cannot purchase property of
person under his guardianship
3. Executors and administrators –Cannot
acquire or purchase property of estate
under their administration.
The prohibition on executors and
administrators does not apply if the
principal consents to the sale. [Distajo v.
CA, G.R. No. 112954 (2000)]
4. Public officers and employees - Cannot
acquire or purchase property of State/any
of its subdivisions, GOCC or
administration, the administration of which
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CIVIL LAW
was entrusted to them. Prohibition includes
judges and government experts who, in
any manner, take part in the sale.
5. Lawyers - Cannot acquire or purchase
property or rights in litigation in which they
take part by virtue of their profession
For the prohibition to operate, the sale or
assignment must take place during the
pendency of the litigation involving the
property. [Laig v. Court of Appeals (1991)]
Exceptions: An assignment to a lawyer by
his client of an interest in the property does
not violate Art 1491, where:
a. A judgment has been rendered and
has become final; and
b. In case of contingency fee
arrangements: the interest of the
lawyer may be annotated as an
adverse claim on the property
awarded to his client [Director of
Lands v. Ababa, G.R. No. L-26096
(1979)]
6. Justices, Judges, prosecuting
attorneys, clerks and other officers and
employees connected with the
administration of justice - Cannot
acquire or purchase property or rights in
litigation or levied upon on execution
before the court within whose jurisdiction or
territory they exercise their respective
functions.
7. Others specially disqualified by law
i. Unpaid sellers with goods in transit
from buying the goods
ii. Officer conducting the execution
sale of deputies
iii. Aliens who are disqualified to
purchase private agricultural lands
b. Effects of incapacity
1. Absolute incapacity
If both parties are incapacitated:
unenforceable [Art. 1403 (3), CC].
U.P. LAW BOC SPECIAL CONTRACTS
If only 1 party is incapacitated: voidable.
Exception: Where necessaries are sold and
delivered to a minor or to a person without
capacity to act, he must pay a reasonable price
therefor. [Art. 1489, par. 2, CC] The resulting
sale therefore described in the foregoing article
is valid and binding.
2. Relative incapacity
Sale between spouses is void.
Rationale:
1. To protect 3rd persons who may have
contracted with the spouse
2. To avoid undue advantage of the dominant
spouse over the weaker spouse.
3. To avoid circumvention of the prohibition
against donations between spouses.
[Medina v. CIR, G.R. No. L-15113 (1961)]
Such prohibition shall likewise apply to
common law spouses. [Calimlim-Canulas v.
Fortun, G.R. No. L-57499 (1984)]
But if already sold to a third person who relied
on the title of his immediate seller,
reconveyance to the seller spouse is no longer
available [Cruz v. CA, G.R. No. 120122 (1997)]
Sale contracted by aliens is void [Art. XII of the
Constitution]
3. Specific incapacity
General rule: Contracts expressly prohibited
by law are VOID and CANNOT BE RATIFIED.
Neither can the right to set-up the defense of
illegality be waived. [Art. 1409 (7), CC]
Those entered into by public
officers/employees, justices and judges, and
lawyers in violation of Art. 1491 are inexistent
and VOID from the beginning. [Rubias v.
Batiller, supra]. It is NOT subject to
RATIFICATION.
Exception: Sales entered into by guardians,
administrators, and agents (specific
incapacities) in violation of Art. 1491 may be
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RATIFIED by means of and in the form of a
new contract when the cause of nullity has
ceased to exist. Ratification is valid only from
date of execution of the new contract and does
not retroact.
3. Obligations of the Vendor
(Note: Further discussion can also be found in
Section J of this Sales Reviewer, on the
Performance of the Contract.)
Obligations of the Vendor in
General
1. To transfer ownership of the thing [Art.
1495, CC]
2. To deliver the thing, with its accessions and
accessories, if any [Arts. 1164, 1166, CC]
3. To warrant against eviction and against
hidden defects [Arts. 1545-1581, CC]
4. To take care of the thing, pending delivery,
with proper diligence [Art. 1163, CC]
5. To pay for the expenses of the deed of sale
[Art. 1487, CC]
(1) To Transfer Ownership of the
Thing and To Deliver the
Thing, with its Accessions
and Accessories
i. When Seller is Not the Owner
General Rule: Ownership is not acquired by
the buyer. One cannot give what one does not
have. [Art. 1505, CC]
Exceptions: buyer acquires ownership
a. Seller has a right to transfer ownership.
Seller need not be the owner of the thing at
the time of perfection of the contract. It is
sufficient that the seller has a right to
transfer ownership thereof at the time it is
delivered. [Art. 1459, CC]
One who sells something he does not own
yet is bound by the sale when he acquires
the thing later. [Bucton v. Gabar, G.R. No.
L-36359 (1974)]
 U.P. LAW BOC SPECIAL CONTRACTS
b. Estoppel: Owner is, by his conduct,
precluded from denying the seller’s
authority to sell. [Art. 1434, CC]
c. Registered land bought in good faith
General rule: Buyer need not go beyond
the Torrens Title
Exception: When he has actual
knowledge of facts and circumstances that
would impel a reasonably cautious man to
make further inquiry
d. Order of courts; Statutory Sale - In
execution sale, the buyer merely steps into
the shoes of the judgment debtor [Sec. 33,
Rule 39, ROC]
e. When goods are purchased in Merchant’s
store, Fair, or Market [Art. 1505, CC]
ii. Sale by Person having a Voidable Title
a. True owner may recover the thing when the
ff. requisites concur:
• Subject matter is movable
Determine first if • Owner has either lost the thing or
there’s a lawful
deprivation has been unlawfully deprived. [Art.
559, CC]
if there is, it can be
recovered
b. Reimbursement is necessary before owner
XPN: if acquired in can recover when:
public sale (cannot ● Buyer acted in good faith
recover without
reimbursing) ● Acquired at a public auction [Art.
559, CC]
c. Recovery no longer possible when:
● Buyer in good faith
● Acquired it at a merchant’s store,
fair or market. [Art. 1506, CC]
iii. Manner of Transfer [Arts. 1477, 1496-150,
CC]
General Rule: Ownership of the thing sold
shall be transferred to the vendee upon actual
or constructive delivery thereof [Art. 1477, CC]
Exceptions:
a. Contrary stipulation
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CIVIL LAW
b. Contract to sell
c. Contract of insurance
d. Sale on acceptance/Trial
e. When seller is not the owner or has
voidable title
Obligation to transfer ownership and to deliver
is implied in every contract of sale [Arts. 1458-
1459, CC]
Transfer of ownership requires delivery [Art.
1495, CC]
General Concepts
Under Article 1495, the seller has twin
obligations to (a) transfer the ownership and (b)
deliver the thing, which is the object of sale to
the buyer. In Article 1164, this includes the
obligation to deliver the fruits and accessories
from the time the obligation to deliver it arises;
however he shall acquire no real right over
them until the same has been delivered to him.
Transfer of ownership is effected even if the
purchase has been made on credit. Payment
of the purchase price is not essential to transfer
of ownership as long as the property sold was
delivered.
Intention to transfer ownership
• All forms of delivery shall be coupled
with intention of delivering the thing
sold.
• Seller must be the owner or authorized
by owner of the thing sold
When right to transfer ownership must
exist: At the time of delivery and not at the time
of perfection of contract of sale.
iv. Concept of Delivery
Requisites
a. Identity – between what must be
delivered and what is actually delivered
b. Integrity – in a condition suitable for
enjoyment
c. Intentional
What to Deliver
a. Thing sold [Art. 1495, CC]
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

b. Fruits [Art. 1164 & 1537, CC] – belong Sale or Return

to the vendee from day of perfection. ● Buyer becomes owner of the property on
c. Accessions and accessories [Art. 1166 delivery, BUT has the option to revest
& 1537, CC] – in the same condition ownership in the seller instead of paying
they were in on day of perfection the price by returning the goods within the
● Improvements by seller at his time fixed in the contract, or, if no time is
expense grants him a usufructuary fixed, within a reasonable time. Otherwise,
right [Art. 1138, 1189, CC] the sale becomes absolute.
● No indemnification ● Loss or destruction of the property prior to
● But he may remove it to the extent return falls upon the buyer and makes him
that there is no damage [Art. 1538, responsible for the purchase price.
CC]
Sale on Approval v. Sale or Return
Where to Deliver Sale on Approval Sale or Return
a. A hierarchy is followed: Ownership passes to
Ownership does not
1. Stipulation buyer on delivery
pass upon delivery
2. Usage of trade and subsequent
3. Seller’s place of business (office) remaining with the
return revests
4. Seller’s residence seller until buyer
ownership in the
signifies his approval.
b. In case of specific goods, which the parties seller.
knew to be at some other place when the Depends on the
contract was perfected, that place is the Depends on the will
character or quality of
place of delivery of the buyer
goods
c. If goods at the time of sale are possessed Subject to a Subject to a
by a third person, then there is no delivery suspensive condition resolutory condition
until he acknowledges to the buyer that he
holds the goods for the buyer. Risk of loss remains Risk of loss remains
with the seller with the buyer
When to Deliver
Absent a stipulation as to time, delivery must Express Reservation
be made within a reasonable time; demand or If it was stipulated that ownership in the thing
tender of delivery shall be made at a shall not pass to the purchaser until he has fully
reasonable hour. paid the price, then ownership remains with
seller even when delivery is made [Art. 1478,
v. When Delivery Does Not Transfer Title CC]. A bill of lading is a legal document issued by a
carrier to a shipper that details the type, quantity,
Sale on Approval or Trial Implied Reservation and destination of the goods being carried
● Title remains with the seller The following are instances when there is an
notwithstanding delivery of the goods. implied reservation of ownership:
● Buyer becomes the owner when he: a. Goods are shipped, but by the bill of
a. Signifies his approval or acceptance to lading goods are deliverable to the
the seller seller or his agent, or to the order of the
b. Does any other act adopting the seller or his agent
transaction (i.e. sale to a third person) b. Bill of lading is retained by the seller or
c. Retains the goods without giving notice his agent.
of rejection after the time fixed has
expired; if no time has been fixed, after When the seller of the goods draws on the
the expiration of a reasonable time [Art. buyer for the price and transmits the bill of
1502, CC] exchange and bill of lading to the buyer, and
the latter does not honor the bill of exchange
by returning the bill of lading to the seller.

Page 337 of 532

U.P. LAW BOC SPECIAL CONTRACTS
When Sale Not Valid
When the thing sold is a public property
Sale by Person Having a Voidable Title
a. True owner may recover the thing when the
ff. requisites concur:
● Subject matter is movable
● Owner has either lost the thing or has
been unlawfully deprived. [Art. 559,
CC]
b. Reimbursement is necessary before owner
can recover when:
● Buyer acted in good faith
● Acquired at a public auction [Art. 559,
CC]
c. Recovery no longer possible when:
● Buyer in good faith
● Acquired it at a merchant’s store, fair or
market. [Art. 1506, CC]
vi. Kinds of Delivery
Actual Delivery
Deemed made when the thing sold is placed in
the control and possession of the vendee [Art.
1497, CC]
Not always essential to passing of title [Art.
147, CC]
Parties may agree when and on what
conditions the ownership shall pass to the
buyer [e.g.: Art 1478 where ownership will only
pass after full payment of the price]
Constructive Delivery
a. Execution of public instrument [par. 1,
Art. 1498, CC]
General Rule: produces the same legal effects
of actual delivery.
Exceptions:
1. The parties intended otherwise.
2. At the time of execution, the subject matter
was not subject to the control of the seller,
which control must subsist for a
reasonable length of time after execution.
[Pasagui v. Villablanca, G.R. No. L-21998
(1975)]
Page 338 of 532
CIVIL LAW
“Control” over thing sold must be such that
the seller is capable of physically
transferring it to buyer.
Although parties may stipulate that the
execution of a public instrument is
equivalent to delivery, this legal fiction
holds true only when there is no
impediment that may prevent the passing
of the property from the vendor to the
vendee. [Vda. de Sarmiento v. Lesaca,
G.R. No. L-15385 (1960)]
If, notwithstanding execution of the
instrument, the buyer cannot enjoy material
tenancy and make use of the object himself
or through another in his name, there is no
delivery. [Power Commercial v. CA, G.R.
No. 119745 (1997)]
Execution of a public instrument gives rise
only to a prima facie presumption of
delivery, negated by failure of the buyer to
take actual possession of land sold. A
person who does not have actual
possession cannot transfer constructive
possession by execution and delivery of
public instrument. [Spouses Santiago v.
Villamor, G.R. No. 168499 (2012)]
b. Symbolic Delivery
Delivery of keys of the place or depositary
where the movable is stored or kept. [Art. 1498,
CC]
Unless otherwise agreed, when symbolic
delivery has been made, the seller is not
obliged to remove tenants to place the buyer in
actual possession of the property as he has
already complied with his obligation to transfer
ownership of and deliver the thing sold. [Power
Commercial and Industrial Corp. v. CA, G.R.
No. 119745 (1997); Sabio v. The International
Corporate Bank, Inc., G.R. No. 132709 (2001)]
c. Traditio Longa Manu (Long Hand)
Delivery of movable property by mere consent
or agreement, if the thing sold cannot be
 U.P. LAW BOC SPECIAL CONTRACTS
transferred to the possession of the buyer at
the time of sale. [Art. 1499, CC]
Example: Seller points to the property without
actually transferring physical possession
thereof.
Delivery by mere agreement; seller points out
to the buyer the property without need of
actually delivering (as when the thing sold
cannot be transferred to the possession of the
vendee at the time of sale). Delivery takes
place when the thing is placed in the sight of
the purchaser so that he can take possession
of it at pleasure. With regard to movable
property, its delivery may also be made by the
delivery of the keys of the place or depository
where it is stored or kept.
When an employer assigned all its rights and
title to all surplus property salvaged by the
contractor, traditio longa manu takes place.
Delivery is upon the moment a thing is
salvaged. [Board of Liquidators v. Floro, G.R.
No. L-15155 (1960)]
d. Traditio Brevi Manu (Short Hand)
Example: If Delivery of movable property by mere consent
you are renting or agreement, if the buyer already had it in his
a house then
you bought it.
possession for any other reason. [Art. 1499,
CC]
Happens when the already has possession of
the thing sold before the sale by virtue of
another title (as lessee, borrower, depositary,
etc.)
e. Traditio Constitutum Possessorium
Seller continues to be in possession of the
property sold not as owner but in some other
capacity, like as tenant or lessee.
At the time of perfection, the seller held
possession of the subject matter in the concept
of owner, and pursuant to the contract, the
seller continues to hold physical possession
thereof as lessee or other form of possession
other than the concept of owner.
Page 339 of 532
CIVIL LAW
For example, a seller remains in possession of
the property sold, by virtue of a lease
agreement with the vendee, at the time of the
perfection of the contract of sale.
Vendee became, as lessor, the legal
possessor while the vendor is in material
possession of the property in the name and
representation of the vendee.
Seller continues to be in possession of the
property sold
f. Quasi-traditio
Mode of delivery of incorporeal things or rights.
Delivery is effected:
● By execution of public instrument
● When such is not applicable, by placing
the titles of ownership in the
possession of the buyer
● By allowing the buyer to use his rights
as new owner with the consent of the
seller
g. Delivery to a Common Carrier
General Rule: Delivery to the courier or carrier
is tantamount to delivery to buyer, whether
carrier is named by buyer or not. The buyer
assumes the risk of loss.
Exceptions
1. Seller reserved title through the form of the
bill of lading, with intent to remain the
owner, not merely for the purpose of
securing payment, OR
2. Contrary intention appears in the contract
(i.e. seller is required to deliver goods to
buyer at the point of destination)
3. Delivery by the seller is in breach of the
contract
4. F.O.B. (Free on Board or Freight on Board)
- When seller bears the expenses of
transportation up to the F.O.B. point.
5. C.I.F. (Cost, Insurance, Freight) - Price
quoted includes the costs of the goods,
insurance, and freight charges on the
goods up to the point of destination.
 U.P. LAW BOC SPECIAL CONTRACTS
6. F.A.S. (Free Alongside) – Seller bears the
expenses of transportation until he delivers
the goods alongside a vessel at a named
port.
vii. Double Sales [Art. 1544, CC]
General Rule: Prior tempore, prior jure (“First
in time, priority in right”) applies.
Requisites:
a. 2 or more valid sales;
b. Same subject matter;
c. 2 or more buyers with conflicting interests
over the rightful ownership of the thing
sold;
d. Same seller. [Cheng v. Genato, G.R. No.
129760 (1998)]
Rules on Double Sale
There is no double sale when:
Note: Double a. Not all the elements of a sale are present
sale b. The principle of prior tempore, prior jure (he
does not apply
to contract of
who is first in time is preferred in right)
sell should apply
c. The two different contracts of sale are
Does not apply
to conditional
made by two different persons, one of them
sale not being the owner of the property sold.
d. The land sold is not yet registered under
Does not apply
if merely steps the Torrens system
into the shoes e. The first sale occurred when land was not
of the yet registered, and the second sale was
judgment
debtor done when the land was already registered
– prior tempore, prior jure should apply
Rules on Preference
a. Personal property
b. First possessor in good faith
c. Real property
d. First registrant in good faith: second buyer
must register the document in good faith,
otherwise, he does not have a better right
e. First possessor in good faith
f. Person with oldest title in good faith
Caveat emptor: One who purchases real
property which is in actual possession of others
should make some inquiry concerning the
rights of those in posses
Page 340 of 532
CIVIL LAW
Rules Governing Sale of Movables,
Immovables and Unregistered Lands
a. Sale of Movable: Ownership shall be
transferred to the person who may have
first taken possession in good faith.
b. Sale of Immovables: Registered Land –
Ownership belongs to the person who:
● In good faith first recorded the sale in
the Registry of Property; or
● If there is no inscription of sale on the
title, ownership passes to the person
who in good faith was first in
possession; or
● In the absence thereof, to the person
who presents the oldest title,
provided there is good faith.
Possession refers to any of the modes of
possession in Arts. 1497-1501, CC
Oldest Title as to any public document
showing acquisition of the land in good
faith. To constitute “title,” the transmission
of ownership must appear in a public
document [Art. 1358 (1), CC]
Registration includes any entry made in
the Primary Entry Book of the registry,
including both registration in its ordinary
and strict sense and cancellation,
annotation, and even marginal notes.
[Cheng v. Genato, G.R. No. 129760
(1998)]
Pencilled entries on the title are not
considered registration. [AFPMBAI v. Court
of Appeals, G.R. No. 126745 (1999)]
c. Second Sale Made by Virtue of
Execution and Attachment – Art. 1544
does NOT apply in cases where the first
sale of an unregistered immovable
occurred prior to an execution sale and the
second sale occurred by virtue of an
execution sale. This is because a buyer of
unregistered land at an execution sale only
steps into the shoes of the judgment debtor
(the person who sold the property prior to
the execution sale). The second buyer
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

merely acquires the latter’s interest in the When buyer is presumed to be in bad faith
property sold as of the time the property ● Annotation of adverse claim: Places any
was levied upon. [Carumba v. CA, G.R. No. subsequent buyer of the registered land in
L-27587 (1970)] bad faith. [Balatbat v. CA, G.R. No. 109410
(1996)]
d. Sale of Immovables: Unregistered Land ● Annotation of Lis Pendens: Buyer cannot
be considered an innocent purchaser for
Instrument or deeds establishing, value where it ignored the lis pendens on
transmitting, acknowledging, modifying or the title.
extinguishing rights with respect to lands ● A purchaser of a parcel of land cannot
not registered under the Land Registration close his eyes to facts which should put a
Act or the Spanish Mortgage Law, are reasonable man upon his guard, such as
required to be registered in the Registry of when the property subject of the purchase
Property to prejudice 3rd persons, although is in the possession of persons other than
such registration is understood to be the seller. A buyer who could not have
“without prejudice to a third party with a failed to know or discover that the land sold
better right”. [PD 1528 Sec 113] to him was in the adverse possession of
another is a buyer in bad faith. [Heirs of
Art. 1544 applies to unregistered land Ramon Durano v. Uy, G.R. No. 136456
subject to a conventional sale (because of (2000)]
Art. 1358) but NOT to unregistered land
subject to judicial sale. Annotation of
Lis Pendens
Adverse Claim
Unregistered by both buyers, the first buyer May be cancelled
May be cancelled
is preferred. only in one
even before the action
instance, i.e., after
If first buyer did not register but second buyer is finally terminated
the claim is
registered property, second buyer is preferred. for causes which may
adjudged invalid or
not be attributable to
unmeritorious by
viii. Property Registration Decree [P.D. the claimant
the Court
1529]
The two are not contradictory or repugnant to
REQUISITES FOR REGISTRATION OF one another; nor does the existence of one
DEED OF SALE IN GOOD FAITH automatically nullify the other, and if any of the
registrations should be considered
a. Purchaser in Good Faith - One who buys unnecessary or superfluous, it would be the
the property of another, without notice that notice of lis pendens [A. Doronila Resources
some other person has a right to or interest Development Inc v. CA, G.R. Nos. L-42956-
in such property, and who pays a full and 571988]
fair price for the sale, at the time of the
purchase or before he has notice of the b. Accompanied by vendors duplicate
claim/interest of some other person in the certificate of title, payment of capital
property. [Agricultural and Home Extension gains tax, and documentary tax
Development Group v. CA, G.R. No. 92310 registration fees
(1992)]
Must be accompanied by:
General Rule: As a rule, he who asserts the ● Vendor’s duplicate certificate of title
status of a purchaser in good faith and for value ● Payment of capital gains tax – 6% of the
has the burden of proving such assertion. selling price or zonal value, whichever is
[Mathay v. CA, G.R. No. 115788 (1998)] higher

Page 341 of 532

U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

● Documentary tax registration fees – 1.5% makes an alteration in them in a

of the selling price or zonal value,
whichever is higher
ix. Risk of Loss
(Note: This is discussed under Section F of this
Sales Reviewer, on Risk of Loss.)
(2) To Warrant Against Eviction
and Against Hidden Defects
manner proper only for an owner;
or
c. When the buyer, after the lapse of
a reasonable time, retains the
goods without intimating his
rejection.
Vendee’s refusal
If vendee has the right to refuse and rightfully
refused upon delivery,

(Note: This is discussed under Section H of this He has no obligation to return them UNLESS
Sales Reviewer, on Warranties.) otherwise agreed BUT he has to take
reasonable care of the goods
4. Obligations of the Vendee
He is not a depositary thereof UNLESS he
voluntarily agrees to be one
Inspection and acceptance
i. Inspection/buyer’s right to examine
The buyer is deemed to have accepted the
[Art. 1584]
goods when:
1. He intimates to the seller that he has
General rule: The buyer is not deemed to have
accepted them
accepted the goods delivered which he has not
2. The goods have been delivered to him and
previously examined unless and until he has
he does any act in relation to them which is
had a reasonable opportunity to examine them
inconsistent with the ownership of the
for the purpose of ascertaining whether they
seller
are in conformity with the contract.
3. After the lapse of a reasonable time, he
retains the goods without intimating to the
Exception: If there is a stipulation to the
seller that he has rejected them. [Art. 1585,
contrary [par. 1, Art. 1584, CC]
CC]
General rule: The seller is bound, when he
General rule: Exercise of acts of ownership
tenders delivery to the buyer, on request, to
over the goods is a manifestation of
afford the buyer a reasonable opportunity to
acceptance, such as making use of them as
examine the goods for the purpose of
owner, making alterations in the goods, or
ascertaining whether they are in conformity
subjecting it to the process of manufacture.
with the contract.
Exception: Buyer’s right to make a test of
Exception: Unless otherwise agreed upon
goods, but only if necessary, to enable him to
[par. 2, Art. 1584, CC]
determine whether to accept or reject the
goods.
Exception to the right to examine: C.O.D.
Sales
Modes of acceptance
Where goods are delivered to a carrier by the
2. Express acceptance - Buyer intimates to
seller, in accordance with an order from or
the seller that the has accepted them
agreement with the buyer, upon the terms that
3. Implied acceptance
the goods shall not be delivered by the carrier
b. When the vendee, after delivery of
to the buyer until he has paid the price, whether
goods, does any act inconsistent
such terms are indicated by marking the goods
with the vendor’s ownership or
with the words "collect on delivery," or

Page 342 of 532

U.P. LAW BOC SPECIAL CONTRACTS
otherwise, the buyer is not entitled to examine
the goods before the payment of the price, in
the absence of:
a. agreement; or
b. usage of trade
c. permitting such examination. [par. 3,
Art. 1584, CC]
ii. Delivery of goods in installment
General rule: The vendee is not bound to
accept delivery of goods in installment
Exception: Unless otherwise agreed upon
[par. 1, Art. 1583, CC]
Where separate price has been fixed for
each installment [par. 2, Art. 1583, CC]
Where there is a contract of sale of goods
1. To be delivered by stated installments,
2. To be separately paid for, and
3. The seller makes defective deliveries in
respect of one or more installments, or the
buyer neglects or refuses without just
cause to take delivery of or pay for one or
more installments.
It depends in each case on the terms of the
contract and the circumstances of the case:
1. Whether the breach of contract is so
material as to justify the injured party in
refusing to proceed further and suing for
damages for breach of the entire contract,
or
2. Whether the breach is severable, giving
rise to a claim for compensation but not to
a right to treat the whole contract as
broken.
Obligation to pay the price
Article 1582, CC: 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.
Page 343 of 532
CIVIL LAW
i. Obligation to pay interest
The buyer shall owe interest on the price from
the time the thing is delivered up to the time of
payment if there is stipulation requiring
interests, or even if there is none, if the thing
delivered produces fruits or income, or if the
buyer incurs in default from the time of judicial
or extrajudicial demand for payment [Baviera].
The three instances when the vendee shall pay
interest for the period between delivery and
payment of the price:
1. If there was a stipulation;
2. If the thing sold and delivered produces
fruits or income;
3. If the vendee is in default, from the time of
judicial or extrajudicial demand for
payment [Art. 1589, CC].
ii. Right of vendee to suspend payment
of price
The vendee has the right to suspend in two
instances:
1. If he is disturbed in the possession or
ownership of the thing bought; or
2. If he has reasonable grounds to fear such
disturbance, by a vindicatory action or a
foreclosure of mortgage [Art. 1590, CC]
Except
1. If the vendor gives security for the return of
the price in a proper case
2. If it has been stipulated
3. If the vendor caused disturbance or danger
to cease
4. If the disturbance is a mere act of trespass
5. If the vendee has already fully paid the
price [De Leon]
Should the vendee be disturbed in the
possession or ownership of the thing delivered,
or should he have reasonable grounds to fear
such disturbance by a vindicatory action, or a
foreclosure of mortgage, he may suspend
payment until the vendor has caused the
disturbance or danger to cease, unless there is
a stipulation to the contrary [Baviera]
U.P. LAW BOC SPECIAL CONTRACTS
In cases of delay of payment, one should also
be liable for interest and penalties for such
delay in payment. It would be grossly unfair for
respondent to be deprived of the amount it
would have received from the sale of their
properties, while petitioners benefited from the
use and continued possession of the properties
[Sps. Mahusay v. B.E. San Diego (2011)].
Obligation to Bear the
Expenses for the Execution and
Registration of the Sale and
Putting the Goods in a
Deliverable State, if so
Stipulated
Art.1521, par. 5: Unless otherwise agreed, the
expenses of and incidental to putting the goods
into a deliverable state must be borne by the
seller.
5. Transfer of Ownership
The ownership of the thing sold shall be
transferred to the vendee upon the actual or
constructive delivery thereof, or in any manner
signifying an agreement that possession is
transferred from the vendor to the vendee.
[Baviera]
Note: The contract of sale constitutes only a
right to the transfer or acquisition of ownership,
while delivery is the method of accomplishing
the same.
When the seller is not the owner
General Rule: Ownership is not acquired by
the buyer. One cannot give what one does not
have. [Art. 1505, CC]
Exceptions
1. Seller has a right to transfer ownership
Seller need not be the owner of the thing at
the time of perfection of the contract. It is
sufficient that seller has a right to transfer
ownership thereof at the time it is delivered.
[Art. 1459, CC]
Page 344 of 532
CIVIL LAW
One who sells something he does not own
yet is bound by the sale when he acquires
the thing later. [Bucton v. Gabar, G.R. No.
L-36359 (1974)]
2. Estoppel: Owner is, by his conduct,
precluded from denying the seller’s
authority to sell. [Art. 1434, CC]
3. Registered land bought in good faith
General rule: Buyer need not go beyond
the Torrens Title
Exception: When he has actual
knowledge of facts and circumstances that
would impel a reasonably cautious man to
make further inquiry
4. Order of courts; statutory sale - In
execution sale, the buyer merely steps into
the shoes of the judgment debtor [Sec. 33,
Rule 39, ROC]
5. When goods are purchased in Merchant’s
store, Fair, or Market [Art. 1505, CC]
Sale by Person Having a
Voidable Title
1. True owner may recover the thing when
the ff. requisites concur:
• Subject matter is movable
• Owner has either lost the thing or has
been unlawfully deprived. [Art. 559,
CC]
2. Reimbursement is necessary before
owner can recover when:
• Buyer acted in good faith
• Acquired at a public auction [Art. 559,
CC]
3. Recovery no longer possible when:
• Buyer in good faith
• Acquired it at a merchant’s store, fair or
market. [Art. 1506, CC]
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

property. [Agricultural and Home Extension

Development Group v. CA, G.R. No. 92310
(1992)]
General Rule: As a rule, he who asserts the
status of a purchaser in good faith and for value
has the burden of proving such assertion.
[Mathay v. CA, G.R. No. 115788 (1998)]
When buyer is presumed to be in bad faith
Annotation of adverse claim: Places any
subsequent buyer of the registered land in bad
faith. [Balatbat v. CA, G.R. No. 109410 (1996)]
Annotation of Lis Pendens: Buyer cannot be
considered an innocent purchaser for value
where it ignored the lis pendens on the title.
A purchaser of a parcel of land cannot close his
eyes to facts which should put a reasonable
man upon his guard, such as when the property
*subject of the purchase is in the possession of
persons other than the seller. A buyer who
could not have failed to know or discover that
the land sold to him was in the adverse
possession of another is a buyer in bad faith.
[Heirs of Ramon Durano v. Uy, G.R. No.
136456 (2000)]
Annotation of
Lis Pendens
Adverse Claim
May be cancelled
May be cancelled
even before the
only in one instance,
action is finally
i.e., after the claim is
terminated for
adjudged invalid or
causes which may
unmeritorious by the
not be attributable to
Court
the claimant
The two are not contradictory or repugnant to
one another; nor does the existence of one
automatically nullify the other, and if any of the
registrations should be considered
unnecessary or superfluous, it would be the
notice of lis pendens [A. Doronila Resources
Development Inc v. CA, G.R. Nos. L-42956-
571988]
b. Accompanied by vendors duplicate
certificate of title, payment of capital
gains tax, and documentary tax
registration fees
Must be accompanied by:
• Vendor’s duplicate certificate of title
• Payment of capital gains tax – 6% of the
selling price or zonal value, whichever is
higher
• Documentary tax registration fees – 1.5%
of the selling price or zonal value,
whichever is higher
6. Risk of Loss
The Code Commission followed the common
law rule that the OWNER bears the risk of
loss in absence of stipulation to the contrary,
while retaining the rule in Roman Law which
requires delivery by the seller, whether actual
or constructive, to transfer OWNERSHIP to the
buyer. 

Article 1263, CC: In an obligation to deliver
a generic thing, the loss or destruction of
anything of the same kind does not
extinguish the obligation.
General Rule: Risk of loss shall be borne by
the owner (Note: owner is not always the seller)
Exceptions
1. When ownership of the goods has been
transferred to him, the buyer bears the risk
of loss.
2. When there is a stipulation to the contrary.
3. When the seller retains the title for security,
the buyer bears the risk of loss.
4. When there is delay in the delivery, the
party in fault bears the risk of loss.
5. When sale is for “approval or trial”, the
seller bears the risk of loss until the buyer
approves or the trial period lapses.
6. When sale is on “return”, the buyer bears
the risk of loss until he returns it.

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U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

Res Perit domino [Arts. 1263,
and 1189 CC]
Owner bears risk of loss and deterioration. The
ownership is transferred only upon delivery.
(1) As avoided; or
(2) As valid in all of the existing goods or in
so much thereof as have not deteriorated,
and as binding the buyer to pay the agreed
price for the goods in which the ownership
will pass, if the sale was divisible.

Prior to Perfection of Contract Partial Loss (Or loss

which results in
Total Loss
Seller bears risk of loss and deterioration. substantial change in
Basis: Res perit domino character)
Contract is void
Buyer may withdraw from
When there is no proof that the parties have because the
the contract
agreed as to the thing which should be the object did not
or
subject of the contract and that one has exist at the time
Buy the remainder at a
accepted the terms proposed by the other, it of the
proportionate price
cannot be said that the contracting parties have transaction.
given their mutual consent as to the subject
and consideration of the contract. The Article 1496 of the Civil Code which provides
disappearance or loss of property which the that in the absence of an express assumption’
owner intended or attempted to sell can only of risk by the buyer, the things sold remain at
interest the owner, who should suffer the loss, seller’s risk until the ownership thereof is
and not a third party who has acquired no rights transferred to the buyer,” is applicable to this
nor incurred any liability with respect thereto. case, for there was neither an actual nor
[Roman v. Grimalt, 1906] constructive delivery of the thing sold, hence,
the risk of loss should be borne by the seller,
Norkis, which was still the owner and
At Time of Perfection [Arts. 1493
possessor of the motorcycle when it was
and 1494, CC] wrecked. This is in accordance with the well-
known doctrine of res perit domino. [Norkis v.
Seller bears risk of loss and deterioration. CA, 1991]
Basis: Res perit domino.
After Perfection but Before
Article 1493, CC: If at the time the contract
of sale is perfected, the thing which is the
Delivery
object of the contract has been entirely lost,
the contract shall be with- out any effect. Loss
But if the thing should have been lost in part General Rule: Stipulations in the contract will
only, the vendee may choose between govern.
withdrawing from the contract and
demanding the remaining part, paying its Exception: In the absence of stipulation, there
are two conflicting views:
price in proportion to the total sum agreed
upon. 1. Res perit creditori or the buyer bears the
risk of loss.
Article 1494, CC: Where the parties purport
a sale of specific goods, and the goods with- This is an exception to the rule of res perit
out the knowledge of the seller have domino
perished in part or have wholly or in a
material part so deteriorated in quality as to Basis: Art. 1504, CC only covers goods.
be substantially changed in character, the
buyer may at his option treat the sale:

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U.P. LAW BOC SPECIAL CONTRACTS
Pursuant to Art. 1262, CC if the thing is
destroyed without the fault of the
debtor/seller, the obligation to pay shall
subsist.
2. Res perit domino or the seller bears the risk
of loss.
Basis: The rule on loss is different from the
rule on deterioration for the loss would be
for the account of the seller, while the
deterioration would be for the account of
the buyer.
In reciprocal obligations, the
extinguishment of the obligation due to loss
of the thing extinguishes the entire juridical
relation.
Deterioration [Art. 1189 CC]
Impairment is borne by the BUYER if the thing
deteriorates without the fault of the seller.
If it deteriorates through the fault of the seller,
the buyer may choose between rescission of
obligation and fulfillment, either case with
indemnity for damages.
After Delivery
Article 1504, CC: Unless otherwise agreed,
the goods remain at the seller's risk until the
ownership therein is transferred to the buyer,
but when the ownership therein is
transferred to the buyer the goods are at the
buyer's risk whether actual delivery has
been made or not, except that:
(1) Where delivery of the goods has been
made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the
ownership in the goods has been retained by
the seller merely to secure performance by
the buyer of his obligations under the
contract, the goods are at the buyer's risk
from the time of such delivery;
(2) Where actual delivery has been delayed
through the fault of either the buyer or seller
the goods are at the risk of the party in fault.
General Rule: Buyer bears risk of loss and
deterioration.
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CIVIL LAW
Exceptions: [Art. 1504 (1) and (2), CC]
a. Where delivery has been made either to
the buyer or to the bailee for the buyer, but
ownership in the goods has been retained
by the seller merely to secure performance
by the buyer of his obligations under the
contract; and
b. Where actual delivery has been delayed
through the fault of either the buyer or
seller, the goods are at the risk of the party
in fault.
SUMMARY OF RULES ON THE RISK OF
LOSS
Before Seller bears risk of loss or
Perfection deterioration
Seller also benefits from the
fruits and improvements therein
At Entire Loss will be ineffective
Perfection Substantial Loss or
Deterioration shall allow buyer
to withdraw or buy the
remainder at a proportionate
price.
After Seller bears risk of loss
Perfection Buyer bears risk of
deterioration
Buyer also benefits from the
fruits and improvements therein
Before Buyer bears risk of loss or
Delivery deterioration
Buyer also benefits from the
fruits and improvements therein
7. Documents of Title
In General
Documents of Title to Goods – Includes bills
of lading, dock warrants, “quedans” or
warehouse receipts or orders for the delivery of
goods
• This is proof of possession or control of
the goods
• This also authorizes the possessor of
the document to transfer or receive,
either by indorsement or delivery, the
goods represented by the document,
Bill of Lading – A document issued by the
common carrier acknowledging receipt of
U.P. LAW BOC SPECIAL CONTRACTS
goods described therein for transportation to a
designated place and delivery to a named
consignee
• It is a symbol of possession and control
of the goods if it is negotiable in form
• This authorizes the consignee to
transfer the goods to another
• If properly negotiated, this shall
operate as a transfer of possession of
the goods in transit as effectively as a
physical delivery thereof
Kinds of Documents of Title
Negotiable – the goods described therein are
deliverable to bearer or to the order of the
consignee
Non-Negotiable – deliverable only to a
specified person
NEGOTIABLE DOCUMENTS OF TITLE
How Negotiated
A negotiable bill of lading may be negotiated by
delivery of the document to another if by the
terms thereof, the goods are deliverable to
bearer
When the bill of lading was endorsed in blank
by the person to whose order the goods
were deliverable.
If by its terms the goods are deliverable to the
order of a specified person, it can only be
negotiated by indorsement of such person.
Who May Negotiate It
Only the owner of the document or one to
whom possession or custody of the document
has been entrusted by the owner, may
negotiate it. [Art. 1512, CC]
Or the one to whom possession or custody of
document has been entrusted by the owner.
This was in accordance with common law
denying the full effects of negotiability of bills of
lading inasmuch as they do not represent
money but merely evidence of performance of
certain contractual duties. Owner should not be
Page 353 of 532
CIVIL LAW
divested of his rights merely upon loss of the
documents.
Rights Acquired by Negotiation
A document of title represents the right of the
consignee in the goods so that:
• A person to whom a negotiable document
of title had been duly negotiated acquires
not merely the rights of his vendor but
also whatever rights the original
consignee had over the goods.
• The buyer of the document of title may
acquire a better title than his vendor,
constituting an exception to Art. 1505, CC.
Note: The validity of the negotiation of a
document of title to an innocent purchaser for
value is not affected by the fact that there was
a breach of duty on the part of the person to
whom such document was entrusted by the
owner, or by the fact that the owner of the
document was deprived of it by loss, theft,
fraud, accident, mistake, duress or conversion.
[Baviera]
Example: If a negotiable instrument was
indorsed in blank by the consignee and was
stolen by the one who sold and delivered the
document to an innocent purchaser for value =
the latter acquires the title of the consignee
Implied Warranties
A person who transfers or negotiates a
document of title for value:
• Warrants not only the genuineness and
validity of the document and his right to
transfer it
• BUT ALSO assumed all the warranties
of a vendor of goods.
However, he does NOT warrant that the
common carrier will fulfill its obligations to
deliver the goods or that the previous indorsers
will fulfill their obligation.
• The indorser of a negotiable document of
title does not assume the same warranties
like that of a general indorser of a
negotiable bill of exchange/promissory
note
U.P. LAW BOC SPECIAL CONTRACTS
o A document of title refers to specific
goods in the possession of the
carrier
○ This cannot be substituted by
similar goods of the same kind and
quantity should the carrier fail to
deliver the goods described in the
document.
Creditor’s Rights Against the Goods
General Rule: Goods in the hands of the
carrier covered by a negotiable document of
title cannot be attached or levied upon
Exception: Unless the document be first
surrendered to the carrier or impounded by the
court or its negotiation be enjoined.
For the mercantile theory of documents of title
is founded on the idea that a negotiable
document of title represents the goods
[Baviera]:
! THUS, it is not allowable for the carrier
to deliver the goods without the
surrender of the negotiable bill of lading
to them
○ Or for the law to allow
attachment or levy on the
goods, regardless of an
outstanding negotiable
document of title.
NON-NEGOTIABLE DOCUMENTS OF TITLE
How Transferred
Goods described in a non-negotiable
document of title are deliverable only to a
specified person:
• Thus, the carrier will NOT deliver the goods
to any holder of the document,
• Or to whom such document of title may
have been endorsed by the consignee.
There must be evidence of the sale or donation
of the goods:
• The person must present to the carrier the
deed of sale or donation in his favor.
• Hence, delivery of such document to a
purchaser or donee cannot operate as a
symbolic delivery of the goods described
therein as would pass title to the latter.
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CIVIL LAW
• Even if the deed of sale or donation is
evidenced in a public instrument, the
execution of such instrument will not
operate as a constructive delivery of the
goods described in the bill of lading where
the goods are in possession of a third
person.
Rights Acquired by Transfer of Documents
of Title
Transfer – the assignment of the rights of the
consignee of a non-negotiable document of
title to another.
Also refers to a case where an “order”
document of title was sold or assigned, without
indorsement.
The effect of a transfer of document of title is
that the transferee does not acquire a better
title than his transferor.
The same rules governing sales of goods not
covered by a document of title apply.
Illustration: Where an "order" bill of lading was
sold without endorsement, the transferee can
bring an action to compel the transferor to
endorse the document, unless a contrary
intention appears – but the “negotiation” will
take effect only as of the time endorsement is
actually made.
Hence, before endorsement, the rights of the
transferee may be defeated by the rights of a
prior party who was illegally deprived of
possession of such document.
8. Warranties
Warranties - A statement or representation
made by the seller contemporaneously and as
part of the contract of sale, having reference to
the character, quality, or title of the goods, and
by which he promises or undertakes to ensure
that certain facts are or shall be as he then
represents.
Not every false representation voids the
contract, only those matters substantially
affecting the buyer’s interest, not matters of
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

opinion, judgment, probability, or expectation. If seller has promised that the condition should
When the buyer undertakes his own happen or be performed, the buyer may treat
investigation, and the seller does nothing to the nonperformance of the condition as a
prevent it from being as full as the buyer breach of warranty. [Art. 1545, CC]
chooses, the buyer cannot afterwards allege
misrepresentations. [Songco v. Sellner, G.R. Express Implied
No. L-11513 (1917)] Nature is
Contractual; Freely Constituted by Law
Economic Loss Doctrine: Where the defect Represented
makes the goods less valuable Only seller is bound,
Stipulated by parties,
whether or not
Condition v. Warranty thereby binding both
intended or known
the seller and buyer
Article 1545, CC: Where the obligation of by the parties.
either party to a contract of sale is subject to
any condition which is not performed, such Express Warranties
party may refuse to proceed with the
contract or he may waive performance of the For there to be express warranty, the following
condition. If the other party has promised requisites must concur:
that the condition should happen or be a. An affirmation of fact or any promise
performed, such first mentioned party may relating to the thing sold;
also treat the nonperformance of the b. The natural tendency of such
condition as a breach of warranty. affirmation or promise is to induce the
buyer to buy;
Where the ownership in the thing has not c. The buyer buys the thing relying
passed, the buyer may treat the fulfillment by thereon. [Art. 1546, CC]
the seller of his obligation to deliver the same d. Made before the sale, not upon
as de- scribed and as warranted expressly delivery or any other point
or by implication in the contract of sale as a
condition of the obligation of the buyer to An express warranty can be made by and also
perform his promise to accept and pay for be binding on the seller even in the sale of a
the thing. second hand article. [Moles v. IAC, G.R. No.
73913 (1989)]
Condition Warranty
Goes into the Express Warranty v. Dealer’s/Trader’s Talk
Pertains to and performance of an Article 1545, CC: Any affirmation of fact or
affects the existence obligation and may, any promise by the seller relating to the thing
of the obligation in itself, be an is an express warranty if the natural
obligation tendency of such affirmation or promise is to
Non-happening does Non-fulfillment induce the buyer to purchase the same, and
not amount to breach constitutes breach if the buyer purchase the thing relying
of contract of contract thereon. No affirmation of the value of the
Stipulation or thing, nor any statement purporting to be a
Must be stipulated statement of the seller's opinion only, shall
operation of law
Always relates to the be construed as a warranty, unless the seller
May attach either to made such affirmation or statement as an
subject matter or the
the seller’s duty to expert and it was relied upon by the buyer.
seller’s obligations
deliver thing or some
as to the subject
other circumstance Article 1340, CC: The usual exaggerations
matter
in trade, when the other party had an

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U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

opportunity to know the facts, are not in Implied Warranties [Art. 1547,
themselves fraudulent. CC]
Article 1341, CC: A mere expression of an An implied warranty is derived by law, by
opinion does not signify fraud, unless made implication, or inference from the nature of the
by an expert and the other party has relied transaction or relativation, or circumstances of
on the former's special knowledge. the parties, irrespective of any intention of the
seller to create it. [De Leon]
Express
Dealer’s or Trader’s Talk
Warranty Implied Warranty of Title
What is a. Implied Warranty against
Affirmation of the value of the
specifically Encumbrance/Non-Apparent Servitudes
thing or statement of only the
represented b. Implied Warranty against Hidden Defects
seller’s opinion is not a
as true in [Art. 1547, CC]
warranty unless:
said
● The seller made it as an • Implied Warranty as to Merchantable
document Quality and Fitness of Goods
expert;
cannot be
● It was relied upon by the • Implied Warranty against Redhibitory
considered Defect in the Sale of Animals [Art.
buyer. [Art.1546, CC]
as mere 1572, CC]
● Ordinarily, what does not
dealer's • Quality and Fitness of Goods in Sale by
appear on the face of the
talk. [Moles Sample or Description
written instrument [Moles
v. IAC, c. Other Warranties
v. IAC, supra]
supra]
IMPLIED WARRANTY OF TITLE
Express Warranty v. False Representation
Article 1342, CC: Misrepresentation by a Implied warranty arises by operation of law and
third person does not vitiate consent, unless need not be stipulated in the contract of sale.
such misrepresentation has created
substantial mistake and the same is mutual. Warranty of Seller’s Right to Sell: Seller
warrants his right to sell at the time the
Express ownership is to pass.
False Representation
Warranty
When concealment of facts Inapplicable to a sheriff, auctioneer,
comes with an active mortgagee, pledgee, or other person
misstatement of fact or a professing to sell by virtue of authority in fact or
partial statement of fact, such law. [Art. 1547, CC]
that withholding of that unsaid
portion makes that which is Warranty against Eviction: Seller warrants
stated absolutely false.
Concealment that buyer, from the time ownership passes,
of facts does shall have and enjoy legal and peaceful
However, a buyer who fails to
not possession of the thing. Its requisites are:
inspect the condition of
necessarily
property despite ample a. Buyer is deprived of the whole or a part of
amount to the thing sold;
opportunity to do so when
false b. Eviction is by final judgment;
there is no opposition on the
representation c. Final judgment based on a right prior to the
part of seller to inspect cannot
later on allege false sale or an act imputable to the vendor;
representation. [Philippine d. Seller is summoned and made co-
Manufacturing Co. v. Go defendant in the suit for eviction at the
Jocco, G.R. No. L-24256 instance of the buyer. [Power Commercial
(1926)] and Industrial Corp. v. CA, G.R. No.
119745 (1997)]

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U.P. LAW BOC SPECIAL CONTRACTS
IMPLIED WARRANTY AGAINST
ENCUMBRANCE/NON-APPARENT
SERVITUDES
Requisites for breach:
a. Thing sold is an immovable
b. Burden or servitude encumbering the thing
sold is:
1. Non-apparent to the naked eye
2. Not mentioned in the agreement
3. Of such nature that it must be
presumed that the buyer would not
have bought it had he been aware of it
4. Not recorded in the Registry of
Property unless there is an express
warranty that the thing is free from all
burdens and encumbrances [Art. 1560,
CC]
IMPLIED WARRANTY AGAINST HIDDEN
DEFECTS
Requisites for breach:
a. The defect renders the thing sold unfit
for the use for which it was intended
OR diminishes its fitness for such use
to such an extent that had the buyer
been aware thereof, he would not have
bought it or would have paid a lower
price;
b. The defect is not patent or visible;
c. The buyer is not an expert who, by
reason of his trade or profession,
should have known the defect
d. The seller is aware of the hidden fault
or defect, OR even if he is not aware
thereof, if there is no stipulation to the
contrary [Art.1566]
The buyer must also give notice of such
redhibitory defect within a reasonable time.
The use contemplated must be that which is
stipulated, and in the absence of stipulation,
that which is adopted to the nature of the thing,
and to the business of the buyer.
IMPLIED WARRANTY AS TO
MERCHANTABLE QUALITY AND FITNESS
OF GOODS
Page 357 of 532
CIVIL LAW
Merchantable Quality
a. Where the goods are brought by
description from a seller who deals in
goods of that description [Art. 1562, CC]
b. In a sale by sample, if the seller is a dealer
in goods of that kind and the defect is not
apparent on reasonable examination of the
sample [Art. 1566, CC]
Warranty of merchantability is warranty that
goods are reasonably fit for the general
purpose for which the same are sold.
Warranty of fitness is warranty that goods are
suitable for the special purpose of the buyer
which will not be satisfied by mere fitness for
general purposes.
In a sale by sample, there is implied warranty
that goods are free from defects not apparent
on reasonable examination of sample and
which render goods unmerchantable.
[Mendoza v. David, G.R. No. 147575 (2004)]
“Fitness for a particular purpose”: Where
the buyer expressly or impliedly makes known
to the seller the particular purpose for which the
goods are acquired AND it appears that the
buyer relied on the seller’s skill or judgment
[Art.1562(1), CC]
IMPLIED WARRANTY AGAINST
REDHIBITORY DEFECT IN THE SALE OF
ANIMALS [Art. 1572, CC]
Redhibitory defect – a hidden defect of
animals of such nature that expert knowledge
is not sufficient to discover it, even in a case
where a professional inspection has been
made
No warranty in case of [Art. 1574, CC]
a. Animals sold at fairs or public auctions
b. Livestock sold as condemned
The following sales are void [Art. 1575, CC]
a. Sale of animals suffering from contagious
diseases
b. Sale of animals unfit for the purpose for
which they are acquired as stated in the
contract
U.P. LAW BOC SPECIAL CONTRACTS
Veterinarians are liable if they fail to discover
or disclose the hidden defect through
ignorance or bad faith. [Art. 1576, CC]
Seller liable if animal dies within 3 days after
its purchase due to a disease that existed at
the time of sale. [Art. 1578, CC]
Effects of Warranties
a. Natural tendency is to induce buyer to
purchase the subject matter
b. Buyer purchases subject matter relying
thereon
c. Seller liable for damages in case of breach
Effects of Waivers
Only applicable to waiver of warranty against
eviction; parties may increase or decrease
warranty against eviction but the effect
depends on good/bad faith of the seller:
a. Seller in bad faith and there is warranty
against eviction – null and void
b. Buyer without knowledge of a particular
risk and made general renunciation of
warranty – not waiver but merely limits
liability of seller in case of eviction (pay
value of subject matter at the time of
eviction)
c. Buyer with knowledge of risk of eviction
assumed its consequences and made a
waiver – vendor not liable
d. Waiver to a specific case of eviction –
wipes out warranty as to that specific risk
but not as to eviction caused by other
reasons
One who purchases real estate with knowledge
of defect or lack of title cannot claim he
acquired title thereto in good faith, as against
true owner of land or of interest therein. [J.M.
Tuason v. CA, G.R. No. L-41233 (1979)] The
same rule must be applied to one who has
knowledge of facts which should have put him
upon such inquiry and investigation as might
be necessary to acquaint him with the defects
in the title of his vendor. A purchaser cannot
close his eyes to facts which should put a
Page 358 of 532
CIVIL LAW
reasonable man upon his guard and then claim
that he acted in good faith under the belief that
there was no defect in the title of the vendor.
Buyer’s Options in Case of
Breach of Warranty
Remedies of buyer for breach of warranty,
both implied and express:
• Accept goods + demand
diminution/extinction of price
• Accept goods + damages
• Refuse to accept goods + damages
Rescind (Refuse to accept or return or offer
to return) + recover price paid [Art. 1599,
CC]
EXPRESS WARRANTY
Prescriptive period: Period specified in
express warranty OR 4 years, if no period is
specified (following the general rule on
rescission of contracts)
Remedies
Rescission not available when buyer:
a. Knew of breach of warranty when he
accepted the goods without protest
b. Fails to notify the seller about election to
rescind within a reasonable period of time
c. Fails to return or offer to return the goods
to the seller in substantially a good
condition as they were when delivered,
unless deterioration was due to breach of
warranty
Measure of damages: Difference between
value of goods at the time of delivery and the
value they would have had if they had
answered to the warranty
Effects of rescission
a. Buyer no longer liable for price: Entitled
to the return of any part of price paid,
concurrently with or immediately after
an offer to return the goods
b. If seller refuses to accept offer to return
goods: buyer deemed as bailee for
seller and has right of lien to secure
payment of part of price paid
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

IMPLIED WARRANTY AGAINST EVICTION

[Arts. 1555, 1556, CC] IMPLIED WARRANTY AGAINST
Total Eviction Partial Eviction ENCUMBRANCES [Art. 1560, CC]
Enforce liability for
eviction Enforce liability Rescission: Within 1 year from execution of
(demand deed of sale OR
Demand from seller: VICED)
(VICED) OR Damages: Within 1 year from execution of
a. Value of thing sold at Rescind within 6 deed of sale or discovery of the burden or
time of eviction months from servitude
b. Income or fruits, if he delivery
has been ordered to a. If he would IMPLIED WARRANTY AGAINST HIDDEN
deliver them to the not have DEFECTS [Arts. 1567-1571, CC]
party who won the bought the
eviction suit thing sold If thing is not lost:
c. Costs of eviction suit without the • Withdraw from contract (accion
and in a proper case, part lost; redhibitoria) + damages
suit against seller for b. BUT he must • Demand a proportionate reduction of the
warranty return the price (accion quanti minoris) + damages
d. Expenses of the thing without
contract, if buyer has other If thing is lost:
paid them encumbranc Due to fortuitous
e. Damages and es than Due to hidden fault event or fault of
interests, and those which buyer
ornamental it had when Demand:
If seller aware of
expenses, IF sale he acquired a. Price paid
defect, buyer may
was made in bad it minus value
demand:
faith of thing
a. Return of
when it was
price
Rules lost
b. Refund of
a. Buyer need not appeal from decision to b. Damages, if
expenses
hold seller liable for eviction seller acted
c. Damages
b. When adverse possession commenced in bad faith
before sale, but prescription period If seller not aware of
completed after transfer: seller is not liable defect:
c. If property sold for nonpayment of taxes Buyer may demand
due and not made known to the buyer price and expenses
before the sale: seller liable BUT NOT damages
d. Judgment debtor also responsible for
eviction in judicial sales, unless it is Prescriptive period: 6 mos. from delivery
otherwise decreed in the judgment
IMPLIED WARRANTY AGAINST
If there is waiver of warranty: REDHIBITORY DEFECTS OF ANIMALS
a. Seller acted in bad faith: Waiver is void,
seller liable for eviction Remedies
b. Buyer made waiver without knowledge of • Withdraw from contract + damages
risks of eviction: Seller liable only for the • Demand a proportionate reduction of the
value of the thing sold at time of eviction price + damages
c. Buyer made waiver with knowledge of
risks: Seller not liable; buyer assumed the If sale is rescinded:
consequences

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U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

a. Buyer must return animal in the condition in Remedies of the Seller

which it was sold and delivered
b. Buyer shall be liable for injury due to his QUICK SUMMARY OF REMEDIES OF
negligence. SELLER
REMEDY
Prescriptive period: 40 days from delivery Damages, Rescission, Price
through Specific
Warranty in Sale of Consumer Performance.
Movables
Goods Special Remedies:
Possessory lien, Stoppage in
If implied warranty accompanies express transitu, Resale, Rescission
warranty, both will be of equal duration. [Sec. Exact fulfillment, Cancellation
Movables on
68, RA 7394] of the Sale, Foreclosure of
Installment
Chattel Mortgage
Express Warranty Implied Warranty Price through Specific
a. Retain the Performance, Rescission (for
a. Demand repair Immovables
goods and anticipatory breach and for
within 30 days;
recover non-payment)
extendible for
damages Contract of Sale: Rescission
causes beyond the
OR Immovables through Article 1592, CC
control of the
b. Reject the on Contract to Sell: Rescission
warrantor
goods, cancel Installment through Maceda Law (RA
b. Demand refund of
contract and 6552)
price minus amount
recover from
directly attributable
seller so much 1. Sale of Goods
to the use of the
of the purchase
consumer prior to
price as has ACTION FOR PRICE [Art. 1595, CC]
the discovery of the
been paid + a. When the ownership of the goods has
non-conformity
damages passed to the buyer and he wrongfully
neglects or refuses to pay for the price
9. Breach of Contract b. When the price is payable on a certain day
and the buyer wrongfully neglects to pay
The following remedies arise from the such price, whether or not ownership has
bilateral nature of the contract of sale: passed
a. Specific performance c. When the goods cannot readily be resold
b. Rescission for a reasonable price, and the buyer
c. Damages wrongfully refuses to accept the goods,
whether or not ownership has passed
General rule: Rescission of a contract will not
be permitted for a slight or casual breach, but In an action by the seller under (2), buyer can
only for such substantial and fundamental set up the defense that the seller, at any time
breach as would defeat the very object of the before judgment in such action, could not or did
parties in making the agreement. [Song Fo & not intend to deliver the goods.
Co. v. Hawaiian-Philippine Co., G.R. No.
23769 (1925)] Unless the contrary appears, payment and
delivery are presumed to be concurrent acts,
Prescriptive periods and the obligation of each party to perform the
• 10 years if based on written contract contract is dependent upon the simultaneous
• 6 years if based on oral contract performance by the other party [de Leon].

Page 360 of 532

U.P. LAW BOC SPECIAL CONTRACTS
If ownership has not yet passed to the buyer,
the seller cannot maintain an action for the
price, unless it involves (1) or (3).
Title to goods passes from the moment the
goods are placed at the buyer’s disposal when
refusal to accept is without just cause. [de Leon
citing Art. 1588, CC]
ACTION FOR DAMAGES [Art. 1596, CC]
When ownership has not yet passed and the
buyer, without lawful cause, neglects or
refuses to ACCEPT and PAY for the goods
General rule: Measure of damages is the
ESTIMATED LOSS directly and naturally
resulting in the ordinary course of events from
the buyer’s breach.
Exceptions:
a. Where there is available market for goods:
Difference between the contract price and
the market price. The market price is fixed
at the time the goods ought to have been
accepted, or if no time was fixed, at the
time of refusal to accept.
Note: When there are special
circumstances showing proximate
damages of a greater amount than the
difference between the contract price and
market price, seller is entitled to such
higher amount of damages when such
damages may be reasonably attributed to
the non-performance of the obligation. [de
Leon; par. 3, Art. 1596 read with par. 2, Art.
2201, CC]
b. Where labor or expense of material amount
is necessary on the part of the seller to
perform the contract: Cost of labor
performed or expenses made before
receiving notice of buyer’s repudiation, and
unrealized profit.
RESCISSION BY GIVING THE BUYER
NOTICE OF THE ELECTION TO RESCIND
[Art. 1597, CC]
When the goods have not yet been delivered to
the buyer, and the buyer repudiated the
contract of sale, or manifested his inability to
Page 361 of 532
CIVIL LAW
perform his obligations, or has committed a
breach of the contract of sale.
Under this rule, rescission would bar an action
on the contract because it means cancellation
of the contractual obligations between the
parties. [Baviera]
The unpaid seller’s right to rescind for non-
performance is not absolute. Not allowed to
rescind when:
a. There are 3rd persons possessing the
objects of the contract to whom no bad faith
is imputable [de Leon; Ocejo Perez & Co.
v. International Bank, G.R. No. L-10658
(1918)]
b. Breach is on slight or casual [de Leon;
Song Fo & Co. v. Hawaiian-Phil. Co.,
supra]
The seller cannot unilaterally and
extrajudicially rescind a contract absent
express stipulation to do so, except as
provided in Art. 1597. [De Leon]
2. Special Remedies of the Unpaid
Seller [Arts. 1525-1535, CC]
a. Possessory lien;
b. Stoppage in transitu;
c. Special right of resale; and
d. Special right to rescind
Note: These special remedies have a
hierarchical application. The special rights to
resell and to rescind can be availed of by the
unpaid seller only when either of the two prior
rights of possessory lien or stoppage in transitu
have been exercised by the unpaid seller.
[Villanueva]
Definition of an Unpaid Seller
Art. 1525. Seller is deemed to be unpaid seller:
1. When the whole of the price has not
been paid or tendered;
2. When a bill of exchange or other
negotiable instrument has been
received as conditional payment, and
the condition on which it was received
has been broken by reason of the
U.P. LAW BOC SPECIAL CONTRACTS
dishonor of the instrument, the
insolvency of the buyer, or otherwise.
Unpaid Seller also includes:
a. The agent of the seller to whom the bill
of lading was endorsed,
b. The consignor or agent who had paid
the price or is responsible for the price
c. Any other person who is in the position
of a seller (i.e. buyer who paid the price
and had a right to return the goods).
[Art. 1525, CC]
A seller is considered to be an unpaid seller if
the whole price has not been paid or tendered,
or when check received as a conditional
payment was dishonored by non-payment or
insolvency of the buyer. [Baviera]
POSSESSORY LIEN OVER THE GOODS
Right to retain possession of goods until
payment or tender of the whole price, or unless
he agrees to sell on credit [Arts. 1526-1529,
1503, 1535, CC]
When lien available
a. The seller is unpaid
b. The unpaid seller has possession over the
thing
c. Ownership of the thing has passed to the
buyer
d. Any of the following: [Art 1527, CC]
• Goods are sold without stipulation as to
credit
• Goods are sold on credit, but term of
credit has expired
• 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 [par. 2,
Art. 1527, CC]
When unpaid seller loses his lien [Art. 1529,
CC]
a. Seller delivers goods to carrier or other
bailee for transmission to the buyer without
reserving ownership or right of possession
(i.e. under a straight or non-negotiable bill
of lading)
b. Buyer or his agent lawfully obtains
possession of goods
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CIVIL LAW
c. Seller waives the lien
● But it is not lost with respect to the
remainder of the goods when only
partial delivery is made (unless such is
symbolic delivery of the whole)
● It is not lost by the mere fact that seller
obtained a judgment for the price
When Lien May Be Revived After Delivery
a. If the buyer refuses to receive the goods
after the same are delivered to the carrier
or other bailee on his behalf, though the
seller has parted with both ownership and
possession. Here, the seller may reclaim
the goods and revest the lien. [par. 1 (2).
Art 1531, CC]
b. If the buyer returns the goods in wrongful
repudiation of the sale, and the seller, in
accepting the goods from the buyer, says
he does not assent to the rescission.
Possessory lien is lost after the seller loses
possession but his lien as an unpaid seller
remains. His preference can only be defeated
by the government’s claim to the specific tax on
the goods. [Arts. 2241, 2247, CC]
RIGHT OF STOPPAGE IN TRANSITU
An extension of the lien for the price; entitles
unpaid seller to resume possession of the
goods while they are in transit before the goods
come in possession of the vendee. [Arts. 1530-
1532, 1535, 1636(2) CC]
Note: This is an old common law remedy which
is an extension of the lien for the price and
entitles the unpaid seller to resume possession
of the goods while they are in transit before the
goods come in possession of the vendee if the
latter is or becomes insolvent.
Requisites for the exercise of stoppage in
transitu
a. The seller is unpaid
b. The buyer is insolvent
c. The goods are in transit
d. The seller either takes actual possession,
or gives notice of claim to the carrier or
other person possessing the goods
U.P. LAW BOC SPECIAL CONTRACTS
e. The seller must surrender the negotiable
instrument or title, if any, issued by the
carrier/bailee
f. The seller must bear the expenses of the
delivery of the goods after exercise of such
right.
When Goods Are In Transit [par. 1, Art 1531,
CC]
a. From the time of delivery to the carrier or
other bailee by the seller, for the purpose
of transmission to the buyer, until the buyer
or his agent takes such delivery from the
carrier.
b. Even when goods have reached their
ultimate destination, if buyer rejects them
and carrier retains possession
To terminate transit by delivery to a
middleman, delivery must be to keep, not to
transport.
In case of misdelivery, the goods are still
considered in transit, hence, the seller may still
exercise his right pursuant to Article 1523.
When Goods are No Longer in Transit [par.
2, Art. 1531, CC]
a. Buyer obtained delivery of the goods
before they have reached their appointed
destination
b. Goods have arrived at the appointed
destination, and the carrier/bailee
acknowledges to hold the goods on behalf
of the buyer
c. Goods have arrived at the appointed
destination, but carrier wrongfully refuses
to deliver to buyer/his agent
Note: 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.
How Right is Exercised [Art. 1532, CC]
a. By obtaining actual possession of the
goods
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CIVIL LAW
b. By giving notice of his claim to the
carrier/other bailee who has possession of
the goods
• Carrier must redeliver goods to seller,
or according to his instructions
• Carrier not obliged to redeliver until the
negotiable document of title, if any, has
been surrendered for cancellation
Effect When Buyer Has Sold the Goods [Art.
1535, CC]
General Rule: Seller’s right to stoppage in
transitu is not affected even if buyer has sold or
disposed of the goods unless the seller has
given his assent thereto.
Exceptions:
a. When seller has given consent thereto
b. When a negotiable document of title has
been issued for the goods to a purchaser
for value in good faith
SPECIAL RIGHT OF RESALE
Available to unpaid seller who has a right of lien
or who has stopped the goods in transitu [Art.
1533, CC].
When available
When the unpaid seller has either a right of lien
or has stopped the goods in transitu and under
any of the following conditions:
a. The goods are perishable in nature
b. The right to resell is expressly reserved in
case the buyer should default
c. The buyer delays in paying the price for an
unreasonable time
The right to resell the goods is not mandatory,
but permissive.
How exercised
a. He must do so within a reasonable time
and in such manner as to obtain the best
price possible.
b. The place of sale shall be at the place of
delivery, except if the seller cannot sell the
thing at a fair price at the place of delivery.
c. Resale is deemed to be a fair sale if it is
undertaken in accordance with established
business practices, with no attempt to take
advantage of the original buyer.
U.P. LAW BOC SPECIAL CONTRACTS
d. Resale may be in a private or public sale,
but seller cannot buy directly or indirectly.
e. For resale to be valid, buyer need not be
notified of an intention to resell or the time
and place of the resale.
Exception: if the ground for resale is failure to
pay for an unreasonable amount of time
The seller must exercise reasonable judgment
in making the sale.
Effects of Resale:
a. Seller is no longer liable to the original
buyer upon the contract of sale or for any
profit made by the resale
b. Buyer at resale acquires good title as
against the original owner
c. In case resale is at a loss, seller is entitled
to recover the difference from the original
buyer
d. Seller may recover damages from original
buyer for breach of contract
SPECIAL RIGHT TO RESCIND
Return of the title over the undelivered goods
to the seller, and right to recover damages for
breach of contract [Art. 1534, CC]
When available
When the unpaid seller has either a right of lien
or has stopped the goods in transitu and under
any of the following conditions:
a. Seller expressly reserved his right to
rescind in case buyer defaults
b. Buyer has been in default in payment for an
unreasonable time
Transfer of title shall not be held to have been
rescinded by the unpaid seller until he
manifests by notice to the buyer or some other
overt act an intention to rescind.
Communication of rescission to buyer is not
always necessary (it can be an overt act). But
giving/failure to give notice is relevant in
determining reasonableness of time given to
the buyer to make good his obligation under
contract. [de Leon]
3. Recto Law: Sale of Movables on
Installment – Arts. 1484-1486, CC
Page 364 of 532
CIVIL LAW
WHEN APPLICABLE
Sale of movables in installment
The rule is intended to apply to sales of
movables, the price of which is payable in 2 or
more installments, but not to straight-term
sales where the price is payable in full, after
making a down payment because the law aims
to protect improvident buyers who may be
tempted to buy beyond their means. [Levy
Hermanos v. Gervacio, G.R. No. l-46306
(1939)]
Lease of personal property with option to
buy
When lessor has deprived the lessee of the
possession or enjoyment of the thing (i.e.
lessor files a complaint for replevin against
lessee).
Also applies when seller assigns his credit to
someone else.
ALTERNATIVE AND EXCLUSIVE
REMEDIES
Note: The exercise of one remedy bars the
exercise of the others.
a. Specific Performance
General Rule: When the seller has chosen
specific performance, he can no longer seek
for rescission or foreclosure of the chattel
mortgage
Exception: If specific performance has
become impossible, the seller may still choose
rescission [Art. 1191, CC]
b. Cancellation of sale if vendee fails to
pay 2 or more installments
When the seller cancels the sale by
repossessing the property sold, he is barred
from exacting payment for its price.
It can only be carried out when he who
demands rescission can return whatever he
may be obliged to restore. [Art. 1385, CC]
U.P. LAW BOC SPECIAL CONTRACTS
c. Foreclosure of Chattel Mortgage if
vendee fails to pay 2 or more
installments
If seller chooses this remedy, he shall have no
further action to recover any unpaid balance,
and any stipulation to the contrary shall be void.
The purpose of the law is to remedy the abuses
committed in foreclosure of chattel
mortgages. It prevents mortgagees from
seizing the mortgaged property, buying it at
foreclosure sale for a low price and then
bringing the suit against the mortgagor for a
deficiency judgment. The almost invariable
result of this procedure was that the mortgagor
found himself minus the property and still
owing practically the full amount of his original
indebtedness. [Bachrach Motor Co., Inc. v.
Millan, G.R. No. L-42256 (1935)]
4. Sale of Immovables
RESCISSION FOR ANTICIPATORY
BREACH [ART. 1591, CC]
Note: This is applicable to both cash sales and
sales in installments.
Requisites
a. There is delivery of immovable property
b. Vendee has not yet paid the price; and
c. Vendor has reasonable grounds to fear the
loss of property and the loss of price
If there is no such reasonable ground, Art. 1191
applies (specific performance or rescission
with damages).
Court has no discretion to compel the seller to
wait for the expiration of the period to pay, or to
grant the buyer more time to pay.
SPECIFIC PERFORMANCE + DAMAGES OR
RESCISSION + DAMAGES [Art. 1191, CC]
Seller may choose between specific
performance and rescission, with damages in
either case. Court has discretion, for a just
cause, to give the buyer more time to pay even
if the seller chooses rescission.
If seller chose specific performance, and such
becomes impossible, he may still avail of
Page 365 of 532
CIVIL LAW
rescission. If absolute sale, seller must make a
demand for rescission.
a. Judicially, OR
b. By a notarial act
Demand necessary even if automatic
rescission is stipulated
a. Effect of lack of demand: Buyer can still pay
b. Effect of demand: Court may not grant
buyer a new term
SECS. 23 AND 24, PD 957
Non-forfeiture of payments
No installment payment made by the buyer
shall be forfeited in favor of the owner or
developer of the condominium or subdivision
project, after due notice, when the buyer
desists from paying due to the failure of the
developer or owner to develop the project
according to the approved plans or within the
time limit stated.
Buyer’s Remedy: At his option, he may
reimburse the total amount paid including
amortization interest with interest thereon at
the legal rate.
If the buyer fails to pay the installments for
reasons other than the failure of the owner or
developer to develop the project, his rights
shall be governed by RA 6552.
5. Maceda Law (RA 6552): Sale of
Immovables on Installment
RA 6552 does NOT apply to:
a. Industrial lots
b. Commercial buildings
c. Sale to tenants under Agricultural Reform
Code [RA 3844]
d. Sale of lands payable in straight terms
[Sec. 3, RA 6552]
Rights of the Buyer:
The law imposes additional requirements on
the part of the seller for a valid rescission.
a. If buyer has paid at least 2 years of
installments then defaults:
• Buyer has right to a grace period of 1
month per year of installment payment
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

made BUT the buyer may only avail of However, mere filing of an unlawful detainer
the grace period once every 5 years suit by the seller does not operate as such
• Buyer has right to the refund of Cash notice. [de Leon]
Surrender Value (CSV): 50% of total
amount paid + 5% for every year after b. Remedies of the Buyer
the first 5 years of installments BUT
total CSV should not be greater than General rule: Courts will refuse to decree
90% of total amount paid specific performance with respect to chattels
• After the lapse of the grace period, because damages are a sufficient remedy.
buyer is given a notice of cancellation
or demand for rescission by notarial Exception: Buyer is entitled to the specific
act, effective 30 days from the buyer’s thing which to him has special value and which
receipt thereof AND only upon full he cannot readily obtain in the market OR
payment of CSV where damages would not furnish a complete
and adequate remedy. [Baviera]
b. If buyer has paid less than 2 years of
installments: QUICK SUMMARY OF REMEDIES OF
• Grace period of at least 60 days BUYER
• After the lapse of the grace period, REMEDY
buyer is given a notice of cancellation Damages, Rescission, Price
or demand for rescission by notarial Movables through Specific
act, effective 30 days upon receipt Performance.
thereof Return or Offer to Return
(with recovery of price or may
c. During the grace period, the buyer shall become the seller’s bailee)
also have the right: Breach of
Acceptance, for recoupment
• To sell or assign his rights, evidenced Warranty
or with damages
in a notarial instrument Refuse to Accept with
• To update his account Damages
• To pay in advance any installment, or Rescission, Suspension of
the full unpaid balance of the price, Payment, PD 957
without any interest, and to have such (Reimbursement of the total
full payment of the purchase price Immovables
amount paid/ compel the
annotated in the certificate of title developer to complete
covering the property. facilities)
Contract of Sale: Article
Down payments, deposits, or options on the Immovables
1592, CC
contract shall be included in the total number of on
Contract to Sell: Maceda Law
installments made. Installment
(RA 6552)

The seller may go to court for judicial rescission

in lieu of a notarial act of rescission.

Cancellation pertains to extrajudicial

cancellation. Absence of notice does not bar
the filing of an action to cancel the contract.

A decision in an ejectment case can operate as

notice of cancellation as required by RA 6552.

Page 366 of 532

U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

1. Sale of Movables seller is bound to make

good the deficiency [Art.
REMEDY FOR BREACH OF OBLIGATION 1464]
TO PRESERVE
2. Sale of Immovables [Art 1539 – 1543,
If thing is lost: CC]
Through fault of seller /
Without fault of
Through Fortuitous IF AT THE RATE OF A CERTAIN PRICE PER
seller
Event (if seller is liable) UNIT OF MEASURE OR NUMBER
NO BREACH
Obligation is Damages Less (in area or More (in area or
extinguished. quality) than what quality) than what
was agreed upon: was agreed upon:
A thing is lost when it: Proportional reduction Reject the excess
a. Perishes; of price OR
b. Goes out of commerce of man; or OR Accept the whole
c. Disappears in such a way that its existence Rescission, if: and pay at contract
is unknown or it cannot be recovered a. Lack in area is at rate
least 1/10 of what
If thing deteriorates: is stated, or inferior
Without fault of value of thing sold
Through fault of seller exceeds 1/10 of
seller
NO BREACH. Rescission + damages price
Impairment shall OR b. Buyer would not
be borne by Specific performance + have bought the
buyer damages property has he
been aware of the
inferior quality or
REMEDY FOR BREACH OF OBLIGATION
smaller area
TO DELIVER
Note: This rule also applies to judicial sales
Delivery of wrong quantity [Art. 1522, CC]
[Art. 1541, CC].
Goods are
Goods are LESS THAN MORE THAN
IF FOR A LUMP SUM
what was contracted what was
contracted Everything is within Not everything is
Reject the goods boundaries, even if within the
OR less or more than boundaries
Accept and pay: stated area
a. At contract rate if No remedy Proportional
buyer accepts reduction in price
Reject the excess Where both the area OR
knowing that
OR and the boundaries of Rescission
seller won’t
Reject the whole, the immovable are
perform in full
if indivisible declared, the area
b. At fair value if
OR covered within the
goods were used
Accept the whole boundaries of the
before knowing
and pay at immovable prevails
that seller won’t
contract rate over the stated area.
be able to
perform in full [Rudolf Lietz, Inc. v.
CA, G.R. No. 122463
Buyer becomes the owner (2005)]
of the whole mass and the

Page 367 of 532

U.P. LAW BOC SPECIAL CONTRACTS
Prescriptive period: 6 months counted from
date of delivery.
10. Performance of the
Contract
Note: The obligations of the vendor and
vendee are also discussed in detail in sections
C and D of this Sales Reviewer.
Delivery of the Thing Sold
1. In General
Payment and delivery of the thing sold are
concurrent acts, in consonance with the rule in
reciprocal obligations. [Baviera]
The rule is that neither party incurs in delay if
the other does not comply or is not ready to
comply in a proper manner with what is
incumbent upon him.
The Agreement of the parties determines
whether it is for the buyer to take possession of
the goods or for the seller to send them to the
buyer. 
 Time is of the essence of the contract
Place, Time and Manner of Delivery
General Rule: The vendor is not bound to
deliver the thing sold if the vendee has not paid
the price
Exception: When the thing is sold on credit
RULE ON THE PLACE
Whether it is for the buyer to take possession
of the goods or for the seller to send them to
the buyer depends on the AGREEMENT
between the two parties.
• In the absence of stipulation: delivery
should be at the seller’s place of business
if he has one
• In case of sale of specific goods which are
in another place: the buyer should take
delivery from such place.
Note: Demand or tender of delivery shall be
made at a reasonable hour.
Page 368 of 532
CIVIL LAW
RULE ON THE TIME
Where by agreement, the seller is bound to
send the goods to the buyer, he is bound to
send them within the time agreed upon.
• If no time fixed: within a reasonable time.
• The expenses of placing the goods in a
deliverable state shall be borne by the
seller (unless otherwise stipulated)
RULE ON THE MANNER
Where the goods at the time of the sale are in
the possession of a third person: NO
DELIVERY unless such third person
acknowledges to the buyer that he holds
the goods on the latter’s behalf.
What Constitutes a Reasonable Time?
When the time of delivery is not fixed in the
contract, time is not of the essence. Delivery
must be made within a reasonable time. [Smith
Bell v. Matti (1922)]
General Rule: The reasonable time for
delivery is determined by the circumstances
attending the particular transaction.
When Time is of the Essence
whenever the intention of the parties is clear
that performance of its terms shall be
accomplished exactly at the stipulated day. It
could also be implied from the nature of the
contract itself, or of the subject matter, or of the
circumstances under which the contract is
made. [Baviera]
Whenever the intention of the parties is clear
that performance of its terms shall be:
• Accomplished exactly at the stipulated day
• Implied from the nature of the contract
itself, the subject matter or the
circumstances under which the contract is
made
When the Vendor is not Bound to Delive
Article 1524, CC: The vendor shall not be
bound to deliver the thing sold, if the vendee
has not paid him the price, or if no period for
the payment has been fixed in the contract.
U.P. LAW BOC SPECIAL CONTRACTS
Article 1536, CC: The vendor is not bound
to deliver the thing sold in case the vendee
should lose the right to make use of the
terms as provided in Article 1198.
Article 1198, CC: The debtor shall lose
every right to make use of the period:
(1) When after the obligation has been
contracted, he becomes insol- vent, unless
he gives a guaranty or security for the debt;
(2) When he does not furnish to the creditor
the guaranties or securities which he has
promised;
(3) When by his own acts he has impaired
said guaranties or securities after their
establishment, and when through a
fortuitous event they disappear, unless he
immediately gives new ones equally
satisfactory;
(4) When the debtor violates any
undertaking, in consideration of which the
creditor agreed to the period;
(5) When the debtor attempts to abscond.
Sales of Goods/ Movables
1. Delivery of Wrong Quantity
Article 1522, CC: Where the seller delivers
to the buyer a quantity of goods larger than
he contracted to sell, the buyer may accept
the goods included in the con- tract and
reject the rest. If the buyer accepts the whole
of the goods so delivered, he must pay for
them at the contract rate. xxxx In the
preceding two paragraphs, if the subject
matter is indivisible, the buyer may reject the
whole of the goods.
Quantity is always of the essence of a sales
contract and a seller is bound to tender the
amount of goods contracted for, in order to hold
the buyer liable for performance. [Baviera]
Page 369 of 532
CIVIL LAW
General Rule: The buyer is not bound to
accept delivery of a quantity of goods more or
less than that agreed upon or to accept goods
which are of a description different from that
agreed upon.
Exception: There is usage of trade, special
stipulation, or course of dealing to the contrary.
REMEDIES PROVIDED FOR BY LAW:
1. Where the seller delivers a quantity less
than that agreed 
upon, the buyer may
reject them. If the buyer accepts or retains
that goods delivered, knowing the inability
of the seller to deliver the rest, the buyer is
bound to pay for them at the contract rate.
If the buyer has used or disposed of the
goods before knowing the inability of the
seller to deliver the rest, the buyer shall pay
not more than the fair value of the goods.
(Note: “fair value” means the price of the
goods in the open market.) 

2. If the quantity delivered is more than that
agreed upon, the buyer may reject the
excess, unless the subject matter is
indivisible, in which case, the buyer may
reject the whole. 

3. Where the seller delivers the goods mixed
with goods of a different description not
included in the contract, the buyer may
accept the goods which are in accordance
with the contract, and reject the rest, unless
the subject matter is in- divisible, in which
case, the buyer may reject the whole.
2. Delivery by Installments
Article 1538, CC: In case of loss,
deterioration or improvement of the thing
before its delivery, the rules in Article 1189
shall be observed, the vendor being
considered the debtor.
General Rule: The buyer is not bound to
accept the delivery of goods by installments.
Exception: Unless it is otherwise stipulated.
Where the contract calls for the delivery of
goods at stated intervals which are to be
U.P. LAW BOC SPECIAL CONTRACTS
separately paid for, whether prompt payment
or delivery is of the essence of the contract
such that a delay or breach of the obligation
would entitle the aggrieved party to treat the
entire contract as broken or to regard each
breach as severable would depend on the
terms of the contract and the circumstances of
the case. [Baviera]
Severability: is whether the breach is so
material as to justify the aggrieved party in
refusing to proceed further with the entire
contract or so immaterial that the breach is
severable, giving rise merely to a claim for
damages.
 Note: This is discussed in Section D of this
Sale of Immovables
1. Where Price is at Certain Rate Per Unit
of Measure
WHEN VENDEE HAS THE OPTION TO
DEMAND A PROPORTIONATE REDUCTION
OF THE PRICE (OR DEMAND RESCISSION
OF CONTRACT)
General Rule: If price is fixed at a certain rate
per unit of measure and the area is delivered is
less than that stated in the contract, or even if
the area is correct but part of the land is not of
the quality stated in the contract.
Exception: Where the entire land is not of the
quality stated in the contract, as in such a case,
the consent must have been obtained by
mistake or fraud (contract may then be
voidable). These rules presuppose that the
actual area was not known to both parties until
a survey was made after the execution of the
contract.
Note: These rules do not apply where the entire
land is not of the quality stated in the contract
because in such case, the consent must have
been obtained by mistake or fraud. [Baviera]
2. Sales for a Lump Sum
Article 1542, CC: In the sale of real estate,
made for a lump sum and not at the rate of a
certain sum for a unit of measure or number,
Page 370 of 532
CIVIL LAW
there shall be no increase or decrease of the
price, although there be a greater or less
area or number than that stated in the
contract.
If the sale of property is for a lump sum, there
shall be no increase or decrease in the price,
whether the actual area delivered turned out to
be greater or less than that stated in the
contract. [Baviera]
Inspection and Acceptance
sales reviewer, on the Obligations of the
Vendee.
1. Payment of Price
LIABILITY FOR INTEREST
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 (Art. 1582, CC:
If the time and place should not have been
stipulated, payment must be made at the time
and place of delivery of the thing sold).
General Rule: The vendee shall owe interest
on the price from the time the thing is
delivered up to the time of payment if there
is a stipulation requiring interests
• If there is no stipulation: from the time of
judicial or extrajudicial demand for
payment.
• This applies if the thing delivered produces
fruits or income, or if the buyer incurs in
default
SUSPENSION OF PAYMENT
Art. 1590, CC A vendee may suspend
payment when:
• The vendee is disturbed in the possession
or ownership of the thing delivered; or
should he have reasonable grounds to fear
such disturbance by vindicatory action, or
a foreclosure of mortgage.
• Unless there is a stipulation to the contrary
notwithstanding any such contingency; or
unless the vendor gives security for the
return of the price in a proper case. (Note:
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

Disturbance or threat of disturbance must RA 6552 (MACEDA LAW)

come through a vindicatory action or a
foreclosure of mortgage, and not through a
mere threat or claim of a third person.)
● Neither can the buyer suspend payment,
on the ground that the vendor is
incapacitated.
● If the third person claims a servitude on the
thing sold, the remedy of the buyer is to
demand rescission of the contract or
payment of the proper indemnity.
A vendee may not suspend payment when:
• For a mere act of trespass by a third
person, the buyer could defend himself and
has no right to suspend payment
Note: There is a mere trespass when the third
person claims no right to the thing whatsoever.
Therefore, in order that the buyer may have a
right to suspend payment, it is absolutely
necessary that the cause of disturbance or
danger be based on a fact arising before the
sale or if it arose after the sale, the cause is
imputable to the vendor or his successor-in-
interest. [Baviera]
EFFECT OF NON-PAYMENT
General Rule: The power to rescind
obligations is implied in reciprocal ones, in
case one of the obligors should not comply with
what is incumbent upon him.
● The injured party may choose between
fulfillment and rescission of the obligation,
with payment of damages in either case.
● The court shall order the rescission
claimed, unless there is just cause
authorizing the granting of a new period.
However, in absolute sales of real property,
even if there is a stipulation providing for ipso
jure rescission, in case of default in payment,
the law required the seller to demand the
resolution of the contract from the buyer
judicially or by a notarial act, before such
stipulation could be given effect. Otherwise, the
buyer could still pay the price, even after the
expiration of the period to pay. [Baviera]
Note: This was discussed in Section I,
Subsection 1.a.5 of this Sales Reviewer, on
Maceda Law.
August 26, 1972: The Realty Installment
Buyer Protection Act was approved:
• It declared a public policy to protect buyers
of real-estate on installments.
• This included residential condominium
apartments, excluding industrial lots,
commercial buildings and lands sold under
RA 3844, against onerous and oppressive
conditions.
11. Extinguishment of Sales
Causes [Arts. 1600, 1231, CC]
Generally, extinguished by the same causes as
all other obligations [Arts.1600, 1231, CC]
a. Payment/performance
b. Prescription
c. Loss of thing due
d. Annulment
e. Novation
f. Condonation/remission
g. Confusion/merger
h. Compensation
i. Rescission
j. Resolutory condition fulfilled
k. Redemption (Conventional or Legal)
Conventional redemption
(Pacto de Retro Sale)
1. Definition
Conventional Redemption exists when the
vendor reserves the right to repurchase the
thing sold, with the obligation to:
1. Return price of the sale
2. Expenses of the contract
3. Any other legitimate payments by reason of
the sale
4. Necessary and useful expenses [Art. 1601,
CC]
Note: Redemption feature does not prevent the
full consummation of the contract of sale.

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U.P. LAW BOC SPECIAL CONTRACTS
Available when the seller reserves the right to
repurchase the thing sold in the same
instrument of sale as one of the stipulations of
the contract [Villarica v. CA, G.R. No. L-19196
(1968)]
2. Period
General Rule: Follow period stipulated in
contract, but should not exceed 10 years.
Exceptions:
1. If no period stipulated but the parties
intended a period, then it shall be 10 years
from the date of the contract.
2. If no period stipulated, then it shall be four
years from the execution of the contract
3. But 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
3. By whom exercised
1. Vendor, after returning to vendee price of
sale plus expenses of the contract, other
legitimate payments made by reason of
sale, and necessary and useful expenses
made on the thing sold [Art. 1616, CC]
2. His heirs, assigns or agents
3. Creditor, after he has exhausted the
property of the vendor [Art. 1610, CC]
4. Co-owners of an immovable, if they sold
their interests to the same person, may
only redeem their respective shares [Art.
1612, CC]
• Vendee cannot be compelled to agree
to a partial redemption [Art. 1613, CC]
• If the co-owners sold their interest to
the same person who previously
bought the share of a co-owner subject
to a right of redemption, then the latter
may be compelled to redeem the whole
property
4. From whom to redeem
1. Vendee a retro
2. His heirs, assigns or agents
Page 372 of 532
CIVIL LAW
3. Subsequent purchaser of property, even if
the right to redeem was not mentioned in
the subsequent contract; except if
registered land, where the right to redeem
must be annotated on the title
4. If several heirs, then the right of redemption
can be exercised against each heir for his
share of the property [Art. 1615, CC]
5. How exercised
1. By returning the ff. to the buyer:
• Price of the sale; except if the parties
agreed on a redemption price
• Expenses of the contract and other
legitimate payments made by reason of
the sale;
• Necessary and useful expenses made
on the thing sold
2. Complying with any other stipulation
agreed upon, if any.
The general rule in redemption is that it is not
sufficient that a person offering to redeem
manifests his desire to do so. The statement of
intention must be accompanied by an actual
and simultaneous tender of payment for the full
amount of the repurchase price. [BPI Family
Savings Bank, Inc. v. Sps. Veloso, G.R. No.
141974 (2004)]
6. Effect of Redemption
1. The sale is extinguished
2. The seller shall receive the thing free from
all charges or mortgages constituted by the
buyer BUT he shall respect leases
executed by the buyer in good faith and in
accordance with local custom.
3. As to fruits:
• If parties agreed on a distribution, the fruits
shall be distributed according to the
agreement.
• If parties did not agree on a distribution,
o If there are growing fruits at the
time of sale and at the time of
redemption:
a. Buyer receives reimbursement
if the buyer paid indemnity at
the time of the sale
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

b. Buyer receives no effectively on the

reimbursement or prorating if buyer
the buyer did not pay indemnity
at the time of sale Equitable Mortgage
○ If there were no growing fruits at
the time of sale, but some exist at An equitable mortgage is defined as one
the time of redemption: fruits which, although lacking in some formality, or
prorated (buyer entitled to part form or words, or other requisites demanded by
corresponding to time he a statute, nevertheless reveals the intention of
possessed the land in the last year, the parties to charge real property as security
counted from the anniversary of the for a debt, and contains nothing impossible or
date of sale) contrary to law. [Molina v. CA, G.R. No. 125755
(2003)]
7. Effect of non-redemption
A pactum commissorium is a stipulation
Ownership is consolidated in the buyer BUT enabling the mortgagee to acquire ownership
the consolidation shall not be recorded in the of the mortgaged properties without need of
Registry of property without a judicial order, foreclosure proceedings which is a nullity being
after the vendor has been duly heard. contrary to the provisions of Article 2088 of the
Civil Code. The inclusion of such stipulation in
8. Right to redeem vs. Option to purchase the deed shows the intention to mortgage
Right to Redeem Option to Purchase rather than to sell. [Legaspi v. Sps. Ong, G.R.
Not a separate No. 141311 (2005)]
contract but part of a
main contract of Generally a principal A pactum commissorium is contrary to the
sale, and cannot contract and may be nature of a true pacto de retro sale since
exist unless reserved created independent ownership of the property sold is immediately
at the time of the of another contract transferred to the vendee a retro upon
perfection of the execution of the sale, subject only to the
main contract of sale repurchase of a vendor a retro within the
Must have a stipulated period.
consideration
Does not need its
separate and distinct 1. Presumption that a contract is
separate
from the purchase an equitable mortgage
consideration to be
price to be valid and
valid and effective
effective [Arts. 1324 Art. 1602. The contract shall be presumed to
and 1479, CC] be an equitable mortgage, in any of the
The maximum period following cases:
The period of the
for the exercise of 1. Price unusually inadequate;
option contract may
the right to 2. Possession retained by the seller as lessee
be beyond the 10-
repurchase cannot or otherwise;
year period
exceed 10 years 3. Period of redemption extended (or granted
Requires in addition anew) upon or after the expiration of the
a tender of payment right to repurchase;
of the amount 4. Part of the purchase price retained by the
May be exercised by
required by law, seller;
notice of its exercise
including 5. Payment of taxes on the thing sold borne
to the offeror
consignment thereof by the seller;
if tender of payment 6. Any other case where it may be fairly
cannot be made inferred that the Real intention of the

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U.P. LAW BOC SPECIAL CONTRACTS
parties is for the transaction to secure a
debt or other obligation.
Note: A contract shall be construed as an
equitable mortgage when any of the
circumstances in Art. 1602 is present. When in
doubt whether equitable mortgage or sale,
settle in favour or equitable mortgage because
it involves a lesser transmission of rights.
By itself, no equitable mortgage under the ff.
instances:
1. Mere tolerated possession
2. Mere delay in transferring title to the buyer
The provisions on equitable mortgage of
Art.1602, CC also applies to a contract
purporting to be a deed of absolute sale.
Remedy: Reformation of the instrument [must
be brought within 10 years]
1. If the agreement is construed to be an
equitable mortgage, any money or other
benefit received as “rents,” shall be
considered as “interest” (and subject to
usury laws)
2. The court may decree that the vendor-
debtor to pay the outstanding loan to the
vendee-creditor
3. Where the agreement is upheld as a pacto
de retro sale, the vendor may still exercise
the right within 30 days from the time the
judgment becomes final.
The right of repurchase is not a right granted to
the seller by the buyer in a subsequent
instrument, but one reserved by the seller in the
same instrument as the sale contract. Any right
granted after the execution of the sale
instrument is not a right to repurchase, but
some other right like an option to buy. [Roberts
v. Papio, G.R. No. 166714 (2007)]
2. Requisites for presumption of
an equitable mortgage
a. That the parties entered into a contract
denominated as a contract of sale, and
b. That their intention was to secure an
existing debt by way of a mortgage.
[Molina v. CA, supra]
Page 374 of 532
CIVIL LAW
In case of doubt, a contract purporting to be
a sale with right to repurchase shall be
construed as an equitable mortgage [Art.
1603, CC]
3. Rationale behind provision on
equitable mortgage
a. Circumvention of usury law
b. Circumvention of prohibition against
pactum commissorium – creditor
cannot appropriate the things given by
way of pledge or mortgage since
remedy is foreclosure.
4. Remedies of apparent vendor
a. If the instrument does not reflect the
true agreement: remedy is reformation
b. If decreed to be an equitable mortgage:
any money, fruits or other benefit to be
received by the buyer as rent or
otherwise considered as interest.
c. If decreed as a true sale with right to
purchase: seller may redeem within 30
days from finality of judgment, even if
the period for redemption has expired.
5. Period of redemption
No stipulation: 4 years from the date of
contract [Art. 1606, CC]
When there is agreement: Period not to
exceed 10 years [Art. 1606, CC]
General Rule: Period starts to run from the
date of the execution of the contract
Exception: When the efficacy of the sale is
subject to a suspensive condition, period
should be counted not from the date appearing
on the instrument, but from the date when the
condition is fulfilled, marking the
consummation of the sale [Tolentino citing
Manresa].
Additional 30 days for Repurchase
The last paragraph of Art. 1606 giving the
vendor the right to repurchase within 30 days
U.P. LAW BOC SPECIAL CONTRACTS
from the time of the rendition of final judgment
applies only where the nature and the
character of the transaction, whether as a
pacto de retro or an equitable mortgage, was
put in issue before the court [Gonzales v. de
Leon, G.R. No. L-14532 (1965)]
When an unrecorded pacto de retro sale was
construed as an equitable mortgage, the
plaintiff had the right to enforce his lien in a
separate proceeding notwithstanding the fact
that he had failed to obtain judgment declaring
him the sole and absolute owner of the land.
[Heirs of Arches v. Diaz, G.R. No. L-27136
(1973)]
Where the petition of the buyer in a pacto de
retro sale is for a judicial orders pursuant Art.
1607, so that there may be consolidation of
ownership since there was failure to redeem
during the redemption period, the right of action
to foreclose or to collect the indebtedness
arises from the court judgment declaring the
contract an equitable mortgage.
6. Exercise of the right to redeem
[Art. 1616, CC]
The seller can avail himself of the right of
repurchase by returning to the buyer:
1. the price of the sale;
2. the expenses of the contract and any other
legitimate payments made by reason of the
sale;
3. the necessary and useful expenses made
on the thing sold [Art.1616, CC].
7. How redemption is exercised
1. The vendor de retro must complete the
repurchase before the expiration of the
redemption period [Panganiban v. Cuevas,
G.R. No. 2001 (1907)]
2. A sincere or genuine tender of payment is
enough. The deposit of the amount of the
repurchase money with the Clerk of Court
was simply an additional security [Legaspi
v. CA, G.R. No. L-45519 (1986)]
3. When tender of payment cannot be validly
made because the buyer cannot be
located, it becomes imperative for the
Page 375 of 532
CIVIL LAW
seller a retro to file a suit for consignation
with the courts of the redemption price
[Catangcatang v. Legayada, G.R. L-26295
(1978)].
4. If the offer or tender of payment for
repurchase is refused, it is not necessary
for the vendor a retro to consign in court or
make judicial deposit of the repurchase
price [Rosales v. Reyes, G.R. No. 8162
(1913)].
The seller a retro is given no option to require
the buyer a retro to remove the useful
improvements on the land subject of the sale a
retro, unlike that granted the owner of a land
under Arts. 546 and 547. Under Art. 1616, the
seller a retro must pay for useful improvements
introduced by the buyer a retro; otherwise, the
latter may retain possession of the land until
reimbursement is made. [Gargollo v. Duero,
G.R. No. L-15973 (1961)]
Legal Redemption [Art. 1619,
CC]
Rationale for the law: Public policy (to minimize
co-ownership) and benefit of the redemptioner
1. Definition
1. 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 [Art. 1619, CC]
2. Applies to transfers of ownership by
onerous title where subrogation is possible.
Hence, it cannot apply to barter or to
transfer by gratuitous title or hereditary
succession.
3. Applies to sales with pacto de retro
[Baviera citing Manresa]
2. Manner
1. A formal offer to redeem or
2. Filing of an action in court together with the
consignation of the redemption price within
U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

the reglementary period [Lee Chuy Realty Judgment debtor,

v. CA, G.R. No. 104114 (1995)] successor–in-
1 year from the date
interest, or creditor
of registration of the
3. Period to redeem with subsequent lien,
certificate of sale
in case of execution
To whom granted Period sale [Sec. 27, Rule
30 days from notice 39, ROC]
● In writing Debtor-mortgagor,
● By the seller successors-in-
● Of the interest,
actual judicial/judgment
execution creditor, any person 1 year from the date
and delivery having a lien on the of the sale
of the deed property, in case of
of sale extrajudicial
foreclosure of
Actual knowledge of mortgage [Sec. 6, Act
the sale is No. 3135]
immaterial, absent Debtor-mortgagor in
Co-owner any showing that case of judicial
[Art 1620, CC] the co-owner has foreclosure of real
90 days from finality
been shown a copy estate mortgage IF
of judgment
Adjoining owner of of the deed of sale the mortgagee is a
Rural Land through a written bank or a banking
[Art 1621, CC] communication. institution. [General
[Doromal v. CA, Banking Law of 2000]
Adjoining owner of G.R. No. L-36083 Agricultural lessee
urban land (1975)] 2 years from the
w/o knowledge of
registration of the
[Art. 1622, CC] sale of landholding
sale
The law did not [Sec. 12, Agrarian
provide for a Land Reform Code]
particular mode of
written notice, thus The notice required in Art. 1623 must be given
any compliance by the seller because the seller is in a better
with “written notice” position to identify who his co-owners are. Said
should suffice, provision is clear. [Francisco v. Boiser, G.R.
including the giving No. 137677 (2000)]
of a copy of the
deed of sale. 4. Instances of legal redemption
[Conejero v. CA,
G.R. No. L-21812 a. Redemption by co-owners [Art. 1621,
(1966)] CC]
Debtor in case a 30 days from the
credit or date the assignee A co-owner of a thing may exercise the right of
incorporeal right in demands payment redemption in case the shares of all the co-
litigation is sold [Art. from debtor owners or any of them are sold to a third person
1634, CC]
Taxpayer in case of Third person refers to all persons who are not
1 year from date of
tax sale [Sec. 215, heirs of the vendor, by will or intestate
forfeiture
NIRC] succession.

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U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

The right is available not only to original co- b. Adjacent lands are separated by
owners, but to those who had later acquired the brooks, drains, roads and other
share of the co-owner. apparent servitudes for the benefit of
other estates
But the right of redemption may be exercised
by a co-owner only when part of the community Order of preference if two or more wishes to
property is sold to a stranger. When the portion exercise the right:
is sold to another co-owner, the right does not • Owner with smaller land area
arise because a new participant is not added to • If same land area, then the one who
the co-ownership [Fernandez v. Sps. Tarun, first requested the redemption
G.R. No. 143868 (2002)].
c. Redemption by adjoining land-owners
If the price of the alienation is grossly of urban land (applies only to small
excessive, the redemptioner shall pay only a portions of urban land) [Art. 1621, CC]
reasonable one.
Right of Pre- Right of
Should two or more co-owners desire to emption Redemption
exercise the right, they may also do so in Owner of any
proportion to the share they may respectively adjoining land has a
have in the thing owned in common. right of pre-emption
If the resale has
at a reasonable price
The ff. requisites must concur: been perfected, the
when:
a. Co-ownership of a thing owner of the
a. Urban land is
b. Alienation of shares of co-owners or all adjoining land shall
so small and
of the other co-owners have a right of
so situated
c. Sale must be to a third person or redemption, also at a
that a major
stranger reasonable price
portion of it
d. Sale must be before partition cannot be
e. Right must be exercised within the Priority if 2 or more
used for any
period specified in Article 1623 adjoining owners
practical
f. Buyer must be reimbursed the price of want to redeem:
purpose w/in
the sale owner whose
a reasonable
intended use of the
time;
Rationale: Public Policy, since co-ownership is land appears to be
b. Was bought
a hindrance to the development and best justified
merely for
administration of the property. [Baviera] speculation;
c. Was resold
b. Redemption by adjoining landowners of Arises before sale Arises after sale
rural land [Art. 1621, CC] No rescission There can be
because no sale rescission of the
The ff. requisites must concur: exists yet original sale
a. All lands must be rural lands The action is
b. Lands must be adjacent to each other Action is directed
directed against
c. A piece of rural land is alienated against buyer
prospective seller
d. Area does not exceed one hectare
e. Buyer must already own other rural d. Redemption of Credit
lands
Available when it is sold while in litigation (From
When not applicable the time the complaint is answered)
a. The grantee does not own any rural
land

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U.P. LAW BOC SPECIAL CONTRACTS CIVIL LAW

Not available when the assignment is in favor f. Redemption in Foreclosure and

of: Execution Sales
a. Co-heir/co-owner of right assigned
b. Creditor in payment of his credit Who may redeem
c. Possessor of a tenement or piece of In extra judicial In execution sales
land which is subject to the right foreclosure • Judgment debtor
assigned ● Debtor • Successor in
● Successor in interest
How exercised: reimburse the assignee for interest • Creditor having a
the: ● Judicial or lien on the property
a. Price paid judgment sold by attachment,
b. Judicial expenses incurred creditor of said judgment or
c. Interest on the price from date of debtor mortgage on the
● Junior property
payment
encumbrancer subsequent to the
judgment
e. Under the Public Land Act
Period to redeem
If land is
Coverage
mortgaged in
a. Every conveyance of land acquired under Execution
Extra-judicial favor of a bank:
a free patent or homestead sale:
foreclosure:
b. The ownership of the land must have been within 1 year
transferred to another. If the transaction is within 12
within 1 year after the sale
a mere promise to sell, there is no right yet months
from the date (not available
to redeem after the
of the sale in case of a
c. This refers to conveyances made after the sale
corporate
prohibited 5 years from the issuance of the mortgagor)
patent or grant Amount of redemption
a. Amount of the purchase
Period: b. Interest at 1% per month from the time
a. Within 5 years from the date of conveyance of the sale up to the time of redemption
b. If pacto de retro sale, the period to redeem c. Any assessment or taxes which the
cannot be less than 5 years purchaser may have paid

Who may redeem Note: Every conveyance of land acquired

General Rule: Applicant, widow, or heirs
Exception: land is sold to another member of
the family of the applicant, or his direct
descendant or heir
From whom: Subsequent purchasers
The right to redeem can be exercised against
any subsequent purchaser even if the land is
registered under the Torrens System because
the fact that it was acquired through a
homestead or free patent can be seen from the
description of the property in the certificate of
title.
under a free patent or homestead, when
proper, shall be subject to repurchase by the
applicant, his widow or legal heirs within 5
years from the date of conveyance.
Sale within the 5-year prohibition is void even
if the sale is in favor of the homesteader’s own
son or daughter. This right of repurchase by
the homesteader cannot be waived.
g. Under the Agrarian Land Reform Code
Lessee’s right of pre-emption
The agricultural lessee shall have the
preferential right to buy under the same
reasonable terms and conditions, in case the
lessor decides to hold the landholding

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Conditions TRUST AS DISTINGUISHED FROM OTHER

a. The landholding must be pre-empted CONCEPTS
by the DAR Stipulation pour
Trust
b. When two or more lessees, each shall autrui
have preferential right only to the Involves any
Refers to a specific
extent of the area cultivated by him stipulation in favor
property
of a third person
Period: 180 days from notice in writing
Trust Condition
Lessee’s right of redemption Performance or
In case landholding is sold to 3rd person Performance of
accomplishment is
without the knowledge of the lessee, the latter trust is enforceable
not enforceable
shall have the right to redeem the same at a
reasonable price and consideration. [Sec. 12, Guardianship or
RA 3844] Trust
Executorship
Guardians or
Period: within 180 days from notice in writing Executors do not
have legal title but
Trustees has legal
mere actual
title to the property
B. TRUSTS possession and
limited powers over
the property
Definition
A trust is the legal relationship between one Trust Contract
person having an equitable ownership of Always involves
A legal obligation
property and another person owning the legal ownership,
based on an
title to such property, the equitable ownership embracing a set of
undertaking
of the former entitling him to the performance rights and duties
supported by a
of certain duties and the exercise of certain fiduciary in
consideration, which
powers by the latter. [Estate of Cabacungan v. character, which
obligation may or
Laigo, G.R. No. 175073 (2011)] may be created by a
may not be fiduciary
declaration without
in character.
Characteristics of Trust: consideration
1. It is a relationship
2. The relationship is of fiduciary character
3. The relationship is with respect to property, Trust Debt
not one involving merely personal duties The beneficiary of a A creditor has
4. It involves the existence of equitable duties trust has a beneficial merely a personal
imposed upon the holder of the title to the interest in the trust claim against the
property to deal with it for the benefit of property. debtor.
another There is a fiduciary There is no fiduciary
5. It arises as a result of a manifestation of relationship between relationship
intention to create the relationship a trustee and a between a debtor
beneficiary. and a creditor.

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