CHAPTER 1 NATURE AND FORM OF THE CONTRACT

 CONTRACT OF SALE – is a contract whereby one of the party undertakes to deliver/transfer

ownership of a determinant thing and the other, to pay a price certain in money or its equivalent.

CHARACTERISTICS of a CONTRACT OF SALE

1. Consensual – perfected by mere consent or meeting of minds of both parties (all contracts are
consensual in nature without stipulation of the parties as to form)
2. Bilateral – more than 1 contracting parties undertaking to fulfill their obligations
3. Onerous – both parties must give something equivalent to what the other party has given
4. Commutative – what is given is equivalent to the other
5. Nominate – has name by law
6. Principal – doesn’t depend on other contracts for its existence

Essential Elements
1. Consent
2. Object – must be determinate, useful, legal and possible
3. Cause/ Consideration – refers to price certain in money or its equivalent

 Natural Elements – deemed to exist without any stipulation

Example: warranties
 Accidental Elements – stipulated by parties
Example: interest

“A contract may be absolute (not subject to any condition) or conditional (subject to condition.)”

 Contract to Sell – if the sale is subject to a condition such as the full payment of price

OBJECT OF A CONTRACT OF SALE

1. Sale of Vain Hope or Expectancy – void
2. Things having potential Existence – valid
3. Mere hope or expectancy – valid
4. Sale of future inheritance – void
EFFECT IF THE OWNER OF A FUNGIBLE GOODS SELLS AN UNDIVIDED SHARE
 The buyer becomes co-owner in proportion to his share
 If later on it was discovered that the mass contains less than what was sold, the buyer becomes
the owner of the whole mass

“things subject to a resolutely condition may be the object of a contract of sale.”

Ex: Pact De Retro Sale – sale with a right to repurchase

 Contract of Agency – a person binds himself to render some service or to do something in

representation or on behalf of another with the consent or authority of the latter
 Contract for a piece of work – the contractor binds himself to execute a piece of work for the
employer. The contractor may either employ his labor or skill or also furnish the material.
  Contract of Barter/ Exchange – one of the parties binds himself to give one thing in consideration
of the other’s promise to give another thing.

RULES GOVERNING PRICE

INSTANCES WHERE PRICE IS CONSIDERED CERTAIN
a) The parties have fixed or agreed upon a definite amount
b) With reference to another thing certain
c) Upon a 3rd person’s judgment

Gross inadequacy of price – contract is valid except:

1. The consent is vitiated
2. The parties really intended a donation
When Price simulated – void
The fixing of the price cannot be left to the discretion of one of the contracting parties.

Effect if price not determined

a. No effect, if yet to be executed (delivered)
b. The buyer must pay a reasonable price thereof, (if delivery has been made)

STAGES OF A CONTRACT OF SALE

1. Negotiation - contracting parties indicate interest
2. Perfection – meeting of the minds of the parties upon the object and upon the price
3. Consummation – parties perform their respective undertakings

OWNERSHIP - ownership of things is transferred through delivery.

Statute of Frauds

- The law enumerates certain transaction to be stated in writhing in order to prevent fraudulent
cases, disputes/ issue
1. Sale that is to be performed more than 1 year
2. Sale of personal (movable) property not less than php500.
3. Sale of real property/interest

 OPTION MONEY – reservation fee, what you paid is the time or the option to buy, not
compelled to buy
 EARNEST MONEY – down payment, part of the purchase price

RISK OF LOSS OF THE OBJECT/SUBJECT MATTER

 Res perit domino – the thing perishes with the owner

1. Before perfection – seller

2. At the time of perfection – contract is void and inexistent because it lacks an essential
element (object)
3. After perfection, before delivery – buyer
 4. After delivery – buyer

REMEDIES OF VENDOR IN SALE OF PERSONAL PROPERTY PAYABLE IN INSTALLMENTS

1. Exact fulfilment
2. Rescission
3. Foreclosure of chattel mortgage

“ Alternative, not cumulative”

 in sale of personal property – chattel mortagage
 In real property- real- estate mortage

“ the installment and rents paid cab be forfeited, if stipulated.”

RIGHT OF FIRST REFUSAL

 After the expiration of the lease term, you have the option to sell the property leased
before offering it to 3rd persons
 Actually, the instrument has defects, the real intention of the parties os a contract of
sale, thus the law on sales will govern
 Indicator: “ lease of personal property with lease to buy.”
 Chapter 4
Section 1 – General Provision
Principal Obligation of Vendor
1. To transfer ownership of a determinate thing
2. To deliver the thing
3. To warrant against eviction and hidden defects
4. To take care of the thing with proper diligence
5. To pay for the expenses

Ways of effecting delivery

1. By actual or real delivery
2. Constructive or legal delivery
3. By delivery in any other manner signifying an agreement that the possession is transferred to the
vendee

 Delivery is an indispensable requisite to transfer ownership and must be made with intention of
delivering the thing sold.
 The delivery must be made to the vendee or his authorized representative.

Ways effecting constructive delivery

1. by the execution of a public instrument
2. By symbolical tradition or “tradition symbolica”
3. by traditio longa manu
4. by tradition brevi manu
5. by tradition constitutium possessorim
6. by quasi-delivery or quasi-traditio

Section 2 – Delivery of the Thing Sold

 Tradition – is a derivative mode of acquiring ownership by virtue which one who has the right
and intention to alienate a corporeal thing, transmits it by virtue of a just title to one who accepts
them.
Importance: To enable the vendee to enjoy and make use of the property purchased.
Actual Delivery
1. There is an actual delivery when the thing sold Is placed in the control and possession of the vendee
2. Actual or manual delivery of an article sold is not always essential to passing of title thereto.
3. Delivery is generally evidenced by a written acknowledgement of the buyer.

Symbolic Tradition – to effect delivery, the parties make use of a token symbol to represent the thing
delivered.
  Public Instrument – It is one which is acknowledged before a notary public or any authorized to
administer oath, by the person who executed the same.
Rule: The execution of such applies to, movable as well as immovable property.
Exception: If it appears from the document or it can be inferred therefrom that it was not the intention of
the parties to make delivery, no tradition can be deemed to have taken place.

 Traditio Longa Manu – takes place by mere consent or agreement of the contracting parties as
when the vendor merely points to the thing sold which shall be at the control and disposal of the
vendee.
 Traditio Brevi Manu – happens when the vendee has already the possession of the thing sold by
virtue of another title as when the lessor sells the thing leases to the lessee.
 Traditio constitutum possessorium – takes place when the vendor continues in possession of
the property sold not as owner but in some other capacity.
 Quasi-traditio – when delivery is in case of incorporeal things.
1. By execution of public instrument
2. If no delivery, by placing of the titles of ownership in the possession of the vendee
3. Allowing the vendee to use his rights as new owner w/ consent of vendor.

Sale or return Sale on trial or approval

The property is sold but the buyer has the option
to return the same to the seller instead of paying
the price.
Subject to resolutory condition
Depends entirely on the will of the buyer
Ownership of goods passes to the buyer on
delivery and subsequent return reverts ownership
to seller
Risk of loss or injury rest upon the buyer
A contract in the nature of an option to purchase,
if the goods prove satisfactory, the approval of the
buyer being a condition precedent.
Subject to suspensive conditions
Depends on the character or quality of the goods
Ownership remains on the seller until the buyer
signifies his approval or acceptance to the seller
Risk still remains with the seller

Delivery of specific goods

 Delivery, be it only constructive, passes title in the thing sold.

 Delivery to a carrier is deemed to be a delivery to the buyer.
Exception
1. If the contrary intention appears by the terms of the contract
2. In the cases provided in the 2nd and 3rd paragraph of article 1523
3. In cases provided in the 2nd, 3rd and last paragraph of article 1503.

Where seller’s title only for purpose of security

1. Form of bill of lading not conclusive
2. Where ownership would have passes but for the form of the bill of lading

 Where goods are shipped and bill of lading is deliverable, but possession of the bill of lading is
retained by seller/agent, the possession of goods remains on the seller.
 The effect of such is controlling, as it does the possession of the goods and the later cannot obtain
the goods without the bill.
Where bill of lading is sent w/ draft
1. Delivery conditional
2. Duty of buyer if draft not honored
3. Right innocent third person

Risk of loss
Res perit domino – if the thing is lost by fortuitous event, the risk id borne by the owner opf the thing at
the time of the loss.
Exception:
1. Where seller reserves the ownership of the goods to secure the performance of the buyer of his
obligations, buyer assumes the risk of loss.
2. Where actual delivery has been delayed through the fault of either, risk is at the party at fault.

Sale by person not the owner

1. Where the owner of goods is, by his conduct, precluded from denying the seller’s authority to sell
2. Where the law enables the apparent owner to dispose of the goods as if he were the true owner
3. Where the sale is sanctioned by statutory or judicial authority
4. Where the sale is made at merchant’s stores, fairs or markets
5. Where the seller has a voidable title which has not been avoided at the time of the sale
6. Where seller subsequently acquires title.

In sale by one having voidable title, buyer can acquire such if:
1. Before the title of the seller has been avoided
2. In good faith for value
3. Without notice of the seller’s defect of title.

Document of title – Includes any bill of lading, dock warrant, “quedan”, or warehouse receipt or any other
document used in the ordinary course of business as proof of the possession or control of the goods.
Nature and Function
1. Refers to goods and not to money. They are receipts of bailee, or orders upon bailee
2. Evidence of transfer of title and possession of goods and contract between the parties
Form of Document of Title
1. Bill of Lading – Receipt for the transport of goods.
2. Dock Warrant – Instrument given by dock owners to an importer of goods warehoused.
3. Warehouse Receipt – receipt for goods deposited w/ a warehouseman.
Classes
1. Negotiable documents of titles
2. Non-negotiable document of titles
Negotiation of negotiable document
1. If the goods are deliverable to the bearer
2. When it is endorsed in blank or to the bearer.
Who may negotiate?
1. By the owner
2. By the person whom the possession or custody is entrusted by the owner
Person being negotiated acquires:
1. Title of the person negotiating the document over the goods covered
2. Title of the person to whose order were to be delivered over such goods
3. Direct obligation of the bailee to hold possession of the goods
Rights of person document been transferred
1. Right to notify the bailee of the transfer
2. Right to acquire the obligation of the bailee to hold the goods for him
If transfer is w/out indorsement, one has the right:
1. To the goods as against the transferor
2. To compel the transferor to indorse the indorsement
A person warrants
1. That the document is genuine
2. That he has the legal right to negotiate or transfer it
3. That he has knowledge of no fact which would impair the validity or worth of the document
4. That he has a right to transfer the title and goods are merchantable or fit for a particular purpose.
Effect of negotiable instrument
1. The indorser will pay the instrument if the party primarily liable fails to do so.
2. The indorsement of a document of title amounts merely to a conveyance by the indorser, not a
contract of guaranty.
Validity of the negotiation is not impaired
1. Breach of duty on the part of the person making the negotiation
2. When owner is deprived of possession by loss, theft, fraud, accident, mistake, duress or
conversion.
When attachment of levy available
1. While in the possession of the bailee, it cannot be attached or levied, unless
Exceptions:
a) the document be first surrendered
b) its negotiation is prohibited by court
2. The bailee cannot be compelled to deliver the possession of goods until the document is
surrendered to him or impounded by the court.
Remedy: Aid from courts of appropriate jurisdiction by adjunction (restraining order)
Place of delivery
1) Where there is agreement, express or implied, the place of delivery is that agreed upon
2) If no agreement, determined by usage of trade
3) If no agreement and prevalent usage, the seller’s place of business
4) In any other case, the seller’s residence
5) In case of specific goods, which knowledge of both is to some other place, that is the place.
Time of delivery
1) No time fixed, seller is bound to send the goods to buyer within a reasonable time
2) Provides time, time is essence and correct performance was offered
3) If contract does not specify and delivery is made within reasonable time, time is not of the
essence.
Hour of delivery
1) Reasonable hour is a question of fact largely dependent upon the circumstances
2) Incase of bulky or needs special care of goods, hour might be reasonable.
Delivery of seller
1) When he delivers quantity of goods less than contracted, the buyer may reject. But when he
accepts with knowledge of seller not going to perform in full, he must pay for them at the
contracted rate.
2) When he delivers quantity of goods larger than contracted, the buyer may accept the goods and
rejects the rest. If he accepts the whole, he must pay for them at the contracted rate.
3) When he delivers goods mixed with goods of a different description, the buyer may accept and
reject the rest.
4) If the subject matter is indivisible, the buyer may reject the whole

 Delivery to a carrier constitutes delivery to the buyer.

 Exceptions: provided in paragraph 1, 2, and 3 or Article 1503.
Sellers duty after delivery to carrier
1) To enter on behalf of buyer into such contract reasonable under the circumstances
2) To hive notice to buyer regarding necessity to insure goods.
Definition of Terms
1) COD (Collect on Delivery) – carrier acts for the seller in collecting the purchase price
2) FOB (Free on Board) – Goods to be delivered free of expense
3) CIF (Cost Insurance and Freight) – Price fixed not only cost of goods but also freight and
insurance
4) FAS (Free Alongside Vessel) – Seller pays all the charges and bears risk until goods are placed
alongside overseas vessel and w/in reach of its loading tackle.
5) Ex-Factory, Ex-warehouse – price quoted applies only at the point of origin
6) Ex Dock – seller quotes price including cost of goods on the dock.

Unpaid seller – one who has not been paid or tendered the whole price or who has received a bill of
exchange or other negotiable instrument as conditional payment and the condition on which it was
received has been broken by reason of the dishonor of the instrument.
Deemed to be unpaid seller
1) When whole price has not been paid or tendered
2) has received a bill of exchange or other negotiable instrument as conditional payment and the
condition on which it was received has been broken by reason of the dishonor of the instrument.
Where whole of the price has not been paid
1) tender of payment of buyer
2) Payment of part of price
3) Payment by negotiable instrument
Remedy of unpaid seller
1) Lien on the goods
2) Stopping the goods in transit
3) Right of resale
4) Right to rescind the sale
Right of unpaid seller as to retention of possession until tender of price
1) Goods have been sold w/out any stipulation as to credit
 2) Goods have been sold on credit, but term has expired
3) Buyer becomes insolvent
When unpaid seller losses possessory lien
1) Delivers goods to agent or bailee of buyer
2) Possession is in the buyer or his agent
3) Waiver
Requisite to exercise right of stoppage in transit
1) The seller must be unpaid
2) The buyer must be insolvent
3) The goods must be in transit
4) The seller must take possession
5) The seller must surrender the negotiable document
6) The seller must bear the expenses of delivery
Goods considered in transit
1) After delivery to a carrier or other bailee and before the buyer takes delivery of them
2) If the goods are rejected by the buyer, and carrier continues in possession
Goods considered in transit
1) After delivery to the buyer or his agent
2) If the buyer or agent obtains possession of the goods
3) If the carrier/bailee acknowledges to hold goods on behalf of the buyer
4) If the carrier/bailee wrongfully refuses to deliver the goods to the buyer.
Ways of exercising the right to stop
1) By taking actual possession of goods
2) By giving notice to his claim to the carrier/bailee
When resale is allowable
1) Where goods are perishable in nature
2) Right to resell is expressly reserved, in case buyer in in default
3) Buyer delays in the payment of price
Seller may rescind
1) It is expressly reserved in case of buyers’ default
2) Buyer delays in the payment of price
Sale of goods subject to lien or stoppage in transit
1) Goods not covered by negotiable document of title – goods are subject to legal lien
2) Goods covered by negotiable document of title – lien cannot prevail
Vendee lose right to make use of the period
1) After obligation has contracted, he becomes insolvent, unless he gives guaranty or security for
debt
2) He does not furnish to the creditor the guaranties or securities which he has promised
3) He has impaired such guaranties and securities after establishment, and through fortuitous event
they disappear, unless he immediately gives new ones equally satisfactory.
4) When vendee violates any undertaking in consideration of the agreement
5) Vendee attempts to abscond
In case of loss, deterioration or improvement of thing before delivery
1) If the thing is lost w/out fault of debtor, the obligations shall be extinguished.
2) If thing lost through vendors fault, he shall pay damages
3) When thing deteriorates w/out fault of debtor, impairment is borne by creditor.
 4) When thing deteriorates in fault of debtor, the creditor may choose between rescission of
obligation and its fulfillment, with indemnity for damages
5) If thing is improved by its nature or by time, it shall inure to the benefit of the creditor
6) If thing is improved at the expense of debtor, he has no right
Sale of real area by unit of measure/number
1) Entire area stated in contract must be delivered
2) Where entire area could not be delivered, he is entitled to rescind it.
When vendee is entitles to rescind
1) If the lack in area is at least 1/10 than that stated or stipulated
2) If the deficiency in the quality specified exceeds 1/10 of the price agreed upon
3) If vendee would have not brought the immovable had he known of its smaller area or inferior
quality
Sale of real estate on lump sum
1) Mistake in the area stated in contract immaterial
2) Where area or number stated together w/ boundaries
 Actions for rescission must be made 6 months from the day of delivery
Rules in cases of double sale
1) If property is movable, ownership shall be acquired by who first take possession in good faith
2) If property is immovable:
a) Vendee who first register the sale to the Registry of Property
b) In absence of registration, vendee who first takes possession in good faith
c) In absence of both, one who presents the oldest title in good faith.

SECTION 3: CONDITIONS AND WARRANTIES

 CONDITION – an uncertain event or contingency on the happening of which the obligation of

the contract depends.
 WARRANTY – any representation made by the seller of the thing with respect to its character,
quality or ownership which he induces the buyer to purchase the same relying on said
representation.
 Warranty is a natural element. It exists without stipulation of the parties
 G/R: Seller is liable for warranties

EFFECT OF EXPRESSION OR OPINION - does not import warranty unless the seller is an
EXPERT.

KINDS OF WARRANTY
1. Expressed – any affirmation of fact or any promise by the seller relating to the thing, the
natural tendency of which is to induce the buyer to purchase the thing and the buyer thus
induced, does purchase the same (art. 1546)
2. Implied – is that which the law derives by implication or inference from the nature of the
transaction or the relative situation or circumstances of the parties irrespective of any
intention of the seller to create it. (art. 1547) these are

a. Implied warranty as to seller’s title (waa]]rranty against eviction)

b. Implied warranty against hidden defects or unknown encumbrances
c. Implied warranty as to fitness or merchantability
WHEN IMPLIED WARRANTY NOT APPLICABLE
1. As is and where is sale – if the vendee takes them in the conditions in which
they are found
 2. Sale of secondhand articles
3. Sale by virtue of authority in fact or law

A. WARRANTY AGAINST EVICTION (SEC 1)

 Eviction – judicial process whereby the vendee is deprived of the whole or part of the thing sold

REQUISITES
 the vendee is deprived in whole or in part of the things purchased
 he is deprived by virtue of final judgement
 the judgement is based on a right prior to the sale or an act imputable to the
vendor
 formal summon of vendor in a suit
 no waiver on the part of the vendee


CHARACTERISTICS
 May be partially evicted or totally evicted
 Can be waived
 Can be increased, diminished or suppressed by agreement of the parties
 Vendees right is not lost even if he did not appeal/ request (art. 1549)

CASES WHERE VENDOR IS NOT LIABLE FOR WARRANTY AGAINST EVICTION

o ART. 1550 When adverse possession had been commenced before the sale but the prescriptive
period is completed after the transfer.
o ART. 1551 if the property is sold for nonpayment of taxes due and it is known to the vendee
o ART. 1553 if vendee is bad faith or if he knew the defect of title at the time of sale.
o ART. 1554 if waived by vendee with knowledge of the risk of eviction and assumption of its
consequences (intencionda)
 If the vendee’s waiver is consciente or without knowing its risks, then
the vendor shall only pay the value which the thing sold had at the time
of eviction.

(art. 1555, 1556, 1560 right of vendee)

LIABILITIES OF VENDOR IN CASE EVICTION TAKES PLACE
A. TOTAL EVICTION (art. 1555)
 The vendee has the right to demand the ff from the vendor
1. Return of the value which the thing sold had at the time of the eviction.
2. Income or fruits
3. Costs of the suit
4. Expenses of the contract
5. Damages and interests
B. PARTIAL EVICTION (art. 1556)
1. enforce the vendor’s liability for eviction as stated in art. 1555
2. demand rescission
RIGHTS OF VENDEE WHERE IMMOVABLE IS SOLD ENCUMBERED WITH NON-
APPARENT BURDEN (ART.1560)
1. rescission
2. ask for indemnity
WHEN RIGHT CANNOT BE EXERCISED
1. when the burden or servitude is apparent
2. if it is registered
3. vendee has knowledge of the encumbrance
WHEN ACTION MUST BE BROUGHT
 action must be brought within one year from the date of discovery of the non-apparent
burden/servitude

CHAPTER 5 OBLIGATIONS OF THE VENDEE

PRINCIPAL OBLIGATIONS OF VENDEE (art. 1582)
1. To accept delivery
2. To pay the price of the thing sold
3. To bear the expenses for the execution and registration of the sale and putting the goods in a
deliverable state

ACCEPTANCE – an assent to become owner of the specific goods (art. 1584)

2 modes of acceptance
1. Expressed – when the buyer expressly intimates to the seller that he has accepted the goods
2. Implied – either
` a. when the buyer does any act inconsistent with the sellers ownership such as
when the buyer uses the goods
b.when the buyer after a lapse of time retains the goods without intimating his
rejection.
RIGHT OF INSPECTION:
G/R: “ the buyer is entitled to a fair opportunity to inspect or examine the articles tenderes to
determine whether it conforms with to the contract.

a. If sent C.O.D (like lazada)

 The buyer is not entitled to such right before payment exceptions:
1. Is stipulated
2. Permitted by usage of trade
3. If paid already
b. If the buyer haven’t yet examined the goods, he is not deemed to have accepted them
DIFFERENCE BETWEEN DELIVERY AND ACCEPTANCE

 Delivery – an act/obligation of the vendor

 Acceptance – act of the vendee

RULES GOVERNING DELIVERY ON INSTALLMENTS (art. 1583)

G/R: “ the buyer is not bound to receive delivery of the goods in installments except if stipulated or
agreed by the parties.”

LIABILITY OF THE SELLER (art. 1586)

G/R: “ The seller is not discharge from liability in damages or other legal remedy for breach of any
promise or warranty except:
 Within a reasonable time, the buyer did not give notice to the seller of
the breach
EX: when you bought mobile phones , you cannot return it after the
allowed time to return it

WHEN BUYERS REFUSAL IS JUSTIFIED (art. 1587)

1. Buyer is not obliged to return the goods
2. Risk of loss belongs to the seller
3. Seller has the obligation to take delivery of the goods
4. Buyer has the right to resell the goods
5. Buyer is not liable as a depositary except when he voluntarily constitutes himself as such

WHEN BUYERS REFUSAL IS WRONGFUL (art. 1588)

1. Title passes to the buyer
2. Risk of loss is borne by buyer

 Justifiable acceptance
- Where the goods are not of the kinds and quality agreed upon and the buyer rejected them

WHEN IS BUYER LIABLE FOR INTEREST (art. 1589)

- Starts from the time of delivery until the payment of price

1. If stipulated
2. If the thing sold produces income or fruits
 3. If buyer default

WHEN CAN VENDEE SUSPEND PAYMENT OF PRICE (art. 1590)

1. If he is disturbed in the possession or ownership of the thing
2. If he has a well-grounded fear that his possession will be disturbed

WHEN VENDEE CANNOT SUSPEND PAYMENT (art. 1590)

1. Vendor gives security for the return of the price
2. If it has been stipulated
3. The vendor has caused the disturbance or danger it cease
4. Mere act of trespass
5. If vendee has fully paid the price

WHEN VENDOR CAN RESCIND SALE

a. Immovable (art. 1591)
1. If he has good reasons to fear the loss of the property and its price
b. Movable (art. 1593)
1. If the buyer without lawful cause, refuses to accept the delivery and pay the
price

WHEN VENDEE MAY STILL PAY EVEN THOUGH SALE IS RESCINDED BY SELLER (art.
1592)
 If the seller has stipulated that he shall rescind the sale ,upon failure of
price but he haven’t given his demand for rescission
 CHAPTER 6
ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS
 In cases where the buyer or seller commits breach of the contract, the
injured party is given remedies or actions
 This provision does not apply to sale of immovable property. It is
governed by the Maceda Law
ACTIONS AVAILABLE TO SELLER
1. Action for the payment of price (art. 1595)
 When the ownership of the goods has passed to the buyer and he wrongfully
neglects or refuses to pay for the price
 When the price is payable on a certain day and the buyer wrongfully neglects or
refuses to pay such price, irrespective if delivery or transfer of title
 When the gods cannot be readily be resold for a reasonable price
 Where ownership of goods has not passed to the buyer, seller
cannot maintain an action for the price
2. Action for damages (art.1596)
 Buyer without lawful cause neglects or refuses or refuses to accept and pay for
the price of the goods
 Where ownership has not passed and the seller cannot maintain action for the
price
 DAMAGES – money given to the injured party in compensation for the injury done
-there is damage when there is injury
Measure of damages : difference between the contract price and the market price
Measure of damages for cancelled by buyer :
(a) The labor performed an expenses incurred for materials before receiving
notice
(b) Profit he would have realized if the sale had been fully performed

3. Rescission of Contract by the seller before delivery (art. 1597)

 When the buyer has repudiated the contract of sale
 When the buyer
ACTIONS AVAILABLE TO BUYER
1. Specific performance (art. 1598)
 When the seller should violate his obligation to make delivery
2. Rescission or damages for breach of warranty (art. 1599)
a. Remedies of buyer for breach of warranty by seller
1. Accept the goods and set up the seller’s breach to reduce or extinguish the price
2. Accept the goods and maintain an action for damages
3. Refuse to accept the goods and maintain an action for the damages
4. Rescind the contract of sale recover the price
b. When rescission not allowed
1. Buyer accepted the goods knowing of the breach of warranty without protest
2. If he fails to notify the seller within a reasonable time of his election to rescind
3. If he fails to return or offer to return the goods in substantially as good condition as
they were at the time of transfer of ownership to him.
c. Rights and obligations of buyer in case of rescission
1. To return the goods
2. To recover the price
3. Right to hold the goods as bailee if the seller refuses the return of the goods
4. Right to lien on the goods for any portion of the price already paid
 CHAPTER 7 EXTINGUSHMENT OF SALE
CAUSES FOR EXTINGUSIMENT OF SALE
1. COMMON – those causes which are also the means of extinguishing all other obligations
2. SPECIAL – causes which are recognized by law on sales
3. EXTRA SPECIAL – conventional and legal redemption

SEC. 1 CONVENTIONAL REDEMPTION

 Definition: the right which the vendor reserves to himself to re acquire the property sold provided
he reimburses the vendee the price, expenses of the contract, any other legitimate payments, and
the necessary and useful expenses.
 It applies to sale of both real and personal property

“Equitable Mortgage” Art. 1602

 Definition: is one although it lacks formalities of a mortgage, shows the intention of the
parties to make the property subject of the contract as a security for the fulfillment of the
obligation.
 The object serves as a security
 The ownership does not pass to the buyer

INSTANCES WHERE EQUITABLE MORTGAGE IS PRESUMED

(1) When the price of a sale with right to repurchase is unusually inadequate
(2) When the vendor remains in possession as lessee or otherwise
(3) When another instrument is executed extending the period of redemption with
(4) When the purchaser retains for himself a part of the purchase price
(5) When the vendor binds himself to pay the taxes on the thing sold
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation

 PACTO DE RETRO SALE - sale with a right to repurchase

 In case of doubt, it shall be construed as an equitable mortgage (art. 1603)
 The vendor may ask for reformation of the contract (art. 1605)
*reformation – remedy by which the written instrument is made or construed so as to
express or conform to the real intention of the parties when such intention is not
expressed in the instrument.

PERIOD FOR REDEMPTION (art. 1606)

a. No agreement as to redemption, then it is an absolute sale
b. 4 years – in the absence of an agreement as to the time
c. Shall not exceed 10 years
d. 30 days, after a final judgement

RIGHT OF VENDEE (art. 1609)

G/R “the vendee may transfer or alienate his right to a third person, mortgage the property, enjoy the
fruits thereof, recover the property against every possessor and perform all other acts of ownership.

OBLIGATIONS OF VENDOR IN CASE OF REDEMPTION (art. 1616)

1. Return the price
2. Reimburse the vendee for the expenses of the contract and any other legitimate payments made
by reason of the sale
 3. Reimbursement for the useful and necessary expenses
SECTION 2: LEGAL REDEMPTION

 DEFINITION: is the right to be subrogated upon the same terms and conditions stipulated in the
contract, in the place of one who acquires a thing by purchase or dation in payment or by any
other transaction whereby ownership is transmitted by onerous title
 Conventional redemption, bases on stipulation of the parties, while legal redemption, based on
law
LEGAL REDEMPTION OF CO- OWNERS (art. 1620)
(1) There must be a co- ownership
(2) There must be alienation of all or of any of the shares of the other co-owners
(3) Sale must be to a third person
(4) Sale must be before partition
(5) The right must be exercised within the period provided
(6) The vendee must be reimburses for the price of the sale
LEGAL REDEMPTION OF ADJACENT OWNERS (RURAL LANDS) (art.1621)
 Applicable only to rural lands
(1)
Both the land must be rural
(2)
Lands are adjacent
(3)
There must be land must be an alienation
(4)
The piece of rural land alienated must not exceed 1 HECTARE
(5)
The vendee must already must own some rural land
(6)
The rural land sold must not be separated by brooks, drains, ravines roads and other apparent
servitudes
 The owner with smaller area is preferred but if both lands have the same area, to the one who first
requested the redemption.

LEGAL REDEMPTION AND PRE EMPTION OF ADJACENT OWNERS (URBAN LANDS) (art.
1622)

 Pre- emption – act or right of purchasing before others

 Redemption – exercised after the sale against the vendee

 The land is urban

 The one exercising the right must be an adjacent owner
 The piece of land sold must be so small and so situated that a major portion
thereof cannot be used for any practical purpose within a reasonable time
 Such urban land was bought by its owner merely for speculation
 About to resold, or that its resale has been perfected
 The law prefers whose intended use of the lands appears best justified.

PERIOD TO EXERCISE THE RIGHT OF PRE-EMPTION/REDEMPTION (art.1623)

 Within 30 days from the notice in writing by the prospective
vendor or vendor.
 The deed of sale shall not be recorded in the registry of property unles accompanied by an
affidavit of the vendor that he has given written notice thereof to all possible redemptioners.