Midterms Rfib 04 14&04 21

REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS
APRIL 14 & APRIL 21, 2021 - MIDTERMS

Week 5 - 6 Voidable Title and Remedies
SALE BY A NON-OWNER OR BY ONE HAVING VOIDABLE TITLE:
1. AT PERFECTION
Sale is consensual in nature since it is perfected or comes into legal being by mere consent, and not by performance of an
act, such as delivery in real contracts, nor does it require the payment of price for its validity. Consent or perfection of the
sale is manifested by the meeting of the offer and the acceptance on three items: (a) subject matter; (b) price; and (c) terms
of payment of the price.
Although a sale ordinarily covers existing things, a valid sale can cover a subject matter that is not existing or having only a
potential existence at the time of perfection; or even a thing subject to a resolutory condition; and ownership of the subject
matter by the seller at the time of perfection is not an essential requirement for the validity of the sale.
In other words, a valid sale exists to bind both seller and buyer even if at the time of perfection the seller was not the owner
thereof since it does not even exist yet; or even if its existed then but did not belong in ownership to the seller at that time of
perfection.
Perfection of a sale merely creates the obligation on the part of the seller to transfer ownership, but by itself perfection does
not transfer ownership. The law state that “the vendor must have a right to transfer the ownership thereof at the time it is
delivered,” and that ownership of the thing sold is not transferred by perfection but “shall be transferred to the vendee upon
the actual or constructive delivery thereof.”
• REVIEW ONLY (refer to previous discussions for more reference and explanation)
• At the time of Perfection of the contract it does not necessarily require the seller to be the owner of the thing
na ibebenta niya, ang kailangan lang ay may ownership na siya at CONSUMMATION stage kapag
perfection pwewdeng hindi muna.
• Pwede ka magbenta kahit di pa nageexist yung property, basta it has the potential for existence.
• Sale is not a mode it is just a title.
• Sale is creation of rights and obligation but what transfer ownership is the delivery.
2. AT CONSUMMATION
Article 1505 of the Civil Code provides that “where goods are sold by a person who is not the owner thereof, and who does
not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller
had.” The article does not say that the sale of goods by a non-owner renders the contract void; it describes the
consequences when delivery under a sale is effected when the seller is not the owner of the thing delivered. As the Court
aptly said: “It is a well-settled principle in law that no one can give what one does not have – nemo dat quod non habet.
Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller
can transfer legally.
In Cavite Development Bank v. Spouses Syrus Lim, the Court explained the proper application of the Latin maxim Nemo dat
quod non habet, as properly applicable to the consummation of the sale thus:
Nemo dat quod non habets as an ancient Latin maxim says, One cannot give what one does not have. In applying this
precept to a contract of sale, a distinction must be kept in mind between the “perfection” and the “consummation” stages of
the contract.
A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract
and upon the price. It is, therefore, not required that, at the perfection stage, the seller be the owner of the thing sold or even
that such subject matter of the sale exists at that point in time.
Thus, under Article 1434 of the Civil Code, when a person sells or alienates a thing which, at that time, was not his, but later
acquires title thereto, such title passes by operation of law to the buyer or grantee. This is the same principle behind the sale
of “future goods” under Art. 1462 of the Civil Code. However, under Art. 1459, at the time of delivery or consummation stage
of the sale, it is required that the seller be the owner of the thing sold. Otherwise, he will not be able to comply with his
obligation to transfer ownership to the buyer. It is at the consummation stage where the principle of nemo dat quod non
habet applies.
• REVIEW ONLY
• Kung ang seller walang right over the property, wala siyang maipapapsa sa buyer. “The buyer acquires no better title
to the goods than the seller had.”
• Ex: Si Joan umuupa sa akin, pero binenta niya yung bahay at lupa ko kay Irish, dahil si Joan ay hindi owner ang
meron lang siya ay ang RIGHT TO LEASE (right to enjoy the property, right to possess), so itong right na ito lang
ang kaya niyang ibigay kay Irish not the ownership.
• “nemo dat quod non habet” = no one can give what one does not have.
• Ex: Stocks may dividends (which is a civil fruits), kapag binenta ko yung Rights to the Fruits ang ibig sabihin lang si
Joan o yung buyer na ang tatanggap ng dividends. Kung ibenta ni Joan yung stocks kay Irish, sino ang may rightful
ownership of the stocks? Siyempre ako pa rin, I have the ‘right to own the property’ dahil ang pinasa ko lang kay
Joan ay yung rights to the fruits so kung ibebenta ni Joan kay Irish yung stocks ang mapupunta lang kay Irish ay
yung right to receive the fruits / dividends.
3. SALE BY CO-OWNER OF THE WHOLE PROPERTY OR DEFINITE PORTION THEREOF
The rule in co-ownership is that none of the co-owners may claim any right, title or interest to a particular portion of the thing
owned in common. A co-owner has no right to sell a divided part of the real estate; although he is the owner of an undivided
half of a tract of land, he has a right to sell and convey an undivided half, but he has no right to divide the lot into two parts,
and convey the whole of one part by metes and bounds.
• Kapg may isang piece of land na hindi pa nahahati legally sa dalawang owner nito na si A and B, walang karapatan
si B na ibenta yung lupa or yung parte niya dahil hindi pa ito nahahati, pwedeng ibenta ni B ay yung interest niya sa
lupa pero hindi yung lupa mismo, kung ibenta ni B yung interest na ang magiging co-owner na ng lupa ay sina A and
C.
RFIB-MIDTERMS-04-14&04-21 1 of 14
EXCEPTIONS TO RULES ON LEGAL EFFECTS OF SALE BY A NON-OWNER (Diba may general rule tayo: “The buyer
acquires no better title to the goods than the seller had.” / no one can give what one does not have. Ito naman yung mga
exception to the general rule, na kahit hindi owner yung seller pwede siyang mag-transfer ng ownership)
Although Article 1505 provides that where goods are sold by a person who is not the owner thereof, and who does
not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller
had, it also provides the following exceptions:
a) When the owner is, by his conduct, precluded from denying the seller’s authority to sell;
• Ex: You have an agent and this agent goes beyond what he has the authority to do. May authority siya na ibenta ang
lupa mon a nasa Batangas, pero ang binenta niya ay yung lupa mo sa Binan. Dahil walang authority si agent kung
sinuman ang makakabili ng lupa ko has no right to acquire the ownership.
• Ang exception to the general rule nangyayari kapag pumayag si Seller na ituloy ang bentahan nung lupa sa Binan or
kung tinanggap ng Seller yung bayad (as an implied acceptance), then magkakaroon ng transfer of ownership doon
sa bumili sa agent.
b) When the contrary is provided for in recording laws;
• Under normal circumstances bawal, pero dahil may recording law at system of registration, ang
sinusunod ng batas ay yung recording law. Ex. Execution of Public Instrument to sale of movable is
equal to delivery.
c) When the sale is made under statutory power of sale or under the order of a court of competent jurisdiction;
and
• Kapag na-foreclose ang property mo kasi ginawa mo siyang security sa isang utang na hindi mo
nabayaran, usually kapag ganitong may narerematang property nagsasagawa ng auction or bentahan
ang court. In this case nagiging seller si court pero hindi naman siya yung owner ng property dahil ang
may-ari pa rin ay ikaw.
d) When the sale is made in a merchant’s store in accordance with the Code of Commerce and special laws.
• Bumili ka ng iPhone naka box pa, tapos nanakaw, yung nagnakaw binenta niya pabalik ulit sa apple
store yung phone mo at binenta sa mas mababang halaga, then si apple naibenta niya ito kay Irish. Si
Irish, dahil ang nangyari ay isa sa mga exception to the general rule, magkakaroon ng transfer of
ownership papunta sa kanya, ikaw man ang original owner, dahil napapunta ito sa isang merchant’s
store then hindi na mag-aaply ang general rule.
• Other exceptions to the main principle enunciated under Article 1505 would be the following:
e) Under Article 1506, the sale by a seller who at the time of delivery had voidable title to the thing delivered;
f) In case of movables, under Article 559, acquisition of possession in good faith under a claim of ownership,
where the real owner has not lost or been deprived of the movable, makes the possessor the rightful owner
of the movable; and
g) Special rights of an unpaid seller of goods to resell under Articles 1526 and 1533 of the Civil Code.
1. WHEN REAL OWNER ESTOPPED

An example when the owner is estopped is Article 1434 of the Civil Code that provides that when a person who is not the
owner of a thing sells or alienates title thereto, such title passes by operation of law to the buyer or grantee. In Bucton v.
Gabar, where the seller sold a parcel of land to the buyer at the time the seller was not yet the owner of the land sold, the
acquisition after one year by the seller of the ownership of said land was automatically transferred to the buyer, and the
seller was estopped from questioning the title of his buyer.
• As discussed kanina, ito yung principle of estoppel. Kung anuman ang sabihin ni seller touchmove na
ito, at bawal ng bawiin.
2. RECORDING LAWS
Except on the effect of registration of chattel mortgage and its subsequent foreclosure and sale at public auction, and the
jurisprudential rules that have come to govern the hierarchy of claims on shares of stock of a corporation, there are at
present no other recording laws pertaining to movables that provide the same principle as “registration as the operative act”
principle applicable to registered land under The Property Registration Decree.
3. STATUTORY POWER; COURT SALE

Judgments of courts divesting the registered owner of title and vesting them in the other party are valid although the courts
may not be the owner of the land. Also, the sale by a sheriff of land levied upon at public auction would validly transfer
ownership to the highest bidder, although the sheriff in executing the certificate of sale has no ownership over said property.
4. SALE AT MERCHANT STORE

The reason for validating the sale and transfer of ownership to buyers who bought from merchant stores is well summarized
in the syllabus in Sun Brothers & Co. v. Velasco:
Under paragraph (3) of Article 1505 of the Civil Code, a person who buys a thing at a merchant’s store after the same has
been put on display thereat, acquires a valid title to the thing although his predecessors in interest did not have any right of
ownership over it. This is a case of an imperfect or void title ripening into a valid one, as a result of some intervening causes.
The policy of the law has always been that where the rights and interests of a vendor come into clash with that of an
innocent buyer for value, the latter must be protected … protecting innocent third parties who have made purchases at
merchant’s stores in good faith and for value appears to be a wise and necessary rule not only to facilitate commercial sales
on movables but to give stability to business transactions.
This rule is necessary in a country such as ours where free enterprise prevails, for a buyer cannot be reasonably expected to
look behind the title of every article when he buys at a store. The doctrine of caveat emptor is now rarely applied, and if it is
ever mentioned it is more of an exception rather than the general rule.
What constitutes “merchant store” can be culled from City of Manila v. Bugsuk Lumber Co., when it held that a “store” is any
place where goods are kept for sale; or where goods are deposited and sold by one engaged in buying and selling them. It
held that “placing of an order for goods and the making of payment thereto at a principal office does not transform said office
into a store, for it is a necessary element that there must also be goods or wares stored therein or on display, and provided
also that the firm or person maintaining that office is actually engaged in the business of buying and selling.
• Kailangan yung store ay engaged in buying and selling, more of retail.
7. “TITLE” AS TO MOVABLE PROPERTIES
Article 559 of the Civil Code provides that possession of movable property acquired in good faith is equivalent to
title. In addition, the article provides that one who has lost any movable or has been unlawfully deprived thereof, may recover
it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully
deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid
therefor.
• Kapag nakuha moa ng isang movable in good faith that is equivalent to ownership. Pero kung ang na-receive mo ay
isang bagay from unlawful deprivation (nakaw), yung may-ari nung nakaw na yun pwedeng i-recover from you yung
gamit niya. If binili niya ito from a public sale, make sure na ire-reimburse mo muna yung thing bago bawiin. Ex: Si A
may phone, ninakaw ni B then binenta ni B kay C. Si A as the owner pwede niyang habulin yung phone kay C.
CHAPTER 10
REMEDIES OF PARTIES
• Discussion for Remedies ay iikot rito  Sa obligation, kapag hindi natupad ni debtor yung kanyang promise kay creditor,
si creditor pwede siyang magdemand ng specific performance (or payment of money, pwede mo rin siyang kasuhan at
ang grounds mo ay specific performance); pwede rin ang rescission (annulment or cancellation of contract); and pwede
rin mag-ask for damages (specific performance with damages, rescission with damages, or purely damages). Take note
rin na kapag ang obligation mo ay service, bawal ang specific performance.
• Sa sales, remember, lagi yang real obligation – delivery of money and delivery of goods.
INTRODUCTION
In the realm of performance, the main rule in Sales was that of caveat emptor (“Let the buyer beware”), which required the
buyer to be aware of the supposed title of the seller to the subject matter; and that a buyer who buys without checking the
seller’s title takes all the risks and losses consequent to such failure. Today, the doctrine is not meant to excuse the seller
from his warranties, but is essentially used to determine whether the buyer, in taking delivery of the subject matter of sale,
can be considered a buyer in good faith; or to determine whether the buyer assumed the risks and contingencies attached to
the subject matter of sale.
Finally, note must be taken of what the Court held in Erquiaga v. Court of Appeals, that: “A basic premise of the doctrine of
‘Le the buyer beware’ is that there be no false representation by the seller. The ancient defense of caveat emptor belongs to
a bygone age, and has no place in contemporary business ethics.
• One of the principles in Law on Sales is caveat emptor – Let the buyer beware. Yung buyer, except for the
warranties, assumes risks kung ano yung mga defects sa title.
REMEDIES IN CASES OF MOVABLES

A. ORDINARY REMEDIES OF SELLER
1. MOVABLES IN GENERAL
In the sale of movables, in case the buyer, upon the expiration of the periods fixed for the delivery of the thing, should not
have appeared to receive it, or, having appeared, he should not have tendered the price at the same time, unless a longer
period has been stipulated for its payment, the seller may maintain an action to rescind the sale.
• Kapag si buyer hindi nagbayad sa tamang oras, pwedeng i-cancel ni seller yung transaction nila – rescission in
ObliCon.
2. SALE OF GOODS
a) Non-Payment of Price by Buyer
Ownership Transferred to Buyer – Where the ownership of the goods has passed to the buyer who wrongfully neglects or
refuses to pay for them according to the terms of the contract, the seller may maintain an action against him for the price of
the goods, i.e., an action for specific performance.
• Kung naibigay na ng seller yung goods sa buyer tapos hindi nagbayad ang remedy doon ay specific performance –
kakasuhan siya ng seller and ask for payment of money.
No Transfer of Ownership to Buyer – When the ownership in the goods has not passed, if they cannot readily be resold for a
reasonable price, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify
the buyer that the goods are thereafter held by the seller as bailee for the buyer; thereafter, the seller may treat the goods as
the buyer’
• Kapag wala pang naibibigay na goods si seller sa buyer, pwede niyang i-offer ulit kay buyer to deliver the good,
tapos pwede na mag-maintain ng action for specific performance.
When Price Payable on Certain Day – Where the price is payable on a certain day, irrespective of delivery or of transfer of
title, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price although
the ownership in the goods has not passed.
However, it shall be a defense to such an action that the seller at any time before the judgment in such action has
manifested an inability to perform the sale on his part or an intention not to perform it.
b) When Buyer Wrongfully Neglects/Refuses to Accept Goods (Ayaw tanggapin yung goods tapos ayaw
magbayad)
Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against
him for damages for non-acceptance, in accordance with the following rules: (pwedeng kasuhan ni seller si buyer and ask for
damages)
I. Damages shall cover the estimated loss directly and naturally resulting in the ordinary course of events from the
buyer’s breach of contract;
• Ex: Hindi binili ni buyer yung goods pero nakaorder ka na so, ng-incur ka na ng cost, pwede kang humingi sa buyer
ng damages doon sa cost of operations. Kasi kung hindi bumili si buyer hindi ka n asana mag incur ng cost of selling
the goods.
II. Where there is an available market for the goods in question, in the absence of special circumstances showing
proximate damage of a different amount, the measure of damages is the difference between the contract price and
market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for
acceptance, then at the time of the refusal to accept;
• Ni-refuse ni Buyer 1 yung goods, so binenta ni seller kay buyer 2 yung goods pero sa mas maliit na halaga.
• Ex: may painting ka worth 100,000 hindi binili ni buyer 1 kaya in-offer mo kay buyer 2, kaso binili lang ito ni buyer 2
sa halagang 75,000, yung difference na 25,000 pwede mo itong kuhanin kay buyer 1.
III. If the buyer repudiates the contract or notifies the seller to proceed no further, buyer shall be liable for labor
performed or expenses of material amount is necessary on the part of the seller to enable him to fulfill his obligations
under the sale made before receiving notice of the buyer’s repudiation or countermand; and
IV. The profits the seller would have made if the contract or the sale had been fully performed shall be considered in
awarding damages. *(for now yung first 2 nalang muna, 3 and 4 are not discussed)
B. SPECIAL REMEDIES OF “UNPAID SELLER” OF GOODS (unique sa Law on Sales)

The provisions of the Civil Code on the remedies of an unpaid seller demonstrate the intention of the Code Commission to
empower, individuals with remedies “to take matters into their own hands” when the circumstances warrant the same,
provided it does not involve physical intrusion into the person or privacy of the buyer in default, by being able to achieve legal
effects without need of seeking the intervention of the courts.
The remedies of an unpaid seller are similar to the “doctrine of self-help” embodied in Article 429 of the Civil Code, which
authorizes the owner or lawful possessor of a thing to use force as may be reasonably necessary to repel or prevent an
actual or threatened unlawful physical invasion or usurpation of his property. In the case of the remedies of the unpaid seller,
the minimum requirement is that the goods are in the possession of the seller so as to prevent an actual physical tussle with
the buyer in the exercise of such remedies.
• Sa ObliCon, ordinary remedies (specific performance, damages, rescission), kailangan niyan ng intervention
ng COURT. Pero sa commerce dahil gusto ng bmabilisan, and kinonsider namn ito ng batas, it brings the
law to the hands of the seller, na kahit walang korte pwedeng may gawin yung seller. Na kay seller ang
prerogative
• Kaya siya tinawag na special remedies, kasi yung ordinary remedies, kailangan ng court, ng judge.
• Ex: (sa doctrine of self-help sa Law on Property) Kung may pumasok sa bakuran niyo, pumasok sa gate at
may dala-dalang baril, at ikaw may shotgun sa bahay, pwede niyo bang barilin ang taong iyon? Pwede, kasi
may dalang baril at hindi niyo siya kakilala. Basta ang rule may actual or threatened physical invasion.
• Sa Law on Sale parang ganyan rin, si seller meron siyang pwedeng gawin para hindi siya maagrabyado.
DEFINITION OF “UNPAID SELLER”
Under Article 1525 of the Civil Code, the seller of goods is deemed to be an “unpaid seller” either:
a) When the whole of the price has not been paid or tendered; (hindi binayaran si seller) or
b) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the
condition on which it was received has been broken by reason of the dishonor of the instrument, the
insolvency of the buyer, or otherwise. (Kapag meron kang negotiable instrument at ito ay na-dishonored, ex:
tumalbog ang check)
The term “unpaid seller” includes an agent of the seller to whom the bill of lading has been indorsed, or consignor or agent
who has himself paid, or is directly responsible for the price, or any other person who is in the position of a seller.
WHAT ARE NEGOTIABLE INSTRUMENTS?
(pwedeng promissory notes o kaya bills of exchange(check)
• In essence, a negotiable instrument (promissory notes and bill of exchange) is a written order to a person requiring
another person to make a specified payment to the signatory or to a named payee.
• Think of a normal check, (BPI Check). A is the checking account holder BPI. A issues a check to B in the amounts of
10,000.
• In this case, A is a drawer (gumawa ng negotiable instrument) because he draws the check. BPI is the Drawee
(pagkukuhanan ng pera, inorderan ni A na bayaran si payee). B is the Payee (babayaran).
• In the transaction, A is writing a negotiable instrument ordering BPI to pay B, the person named in the Check.
• In a Sale transaction using a negotiable document of title (represents goods) (usually nanggagaling kay seller)
or negotiable instrument (represents money), the document used refers to goods/or money. The Drawee can be
a bank, a person, or a warehouseman (if goods) which is called the Bailee.
• The payee can also be called the consignee (if goods) (consignee – usually the buyer; sino ang pagdadalhan ng
goods)
• What differs the negotiable instrument from other instruments is that it can be transferred/negotiated/indorsed to
other persons. If done validly, the drawee/Bailee has the obligation to give the money/goods to the payee or holder
of the instrument.
RIGHTS OF UNPAID SELLER
• When a seller is an “unpaid seller” as defined by law, whether or not ownership over the goods has been transferred
to the buyer, the unpaid seller is entitled to the following rights or remedies: (there are 4 special remedies of unpaid
seller, stages ito)
a) Possessory lien;
b) Stoppage in transitu;
c) Special right of resale; and
d) Special right to rescind. (magagamit mo yung c at d kapag hindi na applicable ang a at b lamang)
The four (4) remedies of an unpaid seller have a hierarchical application, as in fact, 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. The designation “special” is attached to the rights to resell and to rescind,
because they are rights accorded only to the unpaid seller as technically defined by law, and are not of the same nature as
the right to rescind accorded under Article 1191 of the Civil Code to reciprocal contracts.
POSSESSORY LIEN
The general rule is that when it comes to movables, the seller is not bound to deliver the thing sold, if the buyer has not paid
him the price, or if no period for the payment has been fixed in the contract. However, in the absence of stipulation to the
contrary, delivery of the goods to the buyer transfers ownership to the latter, and the non-payment of the price does not
prevent such transfer of ownership as a result of tradition to take effect.
• Means the right to possess
• Kapag hindi nagbayad yung buyer or if no period for the payment has been fixed in the contract, then pwedeng i-
possess muna ng seller yung property, pwedeng wag mo muna i-deliver.
If the seller is an unpaid seller as defined by law, notwithstanding that the ownership in the goods may have passed to the
buyer, the unpaid seller still has a lien on the goods or right to retain them for the price while he is in possession of them.
Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a
right of withholding delivery similar to and co-extensive with his right of lien.
• Possessory Lein is the right given by law to the seller to hold/retain the goods hanggang hindi pa nakakabayad si
buyer.
The possessory lien of the unpaid seller is EXERCISABLE ONLY in the following instances: pwede mo lang gawin yung
possessory lien kapag:
a) Where the goods have been sold without any stipulation as to credit; (nagbibigay ka ng allowance)
b) Where the goods have been sold on credit, but the term of credit has expired; (nagpapautang ka pero natapos na
ang pagpapautang)
c) Where the buyer becomes insolvent. (nalugi na si buyer)
• Kaya may right to retain si seller, kasi example, ikaw, magdedeliver ka pa ba ng goods / products kung alam mong
hindi ka na mababayaran.
The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the
buyer.
The unpaid seller’s right of lien is not affected by any sale, or other disposition of the goods which the buyer may have made,
unless the seller assented thereto.
a) WHEN NEGOTIABLE DOCUMENT OF TITLE ISSUED
If however, a negotiable document of title has been issued for goods, no seller’s lien shall defeat the right of any
purchaser for value and in good faith to whom such document has been negotiated, whether such negotiation be
prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller’s claim
to a lien.
• Kapag na negotiate ang isang negotiable instrument of title. Kung meron possessory lien vs purchaser in good faith
and for value, ang mananalo ay si purchaser in good faith.
b) WHEN PART DELIVERY EFFECTED
Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless
such part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention.
c) INSTANCES WHEN POSSESSORY LIEN LOST
The unpaid seller of goods loses his lien on the goods whenever:
i. Seller delivers the goods to a carrier or other bailee for the purpose of transmission to buyer without
reserving the ownership in the goods or the right to the possession thereof;
• The premise of the right to return is may control pa si seller, pero kapag nawala na yung control niya, ex: naibigay na
yung goods sa carrier at napa LBC na siya, wala nang right to retain si seller, kasi wala na sa kamay at control niya
yung property.
ii. The buyer or his agent lawfully obtains possession of the goods; (wala na rin sa seller ang control ng goods)
iii. By waiver thereof. (pumayag siya)
STOPPAGE IN TRANSITU
Notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods has, in
case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them.
Under Article 1530 of the Civil Code, when the buyer of goods is or becomes insolvent, the unpaid seller who has
parted with the possession of the goods has the right of stopping them in transitu, that is to say, he may resume possession
of the goods at any time while they are in transit, and he will then become entitled to the same rights in regard to the goods
as he would have had if he had never parted with the possession.
The unpaid seller’s right of stoppage in transitu is not affected by any sale, or other disposition of the goods which
the buyer may have made, unless the seller assented thereto.
• For second level Kapag naibagay mo na yung goods sa carrier, LBC, or any shipping lines dito na papasok ang
stoppage in transitu (stoppage of goods in transit). The seller has the right to stop the delivery of the goods.
• Kailan pwede gawin particularly yung stoppage in transitu? Magagawa mo lang ito only kapag nagging insolvent
buyer.
a) WHEN NEGOTIABLE DOCUMENT OF TITLE ISSUED
If however, a negotiable document of title has been issued for goods, no seller’s right to stoppage in transitu shall
defeat the right if any purchaser for value and in good faith to whom such document has been negotiated, whether such
negotiation be prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller’s
claim to right of stoppage in transitu.
• Purchaser of negotiable document of title in good faith and for value. Hindi niya alam ng mga flaws, at
binayaran niya ang document title na ito. Talo nito ang stoppage in transitu.
b) WHEN BUYER IS DEEMED “INSOLVENT”
Under the Law on Sales, a buyer is deemed insolvent who either has ceased to pay his debts in the ordinary course
of business or cannot pay his debts as they become due, whether insolvency proceedings have been commenced or not.
• Hindi nagbabayad or makabayad ng utang kapag nag-due na ito.
• Para maging deemed insolvent, hindi kailangang mag file sa court.
c) WHEN GOODS ARE DEEMED “IN TRANSIT” (wala pa siya sa control ng buyer)
Goods are in transit to authorize the unpaid seller to exercise his right of stoppage in transitu:
i. From the time they are delivered to a carrier by land, water, or air, or other bailee for the purpose of
transmission to the buyer, until the buyer, or his agent in that behalf, takes delivery of them from such carrier
or other bailee; or
ii. If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them, even
if the seller has refused to receive them back.
• Kapag nasa shippiling line pa or nasa warehouse pa lang, means wala pa sa control ni buyer.
• Binalik sa carrier ni buyer, binalik sa warehouse – the goods are still in transit.
d) WHEN GOODS ARE DEEMED NO LONGER IN TRANSIT
Goods are no longer in transit when:
i. The buyer or his agent obtains delivery of the goods before their arrival at the appointed destination;
ii. After the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the
buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for
the buyer or his agent (and it is immaterial that further destination for the goods may have been indicated by
the buyer);
iii. The carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent.
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.
• I and ii, may control na si buyer.
• Sa ii, delivery to the carrier is delivery to the buyer. Also in FOB Sales, kapag in-acknowledge ni
carrier na siya ay representative ni buyer, then hindi na in-transit yung goods.
• In FOB Shipping point, at the time it was shipped kay buyer na yung goods.
• In FOB Destination, kapag nakarating na sa destination yung goods hindi na ito in transit
e) WHEN PART DELIVERY ALREADY MADE
If part delivery of the goods has been made to the buyer, or his agent in that behalf, the remainder of the goods may
be stopped in transitu, unless such part delivery has been under such circumstances as to show an agreement with the
buyer to give up possession of the whole of the goods.
f) HOW RIGHT IS EXERCISED
The unpaid seller may exercise his right of stoppage in transitu either by:
i. Obtaining actual possession of the goods; or
ii. Giving notice of his claim to the carrier or other bailee in whose possession the goods are.
SPECIAL RIGHT TO RESELL GOODS (3rd remedy)

Notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller has a special right
of resale, but only under the conditions provided by law.
a) WHEN RIGHT EXERCISEABLE
The special right of resale can be made only when the unpaid seller has previously exercised either his right of
possessory lien or stoppage in transitu, and under any of the following conditions: (kailangan nagawa yung kahit isa doon sa
naunang dalawang remedy) (magagamit mo lang yung pangatlong remedy kung yung goods ay papasok doon sa tatlong
criteria sa baba:)
i. The goods are of perishable in nature;
• (Ex: magdedeliver ka ng coconut sa Japan, kaso yung buyer nagging insolvent, so ang gagawin mo,
gawin mo yun possessory lien and yung stoppage in transitu, tapos dahil ang coconut ay perishable
in nature, pwede mon a siyang ibenta sa ibang tao)
ii. Where the seller has been expressly reserved in case the buyer should make default; or
• (Hindi perishable in nature pero nakalagay sa kontrata na pwede itong gawin ni seller)
iii. Where the buyer has been in default in the payment of the price for an unreasonable time.
• Ayaw magbayad ni buyer.
b) EFFECT OF HAVING EXERCISED RIGHT OF RESALE
When the unpaid seller has exercised his right of resale, he shall not thereafter be liable to the original buyer upon the sale
or for any profit made by such resale, but may recover from the buyer damages for loss occasioned by the breach of the
sale.
• Pwedeng ibenta sa iba at bawal habulin ng original buyer si seller kapag ginawa niya ito, at pwede
ring kasuhan ni seller si buyer para sa mga cost nan a-incur niya (operational loss)
c) TRANSFER OF OWNERSHIP
Where a resale is made by the unpaid seller, the buyer acquires a good title as against the original buyer. This is special
feature of the right of the unpaid seller to resell: not only is he able to destroy or obliterate the ownership over the goods in
the original byer, he is also able to transfer ownership to the subsequent buyer, even if at the time of tradition ,he is no longer
had ownership over the goods. Ordinarily, the destruction or taking away of ownership in one person and placing it in
another person in such manner can only be done through court action. But in the case of an unpaid seller, he can effect
these, even without judicial action.
d) NOTICE TO DEFAULTING BUYER
It is not essential to the validity of a resale that notice of an intention to resell the goods be given by the seller to the original
buyer. But where the right to resell is not based on the perishable nature of the goods or upon an express provision of the
sale, the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been
in default for an unreasonable time before the resale was made. It is not essential to the validity of a resale that notice of the
time and place of such resale should be given by the seller to the original buyer.
e) STANDARD OF CARE AND DISQUALIFICATION IN RESALE
The seller is bound to exercise reasonable care and judgment in making a resale, and subject to this requirement may make
a resale either by public or private sale. He cannot, however, directly or indirectly buy the goods.
SPECIAL RIGHT TO RESCIND (4th Remedy)

Notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller has a special right to
rescind the sale. (Rescind – cancellation of contract)
a) WHEN RIGHT MAY BE EXERCISED
An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind the transfer of title and resume
the ownership in the goods, where:
a) The seller has expressly reserved the right to do so in case the buyer should make default; or
b) The buyer has been in default in the payment of the price for an unreasonable time.
• Kailan pwede ma-exercise ang special right to rescind?
• i. Kapag nakalagay sa kontrata, at napag-usapan
• ii. Hindi nagbayad si buyer
b) EFFECT OF EXERCISE OF SUCH RIGHT
The seller shall not thereafter be liable to the buyer upon the sale, but may recover from the buyer damages for any loss
occasioned by the breach of the contract.
• Effect? Hindi pwedeng maghabol si buyer, and seller can ask for damages kay buyer.
c) TRANSFER OF TITLE
The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to
the buyer or by some other overt act an intention to rescind. It is not necessary that such overt act should be communicated
to the buyer, but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue
involving the question whether the buyer had been in default for an unreasonable time before the right of rescission was
asserted.
APRIL 21, 2021 - MIDTERMS
C. REMEDIES OF BUYER
1. FAILURE OF SELLER TO DELIVER
Where the seller has broken a contract to deliver specific or ascertained goods, the buyer may seek action for specific
performance to direct that the contract shall be performed specifically, without giving the seller the option of retaining the
goods on payment of damages.
The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and
otherwise, as the court may deem just.
2. BREACH OF SELLER’S WARRANTY
Under Article 1599 of the Civil Code, where there is a breach of warranty by the seller in the sale of goods, the buyer may, at
his election, avail of the following remedies:
a) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in
diminution or extinction of the price;
b) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;
c) Refuse to accept the goods, and maintain an action against the seller for damages for breach of warranty;
d) Rescind the sale and refuse to receive the goods or if the goods have already been received, return them or
offer to return them to the seller and recover the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in any of these ways, no other remedy can thereafter be granted,
without prejudice to the buyer’s right to rescind, even if previously he has chosen specific performance when fulfillment has
become impossible.
• Kapag may breach of seller’s warranty, buyer can ask for specific performance, damages, rescission, diminution or
extinction
• All remedy of the the sellers are alternative in nature.
3. SUSPENSIVE OF PAYMENT IN ANTICIPATION OF BREACH
Under Article 1590 of the Civil Code, should the buyer be disturbed in the possession or ownership of the thing acquired, or
should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the seller has caused the disturbance or danger to cease, unless the latter gives
security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the
buyer shall be bound to make the payment. A mere trespass shall not authorize the suspension of the payment of the price.
• fear such disturbance, by a vindicatory action (paghihiganti) or a foreclosure of mortgage; kapag may mga ganiting
instances, right ni buyer magsuspend ng payment
• sa suspension hindi ica-cancel ang kontrata, isu-suspend lang ang obligation.
• Hindi ito mag-mamatter kung may security na ginawa ang seller
a) REMEDY OF BUYER FOR PENDING SUIT
The pendency of suit over the subject matter of the sale justifies the buyer in suspending payment of the balance of
the purchase price by reason of aforesaid vindicatory action filed against it. The assurance made by the seller that the buyer
did not have to worry about the case because it was pure and simple harassment is not kind of guaranty contemplated under
the exceptive clause in Article 1590 wherein the buyer is bound to make payment even with the existence of a vindicatory
action if the seller should give a security for the return of the price.
• Inexplain ditto kung ano yung mga vindicatory actions, kasi minsan may mga nagkakaso sa seller and connected ito
doon sa property na siyang subject matter ng sale so ang case maaapektuhan yung property dahil doon sa
sinampang kaso.
D. RECTO LAW: SALES OF MOVABLES ON INSTALLMENTS
1. COVERAGE OF LAW
Article 1484 of the Civil Code provides for the remedies of a seller in contracts of sale of personal property by installments,
and incorporates the provision of Act No. 4122 passed by the Philippine Legislature on 9 December 1939, known as the
“Installment Sales Law,” but more popularly referred to as the “Recto Law,” which then amended Article 145 of the Civil Code
of 1889.
Under Article 1484 of the New Civil Code, in a sale of personal property the price of which is payable in installments, the
seller may exercise any of the following remedies:
a) Exact fulfillment of the obligation, should the buyer fail to pay any installment;
• Pwede kang mag specific performance kung hindi nabayaran ng buyer yung installment.
b) Rescind the sale, should the buyer’s failure to pay cover two or more installments;
• I-cancel yung sale kapag hindi nakabayad doon sa pangalawang installment.
c) Foreclosure the chattel mortgage on the thing sold, if one has been constituted, should the buyer’s failure to
pay cover two or more installments.
• I-foreclose or ire-remata. Before noong wala pang recto law, kapag bumili ka sa Honda ng sasakyan, tapos
binayaran niyo ito by loan using a credit facility, so ang nangyayari may ikakabit na mortgage doon sa sasakyan.
Ang nangyayari kapag hindi ka nakabayad ng mortgage pwedeng iremata yung sasakyan. Kapag na-remata
ibebenta yan tapos kadalasan yung mga bidders mababa mag-bid
• For example 800,000 ang halaga ng car, nag down ng 200,000 so may remaining 600,000 pa, na-remata yung
sasakyan,nagkaroon ng bidding tapos ang bumili rin ay si Honda sa halagang 100,000 lamang. Sa kabuuan,
300,000 pa lamang ang bayad doon sa sasakyan, anong gagawin doon sa kulang na 500,000? Itong kulang na
500,000 ay kukuhanin pa sa buyer.
• This happens prior to Recto Law, nakuha na nga yung sasakyan, tapos magbabayad pa si buyer, parang kawawa
naman na yung buyer kapag ganun ang case.
• Sa Recto Law, it just states na alternative in nature ang remedy mo, kung gusto mong i-foreclose, then go, pero
kung naibenta mo yung property sa mas mataas na halaga compared doon sa due then good for you, pero kapag
mas mababa ang halaga ng napagbentahan, malulugi ka pa, dahil hindi ka na makakakuha kay buyer.
• So ang ginagawa ng iba pinipilit nalang si buyer na magbayad.
• Recto law ginagawa niyang alternatives yung mga options mo (yung a,b,and c sa taas), isa lang sa mga options na
iyan ang pwedeng piliin ni seller na remedy.
The article specifically provides that if the seller should foreclose on the mortgage constituted on the thing sold, he shall have
no further action against the purchaser to recover “ any unpaid balance of the price ” and any agreement to the contrary shall
be void. (pinipigilan ng Recto Law na makakuha ng unpaid balance of the price yung mga seller after maremata yung
property)
a) RATIONALE OF RECTO LAW
The passage of the Recto Law was meant to remedy the abuses committed in connection with the foreclosure of chattel
mortgages and to prevent mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and
then bringing suit against the mortgagor for a deficiency judgment. The invariable result of such a procedure was that the
mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness.
The Recto Law “aims to correct a social and economic evil, the inordinate love for luxury of those who, without sufficient
means, purchase personal effects, and the ruinous practice of some commercial houses of purchasing back the goods sold
for a nominal price besides keeping a part of the price already paid and collecting the balance, with stipulated interest, cost
and attorney’s fees. … And although, of course, the purchaser must suffer the consequences of his imprudence and lack of
foresight, the chastisement must not be to the extent of ruining him completely and, on the other hand, enriching the vendor
in a manner which shocks the conscience. The object of the law is highly commendable.
LOANS AND FINANCING TRANSACTIONS
The provisions of the Recto Law are applicable to financing transactions derived or arising from sales of movable on
installments, even if the underlying contract at issue is a loan because the promissory not had been assigned or negotiated
by the original seller.
CONTRACTS TO SELL MOVABLES NOT COVERED (hindi covered ng Recto law ang mga Contract to Sell)
When the contract governing the sale of movables is a contract to sell, then the rules on rescission and substantial breach
are not applicable, since when the suspensive condition upon which the contract is based fails to materialize, it would
extinguish the contract, and consequently there is no contract to rescind. Nevertheless, the provisions of Article 1597 would
apply which would grant the seller the right to “rescind” the contract “by giving notice of his election so to do to the buyer.
• Hindi applicable ang Recto Law sa Contract to sell, simply because wala naming nave-vest na ownership sa
contract to sell dahil wala pang COS sa Contract to Sell (kasi diba sa contract to sell magkakaroon lang nang
contract of sale rito kapag nakabayad na ng full purchase price)
2. REMEDIES PROVIDED UNDER ARTICLE 1484
a) NATURE OF REMEDIES UNDER ARTICLE 1484
Should the buyer of a personal property default in the payment of two or more of the agreed installments, the vendor or seller
has the option to avail of any of these three remedies: (dapat 2 or more installments ang hindi nabayaran ni buyer)
a) Exact fulfillment by the purchaser of the obligation;
b) Rescind or cancel the sale; or
c) Foreclosure the mortgage on the purchased personal property, if one was constituted.
The remedies under Article 1484 have been recognized as alternative, not cumulative, in that the exercise of one would bar
the exercise of the others. (alternative in nature, isa lang pwedeng piliin doon sa above options)
3. REMEDY OF SPECIFIC PERFORMANCE
The general rule is that when the seller has chosen specific performance, he can no longer seek for rescission nor
foreclosure of the chattel mortgage constituted on the thing sold. Although it can be reasoned that even if the seller had
chosen specific performance, but the same has become impossible, he may still choose rescission pursuant to the
provisions of Article 1191 of the Civil Code, which provides that the non-defaulting party to a reciprocal obligation “may also
seek rescission, even after he has chosen fulfillment, if the latter should become impossible;” nonetheless, it is difficult to see
how the generic obligation of the buyer to pay can become impossible.
The seller is deemed to have chosen specific performance to foreclose the resort to the other two remedies under Article
1484, when he files an action in court for recovery. Generally, the mere sending of demand letters to the buyer to pay the
balance of the purchase price should not be considered as having barred the resort to either the remedies of rescission or
foreclosure.
A judgment in an action for specific performance may be executed on all personal and real properties of the buyer which are
not exempt from execution and which are sufficient to satisfy such judgment, which would include the subject matter of he
sale upon which payment is being sought. It has been held therefore that the mere fact that the seller secured possession of
the property subject of the sale by installments did not necessarily mean that the seller would resort to a foreclosure of the
mortgage constituted thereon.
4. REMEDY OF RESCISSION
When a seller chooses the remedy of rescission, then generally he is under obligation to make restitution, which would
include the return of any amount of the purchase price that the buyer may have paid.
Article 1486 of the Civil Code which provides that “a stipulation that the installments or rents paid shall not be returned to the
vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.”
a) WHEN RESCISSION DEEMED CHOSEN
The general rule is that the seller is deemed to have chosen the remedy of rescission, and can no longer avail of the other
two (2) remedies under Article 1484, when he has clearly indicated to end the contract, such as when he sends a notice of
rescission, or takes possession of the subject matter of the sale, or when he files an action for rescission.
5. FORECLOSURE OF CHATTEL MORTGAGE CONSTITUTED ON SUBJECT PROPERTY
a) WHEN REMEDY OF FORECLOSURE DEEMED CHOSEN
When the seller shall have chosen to foreclose on the mortgage constituted on the subject matter of the sale, he can seek
neither the remedies of specific performance nor rescission. Note however, that an action for foreclosure seeks the same
objective as an action for specific performance: to recover from the buyer the price agreed upon in the sale.
b) BARRING EFFECT OF FORECLOSURE
It is the foreclosure and actual sale at public action of the mortgaged chattel that shall bar further recovery by the seller of
any balance on the purchaser’s outstanding obligation not satisfied by the sale; prior to that point in time, the seller has every
right to receive payments on the unpaid balance of the price from the buyer.
LEASE WITH OPTION TO PURCHASE

Under Article 1485 Civil Code, the provisions of Article 1484 are expressly made applicable to “contracts purporting to be
leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of
the thing.” Article 1486 provides that a stipulation that the rents paid shall not be returned to the lessee shall be valid insofar
as the same may not be unconscionable under the circumstances.”
• Minsan kung ayaw nilang mag-engage sa COS, ang ginagawa nila para hindi sila ma-cover ay itong Lease with
Option to Purchase – pinaparenta mo sa iba yung property tapos meron yung option to purchase (rent to own).
• Kapag ganito yung case pwede raw na mag-apply yung Recto Law
The Court has recognized that sellers who do not wish to enter into conditional contracts of sale have often resorted to lease
with options to purchase, but that nevertheless the underlying contract would not prevent the transfer of ownership of the
subject matter to the buyer-lessee upon fulfillment of the condition of the full payment of the “rents,”.
A. REMEDIES IN CASES OF IMMOVABLES

B. REMEDIES OF SELLER (IMMOVABLES)
1. ANTICIPATORY BREACH
Under Article 1591 of the Civil Code, if the seller has reasonable grounds to fear the loss of the immovable property sold and
its price, he may immediately sue for the rescission of the sale.
• Kaya tinawag ito na anticipatory breach kasi naga-anticipate si seller na maaaring mawala yung immovable
property.
• In cases like this, pwedeng kasuhan ni seller si buyer para ma-rescind yung sale.
Should such ground not exist, the provisions of Article 1191 of the Civil Code on rescission shall be observed, which means
that upon substantial breach by the buyer for failure to comply with his obligation to pay the price when due, the seller may
sue for rescission of the sale.
2. FAILURE OF BUYER TO PAY PRICE
a) RESCISSION UNDER ARTICLE 1592
The failure of the buyer to pay the price in full within a fixed period does not, by itself, bar the transfer of the ownership or
possession, much less dissolve the sale. On failure of the buyer to pay the price, the seller has the option under Article 1592
of the Civil Code to rescind the sale upon judicial or notarial demand.
• Si buyer kapag hindi nakapag bayad ng purchase price, susundin natin yung mga na discusss sa unahan.
Under Article 1592 of the Civil Code, in the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the buyer may pay,
even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either
judicially or by a notarial act.
• Notarial Rescission – kung merong certain period of time na kailangang magbayad si buyer pero hindi siya
nagbayad, pwedeng i-rescing ang kontrata through notary. Ino-notify ni seller si buyer through writing na ire-rescind
na niya yung contract pero dapat yung papel / notice ay notaryado.
B. REMEDIES OF BUYER
1. SUSPENSION OF PAYMENT
Under Article 1590 of the Civil Code, should the buyer be disturbed in the possession or ownership of thing acquired, or
should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, the buyer
may suspend the payment of the price until the seller has caused the disturbance or danger to cease, unless the seller gives
a security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency,
the buyer shall be bound to make the payment. Again, a mere act of trespass shall not authorize the suspension of the
payment of the price.
2. IN CASE OF SUBDIVISION OR CONDOMINIUM PROJECTS
Section 23 and 24 of Pres. Decree 957, provide that no installment payments made by the buyer in a subdivision or
condominium project for the lot or unit he contracts to buy shall be forfeited in favor of the owner or developer when the
buyer, after due notice to the owner or developer desists from further payment due to the failure of the owner or developer to
develop the subdivision or condominium project according to the approved plans and within the time limit for complying with
the same. The sections also grant to the buyer the option to be reimbursed the total amount paid.
• Context: Yung Maceda Law at PD 957, pinoprotektahan nito yung mga tao na bumibili ng condo na in installment.
Kasi kadalasan ng mga kontrata noon ng mga developer sinasabi na nila na kpaag hindi ka nagbayad ng installemt
ipo-forfeit namin yung binayad mo. Ex: 2 consecutive installments na di ka nakabayad hindi namin ibabalik ang
binayad mo, tapos ang case 70% bayad mo na yung property pero dahil may dalawang installment ka na hindi
nabayaran pino-forfeit nila. This shows unfairness and this is the reason why we now have the Maceda Law and the
PD 957. Instead na ipo-forfeit yung mga binayad, nagkakaroon yung buyer ng option to reimburse yung naibayad
na.
a) NOTICE REQUIRED UNDER SECTION 23 OF P.D. 957
Section 23 of Pres. Decree 957 does not require that a notice be given first by the buyer to the seller before a demand for
refund can be made as the notice and demand can be made in the same letter or communication.
3. RIGHT TO GRACE PERIOD STIPULATED
When a grace period is provided for in the contract of sale, it should be construed as a right, not an obligation of the debtor,
and when unconditionally conferred, the grace period is effective without further need of demand either calling for the
payment of the obligation or for honoring the right.
• The PD 957 also gives the buyers ‘grace period’.
C. MACEDA LAW: SALES OF REAL ESTATE ON INSTALLMENTS

Republic Act 6552, entitled the “Realty Installment Buyer Protection Act” (also the “Maceda Law”), provides for certain
protection to particular buyers of real estate payable on installments. The law declares as “public policy to protect buyers of
real estate on installment payments against onerous and oppressive conditions. (sa mga kontrata ng developer)
• Ito yung mas gamit ngayon.
• Ang pinoprotektahan namn nito ay yung mga Realty Installment Buyer – mga bumibili ng residential units, may it be
condo or houses in subdivision.
a) “ROLE” OF MACEDA LAW
It would seem that more than just providing for a substantial and procedural setting for the rescission and cancellation of
contracts covered therein, the Maceda Law in whole is relied upon and used by the courts, including the Supreme Court, as
“a policy statement” of the State n protecting the interests of buyers of residential real estate on installments. Thus, in the
McLaughlin v. Court of Appeals the Court took the Law “as an expression of public policy to protect buyers of real estate on
installments against onerous and oppressive conditions (Sec. 2 of Republic Act No. 6552). If that be the case, then the
value of the Maceda Law goes beyond its language and can be interpreted to further a policy that may not even be found
within its language.
1. TRANSACTIONS COVERED
It should be noted that the Maceda Law does not cover all sales of realty on installments, but primarily residential real estate.
But unlike the Recto Law on movables, the Maceda Law covers not only “sales” on installments of real estate, but also
“financing” of such acquisitions. It expressly covers “all transactions or contracts involving the sale or financing of real estate
on installment payments, including residential condominium apartments.
Unlike Article 1592 of the Civil Code, which the Court has interpreted not to be applicable to contracts to sell, the
Maceda Law clearly includes in its provisions both contracts of sale and contract to sell. This conclusion is clear from the use
by the Law of the twin terms of “notice of cancellation or the demand for rescission” of the contract.
2. TRANSACTIONS EXCLUDED FROM COVERAGE
The following transactions, although involving sales on installments, are expressly excluded from the coverage of the
Law, thus: (for residential only)
a) Sales covering industrial lots;
b) Sales covering commercial buildings (and commercial lots by implication); and
c) Sales to tenants under agrarian reform laws.
• Bakit di kasama ? Mayroon kasi tayong CARP Comprehensive Agrarian Reform Program, doon
nakalagay ang procedures and regulations sa pagbebenta.
The enumeration of the transactions not covered by the Maceda Law is not exclusive, since other transactions over
immovables, although not within the enumerated exclusions are to be considered as excluded because they are not within
the clearly expressed coverage. An example would be the sale on installment of commercial or office condominium units.
3. RIGHTS GRANTED
This right granted to a buyer of real estate in a sale or financing covered by the Maceda Law, depend on whether or
not he has paid less than or more than two (2) years of installments.
a) AT LEAST TWO (2) YEARS INSTALLMENTS PAID
Where the buyer has paid at least two (2) years of installments, he is entitled to the following rights in case he
defaults in the payments of succeeding installments:
a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him,
which is fixed at the rate of one (1) month grace period for every one (1) year of installment payments;
• Kapag 5 years ka na nagbabayad, tapos pumalya ka sa bayad, ang sinasabi ng batas di ka bibigyan
ng interest at bibigyan ka ng grace period na 5 months, kasi sabi 1 month for every one year.
b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to 50% of the total payments made and, after five (5) years of installments, an
additional 5% every year but not to exceed 90% of the total payments made.
• 8 years ka na nagbabayad, tapos hindi ka na makabayad, so nagdecide ka na ika-cancel mo nalang
yung kontrata, kapag kinancel ang matatanggap ng buyer is: 50% kung magkano na ang naibayad
niya + 5% for every year doon sa exceeding years after 5 years, so 3 years yun for this case, so in
total, makaka expect si buyer na 65% ng naibayad niya ay mapapabalik sa kanya.
1. EXERCISE OF GRACE PERIOD
The right to make use of the grace period can only be exercised by the buyer only once in every five (5) years of the life of
the contract and its extensions, if any. (sa ika 5th year pumalya ka ng bayad, pwede kang manghingi ng grace period, then sa
ika 8th year pumalya ka ulit, hindi mon a siya magagamit kasi dapat sa ikaw 10 th year mo na siya ulit pwedeng gamitin. Kasi
nga once every 5 years lang)
Down payments, deposits or options on the contract shall be included in the computation of the total number of installments
made.
2. HOW CANCELLATION OF CONTRACT CAN BE EFFECTED
The actual cancellation of the contract shall take place after thirty (30) days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value
to the buyer.
b) LESS THAN TWO (2) YEARS INSTALLMENTS PAID
In case where less than two (2) years of installments were paid, the buyer shall still be entitled to a grace period of sixty (60)
days from the date the installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after
thirty (30) days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act.
• Dito ina-allow na ng batas na i-forfeit ng developer yung property kasi less than 2 years pa lang
naman.
5. OTHER RIGHTS GRANTED TO BUYER
In addition, the Maceda Law provides for the following rights to the buyer:
a) To sell his rights or assign the same to another person or to reinstate the contract by updating the account
during the grace period and before actual cancellation of the contract. The deed of sale assignment shall be
done by notarial act.
• (pwedeng ibenta, i-assign, i-transfer ng seller sa another buyer yung property, pwede ang
assignment, so bawal sabihin ng developer na nontransferable yung property)
b) To pay in advance any installment or the full unpaid balance of the purchase price any time without interest
and to have such full payment of the purchase price annotated in the certificate of title covering the property.
• Pwedeng bayaran in advance ng buyer ang buong property. Minsan kasi ayaw ng mga financing ng
ganito kasi kapag mas maikli ang span ng priod na bayaran, mas kumakaunti ang kita ng mga
financing na ito kasi lumiliit rin ang interest, so minsan pino-prohibit nila itong full payment.
Notice that the provisions of Section 6 of the Maceda Law render nugatory all provisions in loan agreements covering the
financing of residential real estate and condominium units “pre-termination penalty clauses” whereby any payment ahead to
the scheduled amortization was met with a penalty clause to compensate the bank or financial institution for the inability of
such pre-payment to earn interest income on the loan.
• Bawal ang pre-termination penalty clauses.
CANCELLATION OF JUDICIAL SALE
Where a judicial sale is voided without fault of the purchaser, the latter is entitled to reimbursement of the purchase
money paid by him. A judicial sale can only be set aside upon the return to the buyer of the purchase price with simple
interest, together with all sums paid out by him in improvements introduced on the property, taxes, and other expenses by
him.
REMEDIES OF RESCISSION AND CANCELLATION FOR SALES OF IMMOVABLES
a) NATURE OF THE REMEDY OF RESCISSION OR RESOLUTION
The Supreme Court has ruled in one case, that “to rescind” is to declare a contract void at its inception and to put on
end to it as though it never was; it is not merely to terminate the contract and release the parties from further obligations to
each other, but to abrogate it from the beginning and to restore the parties to their relative positions as if no contract had
been made.
• Diba kapag sinabi natin na rescission ng contract ito yung cancelation pero mas proper term rin yung resolution.
• Sa rescission or Resolution bukod sa pagtatanggal ng obligations, nagkakaroon rin ng saulian yung both parties ng
natanggap nila.
RESCISSION GENERALLY JUDICIAL IN NATURE
In a true contract of sale, a provision granting the non-defaulting party a right to rescind would be superfluous because such
remedy is inherent in a contract of sale under Article 1191; consequently, the specification in the contract that in case of
breach, the other party has a right to rescind does not generally confer any additional right. Nonetheless, whether expressed
or implied, the remedy of rescission is inherently judicial in nature, in accordance with the general principle that “no man
may, even one with a valid and lawful cause of action, take the law into his own hands and must resort to the aid of the
courts to enforce his rights.
• Kapag sinabing rescission, kailangan kakasuhan yung isang party then si judge yung magde-decide.
• Take note that, yes, rescission is generally judicial in nature, which means kailangan mo ng court participation, but
the law does not prohibit na yung dalawang party nalang ang mag-usap since contract naman ay consensual in
nature so, regarding sa cancellation ng contract, if magkasundo then hindi na nila kailangan ng court intervention.
Nagkakaproblema lang kung hindi magkasundo at yung isang party ayaw i-cancel, dito na papasok na ang court,
they can seek the court to rescing the contract basta may justifiable grounds.
In the case of immovables, the general provisions of Article 1191 should give way to the particular provisions of Article 1592
which provides that when there has been a demand made of the buyer for rescission either judicially or by a notarial act, “the
court may not grant him a new term.”
• Article 1191, refers to the rescission sa ObliCon, pero when it comes to immovable, ang susundin ay yung Article
1592.
• Bawal magbigay ang court ng grace period on its own.
WHEN EXTRAJUDICIAL RESCISSION ALLOWED
To the general principle that rescission must be exercised judicially, the Court has recognized the validity and effectivity of an
express stipulation by the parties to a reciprocal contract that rescission in case of default by one party, may be resorted to
by the other party extra judicially.
• Hindi sa lahat ng pagkakataon kailangan mo ng court to rescind a contract, kaya nga ang tawag dito ay extrajudicial,
especially kapag nakalagay sa contract na allowed ang extrajudicial rescission. Or kahit naman nakalagay sa
contract na required ang court sa rescission, pwede naming hindi sundin yun, basta mag agree yung both parties
hindi na kailangan ng court. This shows autonomy of contracts – the parties can stipulate and make any terms and
conditions based on what they desire, at pwede rin silang magtanggal basta may consent palagi ng both parties.
CONTRACT OF SALE VERSUS CONTRACT TO SELL
RECAP OF THE RULINGS
An outline survey of Supreme Court decisions covering the bases of determining whether a sale is one of contract of sale or
a contract to sell would often show contradictory pronouncements on the matter, thus: (paano nalalaman kung ang isang
kontrata ay COS o Contract to Sell)
A. AT PERFECTION
1. REQUISITE CONTRACTUAL STIPULATIONS
• In a contract to sell, there must be a stipulation that:
a) Full payment of the purchase price by the buyer constitutes a suspensive condition on the obligation of the
seller to sell and transfer ownership of the subject matter; (sa contract to sell magkakaroon lang ng
obligation ang seller na itarnsfer ang property kapag bayad na ang full purchase price)
b) Accompanied by stipulations or agreements that: (naakalagay ito sa kontrata)
• Ownership of the subject matter shall remain with the seller until full payment of the price ; and
• Specific right is granted to the seller to extrajudicially rescind or cancel the contract in case of
default.
The lack of stipulation expressly reserving title to the seller in spite delivery of the subject matter to the buyer would not
constitute the transactions to a contract to sell.
• Take note: Example, lupa ang binenta under contract to sell, kahit naibigay na sa buyer ang property o yung lupa,
kahit nakatira na siya doon at tinayuan na ng bahay, WALA PA RIN SA KANYA ANG OWNERSHIP, kahit pa
notaryado ang contract to sell between the buyer and seller, hindi pa rin mata-transfer ang ownership kasi malinaw
sa kontrata na ito ay under the condition na kailangan bayad muna yung full purchase price
• RECAP: FOUNDATION: Sa COS may transfer of ownership na kaagad kahit wala pang payment of full purchase
price,pero, kapag Contract to Sell, wala pang transfer of ownership kasi iniintay pa ang full payment of purchase
price
2. STIPULATION ON EXECUTION OF DEED OF ABSOLUTE SALE
• When there is a stipulation or promise that the seller shall execute a deed of absolute sale upon completion of
payment of the purchase price by the buyer, the agreement is a contract to sell, because it would be equivalent to
reservation of title clause.
• Kapag may nakalagay sa kontrata na kapag nagkabayaran ang parehong partido ay gagawa ng Deed of Absolute
Sale, obvious nan a ang kontrata niyo ay Contract to Sell hindi COS.
3. STIPULATION ON THE PAYMENT OF PRICE
• In contract to sell, payment of the price is a suspensive condition, failure of which is not a breach, casual or serious,
but an event that prevents the obligation of the seller to convey title from acquiring obligatory force.
• Suspensive Condition – the happening of the condition gives rise to the obligation, so sa contract to sell, kapag
nangyari yung condition (full payment of purchase price) magkakaroon si seller ng obligation (transfer of ownership
to the buyer).
• Kung hindi mabayaran yung full payment, walang obligation si seller.
B. DURING CONSUMMATION STAGE
1. LEGAL EFFECT OF DELIVERY MADE
• In contract of sale, title to the property passes to the buyer upon the delivery of the thing sold; whereas, in a contract
to sell, ownership is, by agreement, reserved in the seller and is not to pass to the buyer until full payment of the
purchase price.
• Sa Contract to Sell, kahit nagpatayo na ng bahay si Sheila sa lupa, the ownership of the land is still reserve to the
seller.
2. LEGAL EFFECT OF FULL PAYMENT OF PRICE
• In a contract to sell, full payment of the price constitutes the happening of the condition which would convert it into
an executory contract of sale, thus:
a) If delivery of the subject matter had previously been made, then ownership is transferred ipso jure (by mere
operation of law) to the buyer.
b) If delivery of the subject matter has not been made, then it allows the buyer to demand for specific
performance.
• Kapag nabayaran na yung full purchase price, the ownership will automatically be vested to the
buyer.
3. LEGAL EFFECT OF NON-PAYMENT OF PRICE
a) In contract of sale, the non-payment of the purchase price is breach, and when substantial in nature, would allow the
seller to rescind the sale.
• Non-payment of price will result to the breach of contract.
• For immovable kapag more than 10% ang kulang pwede ipa-rescind ang contract.
b) In contract to sell, where ownership is retained by the seller until payment of the price in full , such payment is a
positive suspensive condition, failure of which is not really a breach but an event that prevents the obligation of the
vendor to convey title in accordance with Article 1184 of the Civil Code.
• Basta kapag hindi pa nkakabayad wala pang obligation si seller.
C. REMEDIES AVAILABLE:
1. WHEN CONDITION ON PRICE PAYMENT NOT FULFILLED:
a) In contract of sale, if seller had delivered the subject matter previously without reserving title, it would mean that
ownership has been transferred to the buyer, and seller cannot recover ownership until and unless the contract is
resolved or rescinded by court action.
• Kapag nat-transfer na ang ownership in a COS, the only way para mabawi ito ay to rescind the COS.
Whereas in contract to sell, since ownership was retained by the seller by express reservation until full payment of
the price, and the contract is extinguished, then no action is necessary other than recovery of possession in case buyer
refuses to voluntarily deliver.
• Since di pa naman nabibigay ang ownership – no action.
b) In conditional contract of sale, the non-happening of the condition may be waived by the obligee who may still seek
specific performance; whereas, in contract to sell, the non-happening of the condition prevents the contract from
coming into existence (i.e., extinguishes the contract) and consequently neither rescission or specific performance
may be pursued.
c) In conditional contract of sale, the basis of rescission must be substantial breach; whereas, in a contract to sell, the
issue of breach is completely irrelevant.
d) In contract of sale and conditional contract of sale, rescission may be pursued with forfeiture of the amounts paid
when that has been expressly provided for.
Whereas, in contract to sell, it becomes imperative that the amounts paid must be returned and there would be no
basis upon which to retain them since there was no breach upon which a claim of damage may be interposed.
-NEW TOPIC STARTED-
CONDITIONS AND WARRANTIES
• Specific and unique to Law on Sales
CONDITIONS
Article 1545 of the Civil Code grants two alternative remedies to a party where the obligation of the other party to a contract
of sale is subject to any condition which is not performed, in that such first party may either: (may dalawang pwedeng gawin
kapag hindi nangyari yung conditions)
(a) refuse to proceed with the contract, or
(b) he may waive performance of the condition.
• Parang sa Conditional Sale, may mga conditions: Resolutory – the happening of the condition extinguish the
obligation; Suspensive – the happening of the condition give rise to the obligation.
DISTINCTIONS BETWEEN CONDITIONS AND WARRANTIES
Unlike in the non-fulfillment of a warranty which would constitute a breach of the contract, the non-happening of the
condition, although it may extinguish the obligation upon which it is based, generally does not amount to a breach of the
contract if sale.
• Ibebenta mo ang lupa mo kay Sheila, if Shera and Joshua married each other, kung hindi mangyari yung
kasalan, may breach of contract ba? Wala, kasi hindi mo naman obligasyon at ni Sheila yung condition.
• Ang seller’s warranty kasi, ang sinasabi ng batas ay ito ang mga dapat ito yung ginagawa ng seller sa mga
buyer, ito yung additional obligation imposed by law to the seller.kapag hindi nagawa ito magkakaroon ng
breach of warranty, at ang remedy ni buyer could be rescission, damages, etc.
Under Article 1545 of the Civil Code, where the ownership in the things has not passed, the buyer may treat the fulfillment by
the seller of his obligation to deliver the same, as described and as warranted expressly or by implication in the contract of
sale, as condition of the obligation of the buyer to perform his promise to accept and pay for the thing.
On the other hand, if the party has promised that the condition should happen or be performed, the other party may also
treat the non-performance of the condition as a breach of warranty. Such stipulation would elevate the condition to a
warranty, and the non-happening of the condition would itself constitute a breach of such warranty, and entitle the other party
to sue for damages.
• In reference to the case above, kung hindi makapagpakasl sina Shera and Joshua (ibig sabihin hindi
nangyari yung condition), so ang gagawin ay yung dalawang option na binigay ng batas, pwedeng hindi na
ituloy yung contract or i-waive na yung condition. Pinapakita nito na yung condition hindi siya ganun ka-
essential as compared to warranty. Kasi preliminary lang naman ang condition kung mag-eexist baa ng
contract or hindi. Pero at the end of the day, prerogative pa rin ng dalawang party kung itutuloy ba ng
contract or hindi. Hindi ito kagaya ng warranty na talagang sinabi ng batas na kailangan itong maging parte
ng contract, hindi niyo ito pwedeng tanggalin, sa lahat ng COS, lagging may warranties ang seller.
WARRANTIES ACCORDING TO DE LEON AND VILLANUEVA
(Ano ba ng mga warranties ng Seller?) (since we use two references, medyo may pagkakaiba sa tawag at scope na articles,
though, pareho naman sila ng sinasabi)
• Warranty that the Seller has the Right to Sell(Art. 1547)
• De Leon’s version is “Implied warranty as to seller’s title” (Art. 1548)
• Warranty against non-apparent servitudes (Art. 1560)
• Warranty against hidden defects or unknown encumbrance (Art. 1561)
• Warranty as to fitness or quality (1562)
• De Leon’s version is Warranty of mechantability and Warranty of fitness
TYPES OF WARRANTIES
• Warranties – representation ng seller.
EXPRESS WARRANTIES
Since the breach of an express warranty makes the seller liable for damages, it is important to note that the following
requisites are necessary in order that there be an express warranty in a contract of sale:
a) It must be an affirmation of fact or any promise by the seller relating to the subject matter of the sale;
• Pinromise ni seller na magtatagal ang battery mo for 24 hours, kasi kapag napatunayan na hindi totoo yung
sinasabi ng seller, pwedeng mag-ask ng damages, pwedeng ibalik yung product, pwede ka magsampa ng
kaso.
b) The natural tendency of such affirmation or promise is to induce the buyer to purchase the thing; and
• Ang premise is kaya binili ng buyer yung product dahil sa sinabi ng seller - affirmation of fact or any
promise by the seller.
c) The buyer purchases the thing relying on such affirmation or promise thereon.
• Bibili ba kayo ng phone dahil sa charger nito? Siyempre hindi.
• Sa express warranties, para ma hold niyo accountable si seller for his express warranties, dapat
bumili kayo kasi na-induced kayo doon sa sinasabing respresentations ng seller.
• In claiming express warranties naman, pino-prove pa naman ito.
• Express warranties – sinasabi mismo ni seller. Ginagarantiya ni seller na ganito ang mangyayari sa
binibenta niyang product. Ex: I represent that this phone will last for 10 years, I represent that the battery of
the phone will lasts up to 24 hours
• Ni-rerecognize kasi ng batas ang sales talk. Kailan mo ma-identify kung express warranties ito or sales talk,
kasi kailangan mo itong malaman para ma-hold mo accountable si seller diba. So ang standard na binigay
ng batas ay yung nasa a, b, at c sa taas. Kapag pasok siya doon sa standards sa a,b, at c, ituturing na
express warranties na ito ng batas.
• Minsan naman ang mga express warranties nakalagay yan sa contract. Ex: We warrant that this product will
last for 5 years under normal use. Ex: Kayo ay mabibigyan ng free maintenance for 5 years (for machines
and cars). Yung mga ganito wala to sa batas, it is not required by law
IMPLIED WARRANTIES
Implied warrantied are those which by law constitute part of every contract of sale, whether or not the parties were aware of
them, and whether or not the parties intended them.
Although only a seller is bound by the implied warranties of law, nevertheless, by express contractual stipulation, an agent of
the seller may bind himself to such warranties.
• Implied – normally ito yung sinasabi ng batas, kahit wala sa kontrata, automatic kang my implied warranty,
kasi iyon ang sabi ng batas.
• Yung mga stated na WARRANTIES ACCORDING TO DE LEON AND VILLANUEVA sa taas yung mga
nakapaloob sa mga Articles, that an example of Implied Warranties.
• Kahit hindi aware, o hindi intension ng seller yung mga warranties na ito, obligation nila itong ibigay sa
buyer, as stated in our law.
• Normally ang mga warranties ay para sa seller lang, pero kung may agent ang seller at nagkaroon ng
kontrata at rito nakasaad na may warranties rin si agent / representative, dito magiging liable na rin si agent,
pero nangyayari lang to by express contractual stipulation (napag-usapan)
- END OF MIDTERM -

Midterms Rfib 04 14&04 21

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REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS

APRIL 14 & APRIL 21, 2021 - MIDTERMS

1. WHEN REAL OWNER ESTOPPED

3. STATUTORY POWER; COURT SALE

4. SALE AT MERCHANT STORE

REMEDIES IN CASES OF MOVABLES

B. SPECIAL REMEDIES OF “UNPAID SELLER” OF GOODS (unique sa Law on Sales)

SPECIAL RIGHT TO RESELL GOODS (3rd remedy)

SPECIAL RIGHT TO RESCIND (4th Remedy)

APRIL 21, 2021 - MIDTERMS

LEASE WITH OPTION TO PURCHASE

A. REMEDIES IN CASES OF IMMOVABLES

C. MACEDA LAW: SALES OF REAL ESTATE ON INSTALLMENTS

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