Chapter 6 – Consummation of Sale

Obligations of the Seller

1. To preserve the subject matter

Legal Basis: Article 1163 of the Civil Code - “Every person obliged to give a determinate this is
also obliged to take care of it with the proper diligence of a good father of the family, unless the
law or the stipulation of the parties requires another standard of care.”

2. To deliver the subject matter

Legal Basis: Article 1495 of the Civil Code – The seller is bound: (i) to transfer the ownership of,
and (ii) to deliver, the thing which is the object of the sale, to the buyer.

3. To deliver the fruits and accessories

Legal Basis: Article 1164 of the Civil Code – which applies only to an obligation to deliver a
determinate thing, transferee has the right to the fruits of the thing from the time the obligation
to deliver it arises; however, he shall acquire no real right over them until the same has been
delivered to him.

4. To warrant the subject matter

Legal Basis: Article 1495 of the Civil Code – with the fulfillment of the primary obligation to
deliver the subject matter, the seller is then obliged to “warrant the thing which is the object of
the sale.

Types of Delivery

1. Actual Delivery

Legal Basis: Article 1497 of the Civil Code – there is actual or physical delivery when the thing
sold is placed in the control and possession of the buyer.

2. Constructive Delivery

Legal Basis: Article 1496 of the Civil Code - The ownership of the thing sold is acquired by the
buyer from the moment it is delivered to him in any of the ways specified in Articles 1497 to
1501, or in any other manner signifying an agreement that the possession is transferred from
the seller to the buyer.

a. Execution of Public Instrument

Legal Basis: Article 1498 of the Civil Code – when the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the subject matter
of sale, if from the deed the contrary does not appear or cannot clearly be inferred.
b. Symbolic Delivery

Legal Basis: Article 1498 of the Civil Code – as to movables, constructive delivery may also be
made by the delivery of the keys of the place where the movable is stored or kept.

c. Constitutum Possessorium

Takes effect when at the perfection of the sale, the seller held possession of the subject
matter in the concept of the owner.

d. Traditio Brevi Manu

Opposite of Constitutum Possessorium

e. Traditio Longa Manu

Legal Basis: Article 1498 of the Civil Code – the delivery of movable property may be made
by the mere consent or agreement of the contracting parties, if the thing sold cannot be
transferred to the possession of the buyer at the time of the sale.

f. Delivery of Incorporeal Property

An incorporeal property having no physical existence, its delivery can only be effected by
constructive delivery.

Under Article 1501 of the Civil Code, the following are the three types of constructive
delivery specifically applicable to incorporeal property:
 Public Instrument
 Titles of Ownership
 Use and enjoyment by the buyers of the rights

g. Delivery by Negotiable Document of Title

Under Article 1513 of the Civil Code - A person to whom a negotiable document of title has
been duly negotiated acquires thereby:
 Such title to the goods as the person negotiating the document to him had or had
ability to convey to a purchaser in good faith for value and also such title to the
goods as the person to whose order the goods were to be delivered by the terms of
the document had or had ability to convey to a purchaser in good faith for value;
and
 The direct obligation of the bailee issuing the document to hold possession of the
goods for him according to the terms of the document as fully as if such bailee had
contracted directly with him.
 h. Delivery through carrier

Necessarily pertains to a sale of goods. The general rule, and in the absence of stipulation or
circumstances to the contrary, delivery to carrier is deemed delivery to the buyer, the
premise being that the carrier acts as an agent of the buyer.

 F.A.S. Sales (Free along side ship)

The seller pays all charges and is subject to risk until the goods are placed alongside
the vessel.

 F.O.B. Sales (Free on board)

The seller shall bear all expenses until the goods are delivered, depending on
whether the goods are to be delivered “f.o.b” at the point of shipment or at the
point of destination.

 C.I.F sales (costs, insurance and freight)

The amount quoted by the seller and agreed to by the buyer, covers not only the
cost of the merchandise, but also the cost of insurance and freight.

Two schools of thought:

i. Borne by the buyer
The carrier acts as an agent of the buyer who pays the freight, and therefore
delivery to the carrier is delivery to the buyer.

ii. Borne by the seller

Both parties agree that the seller takes on the responsibility of insuring the
goods and providing for their shipment to the buyer, and for which
responsibility he gets a package price.

Effects and Completeness of Delivery

a. Delivery must be made pursuant to a valid sale

Nemo potest nisi quod de jure potest – No man can do anything except what he can do lawfully

b. Delivery must be made by the seller who has ownership over the subject matter

Nemo dat quod non habet – No man can dispose of that which does no belong to him.

c. To whom delivery must be made

General Rule: Buyer or his duly authorized representatives named in contracts

d. When buyer refuses to accept

 Acceptance of the buyer is not a condition for the completeness of delivery. Under Article 1588
of the Civil Code, when the buyer’s refusal to accept the goods is without just cause, the title
thereto passes to him from the moment they are placed at his disposal.

1. Rules on Effects of Delivery for Movables

Legal basis: Article 1522 of the Civil Code

a. Where the seller delivers to the buyer a quantity of goods less than what he contracted to sell,
the buyer may reject them; if the buyer accepts or retains the goods, he must pay them at
contract rate. If the buyer used the goods before he knows that the seller is not going to
perform his contract in full, the buyer is not liable for more than the fair value.

b. Where the seller delivers to the buyer a quantity of goods larger than what he contracted to sell,
the buyer may accept it and reject the rest; if he accept is all, he must pay at the contract rate, if
the subject matter is indivisible, the buyer may reject the whole thing.

c. Where the seller delivers to the buyer the goods contracted but mixed with goods of a different
description, the buyer may accept the goods and reject the rest; if it is indivisible, the buyer may
reject them.

Other conditions:

 When goods held by third party

The seller has not fulfilled his obligation to deliver to the buyer unless such 3 rd person
acknowledges to the buyer that he holds the goods on the buyer’s behalf.

 Reservation of Ownership (Article 1503 of the Civil Code)

Ownership will not transfer to the buyer in case of express reservation such as when the
parties stipulate that ownership will not transfer until the purchase price is fully paid or
certain conditions are fulfilled

 Sale by Description and/or Sample (Article 1481 of the Civil Code)

Sale by sample – When a small quantity is exhibited by the seller as a fair specimen of the
bulk, which is not present and there is not opportunity to inspect or examine the same. To
constitute a sale by sample, it must appear that the parties treated the sample as the
standard of quality and that they contracted with reference to the sample with the
understanding that the product to be delivered would correspond with the sample.

Sale by description- Where the seller sells the things as being of a particular kind, the buyer
not knowing whether the seller’s representations are true or false, but relying on them as
true. (ex. TV advertisements/marketing)
  On Sale or Return (Article 1502 of the Civil Code)

When goods are delivered to the buyer “on sale or return” to give the buyer an option to
return the goods instead of paying the price, the ownership passes to the buyer on delivery,
but may revest the ownership by returning within the time fixed in the contract or if no
period has been fixed, then for a reasonable time.

 Sale on Approval, Trial, Satisfaction, or Acceptance

Ownership passes to buyer when a) signifies approval to the seller or b) does not signify
approval but retains the goods without giving notice of rejection.

 Form of such special sales

For a sale to be considered a sale or return or sale on approval, there must be express
written agreement otherwise the parties cannot invoke in Article 1502 of the Civil Code.

 Written Proof of Delivery

Generally evidenced by a written acknowledgement such as bill of lading and factory

consignment invoice.

 Time, Place and Delivery for Immovables (Article 1521 of the Civil Code)

- Whether it is for the buyer to take possession or for the seller to deliver them to the
buyer, is a question depending in each case on the contract, express or implied,
between the parties.
- The place of delivery is the seller’s place of business or if not, his residence.
- In case of specific goods, which to the knowledge of the parties when the contract or
the sale was made were in some other place, the said place is the place of delivery
- If no time is fixed for sending the goods, then the seller needs to send them within a
reasonable time.
- Demand or tender of delivery may be ineffectual unless it be done at a reasonable hour
- The expenses in putting the goods in a deliverable state are borne by the seller unless
otherwise agreed upon.

2. Rules on Effects of Delivery for Immovables

a. Sold per unit/number (Article 1539 of the Civil Code)

In a sale of immovable per unit measure, the statement of the area of the immovable is not
conclusive and the price may be reduced or increased depending on the area actually
delivered. (Lietz, Inc. v. CA, 478 scra 451)
 b. Sold for a lump sum (Article 1542 of the Civil Code)

General Rule: In a contract of land in a mass, the specific boundaries stated in the contract
must control over any statement with respect to the area contained within its boundaries.
Exception: The sale of land under the description “more or less” or similar words covers
“only a reasonable excess or deficiency

c. Sold in Mass

A judicial sale in mass of separate known lots will not be set aside, unless it is made to
appear that a larger sum could have been realized from a sale in parcels or that a sale of less
than the whole would have been sufficient to satisfy the debt
(Republic v. NLRC, 244 scra 564)

d. Expenses of Delivery and Registration on Real Estate

- A judgment on a sale that decrees the obligations of the seller to executed and deliver
the deed of absolute sale and the certificate of title, does not necessarily include the
obligation on the part of the seller to pay for expenses in notarizing the deed of sale and
in obtaining a new certificate of title. (Clavano v. HLURB, 378 SCRA 172)

- The obligation of the seller is to transfer ownership which is done by the execution of a
public instrument. Thus, expenses for registration in the Registry of Deeds is to be borne
by the buyer. (Chua v. CA, 401 SCRA 54)

- Registration of the sale should be shouldered by the seller unless there is a contrary
stipulation. (Vive Eagle Land, Inc. v. CA, 444 SCRA 445)

Double Sales

1. Rules of Double Sales Must be Considered in the Realm of Tradition

2. Article 1544 as the Platform for Discussion

Article 1544 of the Civil Code provides that if the same thing should have been sold to different buyers,
the ownership shall be given:

(a) When subject matter is movable, to the buyer:

• Who may have first taken possession thereof in good faith;

(b) When subject matter is immovable, to the buyer:

• “Who in good faith first recorded [the sale] in the Registry of Property;”

• “Should there be no inscription, ... to the person who in good faith was first in the possession” of the
subject matter;
• “[I]n the absence thereof, to the person who presents the oldest title, provided there is good faith.”

When Article 1544 applicable.

Article 1544 applies when the following requisites concur:

1. The two (or more) sales transactions must pertain to valid sales
2. The two (or more) sales transactions must pertain to exactly the same subject matter.
3. The two (or more ) buyers at odds over the rightful ownership of the subject matter must each
represent conflicting interests; and
4. The two (or more ) buyers at odds over the rightful ownership of the subject matter must each
have bought from the very seller.

Article 1544 cannot be invoked where two different contracts of sale are made by two different
persons, one of them not being the owner of the property sold.

When it comes to movable properties, our society has determined that one who possesses in
good faith should be preferred against another who merely interposes a claim even though he be also in
good faith. Possession and enjoyment of movable property are considered to be the public’s best gauge
of who owns a movable. This principle is expressed in Article 559 of the Civil Code, which provides that
the “possession of movable property acquired in good faith is equivalent to title,” which may be good
even against the real owner of such movable.

When it comes to immovable properties, their importance in civil society would require that
they be governed by a system of registration upon which the public may be able to clearly determine
who owns a particular property and what claims and liens pertain thereto. This is the reason why in
many of it decisions, the Supreme Court holds that the execution of a private document or the transfer
of physical possession over real property binds only the parties thereto, but that there must be
compliance with “[f]ormal requirements ... for the benefit of third parties;” that although the “rule of
thumb is that a sale of land, once consummated, is valid regardless of the form it may have been
entered into,” this only applies to the contracting parties and “in the event that a third party ... disputes
the ownership of the property, the person against whom that claim is brought cannot present any proof
of such sale and hence has no means to enforce the contract;” and that other than a proper
memorandum of the sale, but more importantly, the registration of that sale with the Registry of Deeds
is what binds registered land. Thus, under Article 1544, the buyer in good faith who is able to effect
registration of his purchased is preferred.

Rules of Preference

A. If the Object is movable property, ownership shall be transferred to the person who may have first
taken possession thereof in good faith;
B. If the object is an immovable property:

The vendee who first registers the sale in good faith in the registry of property has a preferred right over
another vendee who has not registered his title; the law is clear-- mere registration of title is not
enough-- good faith must concur with registration (Dela Cerna Vs Briones 508 SCRA 62)

Registration VS Possession

As between two purchases, the one who has registered the sale in his favor, has a preferred right over
the other who has not registered his title, even the latter has an actual possession of the immovable
property. However, this does not extend to defeat the right of the party to prescription. Thus the first
vendee, has been in possession under claim of ownership for the period of twenty five years before the
registration of the second sale, it was held that the first vendee had acquired the property by
prescription, and the registration of the second sale although it could have destroyed the efficacy of the
first sale, could not destroy the legal effect of the possession conferring such title by prescription, which
must be upheld unless destroyed by another title superior to it.

Purchaser in good faith

One who buys the property of another without notice that some other person has a right to or interest
in such property or before he has notice of the claim or interest of some other person in the property.

General Rule: A purchaser may be considered purchaser in good faith if he has examined at the very
least the certificate of title.

Exception: When there exists important facts that would create suspicion in an otherwise reasonable
man and cause him to go beyond the present title and investigate those that preceded it (Amancio et al.
VS CA et al, GR No. 152627, September 16, 2005)

Hernandez and Katigbak Rule:

When the property sold on execution is with Torrens title, registration is the operative act that gives
validity to the transfer or creates a lien on the land. A purchaser on execution sale is not required to go
behind the registry to determine the conditions of the property.

Exception: Where the purchaser had knowledge, prior to or at the time of the levy, of such previous lien
or encumbrance, his knowledge is equivalent to registration.

OBLIGATIONS OF BUYER
1. Pay the Price
Buyer is obliged to pay for the price at the time and place stipulated in the contract.
(Article 1582)

Non-payment of the consideration in the sale does not prove simulation; at most, it
gives the seller the right to sue for collection. Generally in a sale, payment of the price is
a “resolutory condition” and the remedy of the seller is to exact fulfillment or, in case of
a substantial breach, to rescind the contract under Article 1191 of the Civil Code.

2. Accept Delivery of Thing Bought

The buyer is bound to accept delivery of the thing bought at the time and place
stipulated in the contract. If the time and place should not have been stipulated, the
payment must be made at the time and place of the delivery of the thing sold.

a. Opportunity to Inspect Goods

Where goods are delivered to the buyer, which he has not previously examined, he
is not deemed to have accepted them unless and until he has had a reasonable
opportunity of examining them for the purpose of ascertaining whether they are in
conformity with the contract, if there is no stipulation to the contrary.

(1) Exception: C.O.D.

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

b. Goods Sold Deliverable by Installments

Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof
by installments.

c. Effect of Acceptance of Goods on Seller’s Warranty

 In the absence of an agreement to the contrary, acceptance of the goods by the
buyer shall not discharge the seller from liability in damages or other legal remedy
for breach of promise or warranty in the sale.

d. Refusal to Accept Goods

Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to
accept them, having the right to do so, he is not bound to return them to the seller,
and it is sufficient that he notifies the seller of his refusal.270 If he voluntarily
constitutes himself as a depository, he shall be liable as such.