SALES AND LEASE

ATTY. PATRICK P. SARMIENTO

BOOK: SALES AND LEASE BY HECTOR DE LEON

I. CONTRACT OF SALE, CONCEPTS (NCC 1458)

1. Characteristics (consensual, bilateral, onerous, commutative, nominate and

principal)
2. Essential Requisites
3. Sale as Distinguished from other Contracts

a. Barter (NCC Arts. 1638 & 1468)

b. Donation
c. Contract for piece of work (NCC Art. 1467)
d. Agency to Sell (NCC Art. 1466)
e. Lease

4. Kinds of Sale

a. Absolute
b. Conditional

Cases: Dignos v. CA, G.R. No. L-59266. February 29, 1988

Hulst v. PR Builders, G.R. No. 156364, September 3, 2007

II. OBJECT OF SALE (NCC 1306)

1. Subject Matter must be Licit (NCC Art. 1459)

2. Subject Matter must be Determinate (NCC Art. 1460)
3. Sale of Things having Potential Existence (NCC Art. 1461)
4. Sale of Hope or Expectancy (NCC Art. 1461)
5. Emptio Rei Speratae
6. Emptio Spei
7. Sale of Existing and future Goods (NCC Art. 1462)
8. Sale of Undivided Interest (NCC Art. 1463)
9. Sale of Fungible Goods (NCC Art. 1464)
10. Sale of Things subject to a resolutory condition (NCC Art. 1465)

III. PRICE

1. Certainty of price (NCC Art. 1469)

2. Who may determine price (NCC Art. 1473-74)
3. Effect of gross inadequacy of price (NCC Art. 1470)
 4. Effect where price is simulated (NCC Art. 1470)
5. Certainty of price of securities, grains, liquids, etc. (NCC Art. 1472)
6. Effect of failure to determine price (NCC Art. 1474)
7. Meeting of minds as to price

Cases: Toyota Shaw, Inc. v. CA GR No. L-116650, May 23, 1995

Sps. Edrada v. Sps. Ramos, G.R. No. 154413, August 31, 2005)

IV. FORMATION/PERFECTION OF CONTRACT OF SALE (NCC Art. 1475)

1. Option contract (NCC Art. 1479)

2. Mutual promise to buy and sell (NCC Art. Art. 1479)
3. Status of advertisements (NCC Arts. 1325-26)
4. Acceptance by letter or telegram (NCC Art. 1319)
5. Perfection of sale by auction (NCC Art. 1476)
6. Earnest money (NCC Art. 1482)
7. Form of sales (NCC Arts. 1483, 1874, 1581, 1403)
8. Right of first refusal

Cases: Lloyd’s Enterprises and Credit Corp. vs. Dolleton 555 SCRA 143
Sanchez vs. Rigos, G.R. No. L-25494, June 14, 1972
Riviera Filipina, Inc. v. CA et. al., GR No. 117355, April 5, 2002
Paranaque Kings Enterprises, Inc. v. CA. GR No. 111538, February 26, 1997

V. PARTIES TO A CONTRACT OF SALE (NCC Arts. 1327, 1489)

1. Sale by a minor (NCC Art. 1489)

2. Sale between spouses (NCC Art. 1490)
3. Special incapacity
a. guardians, agents, and administrators
b. judges
c. lawyers
d. public officers and employees (NCC Arts. 1491-92)
Cases: Lao vs. Genato, G.R. No. L-56451, June 19, 1985
Fronilda vs. RTC, G.R. No. 72306, 5 October 1988
Vicente Godinez vs. Fong Pak Luen, G.R. No. L-36731, 27 January 1983
Jacobus Bernhard vs. PR Builders, Inc., G.R. No. 156364, 25 September 2008

VI. OBLIGATIONS OF THE SELLER (Art. 1495)

1. Preservation of the object of sale (NCC Art. 1163) see also Art. 1164, 1165, 1170,
1173
2. Transfer of ownership and delivery of the object (Art. 1477)
a. Concept of delivery or tradition
 Cases: Daus v. Sps. De Leon, GR No. 149750, June 16, 2003
Sampaguita Pictures, Inc. v. Jalwindor Manufacturers, Inc., GR No. L-43059,
October 11, 1979
Norkis Distributor, Inc. v. CA, G.R. No. 91029, February 7, 1991

b. Concept of delivery or tradition

c. Ways of effecting delivery (NCC Art. 1496-1501)
▪ actual or real (NCC Art. 1497) (see also Art. 1232-1251)
▪ constructive or legal (NCC Arts. 1498-1501)
i. public instrument
ii. tradition longa manu
iii. tradition brevi manu
iv. tradition constitutum possessorium
v. quasi-traditio

Cases: Ten Forty Realty v. Cruz, G.R. No. 151212, September 10, 2003
Rudolph Leits, Inc. vs. CA, 478 SCRA 451
Raymundo De Leon vs. Ong, G.R. No. 170405, 2 February 2010
Asset Privatization Trust vs. TJ Enterprises, G.R. No. 167195, 8 May 2009

d. Special rules on:

▪ contract of sale or return (NCC Art. 1502)
▪ contract of sale on trial or approval (NCC Art. 1502)
▪ Industrial Textile Manufacturing Company vs. LPJ Enterprises,
Inc., G.R. No. 66140, 21 January 1993
▪ sale of specific goods with reserved title (NCC Art. 1503)
▪ delivery to carrier on behalf of the buyer (NCC Art. 1503)
▪ shipping terms – C.O.D., F.O.B., C.I.F.
▪ when person selling is not the owner (NCC Art. 1505)
▪ seller’s title is voidable (NCC Art. 1506)

e. When obligation to deliver arises (NCC Art. 1524)

f. Other rules on delivery:
▪ sale of real property by unit of measure or number (NCC Art. 1539-
41)
▪ sale of real estate made for a lump sum (NCC Art. 1542)

3. Rules in case of double sale (NCC Art. 1544)

Cases:
Consolidated Rural Bank of Cagayan Valley v. CA, G.R. No. 13216, January 17, 2005
Martinez v. CA, GR No. 123547, May 21, 2001
Fudot v. Cattleya Land Inc., GR No. 175942, September 13, 2007
Amancio et al. vs. CA et. al., G.R. No. 152627, September 16, 2005
Mercado v. Allied Bank, GR No. 171460, July 27, 2007
Amancio v. CA, GR No. 152627, September 16, 2005
 Gabriel v. Mabanta, GR No. 142403, March 26, 2003
Leoncio and Barrera vs. CA, et al., G.R. No. 123935, 14 December 2001
De Leon vs. Ong, G.R. No. 170405, 2 February 2010
San Lorenzo Development Corporation vs. CA, G.R. No. 124242, 21 January 2005

4. Delivery of fruits and accessories (NCC Art. 1537)

5. Payment of expenses for execution and registration (NCC Art. 1487)
6. Conditions and warranties

a. Condition; concept (NCC Art. 1545)

b. Warranty
▪ express warranty (NCC Art. 1546)
▪ implied warranties (NCC Art. 1547)
▪ warranty on seller’s title; liability in case of eviction (NCC Arts.
1548-1559)
▪ warranty against hidden defects of, or encumbrances upon the thing
sold; vendor’s responsibility in case of breach (NCC Arts. 1560,
1561, 1566)

Cases: Sigaya v. Mayuga, G.R. No. 143254, August 18, 2005

c. quality or fitness of goods (NCC Art. 1562)

d. merchantability and fitness distinguished
▪ rule in case of sale under a patent or trade name (NCC Art. 1563)
▪ effect of usage of trade (NCC Art. 1564)
▪ rule in case of goods sold y sample (NCC Art. 1565)

e. alternative remedies of buyer to enforce the warranties (NCC Arts. 1561-

62, 1564-66); prescriptive period (NCC Arts. 1567 & 1571)
f. loss of thing sold due to hidden defects (NCC 1568-1569)
g. applicability of warranty on judicial sales (NCC Art. 1570)
h. prescriptive period of action (NCC Art. 1571)
i. rule on sale of animals (NCC Arts. 1572-1581)

VII. DOCUMENTS OF TITLE

1. Concept and functions

2. Common forms of documents of title
3. Classes of documents of title

a. Negotiable documents of title (NCC Arts. 1508-15)

b. Indorser not a guarantor (NCC Art. 1517)
c. Negotiation not impaired by fraud, mistake, etc. (NCC Art. 1518)
d. Non-negotiable documents of title (NCC Art. 1510)
e. Rights of person to whom document has been transferred (NCC Art. 1514)
 f. Warranties of a person negotiating or transferring document (NCC Art.
1516)

VIII. RIGHTS AND OBLIGATIONS OF THE VENDEE

1. Principal obligations of the vendee (NCC Art. 1582)

a. No obligation to accept delivery by installment (NCC Art. 1583)

b. Modes of manifesting acceptance (NCC Art. 1585)
c. Effect of a wrongful refusal to accept (NCC Art. 1588)
d. Liability for interest (NCC Art. 1589)
e. payment of the purchase price (NCC Art. 1524)

Case: Bricktown Dev’t. Corp. v. Amor Tierra Dev’t. Corp., G.R. No. 112182,
December 12, 1994).

2. Rights of the vendee

a. Right to examine the goods before delivery (NCC Art. 1584)

b. Acceptance not a bar to action for damages (NCC Art. 1586)
c. No obligation to return goods wrongfully delivered (NCC Art. 1587)
d. Right to suspension of payment of price (NCC Art. 1590)
e. When recission of sale or real property may be made (NCC Art. 1591-92
f. Rescission in case of sale of movable thing (NCC Art. 1593)

IX. ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS

1. Available remedies on the part of the seller

a. Action for payment of price (NCC Art. 1595)

b. Action for damages in case of non-acceptance of goods (NCC Art. 1596)
c. Action for rescission of contract (NCC Art. 1597)
d. Unpaid seller

▪ concept (NCC Art. 1525)

▪ remedies of an unpaid seller (NCC Art. 1526-1535)

e. Recto Law (NCC Art. 1484-86)

Cases: Southern Motors Inc. v. Moscoso, G.R. No. L-14475, May 30, 1961
Nonato v. IAC, G.R. No. L-67181, November 22, 1985
Borbon II v. Servicewide Specialist, Inc., G.R. No. 106418, July 11, 1996
Magna Financial Services Group, Inc. v. Colorina, G.R. No. 158635,
December 9, 2005

f. Maceda Law (RA 6552)

 Case:Olympia Housing v. Panasiatic, G.R. No. 140468, January 16, 2003

2. Available remedies on the part of the buyer

a. Action by buyer for specific performance (NCC Art. 1598)

b. Action by buyer for rescission or damages for breach of warranty (NCC Art.
1599)
c. Rule in case of sale by description or by sample (NCC Art. 1481)

X. RISK OF LOSS (NCC Arts. 1174, 1493-94, 1504, 1538, 1189)

XI. EXTINGUISHMENT OF SALE (NCC Art. 1600)

1. Common Causes
2. Special Causes
3. Extra-special causes

a. Conventional redemption (NCC Art. 1601-1616)

▪ Definition
▪ Distinguished from option to purchase
▪ Period of redemption (NCC Art. 1606)
▪ Effect when no redemption is made

Cases:Felicen v. Orias, GR No. L-33182, December 18, 1987

Paez v. Magno, GR No. L-793, April 27, 1949 )

▪ Equitable mortgage (NCC Arts. 1602-1606)

Case: Cachola v. CA. G.R. No. 97822, May 7, 1992

b. Right of the parties to the fruits of the land (NCC Art. 1617)
c. Right of vendor a retro as to charges/encumbrances (NCC Art. 1618)
d. Legal Redemption (NCC 1619-1623)

Cases: PSC v. Sps. Valencia, GR No. 150060, August 19, 2003

XII. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS (NCC Arts.

1624-1635)

1. Concepts
2. Excluded Cases of Assignment (NCC Art. 1635)
3. Perfection (NCC Arts. 1624-25)
4. Effects of Assignment (NCC Arts. 1626-27)
5. Warranties of Assignor (NCC Arts. 1628-29)
6. Special Rules
 a. Assignment of Sale of Inheritance (NCC Arts. 1630-33)
b. Assignment of incorporeal right under litigation (NCC Art. 1634)

7. Right of repurchase (NCC Arts. 1634-35)

XIII. BARTER
XIV. BULK SALES LAW (Act. No. 3952)
XV. RETAIL TRADE LIBERALIZATION ACT (R.A. 8762)
XVI. LEASE

1. Concepts and scope (NCC Arts. 1642-44)

2. Lease of rural and urban lands

a. Disqualifications of lessee (NCC Art. 1646 in relation to Arts. 1490-91)

Cases: Rodriguez v. Borromeo, 43 Phil. 479

Melencio v. Dy Tiao Lay, G.R. No. L-32047, November 1, 1930
Tipton v. Andueza, G. R. No. 2070, January 2, 1906

b. Recording of lease (NCC Arts. 1647-48)

c. Assignment of lease (NCC Art 1649)

Case:Vda. De Hijos de Barretto v. Sevilla, Inc., G.R. No. L-41768,

December 17, 1935

d. Sublease

▪ distinguished from assignment of lease

▪ right of lessee to sublease (NCC Art. 1650)
▪ obligations of sublessee (NCC Arts. 1651-52)

e. Obligations of the lessor

▪ general obligations (NCC Art 1654)

▪ warranties of lessor (NCC Art. 1653)
▪ alteration of the thing leased (NCC Art. 1661)
▪ Useful improvements and ornamental expenses (NCC Art. 1678)

f. Obligations of the lessee

▪ general obligations (NCC Art. 1657)

▪ urgent repairs (NCC Art. 1662)
▪ trespass made by a third person (NCC Arts. 1663-64)
 g. Remedies of a party in case of failure of the other to comply with his
obligation/s

▪ Remedies of the lessee

Case: Baens v. CA, GR No. L-57091, November 23, 1983

▪ Remedies of the lessor

3. Duration of the lease

a. Definite time or period

b. No fixed period
c. Implied new lease (NCC Art. 1670)
d. Perpetual lease

Case: Jespajo Realty v. CA, G.R. No. 113626, September 27, 2002.

4. Termination of the lease

XVII. Subdivision and Condominium Buyers’ Protective Decree (PD 957)

XVIII. RENT CONTROL ACT (RA 9341)