FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
TITLE VI Hence, there is a marked difference between a sale of
CIVIL CODE OF THE PHILIPPINES
SALES
FIRST EXAM TOPICS
NATURE AND FORM OF CONTRACT
Article 1458
By the contract of sale one of the contracting parties
obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
(1445a)
Contract of sale – contract whereby one of the parties
(seller/vendor) obligates himself to deliver something
to the other (buyer/purchaser/vendee) who on his
part, binds himself to pay therefor a sum of money or
its equivalent (price).
Types of contracts of sale
1) Absolute
2) Conditional
Sale v. declaration of heirship and waiver of
rights (ACAP v. CA)
An asserted claim does not necessarily amount to ownership
In the first place, an asserted right or claim to
ownership or a real right over a thing arising from a
juridical act, however justified, is not per se sufficient
to give rise to ownership over the res. That right or title
must be completed by fulfilling certain conditions
imposed by law.
Modes of acquisition of ownership under Civil Code
Under Article 712 of the Civil Code, the modes of
acquiring ownership are generally classified into two (2)
classes, namely, the original mode (i.e., through
occupation, acquisitive prescription, law or intellectual
creation) and the derivative mode (i.e., through
succession mortis causa or tradition as a result of
certain contracts, such as sale, barter, donation,
assignment or mutuum).
Sale and declaration of heirship and waiver of rights distinguished
In a Contract of Sale, one of the contracting parties
obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other party
to pay a price certain in money or its equivalent.
Upon the other hand, a declaration of heirship and
waiver of rights operates as a public instrument
when filed with the Registry of Deeds whereby the
intestate heirs adjudicate and divide the estate left
by the decedent among themselves as they see fit.
It is in effect an extrajudicial settlement between the
heirs under Rule 74 of the Rules of Court.
Sale of hereditary rights v. waiver of hereditary rights
Sales | VENTEROSO
hereditary rights and a waiver of hereditary rights. The
first presumes the existence of a contract or deed
of sale between the parties. The second is,
technically speaking, a mode of extinction of
ownership where there is an abdication or
intentional relinquishment of a known right with
knowledge of its existence and intention to
relinquish it, in favor of other persons who are co-
heirs in the succession.
Private respondent, being then a stranger to the
succession of Cosme Pido, cannot conclusively claim
ownership over the subject lot on the sole basis of the
waiver document which neither recites the elements of
either a sale, or a donation, or any other derivative
mode of acquiring ownership.
Right of first refusal (PUP v. CA)
A contract of sale must be mutually obligatory
It is therefore a general requisite for the existence of a
valid and enforceable contract of sale that it be
mutually obligatory, i.e., there should be a concurrence
of the promise of the vendor to sell a determinate thing
and the promise of the vendee to receive and pay for
the property so delivered and transferred.
All three (3) essential elements of a valid sale, without
which there can be no sale, were attendant in the
"disposition" and "transfer" of the property from
NDC to PUP - consent of the parties, determinate
subject matter, and consideration therefor.
Consent to the sale is obvious from the prefatory
clauses of Memorandum Order No. 214 which
explicitly states the acquiescence of the parties to the
sale of the property –
Furthermore, the cancellation of NDC's liabilities in
favor of the National Government in the amount of
P57,193,201.64 constituted the "consideration" for the
sale.
Transfer of title or an agreement to transfer title for a
price paid, or promised to be paid, is the very essence
of sale.
Art 1458 is a catchall provision
The Civil Code provision is, in effect, a "catch-all"
provision which effectively brings within its grasp
a whole gamut of transfers whereby ownership of
a thing is ceded for a consideration.
Right of first refusal
In the instant case, the right of first refusal is an integral
and indivisible part of the contract of lease and is
inseparable from the whole contract. The
consideration for the right is built into the reciprocal
obligations of the parties. Thus, it is not correct for
petitioners to insist that there was no consideration
paid by FIRESTONE to entitle it to the exercise of the
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right, inasmuch as the stipulation is part and parcel of
the contract of lease making the consideration for the
lease the same as that for the option.
It is a settled principle in civil law that when a lease
contract contains a right of first refusal, the lessor is
under a legal duty to the lessee not to sell to anybody
at any price until after he has made an offer to sell to
the latter at a certain price and the lessee has failed to
accept it. The lessee has a right that the lessor's first
offer shall be in his favor.
Parties on a contract of sale
1) Buyer (vendee) – with an obligation pay a
price certain in money or its equivalent
2) Seller (vendor) – with an obligation to transfer
ownership and deliver a determinate thing
Stages of a contract (NPC)
1) Negotiation
2) Perfection
3) Consummation
Manner of payment (Toyota Shaw v. CA)
Three stages of a contract
There are three stages in the contract of sale, namely:
a) preparation, conception, or generation, which
is the period of negotiation and bargaining,
ending at the moment of agreement of the
parties;
b) perfection or birth of the contract, which is the
moment when the parties come to agree on the
terms of the contract; and
c) consummation or death, which is the
fulfillment or performance of the terms agreed
upon in the contract.
The second phase of the generation or negotiation
stage in this case was the execution of the VSP. It must
be emphasized that thereunder, the downpayment of
the purchase price was P53,148.00 while the balance to
be paid on installment should be financed by B.A.
Finance Corporation. It is, of course, to be assumed
that B.A. Finance Corp. was acceptable to Toyota,
otherwise it should not have mentioned B.A. Finance
in the VSP.
The VSP was a mere proposal which was aborted in
lieu of subsequent events. It follows that the VSP
created no demandable right in favor of Sosa for the
delivery of the vehicle to him, and its non-delivery did
not cause any legally indemnifiable injury.
Manner of payment is essential in a contract of sale
This Court had already ruled that a definite agreement
on the manner of payment of the price is an essential
element in the formation of a binding and enforceable
contract of sale. This is so because the agreement as to
the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount
to a failure to agree on the price. Definiteness as to the
Sales | VENTEROSO
price is an essential element of a binding agreement to
sell personal property.
Earnest deposit (San Miguel Properties v.
Spouses Huang)
The giving of deposit will not give rise to a perfected sale
In the present case, the ₱1 million "earnest-
deposit" could not have been given as earnest
money as contemplated in Art. 1482 because, at the
time when petitioner accepted the terms of
respondents’ offer of March 29, 1994, their contract
had not yet been perfected. This is evident from the
following conditions attached by respondents to their
letter, to wit: (1) that they be given the exclusive option
to purchase the property within 30 days from
acceptance of the offer; (2) that during the option
period, the parties would negotiate the terms and
conditions of the purchase; and (3) petitioner would
secure the necessary approvals while respondents
would handle the documentation.
Thus, it is not the giving of earnest money, but the
proof of the concurrence of all the essential
elements of the contract of sale which establishes
the existence of a perfected sale.
Stages of contract
In the present case, the parties never got past the
negotiation stage. The alleged "indubitable evidence"
of a perfected sale cited by the appellate court was
nothing more than offers and counter-offers which
did not amount to any final arrangement
containing the essential elements of a contract of
sale.
Essential characteristics of a contract of sale
1) Nominate and principal –
Nominate
Given a special or particular name in the Civil
Code “Law on Sales”, its nature and
consequences are governed by the laws on that
particular name, the title given by the party is
not as significant as its substance. The intent of
the parties and not the nomenclature will
prevail.
Principal
Does not depend its existence upon another
contract
2) Consensual – perfected by mere consent
 delivery is required only in the
consummation stage
Article 1475. The 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.
From that moment, the parties may
reciprocally demand performance,
subject to the provisions of the law
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governing the form of contracts.
(1450a)
Level of mutuality (Villanueva v. PNB)
What level of mutuality is required before the element of consent
is said to be present
Contracts of sale are perfected by mutual consent
whereby the seller obligates himself, for a price certain,
to deliver and transfer ownership of a specified thing
or right to the buyer over which the latter agrees.
Mutual consent being a state of mind, its existence
may only be inferred from the confluence of two
acts of the parties: an offer certain as to the object
of the contract and its consideration, and an
acceptance of the offer which is absolute in that it
refers to the exact object and consideration
embodied in said offer. While it is impossible to
expect the acceptance to echo every nuance of the
offer, it is imperative that it assents to those points
in the offer which, under the operative facts of
each contract, are not only material but motivating
as well. Anything short of that level of mutuality
produces not a contract but a mere counter-offer
awaiting acceptance.
Consent also must be unanimous on the rate of payment and its
terms
More particularly on the matter of the consideration of
the contract, the offer and its acceptance must be
unanimous both on the rate of the payment and on its
term. An acceptance of an offer which agrees to the
rate but varies the term is ineffective.
xxWhen petitioner suddenly introduced a term of
payment in his July 11, 1990 counter-offer, he
interjected into the negotiations a new substantial
matter on which the parties had no prior discussion
and over which they must yet agree. Petitioner’s July
11, 1990 counter-offer, therefore, did not usher the
parties beyond the negotiation stage of contract
making towards its perfection. He made a
counter-offer that required acceptance by
respondent.
Not consent but only counter-offers
Respondent replied to the June 28, 1990 offer with a
July 6, 1990 letter that only Lot No. 19 is available and
that the price therefor is now P2,883,300.00. As the CA
pointed out, this reply was certainly not an acceptance
of the June 28, 1990 offer but a mere counter-offer.
It deviated from the original offer on three material
points: first, the object of the proposed sale is now only
Lot No. 19 rather than Lot Nos. 17 and 19; second, the
area of the property to be sold is still 41,190 sq. m but
an 8,797-sq. m portion is now part of a public road;
and third, the consideration is P2,883,300 for one lot
rather than P3,677,000.00 for two lots. More
important, this July 6, 1990 counter-offer imposed two
conditions: one, that petitioner submit a revised offer
to purchase based on the quoted price; and two, that
the sale of the property be approved by the Board of
Sales | VENTEROSO
Directors and subjected to other terms and conditions
imposed by the Bank on the sale of acquired assets.
In reply to the July 6, 1990 counter-offer, petitioner
signed his July 11, 1990 conformity to the quoted price
of P2,883,300.00 but inserted the term
"downpayment of P600,000.00 and the balance
payable in two years at quarterly amortization."
The CA viewed this July 11, 1990 conformity not as an
acceptance of the July 6, 1990 counter-offer but a
further counter-offer for, while petitioner accepted the
P2,883,300.00 price for Lot No. 19, he qualified his
acceptance by proposing a two-year payment term.
Moreover, petitioner’s payment of P200,000.00 was
with the clear understanding that his July 11, 1990
counter-offer was still subject to approval by
respondent. This is borne out by respondent’s Exhibits
"2-a" and "2-b", which petitioner never controverted,
where it appears on the dorsal portion of O.R. No.
16997 that petitioner acceded that the amount he paid
was a mere "x x x deposit made to show the
sincerity of [his] purchase offer with the
understanding that it shall be returned without
interest if [his] offer is not favorably considered x
x x." This was a clear acknowledgment on his part
that there was yet no perfected contract with
respondent and that even with the payments he had
advanced, his July 11, 1990 counter-offer was still
subject to consideration by respondent.
In sum, the amounts paid by petitioner were not in the
nature of downpayment or earnest money but were
mere deposits or proof of his interest in the purchase
of Lot No. 19. Acceptance of said amounts by
respondent does not presuppose perfection of any
contract.
Ownership by the seller (Quijada v. CA)
Ownership is not an essential element
Ownership by the seller on the thing sold at the time
of the perfection of the contract of sale is not an
element for its perfection. What the law requires is
that the seller has the right to transfer ownership
at the time the thing sold is delivered. Perfection
per se does not transfer ownership which occurs
upon the actual or constructive delivery of the
thing sold. A perfected contract of sale cannot be
challenged on the ground of non-ownership on the
part of the seller at the time of its perfection;
hence, the sale is still valid.
Ownership at consummation stage
The consummation, however, of the perfected
contract is another matter. It occurs upon the
constructive or actual delivery of the subject
matter to the buyer when the seller or her
successors-in-interest subsequently acquires
ownership thereof. Such circumstance happened in
this case when petitioners — who are Trinidad
Quijada's heirs and successors-in-interest — became
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the owners of the subject property upon the reversion
of the ownership of the land to them. Consequently,
ownership is transferred to respondent Mondejar and
those who claim their right from him.
Characteristics of a valid consent (Vda. De Ape
v. CA)
A contract of sale is consensual
A contract of sale is a consensual contract, thus, it is
perfected by mere consent of the parties. It is born
from the moment there is a meeting of minds upon the
thing which is the object of the sale and upon the price.
Upon its perfection, the parties may reciprocally
demand performance, that is, the vendee may compel
the transfer of the ownership and to deliver the object
of the sale while the vendor may demand the vendee
to pay the thing sold.
Essence of consent
The essence of consent is the agreement of the parties
on the terms of the contract, the acceptance by one of
the offer made by the other. It is the concurrence of
the minds of the parties on the object and the
cause which constitutes the contract. The area of
agreement must extend to all points that the
parties deem material or there is no consent at all.
Characteristics of consent (IFS)
To be valid, consent must meet the following
requisites: (a) it should be intelligent, or with an exact
notion of the matter to which it refers; (b) it should be
free and (c) it should be spontaneous. Intelligence in
consent is vitiated by error; freedom by violence,
intimidation or undue influence; spontaneity by fraud.
In this jurisdiction, the general rule is that he who
alleges fraud or mistake in a transaction must
substantiate his allegation as the presumption is
that a person takes ordinary care for his concerns
and that private dealings have been entered into
fairly and regularly. The exception to this rule is
provided for under Article 1332 of the Civil Code
which provides that "[w]hen one of the parties is
unable to read, or if the contract is in a language
not understood by him, and mistake or fraud is
alleged, the person enforcing the contract must
show that the terms thereof have been fully
explained to the former."
In this case, as private respondent is the one seeking to
enforce the claimed contract of sale, she bears the
burden of proving that the terms of the agreement
were fully explained to Fortunato Ape who was an
illiterate. This she failed to do. While she claimed in
her testimony that the contents of the receipt were
made clear to Fortunato, such allegation was debunked
by Andres Flores himself when the latter took the
witness stand.
As can be gleaned from Flores's testimony, while he
was very much aware of Fortunato's inability to read
Sales | VENTEROSO
and write in the English language, he did not bother to
fully explain to the latter the substance of the receipt
(Exhibit "G"). He even dismissed the idea of asking
somebody else to assist Fortunato considering that a
measly sum of thirty pesos was involved. Evidently, it
did not occur to Flores that the document he himself
prepared pertains to the transfer altogether of
Fortunato's property to his mother-in-law. It is
precisely in situations such as this when the wisdom of
Article 1332 of the Civil Code readily becomes
apparent which is "to protect a party to a contract
disadvantaged by illiteracy, ignorance, mental weakness
or some other handicap."
Contract to sell v. contract of sale (Laforteza v.
Machuca)
A contract of sale is consensual
A contract of sale is a consensual contract and is
perfected at the moment there is a meeting of the
minds upon the thing which is the object of the
contract and upon the price. From that moment the
parties may reciprocally demand performance
subject to the provisions of the law governing the form
of contracts.
There was a perfected contract of sale
In the case at bar, there was already a perfected
contract. The condition was imposed only on the
performance of the obligations contained therein.
Considering however that the title was eventually
"reconstituted" and that the petitioners admit their
ability to execute the extrajudicial settlement of their
fathers estate, the respondent had a right to demand
fulfillment of the petitioners obligation to deliver and
transfer ownership of the house and lot.
Condition imposed upon perfection v condition imposed upon
performance
The issuance of the new certificate of title in the name
of the late Francisco Laforteza and the execution of an
extrajudicial settlement of his estate was not a
condition which determined the perfection of the
contract of sale. The petitioners fail to distinguish
between a condition imposed upon the perfection of
the contract and a condition imposed on the
performance of an obligation. Failure to comply with
the first condition results in the failure of a
contract, while the failure to comply with the
second condition only gives the other party the
option either to refuse to proceed with the sale or
to waive the condition.
Contract of sale and not contract to sell
There is nothing contained in the Memorandum
Agreement from which it can reasonably be deduced
that the parties intended to enter into a contract to sell,
i.e. one whereby the prospective seller would explicitly
reserve the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject
of the contract to sell until the full payment of the
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price, such payment being a positive suspensive
condition, the failure of which is not considered a
breach, casual or serious, but simply an event which
prevented the obligation from acquiring any obligatory
force. There is clearly no express reservation of title
made by the petitioners over the property, or any
provision which would impose non-payment of the
price as a condition for the contracts entering into
force. Although the memorandum agreement was also
denominated as a "Contract to Sell", we hold that the
parties contemplated a contract of sale. A deed of sale
is absolute in nature although denominated a
conditional sale in the absence of a stipulation
reserving title in the petitioners until full payment of
the purchase price. In such cases, ownership of the
thing sold passes to the vendee upon actual or
constructive delivery thereof. The mere fact that the
obligation of the respondent to pay the balance of the
purchase price was made subject to the condition that
the petitioners first deliver the reconstituted title of the
house and lot does not make the contract a contract to
sell for such condition is not inconsistent with a
contract of sale.
3) Bilateral and reciprocal – both contracting
parties are bound to fulfill obligations
reciprocally towards each other
 Seller – deliver and transfer ownership
of the determinate thing
 Buyer – pay the price
 Give and take relationship
 To be performed simultaneously
Legal effects of contracts being reciprocal
1) The power to rescind is implied and such
power need not even be stipulated in order for
the parties to invoke the remedy (Art 1191)
2) Neither incurs in delay if the other does not
comply (Art 1168)
3) From the moment one complies, the other
incurs delay without need of demand (Art 1179)
Compensatio morae (Cortes v. CA)
A contract of sale is reciprocal
There is no doubt that the contract of sale in question
gave rise to a reciprocal obligation of the parties.
Reciprocal obligations are those which arise from the
same cause, and which each party is a debtor and a
creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are
to be performed simultaneously, so that the
performance of one is conditioned upon the
simultaneous fulfillment of the other.
In reciprocal obligations, neither party incurs in delay
if the other does not comply or is not ready to comply
in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his
obligation, delay by the other begins.
Intention of the parties must be looked into and not the title
Sales | VENTEROSO
The settled rule is that the decisive factor in evaluating
an agreement is the intention of the parties, as shown
not necessarily by the terminology used in the contract
but by their conduct, words, actions and deeds prior to,
during and immediately after executing the agreement.
As such, therefore, documentary and parol evidence
may be submitted and admitted to prove such
intention.
In the case at bar, the stipulation in the Deed of
Absolute Sale was that the Corporation shall pay in full
the P2,200,000.00 down payment upon execution of
the contract. However, as correctly noted by the Court
of Appeals, the transcript of stenographic notes reveal
Cortes' admission that he agreed that the Corporation's
full payment of the sum of P2,200,000.00 would
depend upon his delivery of the TCTs of the three lots.
In fact, his main defense in the Answer is that, he
performed what is incumbent upon him by delivering
to the Corporation the TCTs and the carbon duplicate
of the Deed of Absolute Sale, but the latter refused to
pay in full the down payment.
By agreeing to transfer title upon full payment of
P2,200,000.00, Cortes' impliedly agreed to deliver the
TCTs to the Corporation in order to effect said
transfer. Hence, the phrase "execution of this
instrument" as appearing in the Deed of Absolute Sale,
and which event would give rise to the Corporation's
obligation to pay in full the amount of P2,200,000.00,
cannot be construed as referring solely to the signing
of the deed. The meaning of "execution" in the instant
case is not limited to the signing of a contract but
includes as well the performance or implementation or
accomplishment of the parties' agreement. With the
transfer of titles as the corresponding reciprocal
obligation of payment, Cortes' obligation is not only to
affix his signature in the Deed, but to set into motion
the process that would facilitate the transfer of title of
the lots, i.e., to have the Deed notarized and to
surrender the original copy thereof to the Corporation
together with the TCTs.
When delay is incurred
Since Cortes did not perform his obligation to have the
Deed notarized and to surrender the same together
with the TCTs, the trial court erred in concluding that
he performed his part in the contract of sale and that it
is the Corporation alone that was remiss in the
performance of its obligation. Actually, both parties
were in delay. Considering that their obligation was
reciprocal, performance thereof must be
simultaneous. The mutual inaction of Cortes and
the Corporation therefore gave rise to a
compensation morae or default on the part of both
parties because neither has completed their part in
their reciprocal obligation. Cortes is yet to deliver
the original copy of the notarized Deed and the TCTs,
while the Corporation is yet to pay in full the agreed
down payment of P2,200,000.00. This mutual delay
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of the parties cancels out the effects of default,
such that it is as if no one is guilty of delay.
4) Onerous – the thing sold is conveyed in
consideration of the price and vice versa
 Imposes a valuable consideration as
prestation (a price certain in money or
its equivalent
Onerous and commutative (Gaite v. Fonacier)
Onerous and commutative contracts
A contract of sale is normally commutative and
onerous: not only does each one of the parties assume
a correlative obligation (the seller to deliver and
transfer ownership of the thing sold and the buyer to
pay the price), but each party anticipates performance
by the other from the very start. The only rational view
that can be taken is that the sale of the ore to Fonacier
was a sale on credit, and not an aleatory contract where
the transferor, Gaite, would assume the risk of not
being paid at all; and that the previous sale or shipment
of the ore was not a suspensive condition for the
payment of the balance of the agreed price, but was
intended merely to fix the future date of the payment.
Nothing is found in the record to evidence that Gaite
desired or assumed to run the risk of losing his right
over the ore without getting paid for it, or that Fonacier
understood that Gaite assumed any such risk. This is
proved by the fact that Gaite insisted on a bond a to
guarantee payment of the P65,000.00, and not only
upon a bond by Fonacier, the Larap Mines & Smelting
Co., and the company's stockholders, but also on one
by a surety company; and the fact that appellants did
put up such bonds indicates that they admitted the
definite existence of their obligation to pay the balance
of P65,000.00.
Rule of interpretation
The Civil Code of the Philippines, Article 1378,
paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in
favor of the greatest reciprocity of interests.
There can be no question that greater reciprocity
obtains if the buyer' obligation is deemed to be actually
existing, with only its maturity (due date) postponed or
deferred, that if such obligation were viewed as non-
existent or not binding until the ore was sold.
5) Commutative – thing sold is considered
equivalent of the price paid and vice versa
*May be aleatory in case of sale of hope (ex.
sweepstakes)
 Value for value
 No requirement that there is
equivalence of the price and the exact
value of the subject matter
 Sales on discounts would still be
considered valid
Sales | VENTEROSO
Commutative value (Buenaventura v. CA)
Failure to pay the consideration v. lack of consideration
Failure to pay the consideration is different from lack
of consideration. The former results in a right to
demand the fulfillment or cancellation of the obligation
under an existing valid contract while the latter
prevents the existence of a valid contract.
Commutative value of the contract
There is no requirement that the price be equal to the
exact value of the subject matter of sale. All the
respondents believed that they received the
commutative value of what they gave. As we stated in
Vales v. Villa:
Courts cannot follow one every step of his life and
extricate him from bad bargains, protect him from
unwise investments, relieve him from one-sided
contracts, or annul the effects of foolish acts. Courts
cannot constitute themselves guardians of persons
who are not legally incompetent. There must be, in
addition, a violation of the law, the commission of
what the law knows as an actionable wrong, before the
courts are authorized to lay hold of the situation and
remedy it.
In the instant case, the trial court found that the lots
were sold for a valid consideration, and that the
defendant children actually paid the purchase price
stipulated in their respective Deeds of Sale.
6) A title and not a mode of acquisition
Title and mode distinguished (SLDC v. CA)
Definition of a mode and a title
In relation to the acquisition and transfer of ownership,
it should be noted that sale is not a mode, but merely a
title. A mode is the legal means by which dominion
or ownership is created, transferred or destroyed,
but title is only the legal basis by which to affect
dominion or ownership. Contracts only constitute
titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the mode of
accomplishing the same. Therefore, sale by itself
does not transfer or affect ownership; the most that
sale does is to create the obligation to transfer
ownership. It is tradition or delivery, as a
consequence of sale, that actually transfers
ownership.
Kinds of delivery
The law recognizes two principal modes of delivery, to
wit: (1) actual delivery; and (2) legal or constructive
delivery.
Actual delivery consists in placing the thing sold in
the control and possession of the vendee. Legal or
constructive delivery, on the other hand, may be had
through any of the following ways: the execution of a
public instrument evidencing the sale;
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1) symbolical tradition - such as the delivery of
the keys of the place where the movable sold is
being kept;
2) traditio longa manu - by mere consent or
agreement if the movable sold cannot yet be
transferred to the possession of the buyer at
the time of the sale;
3) traditio brevi manu - if the buyer already had
possession of the object even before the sale;
and traditio
4) constitutum possessorium - where the seller remains
in possession of the property in a different
capacity.
Babasanta did not acquire ownership by the mere
execution of the receipt by Pacita Lu acknowledging
receipt of partial payment for the property. For one,
the agreement between Babasanta and the Spouses Lu,
though valid, was not embodied in a public instrument.
Hence, no constructive delivery of the lands could have
been effected. For another, Babasanta had not taken
possession of the property at any time after the
perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the
rightful owner of the lands. Simply stated, there was no
delivery to Babasanta, whether actual or constructive,
which is essential to transfer ownership of the
property. Thus, even on the assumption that the
perfected contract between the parties was a sale,
ownership could not have passed to Babasanta in the
absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the
delivery of the thing sold.
Since SLDC acquired possession of the property in
good faith in contrast to Babasanta, who neither
registered nor possessed the property at any time,
SLDC’s right is definitely superior to that of
Babasanta’s.
Presumptive nature of execution of public
instrument as delivery (Equatorial Realty v.
Mayfair)
Constructive delivery is negated by the failure of the vendee to take
actual possession
Thus, it has been held that while the execution of a
public instrument of sale is recognized by law as
equivalent to the delivery of the thing sold, such
constructive or symbolic delivery, being merely
presumptive, is deemed negated by the failure of the
vendee to take actual possession of the land sold. It has
been held that the execution of a contract of sale as a
form of constructive delivery is a legal fiction. It holds
true only when there is no impediment that may
prevent the passing of the property from the hands of
the vendor into those of the vendee. When there is
such impediment, "fiction yields to reality — the
delivery has not been effected."
Mayfair's opposition to the transfer of the property by
way of sale to Equatorial was a legally sufficient
Sales | VENTEROSO
impediment that effectively prevented the passing of
the property into the latter's hands. The execution of a
public instrument gives rise, therefore, only to a prima
facie presumption of delivery. Such presumption is
destroyed when the instrument itself expresses or
implies that delivery was not intended; or when by
other means it is shown that such delivery was not
effected, because a third person was actually in
possession of the thing. In the latter case, the sale
cannot be considered consummated.
Essential elements
Consent
Article 1475. The 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.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts. (1450a)
Characteristics of consent (IFS)
1) Intelligent
2) Free
3) Spontaneous (Vda de Ape v. CA)
GR: As a general rule, all persons, whether natural or
juridical, who can bind themselves by contract have
also legal capacity to buy and sell.
XPN: There are two (2) kinds of incapacity under the
law:
1) Absolute incapacity – The incapacity is
absolute when the person cannot bind himself
in any contract. An example would be those
enumerated in Article 38 of the Civil Code; or
Article 38. Minority, insanity or imbecility, the
state of being a deaf-mute, prodigality and civil
interdiction are mere restrictions on capacity to
act, and do not exempt the incapacitated person
from certain obligations, as when the latter arise
from his acts or from property relations, such as
easements. (32a)
Minors, insane, demented persons, and deaf-
mutes
Article 1489. All persons who are authorized in this
Code to obligate themselves, may enter into a
contract of sale, saving the modifications contained
in the following articles.
Where necessaries are those sold and delivered to
a minor or other person without capacity to act, he
must pay a reasonable price therefor. Necessaries
are those referred to in article 290. (1457a)
Article 290. Support is everything that is
indispensable for sustenance, dwelling, clothing
and medical attendance, according to the social
position of the family.
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Support also includes the education of the person
entitled to be supported until he completes his
education or training for some profession, trade
or vocation, even beyond the age of majority.
(142a)
Article 1327. The following cannot give consent to
a contract:
1) Unemancipated minors;
2) Insane or demented persons, and deaf-
mutes who do not know how to write.
(1263a)
Article 1328. Contracts entered into during a lucid
interval are valid. Contracts agreed to in a state of
drunkenness or during a hypnotic spell are
voidable. (n)
GR: contracts entered into by a minor and other
incapacitated person (e.g., insane or demented persons,
deaf-mutes who do not how to write) are voidable
XPN: where necessaries are sold and delivered to a
minor, without the intervention of a parent or
guardian, the minor must pay a reasonable price
therefor
 Effect: the contract is, therefore, valid but the
minor has the right to recover any excess
above a reasonable value paid by him. The
following elements must concur:
1) Perfection of sale
2) Delivery of the subject necessaries – absent
delivery – voidable
 Active misrepresentation - sale of real estate
effected by minors who have already passed
the ages of puberty and adolescence and are
now in the adult age, when they pretended to
have already reached their majority, while in
fact they have not, is valid. They cannot be
permitted afterwards to excuse themselves
from compliance with the obligations assumed
by them or to seek their annulment
RULE:
VOIDABLE – when one of the parties are
incapacitated to give consent;
UNENFORCEABLE – when both of the parties are
incapacitated to give consent
Article 1390. The following contracts are voidable or
annullable, even though there may have been no
damage to the contracting parties:
1) Those where one of the parties is incapable
of giving consent to a contract;
2) Those where the consent is vitiated by
mistake, violence, intimidation, undue
influence or fraud.
These contracts are binding, unless they are annulled
by a proper action in court. They are susceptible of
ratification. (n)
Article 1403. The following contracts are
unenforceable, unless they are ratified:
Sales | VENTEROSO
xxx (3) Those where both parties are incapable of
giving consent to a contract.
2) Relative incapacity – The incapacitated
person cannot buy or sell a certain property
because of a special prohibition. An example
would be those enumerated in Article 1490 and
1491 of the Civil Code which will be discussed
in this and the subsequent notes.
Sales by spouses
Important dates
Date of transaction – to determine the governing law,
whether it is the Civil Code or the Family Code
Date of marriage - only considered in determining the
property regime of the spouses (i.e., whether it is
Conjugal Partnership of Gains or Absolute
Community of Property)
Family Code Civil Code
On or after Aug 3, 1988
Before Aug 3, 1988
Written consent Consent; express or
implied
The administrator is The administrator is the
both the husband and husband
the wife
Art 124 Art 166, 173, 207
Void Voidable
Civil Code
CPOG
Article 165. The husband is the administrator of
the conjugal partnership. (1412a)
Article 166. Unless the wife has been declared a non
compos mentis or a spendthrift, or is under civil
interdiction or is confined in a leprosarium, the
husband cannot alienate or encumber any real
property of the conjugal partnership without the
wife's consent. If she refuses unreasonably to give
her consent, the court may compel her to grant the
same.
This article shall not apply to property acquired by
the conjugal partnership before the effective date of
this Code. (1413a)
Article 173. The wife may, during the marriage, and
within ten years from the transaction
questioned, ask the courts for the annulment of any
contract of the husband entered into without her
consent, when such consent is required, or any act
or contract of the husband which tends to defraud
her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this
right, she or her heirs, after the dissolution of the
marriage, may demand the value of property
fraudulently alienated by the husband. (n)
 The view that the contract made by Gimena is a
voidable contract is supported by the legal provision that
contracts entered by the husband without the consent of
the wife when such consent is required, are annullable
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
at her instance during the marriage and within ten years
from the transaction questioned. (Ainza v. Padua)
ACOP
Article 207. Neither spouse may alienate or
encumber any common property without the
consent of the other. In case of unjustifiable refusal
by the other spouse, the courts may grant the
necessary consent.
Family Code
ACOP
Art. 96. The administration and enjoyment of the
community property shall belong to both spouses
jointly. In case of disagreement, the husband's
decision shall prevail, subject to recourse to the
court by the wife for proper remedy, which must be
availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or
otherwise unable to participate in the
administration of the common properties, the
other spouse may assume sole powers of
administration. These powers do not include
disposition or encumbrance without authority of the
court or the written consent of the other spouse. In
the absence of such authority or consent, the
disposition or encumbrance shall be void.
However, the transaction shall be construed as
a continuing offer on the part of the consenting
spouse and the third person, and may be
perfected as a binding contract upon the
acceptance by the other spouse or authorization
by the court before the offer is withdrawn by
either or both offerors. (206a)
CPOG
Art. 124. The administration and enjoyment of the
conjugal partnership shall belong to both spouses
jointly. In case of disagreement, the husband's
decision shall prevail, subject to recourse to the
court by the wife for proper remedy, which must be
availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or
otherwise unable to participate in the
administration of the conjugal properties, the
other spouse may assume sole powers of
administration. These powers do not include
disposition or encumbrance without authority of the
court or the written consent of the other spouse. In
the absence of such authority or consent, the
disposition or encumbrance shall be void. However,
the transaction shall be construed as a continuing
offer on the part of the consenting spouse and
the third person, and may be perfected as a
binding contract upon the acceptance by the
other spouse or authorization by the court
before the offer is withdrawn by either or both
offerors. (165a)
Articles Civil Code Family Code
CPOG 166, 173 124
Sales | VENTEROSO
ACOP 207 96
Sale between spouses
Article 1490. The husband and the wife cannot sell
property to each other, except:
1) When a separation of property was
agreed upon in the marriage settlements;
or
2) When there has been a judicial
separation of property under article 191.
(1458a)
A sale between husband and wife is inexistent and
void from the beginning. They are also prohibited
from making donations to each other during the
marriage except moderate gifts on the occasion of any
family rejoicing.
The reason for the law is not based so much on the
union of the personality of the husband and wife nor
on the weakness of the sex and on the possibility that
the husband will induce his wife to engage in ruinous
operations. The prohibition is primarily for the
protection of third persons who, relying upon
supposed property of either spouse, enters into a
contract with either of them only to find out that the
property relied upon was transferred to the other
spouse.
Sale between couple living as husband and wife - It is
contrary to morals and public policy (Calimlim
Canullas v. Fortun)
Others relatively incapacitated
Article 1491. The following persons cannot acquire
by purchase, even at a public or judicial auction,
either in person or through the mediation of
another:
1) The guardian, the property of the person
or persons who may be under his
guardianship;
2) Agents, the property whose
administration or sale may have been
intrusted to them, unless the consent of
the principal has been given;
3) Executors and administrators, the
property of the estate under
administration;
4) Public officers and employees, the
property of the State or of any
subdivision thereof, or of any
government-owned or controlled
corporation, or institution, the
administration of which has been
intrusted to them; this provision shall apply
to judges and government experts who, in
any manner whatsoever, take part in the sale;
5) Justices, judges, prosecuting attorneys,
clerks of superior and inferior courts, and
other officers and employees connected
with the administration of justice, the
property and rights in litigation or levied
upon an execution before the court
within whose jurisdiction or territory
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
they exercise their respective functions;
this prohibition includes the act of
acquiring by assignment and shall apply
to lawyers, with respect to the property
and rights which may be the object of
any litigation in which they may take
part by virtue of their profession;
6) Any others specially disqualified by law.
(1459a)
VOIDABLE – 1, 2 ,3
VOID – 4, 5, 6
Guardians of property of the person or persons
who may be under his guardianship
Sale to a guardian Sale by a guardian in
behalf of his ward
Voidable Rescissible
The lesion, if there is If the lesion is more
any, is immaterial than ¼ of the value
Agents
Without consent by the principal – VOIDABLE
With consent by the principal – VALID
XPN: “brokers” do not come within the coverage of
the prohibition as their authority consist merely in
looking for a buyer or a seller, and to bring the former
and the latter together to consummate the transaction;
therefore, they are not prohibited to buy for
themselves.
Executors and administrators
The prohibition on the part of the executors and
administrators is only with reference to properties of
the estate of the deceased under administration in the
probate court. Guardians, administrators and
executors are necessarily officers of the courts since
they are appointed or confirmed to such position
pursuant to judicial proceedings
Public officers and employees
The prohibition leveled against public officers and
employees refers only to properties belonging to the
State or of any subdivision thereof, etc. placed under
their control or administration. The reason for the
prohibition is grounded on public policy.
Justices, judges and lawyers
The prohibition in paragraph 5 refers only to the sale
or assignment of a property subject of a litigation. The
sale or assignment, to be assailable, must have been
made during the pendency of the litigation.
Judges Lawyers
Even if a judge had It is no longer unethical
purchased the property if the lawyer purchases
after his decision had the property of a client
already become final and after litigation
executory, it is still
unethical
Sales | VENTEROSO
Contingent fee - based on a certain percentage of the
value of the property or even a part of the property in
litigation is not violative of Article 1491. The reason is
that the payment, which is contingent or dependent on
victory, is effected only after the favorable decision had
become final and executory. A contingent fee
arrangement is recognized under Canon 13 of the
Canons of Professional Ethics, as an exception to
Canon 10 thereof which prohibits a lawyer from
purchasing any interest in the subject matter of the
litigation he is conducting.
Champerty/champertous contracts – an
arrangement wherein the lawyer assumes the litigation
expenses, without providing for reimbursement, in
exchange for a contingency fee
Champerty is characterized by “the receipt of a share
of the proceeds of the litigation by the intermeddler.”
Some common law court decisions, however, add a
second factor in determining champertous contracts,
namely, that the lawyer must also, “at his own expense
maintain, and take all the risks of, the litigation. (The
Conjugal Partnership of the Spouses Vicente
Cadavedo v. Lacaya)
Other persons disqualified by law
1) Aliens who are disqualified to purchase private
agricultural lands (Article XII, Sections 3 and
7 of the Constitution)
XPN: transfer to Filipinos – defect is
considered cured
2) An unpaid seller having a right of lien or having
stopped the goods in transitu, who is prohibited
from buying the goods either directly or
indirectly in the resale of the same at a public
or private sale which he may make (Article
1533 par.5 and Article 1476 [4]); and
3) The officer conducting an execution sale of
property to enforce a court judgment rendered
against the owner thereof cannot become the
purchaser or be interested directly or indirectly
in any purchase at such sale.
Object/ subject matter/ determinate thing
Characteristics of a subject matter of sale
It is existing, future or contingent;
Article 1461. Things having a potential existence may
be the object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy
is deemed subject to the condition that the thing will
come into existence.
The sale of a vain hope or expectancy is void. (n)
Article 1462. The goods which form the subject of a
contract of sale may be either existing goods, owned
or possessed by the seller, or goods to be
manufactured, raised, or acquired by the seller after
the perfection of the contract of sale, in this Title
called "future goods."
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
There may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency
which may or may not happen. (n)
Article 1465. Things subject to a resolutory condition
may be the object of the contract of sale. (n)
We do not consider the physical existence or non-
existence of the subject matter but rather the type and
nature thereof wherein taking into consideration the
state of technology and science at the time the sale is
perfected, it exists or could be made to exist to allow
the buyer reasonable certainty of being able to compel
compliance by seller of his real obligation to deliver.
Sale of a future thing
 Emptio rei speratae
 Strictly a contract covering future things, and
subject to a suspensive condition that the
subject matter will come into existence
 If the subject matter does not come into
existence, as in the case of conditional
obligations, the contract is deemed
extinguished as soon as the time expires or if it
has become indubitable that the event will not
take place
Sale of a present object
 Emptio spei
 Sale of hope or expectancy
 The contracting parties intended the contract
of sale to exist at all events, that is, whether or
not the expected thing will come into existence
such that the buyer will have to pay the
purchase price
 The contract is aleatory in nature.
 XPN: VOID
1) Sale of hope or expectancy in vain
2) The parties intended that if the hope or
expectancy will not materialize
If there is a doubt whether the sale is emptio rei speratae
or emptio spei, the presumption is in favor of emptio rei
speratae because the former is more in keeping with
the commutative character of a contract of sale.
Resolutory condition
An uncertain event upon the happening of which the
obligation (or right) subject to it is extinguished
It is licit;
Article 1459. The thing must be licit xxx
Article 1409. The following contracts are inexistent
and void from the beginning:
(1) Those whose cause, object or purpose is contrary
to law, morals, good customs, public order or public
policy;
(4) Those whose object is outside the commerce of
men;
Sales | VENTEROSO
(7) Those expressly prohibited or declared void by
law.
These contracts cannot be ratified. Neither can the
right to set up the defense of illegality be waived.
2 classes of illicit things
1) Illicit Per Se –by its nature it is heinous,
immoral and wrongful.
Ex. house of prostitution.
2) Illicit Per Accidens – it is illegal only because
there is a law prohibiting it.
Ex. the sale of a parcel of land to a disqualified
alien is void because it is prohibited by the
Constitution (Article XII, Section 7 of the 1987
Constitution)
The prohibition to sell illicit things under Article
1459 of the Civil Code refers to both illicit per se and
illicit per accidens.
It is determinate or at least determinable; and
Article 1460. A thing is determinate when it is
particularly designated or physical segregated from
all others of the same class.
The requisite that a thing be determinate is satisfied
if at the time the contract is entered into, the thing is
capable of being made determinate without the
necessity of a new or further agreement between the
parties. (n)
Article 1409. The following contracts are inexistent
and void from the beginning:
xxx
(6) Those where the intention of the parties relative
to the principal object of the contract cannot be
ascertained;
These contracts cannot be ratified. Neither can the
right to set up the defense of illegality be waived.
Determinate - when it is particularly designated or
physical segregated from all others of the same class
Determinable
1) If the subject matter agreed upon is capable of
being made determinate (“Capacity to
Segregate” Test);
2) Without the necessity of a new or future
agreement between the parties (“No Further
Agreement” Test)
However, the fact that the quantity is not
determinate shall not be an obstacle to the existence
of the contract, provided it is possible to determine
the same, without need of a new contract between
the parties.
It is owned by the seller at the time of delivery.
Article 1459. xxxthe vendor must have a right to
transfer the ownership thereof at the time it is
delivered. (n)
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

any substance, minds of the parties

Article 1477. The ownership of the thing sold shall because the parties had met, but not
be transferred to the vendee upon the actual or have no intention to declared, and what is
constructive delivery thereof. (n) be bound by it. stated in the
covering deed is not
Article 1409. The following contracts are inexistent the one intended to
and void from the beginning: be paid.
Absolute simulation Relative simulation
(5) Those which contemplate an impossible service; VOID VALID; subject to
Xxx reformation

These contracts cannot be ratified. Neither can the False consideration

right to set up the defense of illegality be waived. Old Civil Code New Civil Code
VOIDABLE; can VALID; subject to
Nemo dat quod non habet be annulled within 4 reformation
You cannot give what you cannot have years from date of
consummation of
The seller must have the right to transfer the ownership contract (Mapalo v.
of the thing or right sold to the buyer at the time of Mapalo)
delivery. Delivery may be actual or constructive. By
implication, at the time of the perfection of the Failure to pay the Lack of
contract, the seller need not be the owner of the thing price consideration
results in a right to prevents the
or right sold. What is important is that at the time of
demand the existence of a valid
delivery, he is already the owner of the thing or right. fulfillment or contract
cancellation of the
Effects if seller is not the owner at the time of delivery obligation
1) he can be made liable for damages for 1) Demand
breach of warranty of the seller’s right to sell or specific
warranty against eviction. performance
2) the seller may be liable for estafa, if he is 2) Rescission of
guilty of deceit in selling a thing which he the contract of
cannot own or which belongs to somebody sale
else. (Article 316, par. 1, Revised Penal Code) VALID VOID ab initio

Cause or consideration or price 2) It must be in MONEY OR ITS

Price - signifies the sum stipulated as the equivalent of
the thing sold and every incident taken into
consideration for the fixing of the price, put to the
debit of the buyer and agreed to by him
Requisites
1) It must be REAL;
Article 1471. If the price is simulated, the sale
is void, but the act may be shown to have
been in reality a donation, or some other act
or contract. (n)
Price is “real” when at the perfection of the
sale:
Buyer - there is legal intention on the part of
the buyer to pay the price,
Seller - and legal expectation on the part of the
seller to receive such price as the value of the
subject matter he obligates himself to deliver
If there is no such legal intention, the price is
said to be “simulated”
Simulated price v. false price
Simulated price False price
There is a colorable There is a real price
contract but without upon which the
EQUIVALENT (i.e., it must be of valuable
consideration); and
Article 1458. By the contract of sale one of
the contracting parties obligates himself to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional. (1445a)
Article 1468. If the consideration of the
contract consists partly in money, and partly
in another thing, the transaction shall be
characterized by the manifest intention of
the parties. If such intention does not clearly
appear, it shall be considered a barter if the
value of the thing given as a part of the
consideration exceeds the amount of the
money or its equivalent; otherwise, it is a
sale. (1446a)
A contract of sale may still validly exist and
thereby be governed by the Law on Sales, when
it is supported by other valuable
considerations.
12

Sales | VENTEROSO
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
Money being the highest form or
representation of commercial value in society,
removes any doubt that of what is “valuable
consideration” and functions merely as the
model of prestation, cause or consideration
that would promote the onerous nature of the
contract of sale. There is little doubt,
therefore, that other forms of cause or
consideration which are “valuable” would
support a valid contract of sale.
3) It must be CERTAIN or ASCERTAINABLE.
Article 1469. In order that the price may be
considered certain, it shall be sufficient that
it be so with reference to another thing
certain, or that the determination thereof be
left to the judgment of a special person or
persons.
Should such person or persons be unable or
unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently
agree upon the price.
If the third person or persons acted in bad
faith or by mistake, the courts may fix the
price.
Where such third person or persons are
prevented from fixing the price or terms by
fault of the seller or the buyer, the party not
in fault may have such remedies against the
party in fault as are allowed the seller or the
buyer, as the case may be. (1447a)
Article 1472. The price of securities, grain,
liquids, and other things shall also be
considered certain, when the price fixed is
that which the thing sold would have on
a definite day, or in a particular exchange
or market, or when an amount is fixed
above or below the price on such day, or
in such exchange or market, provided
said amount be certain. (1448)
Article 1473. The fixing of the price can
never be left to the discretion of one of
the contracting parties. However, if the
price fixed by one of the parties is accepted
by the other, the sale is perfected. (1449a)
Article 1474. Where the price cannot be
determined in accordance with the
preceding articles, or in any other manner,
the contract is inefficacious. However, if the
thing or any part thereof has been delivered
to and appropriated by the buyer he must
pay a reasonable price therefor. What is a
reasonable price is a question of fact
dependent on the circumstances of each
particular case. (n)
Certain – price is certain when it has been
expressed and agreed in terms of specific pesos
Sales | VENTEROSO
and/or centavos, which affirms the
proposition that money represents the best
model of valuable consideration
Ascertainable - it shall be sufficient that it be
so with reference to another thing certain, or
that the determination thereof be left to the
judgment of a specified person or persons
RULES
1) If the prices are mere estimates, the
transaction lacks the requisites
essential for the perfection of the
contract
2) The designation of a third party to fix
the price is valid, and such designation
by itself makes the price ascertainable
as to give rise to a valid contract of sale.
3) the fixing of the price cannot be validly left
to the discretion of one of the contracting
parties for to consider a contract of sale
already existing when the price has yet to
be fixed by one of the parties would render
the contract to be without the
characteristics of mutuality and
obligatory force
XPN: When accepted by the other party
Appropriation doctrine
Tolentino explains the same by saying that if the terms
of a sale are complete except for an agreement with
reference to the price, the law implies a price equivalent
to the reasonable value of the goods in cases where the
buyer has appropriated the things sold. And where the
buyer accepts delivery knowing the price claimed by
the seller, he cannot thereafter refuse to pay for it at
that price, even if there is no agreement as to price. The
appropriation doctrine is based on the principle of
unjust enrichment directed against the buyer who is not
allowed to retain the subject matter of the sale without
being liable to pay the price.
Terms or manner of payment of the price
An agreement on the manner of payment goes into the
price so much so that a disagreement on the manner of
payment is tantamount to a failure to agree on the
price, and no contract of sale is deemed to have been
perfected
Even from an economist’s point of view, the manner
and terms of payment of the price is an integral part of
the concept of “price” because of the time value of
money. A seller may be willing to accept a comparative
lower price for the object of the sale if it is payable
within a short period of time as to allow him to make
investments or apply the proceeds to earn more profits;
and yet would be demanding a higher price if the
purchase price were to be paid over a long stretch of
time.
13
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

The agreement on the terms and manner of payment matter or object of the contract pursuant to
becomes more relevant when the payment is not made Article 1381 of the Civil Code –
in lump sum and outright. That is, if the parties are to RESCISSIBLE
have a mode of payment of the price other than
immediate payment. In such case, there could not be a Simulated price Gross inadequacy
final meeting of the minds as to the price because both The parties do not There is insufficiency in
parties knew and expected that certain negotiations still intend to be bound by a the price.
had to be made with respect to the manner of payment contract.
of the price There is no real GR: It will not by itself
agreement between the invalidate a contract
Article 1179. Every obligation whose performance parties. The contract is
does not depend upon a future or uncertain void XPN:
event, or upon a past event unknown to the 1) there be a defect in
parties, is demandable at once. consent or it be
proven that the
Every obligation which contains a resolutory intention is a
condition shall also be demandable, without donation or some
prejudice to the effects of the happening of the other contract
event. (1113) 2) judicial sale - the
contract of sale is not
the result of
In a contract to sell property by installments, it is
negotiations and
not enough that the parties agree on the price as well bargaining; in fact,
as the amount of downpayment. The parties must, the property of the
likewise, agree on the manner of payment of the supposed seller
balance of the purchase price and on the other terms would be sold at
and conditions relative to the sale. Even if the buyer public auction
makes a downpayment or portion thereof, such without his
payment cannot be considered as sufficient proof of intervention.
the perfection of any purchase and sale between the However, for a
parties. (Bank of Commerce v. Manalo) judicial sale to be set
aside on the ground
Inadequacy of price of inadequacy of the
price, the inadequacy
Article 1355. Except in cases specified by law, lesion
must be such as to be
or inadequacy of cause shall not invalidate a
shocking to the
contract, unless there has been fraud, mistake or
conscience of man.
undue influence. (n)
XPN of XPN: when
there is a right of
Article 1470. Gross inadequacy of price does not redemption - the
affect a contract of sale, except as it may indicate more inadequate the
a defect in the consent, or that the parties really winning bid at public
intended a donation or some other act or sale, the more easily
contract. (n) it is for the owner to
redeem the property
Article 1471. If the price is simulated, the sale is
void, but the act may be shown to have been in Natural and accidental elements
reality a donation, or some other act or contract. (n) 1) Natural elements – deemed to exist in certain
contracts, in the absence of any contrary
Gross inadequacy - There is “gross inadequacy” in stipulation
price if a reasonable man will not agree to dispose of o Warranty against eviction
his property at that amount. o Warranty against hidden effects
2) Accidental elements – may be present or
In determining the adequacy or inadequacy of the absent depending on the stipulations of the
price, the price obtaining at the time of the execution parties
of the contract shall be considered, and not the price o Conditions, penalties, interest
obtaining thereafter.
Two kinds of contract of sale
1) A sale TO a guardian involving a property of 1) Absolute – Sale is not subject to any condition
the person or persons who may be under his whatsoever and where the title or ownership
guardianship – VOIDABLE passes to the buyer upon delivery of the thing
2) a sale made BY a guardian on behalf of his sold
ward if the ward suffers a lesion by more than 2) Conditional – the sale contemplates a
one-fourth (1/4) of the value of the subject contingency and where the contract is subject
14

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to certain conditions (usually the full payment estate. (Buenaventura

of the purchase price) v. CA)
Future things and goods As a rule, future property
Sales as distinguished from other contracts may be the object of the cannot be subject of
Sales v. Barter contract donation
Article 1638. By the contract of barter or exchange
one of the parties binds himself to give one thing in Donations cannot
consideration of the other's promise to give another comprehend future
thing. (1538a) property.

By future property is
Article 1468
understood anything
If the consideration of the contract consists partly in
which the donor cannot
money, and partly in another thing, the transaction
dispose of at the time of
shall be characterized by the manifest intention of
the donation. (Art 751)
the parties. If such intention does not clearly appear,
Imposed upon with Imposed upon with
it shall be considered a barter if the value of the thing
income tax, VAT or donor’s tax
given as a part of the consideration exceeds the
percentage tax, as the
amount of the money or its equivalent; otherwise, it
case may be
is a sale. (1446a)
Gross inadequacy of the price will affect the validity of
Sale Barter/exchange
a contract of sale if the real contract intended is one of
The main distinguishing element is the
consideration. donation
Vendor gives a thing in Vendor gives a thing in
consideration for a price consideration for Sales v. Contract for a piece of work
in money another thing Article 1467
The price is certain in No such element A contract for the delivery at a certain price of an
money or its equivalent article which the vendor in the ordinary course of his
Statute of frauds applies Does not apply business manufactures or procures for the general
to the sale of real market, whether the same is on hand at the time or
property and personal not, is a contract of sale, but if the goods are to be
property bought at manufactured specially for the customer and upon
500.00 or more his special order, and not for the general market, it
The right of legal Does not exist is a contract for a piece of work. (n)
redemption granted by
law to an adjoining Article 1713. By the contract for a piece of work the
owner of an urban land contractor binds himself to execute a piece of work
exists in a resale of for the employer, in consideration of a certain price
property or compensation. The contractor may either employ
only his labor or skill, or also furnish the material.
Sales v. donation (1588a)
Article 725. Donation is an act of liberality whereby
a person disposes gratuitously of a thing or right in New York rule
favor of another, who accepts it. (618a) If the article already exists, the contract is a sale

Sale Donation English rule

The main distinguishing element is the consideration
Onerous contract Gratuitous contract
Consensual contract Formal/solemn contract
There is no diminution Diminishes the value of
of the estate but merely the estate
substitution of values,
that is, the property sold In their overzealousness
is replaced by the to safeguard their future
equivalent monetary legitime, petitioners
consideration forget that theoretically,
the sale of the lots to
their siblings does not
affect the value of their
parents estate. While the
sale of the lots reduced
the estate, cash of
equivalent value replaced
the lots taken from the
If the material is more valuable than the work, the
contract is a sale. If it is the work or skill which is more
valuable, it is a contract for a piece of work.
Sale Piece of work
The thing transferred is The thing transferred is
one which would have one not in existence and
existed and been the which never would have
subject of sale to some existed but for the order
other person, even if theof the party desiring to
order had not been given acquire it
The risk of loss is borneThe risk of loss before
by the buyer delivery is borne by the
worker or contractor
Within Statute of Frauds Not within Statute of
Frauds
Imposed upon with sales Imposed upon with
tax contractor’s tax
15

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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

Action for specific Action for specific The seller profits from The agent is disqualified
performance is available performance is not the transaction from receiving any
because it involves an available because it personal profit from the
obligation to give involves an obligation to transaction covered by
do. To allow the same the agency and any
amounts to involuntary profit pertains to the
servitude. principal

Tests for determination Sales v. payment by cession

1) Test of special orders – When a factory Article 1255. The debtor may cede or assign his
requires the use of extraordinary or additional property to his creditors in payment of his debts.
equipment, or involves services not generally This cession, unless there is stipulation to the
performed by it – it thereby contracts for a contrary, shall only release the debtor from
piece of work – filing special orders within the responsibility for the net proceeds of the thing
meaning of Article 1467. (Celestino Co. v. assigned. The agreements which, on the effect of the
Collector) cession, are made between the debtor and his
creditors shall be governed by special laws. (1175a)
2) Consensuality test – The distinction between
the two contracts depends on the intention of
Sales Payment by cession
the parties (Engineering Machinery v. CA)
A title which allows a A mode of payment
party to demand
Sales v. agency to sell performance of an
Article 1868. By the contract of agency a person obligation
binds himself to render some service or to do
something in representation or on behalf of another, Sales v. dacion en pago
with the consent or authority of the latter. (1709a)
Article 1245. Dation in payment, whereby property is
alienated to the creditor in satisfaction of a debt in
Article 1466 money, shall be governed by the law of sales. (n)
In construing a contract containing provisions
characteristic of both the contract of sale and of the Dacion en pago – constitutes the delivery and
contract of agency to sell, the essential clauses of
transmission of a thing by the debtor to the creditor as
the whole instrument shall be considered. (n)
an accepted equivalent of the performance of the
obligation. By express provision of law, dation in
Sale Agency to sell
Buyer receives the Ownership is not payment is governed by the Law on Sales since it
goods as owner transferred essentially involves the transfer of ownership of a
Buyer has to pay the Agent simply has to subject matter. It is legally considered as a sale.
price of the thing account for the
proceeds of the sale he Sales Dacion en pago
may make on the A title which allows a A mode of payment
principal’s behalf party to demand
Buyer, as a general rule, Agent can return the performance of an
cannot return the object object in case he is obligation
sold unable to sell the same No pre-existing credit With pre-existing credit
to a third person Gives rise to obligation Extinguishes obligation
Seller warrants the thing Agent makes no Price from the Extinguishes debt from
sold warranty for which he viewpoint of the seller; the viewpoint of the
assumes personal object from the debtor; acquisition of
liability as long as he viewpoint of the buyer the object from the
acts within the authority viewpoint of the
and in the name of the creditor
seller
Buyer can deal with the Agent in dealing with Cession Dation in payment
thing sold as he pleases, the thing received must In both, there is delivery of the thing in satisfaction
being the owner act and is bound of a debt.
according to the There are several There is only one
instructions of his creditors creditor
principal Debtor is insolvent at Does not presuppose
There is generally no The parties may agree the time of assignment the insolvency of the
commission between on commissions debtor or a situation of
the buyer and the seller financial difficulties
By its very nature, a sale Because it covers an No extinguishment of There is extinguishment
is not unilaterally underlying fiduciary obligation as a general of an obligation
revocable relationship, it is rule
essentially revocable
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Involves the Does not involve all the Contract to sell - defined as a bilateral contract
universality of the properties of the debtor whereby the prospective seller, while expressly
properties of the reserving the ownership of the subject property despite
debtor, applied to delivery thereof to the prospective buyer, binds himself
creditors to sell the said property exclusively to the prospective
proportionately based buyer upon fulfillment of the condition agreed upon,
on their credit that is, full payment of the purchase price.
The creditors acquire The creditor becomes
only the right to sell the owner of the thing
the thing and apply the given by the debtor The determination of whether a contract is a contract
proceeds to their credits to sell, lies in locating the existence of two (2) clauses:
pro-rata and possession 1) Reservation of the ownership of the subject
of the thing matter with the seller, even if there should
be delivery thereof to the buyer; and
Sales v. lease 2) Reservation of the right of the seller to
ARTICLE 1642. The contract of lease may be of rescind the contract extra-judicially in the
things, or of work and service. (1542) event the suspensive condition (usually the
full payment of the purchase price) does
ARTICLE 1643. In the lease of things, one of the not happen.
parties binds himself to give to another the
enjoyment or use of a thing for a price certain, and While the subsequent execution of the Deed of
for a period which may be definite or indefinite. Absolute Sale after full payment of purchase price is
However, no lease for more than ninety-nine years highly indicative that a contract is a contract to sell,
shall be valid. (1543a) the same is not in itself conclusive. It is only when
the subsequent execution of the Deed of Absolute
ARTICLE 1644. In the lease of work or service, one Sale is actually the consequence of the
of the parties binds himself to execute a piece of reservation by the seller of ownership prior to full
work or to render to the other some service for a payment of the purchase price that it results to the
price certain, but the relation of principal and agent inference that the one involved is a contract to sell
does not exist between them. (1544a)
Sale Contract to sell
Sale Lease Title over the property Ownership is retained by
Transfer of possession Transfer of possession passes to the buyer upon the seller whether or not
or delivery to vendee or delivery to the lessee delivery unless there is a there is delivery.
vests ownership to him does not vest ownership contrary agreement Ownership passes to
in the latter buyer only upon full
payment of price.
Sales v. contract to sell Non-payment of the The payment in full is a
Article 1479. A promise to buy and sell a determinate purchase price is a positive suspensive
thing for a price certain is reciprocally demandable. negative resolutory condition. If the price is
condition. The sale not paid, the obligation
An accepted unilateral promise to buy or to sell a becomes ineffective to deliver and to transfer
determinate thing for a price certain is binding upon upon the happening of ownership on the part of
the promisor if the promise is supported by a such condition. Seller the seller does not
consideration distinct from the price. (1451a) may rescind the contract become effective
or exact fulfillment
Article 1191. The power to rescind obligations is After delivery of the Whether there is delivery
implied in reciprocal ones, in case one of the object, the seller losesor not, the seller retains
obligors should not comply with what is incumbent ownership over it.
the ownership of the
upon him. Unless the contract is set
object. If the seller, due
aside, he cannot recoverto the non-payment of
The injured party may choose between the the object. the price is ousting the
fulfillment and the rescission of the obligation, with buyer from the property,
the payment of damages in either case. He may also he is not rescinding the
seek rescission, even after he has chosen fulfillment, contract of sale but is
if the latter should become impossible. precisely enforcing it.
Rescission can be The doctrine of
The court shall decree the rescission claimed, unless availed of only in case substantial breach has
there be just cause authorizing the fixing of a period. there has been no application, since
substantial breach. the non-happening of
This is understood to be without prejudice to the the condition by
rights of third persons who have acquired the thing, whatever means or
in accordance with articles 1385 and 1388 and the reason, substantial or
Mortgage Law. (1124) not, ipso jure
extinguishes the contract
17

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Since delivery transfers The rescission can be 4) The nomenclature of the subject contract is not
ownership to the buyer, made extrajudicially. controlling, considering that the Court looks
rescission mustNo court intervention is beyond the title of said document, since the
necessarily be done needed to rescind. denomination or title given by the parties in
judicially since only the Should court their contract is not conclusive of the nature of
courts can grant the intervention is necessary, its contents. (Agustin v. de Vera)
remedy of recalling it is not for the rescission
ownership that has of the contract but for
passed to the buyer and the recovery of the Contract to sell Conditional contract
reverting it to the sellerpossession from the of sale
buyer who is not entitled The consent is lacking; The consent is present,
thereto, and refuses to the seller does not although it is
voluntarily return the consent to the sale but conditioned upon the
subject matter of the sale only promises to sell happening of a
The giving of the earnest The giving of the earnest once the condition is contingent event which
money is the proof of money will not change met may or may not happen
perfection of the the nature of the Upon the fulfillment of If the suspensive
contract contract entered the suspensive condition condition is not fulfilled,
(Serrano v. Caguiat) which is the full payment the perfection of the
of the purchase price, contract of sale is
ownership will not completely abated.
Distinguishing acts
automatically transfer to However, if the
1) Still controlling are the buyer although the suspensive condition is
 the lack of any stipulation in the sale property may have been fulfilled, the contract of
contract reserving the title of the property previously delivered to sale is thereby perfected,
on the vendors and him. The prospective such that if there had
 the lack of any stipulation giving the seller still has to already been previous
sellers the right to unilaterally rescind the convey title to the delivery of the property
contract upon non-payment of the prospective buyer by subject of the sale to the
balance thereof within a fixed period. The entering into a buyer, ownership thereto
absence of such stipulations in a sale contract of absolute automatically transfers
contract makes the said contract a sale. to the buyer by operation
of law without any
contract of sale. Hence, the Contract to
further act having to be
Purchase and Sale entered into by
performed by the seller.
Gregorio and Hipolito is a contract of
sale. (Agustin v. de Vera)
Article 1459
2) This stipulation, i.e., to execute a deed of The thing must be licit and the vendor must have a
absolute sale upon full payment of the right to transfer the ownership thereof at the time it
purchase price, is a unique and distinguishing is delivered. (n)
characteristic of a contract to sell. (Diego v.
Diego) Object of sales
 While a stipulation or promise to the Article 1347. All things which are not outside the
effect that a seller shall execute a deed commerce of men, including future things, may
of sale upon the completion of be the object of a contract. All rights which are not
payment of the purchase price by the intransmissible may also be the object of contracts.
buyer may be considered a factor or a
sign that a contract might possibly be a No contract may be entered into upon future
contract to sell, such stipulation in inheritance except in cases expressly authorized by
law.
itself, taken in isolation, is by no means
determinative and conclusive as to the
All services which are not contrary to law, morals,
contract being a contract to sell. good customs, public order or public policy may
(Agustin v. de Vera) likewise be the object of a contract. (1271a)
3) Contemporaneous acts of the parties show that
they agreed on a contract to sell, not of sale or Article 1348. Impossible things or services cannot
that the parties never intended to transfer be the object of contracts. (1272)
ownership except upon full payment of the
purchase price. (SLDC v. CA) (Diego v. Article 1349. The object of every contract must be
Diego) determinate as to its kind. The fact that the quantity
 Non- execution of the deed of absolute is not determinate shall not be an obstacle to the
sale even upon partial payment existence of the contract, provided it is possible to
 The title of possession is not delivered or determine the same, without the need of a new
surrendered contract between the parties. (1273)
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
1) Things
o Must be licit or lawful (Art 1347)
1) Illicit per se (of its nature)
2) Illicit per accidens (because some
provisions of the law declare it
illegal)
XPN: THINGS OUTSIDE
COMMERCE OF MAN - res nullus
(nobody owns), res communes (common
to all)
THOSE CONTRARY TO LAW,
MORALS, GOOD CUSTOMS,
PUBLIC ORDER AND PUBLIC
o Must not be impossible (Art 1348)
o Must be determinate (Art 1349)
2) Rights
o Must not be intransmissible (Art 1347)
o Must not be personal
Contract of sale Contracts in general
Services may not be an Services may be an
object object
Right of the vendor to transfer ownership
GR: One can only sell what one owns (nemo dat quod
non habet)
XPN: It is sufficient that he has the right to sell the
thing at the time it is delivered or at the time when
the ownership is to pass
1) Future things/goods
2) Goods whose acquisition by the seller depends
upon a contingency
Article 1460
A thing is determinate when it is particularly
designated or physical segregated from all others of
the same class.
The requisite that a thing be determinate is satisfied
if at the time the contract is entered into, the thing is
capable of being made determinate without the
necessity of a new or further agreement between the
parties. (n)
Determinate thing
1) particularly designated or
2) physical segregated from all others of the same
class
GR: The object of the sale must be determinate at the
time of the sale
XPN: Sufficient if the subject matter is capable of
being determinable (capable of being made
determinate without the necessity of a new or further
agreement between the parties), provided it becomes
determinate at the time of delivery
 when a generic thing belongs to a class,
then the class itself is LIMITED
GENERIC and thus can be an object of
a contract (Galas)
Sales | VENTEROSO
 If the object is VERY GENERIC, it
cannot be an object (Galas)
Article 1461
Things having a potential existence may be the
object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy
is deemed subject to the condition that the thing will
come into existence.
The sale of a vain hope or expectancy is void. (n)
Sale of things having potential existence
 Considered as future things (Art 1347)
1) Must be specific and identified
2) Must be owned by the vendor at the time
Sale of hope or expectancy
GR: Sale of hope or expectancy can be the object of
sale
XPN: Sale of vain hope
Article 1462
The goods which form the subject of a contract of
sale may be either existing goods, owned or
possessed by the seller, or goods to be
manufactured, raised, or acquired by the seller after
the perfection of the contract of sale, in this Title
called "future goods."
There may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency
which may or may not happen. (n)
Goods subject to a contract of sale
1) existing goods owned or possessed by the seller
2) goods to be manufactured, raised, or
acquired by the seller after the perfection of
the contract of sale (future goods)
 valid only as an executory contract to be
fulfilled by the acquisition and delivery of the
goods specified
 XPN: contracts of piece of work
Article 1467. A contract for the delivery at a
certain price of an article which the
vendor in the ordinary course of his
business manufactures or procures for the
general market, whether the same is on hand
at the time or not, is a contract of sale, but
if the goods are to be manufactured
specially for the customer and upon his
special order, and not for the general
market, it is a contract for a piece of work.
(n)
Article 1463
The sole owner of a thing may sell an undivided
interest therein. (n)
Sale of undivided interest
1) Goods (Art 1464)
2) Things (Art 1463)
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
Sale of undivided interest of a sole owner
May sell:
1) The entire thing
2) A specific portion
3) An undivided interest – aliquot part of the
whole
 Legal effect: to make the buyer a co-
owner of the thing sold
 The co-owner can dispose of his
undivided share even without the
consent of other co-owners (Art 493)
Article 493. Each co-owner shall
have the full ownership of his part
and of the fruits and benefits
pertaining thereto, and he may
therefore alienate, assign or
mortgage it, and even substitute
another person in its enjoyment,
except when personal rights are
involved. But the effect of the
alienation or the mortgage, with
respect to the co-owners, shall be
limited to the portion which may be
allotted to him in the division upon
the termination of the co-ownership.
(399)
Article 1464
In the case of fungible goods, there may be a sale of
an undivided share of a specific mass, though the
seller purports to sell and the buyer to buy a definite
number, weight or measure of the goods in the mass,
and though the number, weight or measure of the
goods in the mass, and though the number, weight
or measure of the goods in the mass is
undetermined. By such a sale the buyer becomes
owner in common of such a share of the mass as the
number, weight or measure bought bears to the
number, weight or measure of the mass. If the mass
contains less than the number, weight or measure
bought, the buyer becomes the owner of the whole
mass and the seller is bound to make good the
deficiency from goods of the same kind and quality,
unless a contrary intent appears. (n)
Sale of an undivided share of a specific mass
Fungible goods – goods of which any unit is, from its
nature or by mercantile usage, treated as the equivalent
of any other unit
Application
1) Applies when to fungible goods or goods
incapable of being segregated
2) The whole mass must be specific or
determinate
3) Applies whether the sale purports to a definite
number, weight or measure of the goods in the
mass or not
Effect of the sale
1) The owner of the mass of goods may sell only
the undivided portion thereof, provided that
Sales | VENTEROSO
the mass is specific or capable of being
made determinate
2) The buyer becomes a co-owner
3) If the mass contains less than the number,
weight or measure bought, the buyer
becomes the owner of the whole mass and the
seller is bound to make good the deficiency
 Applies only if the sale purports to a
definite number, weight or measure of
the goods in the mass
4) The whole mass is at risk of all the parties
interested in it, in proportion to their various
holdings
5) The subject matter of the sale is intangible or
incorporeal
Article 1465
Things subject to a resolutory condition may be the
object of the contract of sale. (n)
Sale of thing subject to a resolutory condition
Resolutory condition – an uncertain event upon the
happening of which the obligation or right subject to it
is extinguished
Article 1466
In construing a contract containing provisions
characteristic of both the contract of sale and of the
contract of agency to sell, the essential clauses of the
whole instrument shall be considered. (n)
Principles
1) A contract is what the law defines it to be, and
not what it is called by the contracting parties
2) The law should be interpreted as a whole (ut
magis valeat quam pereat)
3) To classify a contract, due regard must be given
to its essential clauses
Article 1467
A contract for the delivery at a certain price of an
article which the vendor in the ordinary course of his
business manufactures or procures for the general
market, whether the same is on hand at the time or
not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon
his special order, and not for the general market, it
is a contract for a piece of work. (n)
Contract of piece of work –
Article 1713. By the contract for a piece of work the
contractor binds himself to execute a piece of work
for the employer, in consideration of a certain price
or compensation. The contractor may either employ
only his labor or skill, or also furnish the material.
(1588a)
Article 1468
If the consideration of the contract consists partly in
money, and partly in another thing, the transaction
shall be characterized by the manifest intention of
the parties. If such intention does not clearly appear,
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
it shall be considered a barter if the value of the thing
given as a part of the consideration exceeds the
amount of the money or its equivalent; otherwise, it
is a sale. (1446a)
Rules to distinguish
1) Manifest intentions of the parties – taking
into account the contemporaneous and
subsequent acts of the parties
2) When intentions of the parties are not
manifest
 Value of thing > Value of money =
BARTER
 Value of thing < Value of money =
SALE
 Value of thing = Value of money – SALE
(greatest reciprocity of interest)
 If the intentions of the parties are manifest, the
value of the thing nor the money will not
matter as it is the intentions of the parties that
will be controlling
Article 1469
In order that the price may be considered certain, it
shall be sufficient that it be so with reference to
another thing certain, or that the determination
thereof be left to the judgment of a special person or
persons.
Should such person or persons be unable or
unwilling to fix it, the contract shall be inefficacious,
unless the parties subsequently agree upon the price.
If the third person or persons acted in bad faith or
by mistake, the courts may fix the price.
Where such third person or persons are prevented
from fixing the price or terms by fault of the seller
or the buyer, the party not in fault may have such
remedies against the party in fault as are allowed the
seller or the buyer, as the case may be. (1447a)
Codal Dissection
1st par – WHEN PRICE IS CONSIDERED
CERTAIN
1) The parties have fixed or agreed upon a
definite amount
2) Certain with reference to another thing
3) Determination thereof is left to the
judgment of a special person or persons
2nd, 3rd, 4th par – EFFECTS WHEN PRICE IS
DETERMINED BY THIRD PERSONS
1) unable or unwilling to fix – the contract
shall be INEFFICACIOUS
XPN: the parties subsequently agree upon
the price
2) acted in bad faith or by mistake – the
courts may fix the price
3) prevented from fixing the price or terms
by fault of the seller or the buyer - party
not in fault may have such remedies against
Sales | VENTEROSO
the party in fault as are allowed the seller or
the buyer
Price
 must be certain or ascertainable
1) The parties have fixed or agreed upon a
definite amount
 money – currency
 equivalent of money – promissory
notes, checks, and other mercantile
instruments
2) In reference with a thing certain (Art 1472)
 may be determined by the parties themselves
or third persons
Effects when price is determined by third persons
1) unable or unwilling to fix – the contract
shall be INEFFICACIOUS (as if no price has
been fixed)
XPN: the parties subsequently agree upon the
price
 Mere error in judgment cannot serve as a basis
for disregarding the price fixed
2) acted in bad faith or by mistake – the courts
may fix the price
3) prevented from fixing the price or terms by
fault of the seller or the buyer - party not in
fault may have such remedies against the party
in fault as are allowed the seller or the buyer
Remedies
 fulfillment with damages – courts shall
fix the price
 rescission with damages
Article 1191 (2). The injured party
may choose between the fulfillment
and the rescission of the obligation,
with the payment of damages in
either case. He may also seek
rescission, even after he has chosen
fulfillment, if the latter should
become impossible.
Article 1470
Gross inadequacy of price does not affect a contract
of sale, except as it may indicate a defect in the
consent, or that the parties really intended a
donation or some other act or contract. (n)
Effect of gross inadequacy of price
 Gross inadequacy of price does not affect a
contract of sale, but may indicate a vitiated
consent. With this, the contract of sale is
not void for the inadequacy (gross or
otherwise) of the price but because of the
DEFECT IN CONSENT
VOLUNTARY SALES
GR: Mere inadequacy of price or the fact that the
bargain was a hard one generally does not affect its
validity
21
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
XPN: The inadequacy of price may indicate vitiated
consent (VOIDABLE)
 One of the badges of fraud is the gross
inadequacy of the price
INVOLUNTARY OR EXECUTION SALES
GR: Mere inadequacy of price is not a sufficient
ground for the cancellation of an execution sale
XPN:
1) Judicial sales - When the price is so inadequate
as to shock the conscience of the Court, a
judicial sale will be SET ASIDE
SALES WITH RIGHT TO REPURCHASE
The validity of the sale is not necessarily affected where
the law gives to the owner the right to redeem
WHEN THE SALE IS REALLY INTENDED
AS A DONATION OR OTHER CONTRACT
 When the sale is really intended as a donation
or other contract, the contract of sale is
relatively simulated – VOID AS A SALE,
BUT VALID AS A DONATION OR
OTHER ACT WHEN REFORMED (Art
1471)
 When the price is absolutely simulated - VOID
Article 1471
If the price is simulated, the sale is void, but the act
may be shown to have been in reality a donation, or
some other act or contract. (n)
1) The price is simulated or false, such as when
the vendor really intended to transfer the thing
gratuitously – VOID AS A SALE, VALID AS
A DONATION
2) The contract is not shown to be donation or
any other act or contract transferring
ownership because the parties do not intend to
be bound at all – VOID AND
INEXISTENT
Article 1472
The price of securities, grain, liquids, and other
things shall also be considered certain, when the
price fixed is that which the thing sold would have
on a definite day, or in a particular exchange or
market, or when an amount is fixed above or below
the price on such day, or in such exchange or market,
provided said amount be certain. (1448)
In reference with a thing certain
 Applicable to price of fungible things such
as securities, grain, liquids, and other
things, the prices of which are subject to
fluctuations in the market
1) price fixed is that which the thing sold would
have on a definite day
2) price fixed is that in a particular exchange or
market
Sales | VENTEROSO
3) when an amount is fixed above or below the
price on such day, or in such exchange or
market
Effect when the price cannot be determined
The sale becomes INEFFICACIOUS (Art 1471)
Article 1473
The fixing of the price can never be left to the
discretion of one of the contracting parties.
However, if the price fixed by one of the parties is
accepted by the other, the sale is perfected. (1449a)
Fixing of price
GR: fixing of the price can never be left to the
discretion of one of the contracting parties
Mutuality of contracts
Article 1308. The contract must bind both
contracting parties; its validity or compliance
cannot be left to the will of one of them.
(1256a)
XPN: The price fixed by one of the parties is accepted
by the other, the sale is perfected. There is now true
meeting of the minds
Article 1474
Where the price cannot be determined in accordance
with the preceding articles, or in any other manner,
the contract is inefficacious. However, if the thing or
any part thereof has been delivered to and
appropriated by the buyer he must pay a reasonable
price therefor. What is a reasonable price is a
question of fact dependent on the circumstances of
each particular case. (n)
Codal Dissection
Part 1 – EFFECT WHEN PRICE CANNOT
BE DETERMINED
The contract is INEFFICACIOUS
Part 2 – EFFECT PARTLY EXECUTED
SALES
The buyer must pay a reasonable price
 Despite the contract being inefficacious
Part 3 – WHAT IS A REASONABLE PRICE?
A question of fact dependent on the circumstances
of each particular case
When the contract of sale is inefficacious
1) The third person is unwilling or unable to fix
the price (Art 1469)
2) The price cannot be determined under Art
1472 or in any other matter
GR: When a contract is inefficacious, it is as if there is
no price agreed and the vendee is not in under any
obligation to pay and vendor to deliver the thing
XPN: When the contract, even though inefficacious,
was already partly executed, the buyer must pay a
reasonable price.
22
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
Article 1475
The 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.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts. (1450a)
Perfection of a contract of sale
The contract of sale being consensual, it is perfected
without the necessity of any other circumstances.
Transfer of ownership
While the perfection of the contract of sale happens at
the exact time that there is meeting of the minds upon
the object and the price, the ownership is not
transferred until the thing has been delivered.
Right of owner
1) The owner has the right to quote his own price,
reasonable or unreasonable
2) The owner may even impose a condition hard
to fulfill and name a price quite out of
proportion
3) He may quote a small or nominal consideration
Effect of failure to pay price/absence of price
1) If price is stipulated – non-payment does not
convert the contract into one without a
consideration. Payment at the time of the
establishment of the contract is not an essential
element for the existence of the contract of
sale.
2) If price is not stipulated – where the purchase
price which appears to be paid has in fact never
been paid by the buyer, the sale is void
(ABSENCE OF CONSIDERATION)
Article 1476
In the case of a sale by auction:
1) Where goods are put up for sale by auction
in lots, each lot is the subject of a separate
contract of sale.
2) A sale by auction is perfected when the
auctioneer announces its perfection by the
fall of the hammer, or in other customary
manner. Until such announcement is made,
any bidder may retract his bid; and the
auctioneer may withdraw the goods from the
sale unless the auction has been announced
to be without reserve.
3) A right to bid may be reserved expressly by
or on behalf of the seller, unless otherwise
provided by law or by stipulation.
4) Where notice has not been given that a sale
by auction is subject to a right to bid on
behalf of the seller, it shall not be lawful for
the seller to bid himself or to employ or
induce any person to bid at such sale on his
behalf or for the auctioneer, to employ or
Sales | VENTEROSO
induce any person to bid at such sale on
behalf of the seller or knowingly to take any
bid from the seller or any person employed
by him. Any sale contravening this rule may
be treated as fraudulent by the buyer. (n)
Codal Dissection
Par 1 – SALE IN AUCTION BY LOTS
Each lot is the subject of a separate contract of sale
Par 2 – PERFECTION
Upon announcement by the fall of the hammer or in
other customary manner
GR: Until such announcement is made, any bidder
may retract his bid; and the auctioneer may withdraw
the goods from the sale
XPN: Auction has been announced to be without
reserve
Par 3 – RIGHT TO BID
GR: A right to bid may be reserved expressly by or
on behalf of the seller
XPN: Unless otherwise provided by law or by
stipulation.
Par 4 – EFFECTS IF NO NOTICE ON THE
RIGHT TO BID BY THE SELLER
1) it shall not be lawful for the seller to bid
himself
2) it shall not be lawful for the seller to employ
or induce any person to bid at such sale on
his behalf or for the auctioneer
3) it shall not be lawful to employ or induce any
person to bid at such sale on behalf of the
seller or knowingly to take any bid from the
seller or any person employed by him.
Rules regarding sale by auction
 Each lot is the subject of a separate contract of
sale though the parties may subsequently
consolidate all the purchases into one
transaction
 In making the bids, the seller is merely making
an invitation to those present to make offers.
The sale by auction is perfected upon
announcement by
 the fall of the hammer or
 in other customary manner
 Before the perfection, any bidder may retract
his bid; and the auctioneer may withdraw the
goods from the sale unless the auction has been
announced to be without reserve
 When the auction is without reserve,
the auctioneer cannot withdraw the
goods from sales once a bid has been
made and the highest bidder has a right
to enforce his bid
23
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

 The seller has the right to bid and he may do

so by reservation made expressly or in his
behalf unless otherwise provided by
 Law
 Stipulation
 Requisites for the right to bid by the seller
 Such right was reserved
 Notice was given that the sale is subject
to a right to bid on behalf of the seller
 The right to bid by the seller is not
prohibited by law or stipulation
 Effects when there is no notice of the right to
bid by the seller
 it shall not be lawful for the seller to bid
himself
 it shall not be lawful for the seller to
employ or induce any person to bid at
such sale on his behalf or for the
auctioneer
 it shall not be lawful to employ or
induce any person to bid at such sale
on behalf of the seller or knowingly to
take any bid from the seller or any
person employed by him.
 The purpose of the notice is to prevent
puffing or secret bidding by or on behalf of
the seller by people who are not themselves
bound

24

Sales | VENTEROSO
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
SECOND EXAM TOPICS
Article 1477
The ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive
delivery thereof. (n)
Article 1478
The parties may stipulate that ownership in the thing
shall not pass to the purchaser until he has fully paid
the price. (n)
FORMATION OF A CONTRACT OF SALE
1) POLICITACION, negotiation, preparation,
conception or generation stage, which is the
period of negotiation and bargaining, ending at
the moment of perfection;
 there is “Freedom to Contract”,
which signifies the right to choose with
whom to contract and what to contract
2) PERFECTION or “birth” of the contract,
which is the point in time when the parties
come to agree on the terms of the sale; and
3) CONSUMMATION or “death” of the
contract, which is the process of fulfillment or
performance of the terms agreed upon in the
contract.
Advertisements and invitations
Business advertisements
Article 1325. Unless it appears otherwise, business
advertisements of things for sale are not definite
offers, but mere invitations to make an offer. (n)
Advertisements for bidders
Article 1326. Advertisements for bidders are simply
invitations to make proposals, and the advertiser
is not bound to accept the highest or lowest bidder,
unless the contrary appears. (n)
Offers
Article 1319. Consent is manifested by the meeting
of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The
offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a
counter-offer.
Acceptance made by letter or telegram does not bind
the offerer except from the time it came to his
knowledge. The contract, in such a case, is
presumed to have been entered into in the place
where the offer was made. (1262a)
Article 1320. An acceptance may be express or
implied. (n)
Article 1321. The person making the offer may fix
the time, place, and manner of acceptance, all of
which must be complied with. (n)
Sales | VENTEROSO
Article 1322. An offer made through an agent is
accepted from the time acceptance is
communicated to him. (n)
Article 1323. An offer becomes ineffective upon the
death, civil interdiction, insanity, or insolvency
of either party before acceptance is conveyed. (n)
Prior to its acceptance,
1) Offeror - It may be withdrawn or destroyed by
the offeror prior to its acceptance and it is not
even necessary that the offeree learns of the
withdrawal
 The promisee (acceptor) has the
burden of proving the existence of a
consideration.
2) Offeree - has no authority to treat the offer as
consisting of separate and distinct parts since
he must accept and comply with all the
requirements provided in the offer. He has
only the choice to accept or reject the offer in
its entirety. He has no choice to reject that
portion of the offer which is
disadvantageous and accept only that
which is beneficial.
 has the choice to indicate further
negotiations by making a counter-offer
Counter-offer - always considered in law a rejection of
the original offer, and has the effect of extinguishing
the original offer
Option contracts
Article 1479
A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promisor if the promise is supported by a
consideration distinct from the price. (1451a)
Article 1324. When the offerer has allowed the
offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by
communicating such withdrawal, except when the
option is founded upon a consideration, as
something paid or promised. (n)
Article 1354. Although the cause is not stated in the
contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary.
(1277)
Three kinds of promises treated in Article 1479
1) An accepted unilateral promise to sell in which
the promisee (acceptor) elects to buy;
2) An accepted unilateral promise to buy in which
the promisee (acceptor) elects to sell; and
3) A bilateral promise to buy and sell reciprocally
accepted in which either of the parties chooses
to exact fulfillment.
25
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

Obligations of the offeror in a valid option contract

Option 1) Not to offer to any third party the sale of the
1) A privilege existing in one person, for which he object of the option during the option period;
had paid a consideration, giving him the right, 2) Not to withdraw the offer or option during
if he chooses to buy/sell, for example, a certain the option period; and
merchandise or certain specified property at a 3) To hold the subject matter for sale and to
fixed price, from/to another person, at any transfer it to the offeree in the event that the
time within the agreed period or in compliance offeree exercises his option during the option
with certain conditions. period.
2) A preparatory contract in which one party
grants to the other, for a fixed period and Elements of a valid option contract
under specified conditions, the power to 1) Consent or meeting of the minds;
decide, whether or not to enter into a principal 2) Subject matter which is an option right to a
contract. It binds the party who has given the unilateral offer to sell or to buy;
option, not to enter into the principal contract 3) Prestation or a consideration separate and
with any other person during the period distinct from the purchase price for the
designated, and, within that period, to enter option given.
into such contract with the one to whom the  The more controlling concept is the
option was granted, if the latter should decide “separateness” of such consideration
to use the option. It is a separate agreement from the purchase price agreed upon.
distinct from the contract which the parties  without a consideration separate from
may enter into upon the consummation of the purchase price, an option contract
the option. (Jose Ramon Carceller vs. Court would be void as a contract but would
of Appeals) still constitute a valid offer (Sanchez
3) A valid option contract is essentially a v. Rigos)
“contracted certain offer”  Even if the promise is accepted, the
party will not be bound due to the
Sales Option absence of a distinct consideration.
As to burden Both are onerous (Diamante v. CA)
As to type of A principal A preparatory  the case of Sanchez vs. Rigos is a good
contract contract as it contract law and is the controlling doctrine
can stand on its entered in (Philippine National Oil Company
own preparation of vs. Keppel Philippines Holdings)
an eventual
 when the consideration is not
sales
transaction monetary, the consideration must be
As to Consideration is Consideration clearly specified as such in the option
consideration price certain in may be contract or clause (Philippine
money or its anything of National Oil Company vs. Keppel
equivalent or value and Philippines Holdings)
essentially “any which may be  For uniformity and consistency in
valuable something contract interpretation, the better rule
consideration.” paid or to follow is that the consideration for
promised the option contract should be clearly
As to nature Both are consensual contracts specified as such in the option contract
As to Sales contracts An option or clause. Otherwise, the offeree must
obligations are bilateral contract is bear the burden of proving that a
imposed since both the essentially a
separate consideration for the option
seller and the unilateral
buyer have contract, since contract exists (Philippine National
obligations. only the Oil Company vs. Keppel
offeror is Philippines Holdings)
obliged.  An option, though unsupported by a
As to subject An object The option to separate consideration, remains an
matter which must be purchase the offer that, if duly accepted, generates
possible, licit, subject matter into a contract to sell where the parties'
determinate or of the sale respective obligations become
determinable. reciprocally demandable (Philippine
As to Statute of Statute of National Oil Company vs. Keppel
applicability of Frauds is Frauds is not Philippines Holdings)
the Statute of applicable applicable
Frauds
Thus, when an offer is supported by a separate
consideration, a valid option contract exists, i.e.,
26

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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

there is a contracted offer which the offerer cannot The right of first refusal to be an innovative juridical
withdraw from without incurring liability in relation which cannot be deemed a perfected sale
damages. On the other hand, when the offer is not under Article 1458 of the Civil Code and not an option
supported by a separate consideration, the offer contract under either Articles 1319 and 1479 thereof
stands but, in the absence of a binding contract, the because it merely pertains to a specific property
offeror may withdraw it any time. In either case, without containing an agreement as to the price or
once the acceptance of the offer is duly terms of payment in case of its exercise. (Ang Yu v.
communicated before the withdrawal of the
Asuncion v. Court of Appeals)
offer, a bilateral contract to buy and sell is
generated which, in accordance with the first
paragraph of Article 1479 of the Civil Code, Ang Yu case Equatorial case
becomes reciprocally demandable Recovery of damages Rescissible
Art 19, NCC Art 1381, NCC
The Constitution itself declares that "no doctrine or A right of first refusal A right of first refusal
principle of law laid down by the court in a decision belongs to a class of must be enforced
rendered en banc or in division may be modified or preparatory juridical according to the law on
reversed except by the court sitting en banc. Sanchez v. relations which is contracts instead of the
Rigos was an en banc decision which was affirmed in governed not by panoramic and indefinite
1994 in Asuncion v. CA, also an en banc decision, while contracts but by, among rule on human relations.
the decisions citing the Southwestern Sugar doctrine are other laws of general
all division cases. Based on the constitutional rule (as application, the pertinent
well as the inherent logic in reconciling Civil Code provisions on human
provisions), there should be no doubt that Sanchez relations. There is
v. Rigos remains as the controlling doctrine nothing to execute.
(Philippine National Oil Company vs. Keppel a right of first refusal pins the enforceability of
Philippines Holdings) cannot be the subject of a right of first refusal on
an action of specific the obligatory force of
Prescription performance because of the main contract of
Article 1144. The following actions must be brought the lack of agreement on lease to which it is
within ten years from the time the right of action the price. attached
accrues: Applicable if the Applicable when the
contract is limited to the obligation is embodied
(1) Upon a written contract; buying and selling of real in a contract
(2) Upon an obligation created by law; property (embodied in a
(3) Upon a judgment. (n) separate contract)
Law on human relations Law on contracts
Notice of the exercise of the option need not be
coupled with actual payment of the price, so long as In sum, the prevailing doctrine is that a sale entered
this is delivered to the owner of the property upon into in violation of a right of first refusal of another
performance of his part of the agreement. person found in a valid principal contract is
rescissible. The basis of the right of first refusal must
In one case, it was held that when the option contract be the current offer of the seller to sell or the offer to
does not contain a period, it cannot be presumed that purchase of a prospective buyer. Only after the lessee
the exercise thereof can be made indefinitely, grantee fails to exercise its rights under the same
otherwise, it would render uncertain the status of the terms and within the period contemplated can the
subject matter. Under Article 1144 (1) of the Civil owner validly offer to sell the property to a third
Code, actions upon written contract must be brought person, again under the same terms as offered to
within ten (10) years, and thereafter, the right of option the grantee.
would prescribe. Thus, the action for specific
performance to enforce the option to purchase must Right of first refusal v. option contract
be filed within ten (10) years after the accrual of the Right of first refusal Option contract
cause of action as provided under Article 1144 of the a contractual grant, not a contract by which the
of the sale of a owner of the property
New Civil Code
property, but of the agrees with another
first priority to buy the person that the latter
Right of first refusal property in the event the shall have the right to
Definition owner sells the same. buy the former’s
A contractual grant, not of a sale of property, but of (Polytechnic property at a fixed price
the first priority to buy the property in the event the University v. Golden within a certain time.
owner sells the same. It involves a promise on the part Horizon) (Polytechnic
of the owner that if he decides to sell the property any University v. Golden
time in the future, he would first negotiate its sale to Horizon)
the promissee. While the object might Object is determinate;
be made determinate, cause is certain
the exercise of the right (Polytechnic
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Sales | VENTEROSO
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

of first refusal would be University v. Golden
dependent not only on Horizon)
the owner’s eventual
intention to enter into a
binding juridical relation
with another but also on
terms, including the
price, that are yet to be
firmed up. (Polytechnic
University v. Golden
Horizon)
Since the stipulation
forms part of the entire
lease contract, the
consideration for the
lease includes the
consideration for the
grant of the right of first
refusal. (Ang Yu v.
Court of Appeals)
Integral part of the
contract of lease
(Equatorial Realty v.
Mayfair)
its payment. Until a sale is perfected, it cannot become
an independent source of obligation, nor serve as a
binding juridical relation.
Sale by auction
Sale by auction is generally exercised by the sheriff in
case of judicial sales arising from execution or
foreclosure of mortgages. Notaries public are also
authorized to sell mortgaged properties foreclosed
extrajudicially under Act 3135 as amended.
The consideration is
separate and distinct Rules regarding sale by auction
(Ang Yu v. Court of  Each lot is the subject of a separate contract of
Appeals) sale though the parties may subsequently
consolidate all the purchases into one
transaction
 In making the bids, the seller is merely making
an invitation to those present to make offers.
The sale by auction is perfected upon
A separate and distinct
announcement by
contract (Equatorial
Realty v. Mayfair)  the fall of the hammer or
 in other customary manner

Article 1475  Before the perfection, any bidder may retract

The 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.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts. (1450a)
Article 1476
In the case of a sale by auction:
(1) Where goods are put up for sale by auction in
lots, each lot is the subject of a separate contract of
sale.
(2) A sale by auction is perfected when the
auctioneer announces its perfection by the fall of
the hammer, or in other customary manner.
Until such announcement is made, any bidder may
retract his bid; and the auctioneer may withdraw the
goods from the sale unless the auction has been
announced to be without reserve.
(3) A right to bid may be reserved expressly by or on
behalf of the seller, unless otherwise provided by law
or by stipulation.
(4) Where notice has not been given that a sale by
auction is subject to a right to bid on behalf of the
seller, it shall not be lawful for the seller to bid
himself or to employ or induce any person to bid at
such sale on his behalf or for the auctioneer, to
employ or induce any person to bid at such sale on
behalf of the seller or knowingly to take any bid from
the seller or any person employed by him. Any sale
contravening this rule may be treated as fraudulent
by the buyer. (n)
Perfection of a sale
A contract of sale is “born” from the moment there is
a meeting of minds upon the thing which is the object
of the contract and upon the price and the manner of
his bid; and the auctioneer may withdraw the
goods from the sale unless the auction has been
announced to be without reserve
 When the auction is without reserve,
the auctioneer cannot withdraw the
goods from sales once a bid has
been made and the highest bidder
has a right to enforce his bid
 The seller has the right to bid and he may do
so by reservation made expressly or in his
behalf unless otherwise provided by
 Law
 Stipulation
 Requisites for the right to bid by the seller
 Such right was reserved
 Notice was given that the sale is
subject to a right to bid on behalf of the
seller
 The right to bid by the seller is not
prohibited by law or stipulation
 Effects when there is no notice of the right to
bid by the seller
 it shall not be lawful for the seller to bid
himself
 it shall not be lawful for the seller to
employ or induce any person to bid at
such sale on his behalf or for the
auctioneer
 it shall not be lawful to employ or
induce any person to bid at such sale
on behalf of the seller or knowingly to
take any bid from the seller or any
person employed by him.
 The purpose of the notice is to prevent
puffing or secret bidding by or on behalf of
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

the seller by people who are not themselves be considered as part of the price and proof of the
bound perfection of the contract.

Article 1319 The rule under Article 1482 of the Civil Code is no
Consent is manifested by the meeting of the offer more than a disputable presumption and prevails only
and the acceptance upon the thing and the cause in the absence of contrary or rebuttal evidence. It is not
which are to constitute the contract. The offer must the giving of earnest money but the proof of the
be certain and the acceptance absolute. A qualified concurrence of all the essential elements of the sale
acceptance constitutes a counter-offer. which establishes the existence of a perfected sale.
Acceptance made by letter or telegram does not bind
(Rizalino Oesmer v. Paraiso Development
the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed Corporation)
to have been entered into in the place where the Earnest Option money
offer was made. (1262a) money
As to treatment part of the a distinct
Meeting of the minds purchase price consideration
1) Offer certain is met by absolute acceptance for an option
contract.
2) must be plain and unconditional (Zayco v.
As to when given only applies to a sale
Serra) given where there is not yet
3) substantial modification or correction – already a sale perfected.
XPN: if there is merely modificatory As to the When earnest When the
correction, it is considered meeting of the consequent money is given, would-be buyer
minds (Villonco v. Bormaheco) obligations of the buyer is gives the
4) The acceptance must be identical in all the payor bound to pay option money,
respects with that of the offer so as to the balance. he is not
produce consent or meeting of the minds. required to buy
(Heirs of Ignacio v. Home Bankers) but may even
5) While it is impossible to expect the acceptance forfeit it
to echo every nuance of the offer, it is depending on
imperative that it assents to those points in the terms of
the option
the offer which, under the operative facts of
each contract, are not only material but
RULES:
motivating as well. Anything short of that
1) Absent proof of the concurrence of all the
level of mutuality produces not a contract but
essential elements of a contract of sale, the
a mere counter-offer awaiting acceptance.
giving of earnest money cannot establish
(Villanueva v. PNB)
the existence of a perfected contract of sale.
6) An acceptance may be made either in a formal
(Manila Metal Container v. PNB)
or an informal manner, and may be shown by
2) Where the parties merely exchanged offers and
acts, conduct, or words of the accepting party
counter-offers, no contract is perfected since
that clearly manifest a present intention or
they did not yet give their consent to such
determination to accept the offer to buy or sell.
offers. Earnest money applies to a perfected
(Adelfa Proeprties v. CA)
sale. In a potential sale transaction, the prior
payment of earnest money even before the
Manifestation of contract
property owner can agree to sell his property is
Acceptance may be evidenced by some act, or conduct,
irregular, and cannot be used to bind the owner
communicated to the offeror, either in a formal or an
to the obligations of a seller under an otherwise
informal manner, that clearly manifest the intention or
perfected contract of sale; to cite a well-worn
determination to accept the offer to buy or sell.
cliché, the carriage cannot be placed before the
horse. (First Optima Realty v. Securitron)
Article 1482
Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as Article 1483
proof of the perfection of the contract. (1454a) Subject to the provisions of the Statute of Frauds
and of any other applicable statute, a contract of sale
may be made in writing, or by word of mouth, or
Earnest money
partly in writing and partly by word of mouth, or
“Arras”, the money given to the seller by the may be inferred from the conduct of the parties. (n)
prospective buyer to show that the latter is truly
interested in buying the property, and its aim is to bind Article 1356
the bargain. It is a statutory rule that whenever Contracts shall be obligatory, in whatever form they
earnest money is given in a contract of sale, it shall may have been entered into, provided all the
essential requisites for their validity are present.
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
However, when the law requires that a contract be
in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain
way, that requirement is absolute and indispensable.
In such cases, the right of the parties stated in the
following article cannot be exercised. (1278a)
Article 1357
If the law requires a document or other special form,
as in the acts and contracts enumerated in the
following article, the contracting parties may compel
each other to observe that form, once the contract
has been perfected. This right may be exercised
simultaneously with the action upon the contract.
(1279a)
Article 1358
The following must appear in a public document:
(1) Acts and contracts which have for their object
the creation, transmission, modification or
extinguishment of real rights over immovable
property; sales of real property or of an interest
therein are governed by articles 1403, No. 2, and
1405;
xxx
All other contracts where the amount involved
exceeds five hundred pesos must appear in writing,
even a private one. But sales of goods, chattels or
things in action are governed by articles, 1403, No.
2 and 1405. (1280a)
Convenience
Despite the seemingly mandatory provisions of Article
1358, the Supreme Court has held that the provisions
thereof on the necessity of public document are for
purposes of convenience, not for validity or
enforceability
Effects
1) Transactions enumerated under Article 1358
which are not found in a public instrument are
still valid and enforceable
2) The article merely grants a cause of action to
the party to a contract in a suit to sue or compel
the other party to have the document covering
the contract acknowledged before a notary
public.
Public document
The deed of sale operates as a formal or symbolic
delivery of the property sold and authorizes the buyer
to use the document as proof of ownership. To make
it a public document, a deed of sale must be properly
subscribed and acknowledged before a notary
public and when so acknowledged, a deed of sale
enjoys the presumption of regularity and due
execution. The execution and notarization of a
deed of sale however, though a form of
constructive delivery, is not a conclusive
presumption of delivery of possession.
Article 1403
Sales | VENTEROSO
The following contracts are unenforceable, unless
they are ratified:
(2) Those that do not comply with the Statute of
Frauds as set forth in this number. In the following
cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some
note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be
received without the writing, or a secondary
evidence of its contents:
(a) An agreement that by its terms is not to be
performed within a year from the making thereof;
(d) An agreement for the sale of goods, chattels or
things in action, at a price not less than five hundred
pesos, unless the buyer accept and receive part of
such goods and chattels, or the evidences, or some
of them, of such things in action or pay at the time
some part of the purchase money; but when a sale is
made by auction and entry is made by the
auctioneer in his sales book, at the time of the
sale, of the amount and kind of property sold, terms
of sale, price, names of the purchasers and person
on whose account the sale is made, it is a sufficient
memorandum;
(e) An agreement for the leasing for a longer period
than one year, or for the sale of real property or of
an interest therein;
Article 1406
When a contract is enforceable under the Statute of
Frauds, and a public document is necessary for its
registration in the Registry of Deeds, the parties may
avail themselves of the right under Article 1357.
Article 1874
When a sale of a piece of land or any interest therein
is through an agent, the authority of the latter shall
be in writing; otherwise, the sale shall be void. (n)
Article 1581
The form of sale of large cattle shall be governed by
special laws. (n)
Formal requisites
GR: Form is not important for the validity of a sale
(Art 1483, 1356)
XPNs:
1) The power to sell a piece of land or interest
therein which must be in writing, otherwise,
the sale thereof by the agent would be void;
(Art 1874)
2) Sale of large cattle which must be in writing and
registered with the municipal treasurer who
shall issue a certificate of transfer; otherwise,
the sale is void; (Art 1581)
3) Sale of land by a Non-Muslim hill tribe cultural
minorities all throughout the Philippines which
is void if not approved by the National
Commission on Indigenous Peoples.
4) Certain sales transactions come within the
coverage of the Statute of Frauds such that
failure to put the same in a note or
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
memorandum make it unenforceable. An
unenforceable contract cannot be enforced
through a court litigation.
A) A sale which by its terms is not to be
performed within a year from the making
thereof; (FULLY EXECUTORY
CONTRACTS)
B) Sale of goods, chattels or things in action,
at a price not less than P500.00; and (SALE
OF GOODS)
C) Sale of real property or an interest therein
(SALE OF REAL PROPERTY)
Statute of Frauds
Is descriptive of the statutes which require certain
classes of contracts, such as agreements for the sale
of real property, to be in writing, the purpose being to
prevent fraud of perjury in the enforcement of
obligations depending for their evidence the
unassisted memory of witnesses by requiring
certain enumerated contracts and transactions to
be evidenced by a writing signed by the party to
be charged. The written note or memorandum, as
contemplated by Article 1403 of the Civil Code should
embody the essentials of the contract.
CONSUMMATION
Obligations of the seller
1) To preserve the subject matter;
2) To deliver the subject matter and transfer
ownership thereof;
3) To deliver the fruits and accessories;
4) To pay for the expenses for the execution and
registration of the deed of sale, unless there is
a stipulation to the contrary; and
5) To warrant the subject matter.
To preserve the subject matter
Article 1163. Every person obliged to give something
is also obliged to take care of it with the proper
diligence of a good father of a family, unless the
law or the stipulation of the parties requires another
standard of care. (1094a)
To deliver the subject matter
Article 1458
By the contract of sale one of the contracting parties
obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
(1445a)
Article 1495
The vendor is bound to transfer the ownership of
and deliver, as well as warrant the thing which is the
object of the sale. (1461a)
Delivery, as used in the Law on Sales, refers to the
concurrent transfer of two (2) things:
1) possession; and
Sales | VENTEROSO
2) ownership.
To deliver the fruits and accessories
Article 1164. The creditor has a right to the fruits of
the thing from the time the obligation to deliver
it arises. However, he shall acquire no real right
over it until the same has been delivered to him.
(1095)
Article 1537
The vendor is bound to deliver the thing sold and its
accessions and accessories in the condition in
which they were upon the perfection of the
contract.
All the fruits shall pertain to the vendee from the
day on which the contract was perfected. (1468a)
This obligation is in accordance with the principle that
the accessories always follow the principal; and since
from the perfection the subject matter is intended for
delivery to the buyer, necessarily the accessories and
fruits must then on be held for the account of the
buyer.
To pay for the expenses for the execution and
registration of the deed of sale
Article 1487
The expenses for the execution and registration
of the sale shall be borne by the vendor, unless there
is a stipulation to the contrary. (1455a)
GR: The seller is bound to pay for the expenses for the
execution and registration of the sale
XPN: When parties agree otherwise
To warrant the subject matter
Article 1495
The vendor is bound to transfer the ownership of
and deliver, as well as warrant the thing which is
the object of the sale. (1461a)
Article 1547
In a contract of sale, unless a contrary intention
appears, there is:
(1) An implied warranty on the part of the seller
that he has a right to sell the thing at the time
when the ownership is to pass, and that the buyer
shall from that time have and enjoy the legal and
peaceful possession of the thing;
(2) An implied warranty that the thing shall be free
from any hidden faults or defects, or any charge
or encumbrance not declared or known to the
buyer.
This article shall not, however, be held to render
liable a sheriff, auctioneer, mortgagee, pledgee,
or other person professing to sell by virtue of
authority in fact or law, for the sale of a thing in
which a third person has a legal or equitable interest.
(n)
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

Warranties of the seller (FREHN) place or depository where it is stored or kept.

1) Warranty that the seller has the right to sell (at (1463a)
the time when the ownership is to pass);
2) Warranty against eviction; Article 1499
3) Warranty against non-apparent servitudes; The delivery of movable property may likewise be
4) Warranty against hidden defects; and made by the mere consent or agreement of the
5) Warranty as to fitness or quality. contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the
DELIVERY time of the sale, or if the latter already had it in
his possession for any other reason. (1463a)
Article 712. Ownership is acquired by occupation
and by intellectual creation.
Article 1500
Ownership and other real rights over property are There may also be tradition constitutum possessorium.
acquired and transmitted by law, by donation, by (n)
testate and intestate succession, and in consequence
of certain contracts, by tradition. Article 1501
With respect to incorporeal property, the provisions
They may also be acquired by means of prescription. of the first paragraph of article 1498 shall govern. In
(609a) any other case wherein said provisions are not
applicable, the placing of the titles of ownership in
Tradition - is a derivative mode of acquiring the possession of the vendee or the use by the
ownership by virtue of which one who has the right vendee of his rights, with the vendor's consent, shall
be understood as a delivery. (1464)
and intention to alienate a corporeal thing, transmits it
by virtue of a just title to one who accepts the same.
Execution of public instrument (Art 1498, 1)
GR: Execution of a public instrument shall be
Delivery of the thing, together with the payment of the
equivalent to the delivery of the thing which is the
price, marks the consummation of the contract of sale.
object of the contract, if from the deed the contrary
Delivery is also necessary to enable the vendee to enjoy
does not appear or cannot clearly be inferred.
and make use of the property purchased
XPN: There are three (3) instances when the execution
After delivery, the risk of loss of the thing is already
of a public instrument cannot produce the effects of
borne by the vendee. This is by virtue of the principle
delivery and that is when:
RES PERIT DOMINO which literally translates to
1) When there is a stipulation to that effect;
“the thing is lost to the owner” and in simpler terms
2) When at the time of the execution of the public
mean the owner bears the loss
instrument, the subject matter was not subject
to the control of the seller; and
Two kinds of delivery
3) When the control or ability to transfer
Article 1477
physical possession and enjoyment of the
The ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive subject matter does not subsist for a
delivery thereof. (n) reasonable length of time after the
instrument’s execution
1) Actual or physical
Nowhere in the Civil Code, however, does it
Article 1497 provide that execution of a deed of sale is a
The thing sold shall be understood as delivered, conclusive presumption of delivery of
when it is placed in the control and possession of possession. The Code merely said that the
the vendee. (1462a) execution shall be equivalent to delivery. The
presumption can be rebutted by clear and
convincing evidence. Presumptive delivery can be
What is determinative as to the effect of delivery is
negated by the failure of the vendee to take actual
control. possession of the land sold.
2) Constructive
As found by both the trial and appellate courts and
Article 1498 amply supported by the evidence on record,
When the sale is made through a public Salvador was never placed in control of the
instrument, the execution thereof shall be property. The original sellers retained their
equivalent to the delivery of the thing which is control and possession. Therefore, there was no
the object of the contract, if from the deed the real transfer of ownership. As found by both the trial
contrary does not appear or cannot clearly be and appellate courts and amply supported by the
inferred. evidence on record, Salvador was never placed in
control of the property. The original sellers retained
With regard to movable property, its delivery may their control and possession. Therefore, there was
also be made by the delivery of the keys of the no real transfer of ownership.
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
The critical factor in the different modes of effecting
delivery, which gives legal effect to the act is the
actual intention of the vendor to deliver, and its
acceptance by the vendee. (Santos v. Santos)
In the instant case, actual delivery of the subject
tractor could not be made. However, there was
constructive delivery already upon the execution of
the public instrument pursuant to Article 1498 and
upon the consent or agreement of the parties when
the thing sold cannot be immediately transferred to
the possession of the vendee. (Art. 1499)
While it is true that Wilfredo Dy was not in
actual possession and control of the subject
tractor, his right of ownership was not divested
from him upon his default. Neither could it be said
that Libra was the owner of the subject tractor
because the mortgagee cannot become the owner of
or convert and appropriate to himself the property
mortgaged. (Dy Jr. v. CA)
In order that this symbolic delivery may produce the
effect of tradition, it is necessary that the vendor
shall have had such control over the thing sold
that, at the moment of the sale, its material
delivery could have been made. It is not enough
to confer upon the purchaser the ownership and the
right of possession. The thing sold must be placed
in his control. When there is no impediment
whatever to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of
a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the
purchaser cannot have the enjoyment and material
tenancy of the thing and make use of it himself or
through another in his name, because such tenancy
and enjoyment are opposed by the interposition of
another will, then fiction yields to reality — the
delivery has not been effected.
The Supreme Court of Spain, interpreting article
1462 of the Civil Code, held in its decision of
November 10, 1903, (Civ. Rep., vol. 96, p. 560) that
this article "merely declares that when the sale is
made through the means of a public instrument, the
execution of this latter is equivalent to the delivery
of the thing sold: which does not and cannot mean
that this fictitious tradition necessarily implies the
real tradition of the thing sold, for it is
incontrovertible that, while its ownership still
pertains to the vendor (and with greater reason if it
does not), a third person may be in possession of the
same thing; wherefore, though, as a general rule, he
who purchases by means of a public instrument
should be deemed . . . to be the possessor in fact, yet
this presumption gives way before proof to the
contrary." (Addison v. Felix)
the execution of a public instrument gives rise only
to a prima facie presumption of delivery, which is
negated by the failure of the vendee to take actual
possession of the land sold. "A person who does not
Sales | VENTEROSO
have actual possession of the thing sold cannot
transfer constructive possession by the execution
and delivery of a public instrument."
the execution of a public instrument gives rise only
to a prima facie presumption of delivery, which is
negated by the failure of the vendee to take actual
possession of the land sold. "A person who does not
have actual possession of the thing sold cannot
transfer constructive possession by the execution
and delivery of a public instrument." (Santiago v.
Villamor)
The right (of first refusal) can be enforced by an
action for specific performance upon a showing
of its breach by an actual sale of the property
under circumstances showing palpable bad faith on
the part of both seller and buyer. (Equatorial
Realty v. Mayfair)
The vendee has nothing to do with the act of
delivery by the vendor. On the other hand,
acceptance is an obligation on the part of the vendee
(Art. 1582). Delivery and acceptance are two distinct
and separate acts of different parties. Consequently,
acceptance cannot be regarded as a condition to
complete delivery.
The failure of La Fuerza to express categorically
whether they accepted or rejected the conveyors
does not detract from the fact that the same were
actually in its possession and control; that,
accordingly, the conveyors had already been
delivered by the plaintiff; and that, the period
prescribed in said Art. 1571 had begun to run. (La
Fuerza v. CA)
Symbolic delivery or traditio symbolica (Art 1498,
2)
Constructive delivery is symbolic when, to effect the
delivery, the parties must make use of a token symbol
to represent the thing delivered.
Tradition longa manu (Art 1499)
An example of how it is effected is when the seller
points the property subject matter of the sale and the
buyer agrees from that time on that he is the owner
thereof, without need of delivering physical possession
thereof.
Traditio brevi manu (Art 1499)
This is a mode of delivery where, before the sale, the
would-be buyer is already in possession of the would-
be subject matter of the sale, say as a lessee, and
pursuant to the sale, he would now hold possession in
the concept of an owner. This type of delivery is also
backed up by Article 1499 of the Civil Code.
Constitutum possessorium (Art 1500)
At the time of the perfection of the sale, the seller held
possession of the subject matter in the concept of an
owner, and pursuant to the contract, the seller
continues to hold physical possession thereof no
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
longer in the concept of an owner, but as a lessee of
any other form of possession other than in the concept
of owner. This is the complete opposite of traditio
brevi manu.
Quasi-delivery or quasi-traditio (Art 1501)
Aside from delivery through the execution of a public
instrument, incorporeal property can make use of
quasi-traditio, to wit:
a) By placing of the titles of ownership in the
possession of the buyer; or
b) By the use and enjoyment by the buyer of
the rights pertaining to the incorporeal
property with the seller’s consent.
TRADE TERMS
These are rules of presumption
1) C.O.D. – The initials stand for the words,
“collect on delivery.” If the goods are marked
C.O.D., the carrier acts for the seller in
collecting the purchase price. The buyer must
pay for the goods before he can obtain
possession. C.O.D. terms do not prevent
title from passing to the buyer on delivery
to the carrier where they are solely intended
as security for the purchase price
Article 1504. Unless otherwise agreed, the goods
remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the
goods are at the buyer's risk whether actual delivery
has been made or not, except that:
(1) Where delivery of the goods has been made to
the buyer or to a bailee for the buyer, in pursuance
of the contract and the ownership in the goods has
been retained by the seller merely to secure
performance by the buyer of his obligations
under the contract, the goods are at the buyer's
risk from the time of such delivery;
(2) Where actual delivery has been delayed through
the fault of either the buyer or seller the goods
are at the risk of the party in fault. (n)
XPN:
Article 1503. When there is a contract of sale of
specific goods, the seller may, by the terms of the
contract, reserve the right of possession or
ownership in the goods until certain conditions
have been fulfilled. The right of possession or
ownership may be thus reserved notwithstanding
the delivery of the goods to the buyer or to a carrier
or other bailee for the purpose of transmission to
the buyer.
Where goods are shipped, and by the bill of lading
the goods are deliverable to the seller or his
agent, or to the order of the seller or of his agent,
the seller thereby reserves the ownership in the
goods. But, if except for the form of the bill of
lading, the ownership would have passed to the
Sales | VENTEROSO
buyer on shipment of the goods, the seller's
property in the goods shall be deemed to be only
for the purpose of securing performance by the
buyer of his obligations under the contract.
Where goods are shipped, and by the bill of lading
the goods are deliverable to order of the buyer
or of his agent, but possession of the bill of lading
is retained by the seller or his agent, the seller thereby
reserves a right to the possession of the goods as
against the buyer.
Where the seller of goods draws on the buyer for the
price and transmits the bill of exchange and bill of
lading together to the buyer to secure acceptance or
payment of the bill of exchange, the buyer is bound
to return the bill of lading if he does not honor the
bill of exchange, and if he wrongfully retains the bill
of lading he acquires no added right thereby. If,
however, the bill of lading provides that the goods
are deliverable to the buyer or to the order of the
buyer, or is indorsed in blank, or to the buyer by the
consignee named therein, one who purchases in
good faith, for value, the bill of lading, or goods
from the buyer will obtain the ownership in the
goods, although the bill of exchange has not been
honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the
consignee named therein, or of the goods, without
notice of the facts making the transfer wrongful. (n)
2) F.O.B. – The initials stand for the words, “free
on board.” They mean that the goods are to be
delivered free of expense to the buyer to the
point where they are F.O.B. In general, the
point of F.O.B., either the point of shipment
or the point of destination, determines when
the ownership passes.
A) F.O.B. Shipping Point – delivery of the
goods to the carrier is equivalent to delivery
to the buyer, and at that point, the risk of
loss pertains to the buyer.
B) F.O.B. Destination – only when the vessel
has arrived at the point of destination
would there be delivery to the buyer and
prior to that point in time, the risk of loss
over the subject matter of the sale will be
borne by the seller.
Article 1523. Where, in pursuance of a contract of
sale, the seller is authorized or required to send the
goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for
the purpose of transmission to the buyer is
deemed to be a delivery of the goods to the
buyer, except in the cases provided for in article
1503, first, second and third paragraphs, or unless a
contrary intent appears.
Unless otherwise authorized by the buyer, the seller
must make such contract with the carrier on behalf
of the buyer as may be reasonable, having regard to
the nature of the goods and the other circumstances
of the case. If the seller omits so to do, and the goods
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
are lost or damaged in course of transit, the buyer
may decline to treat the delivery to the carrier as
a delivery to himself, or may hold the seller
responsible in damages.
Unless otherwise agreed, where goods are sent by
the seller to the buyer under circumstances in which
the seller knows or ought to know that it is usual to
insure, the seller must give such notice to the buyer
as may enable him to insure them during their
transit, and, if the seller fails to do so, the goods shall
be deemed to be at his risk during such transit. (n)
3) C.I.F. – The initials stand for the words “cost,
insurance and freight.” They signify that the
price fixed covers not only the cost of the
goods, but the expenses of freight and
insurance to be paid by the seller up to the
point especially named.
4) F.A.S. – Under a “free alongside ship”
arrangement, the seller pays all the charges and
is subject to risk until the goods are placed
alongside the vessel. In other words, the
goods alongside the vessel completes the
effect of tradition.
Determination of the place of delivery always
resolves itself into a question of act. If the contract
be silent as to the person or mode by which the
goods are to be sent, delivery by the vendor to a
common carrier, in the usual and ordinary
course of business, transfers the property to the
vendee.
If the buyer is to pay the freight, it is reasonable to
suppose that he does so because the goods become
his at the point of shipment. On the other hand, if
the seller is to pay the freight, the inference is equally
so strong that the duty of the seller is to have the
goods transported to their ultimate destination and
that title to property does not pass until the goods
have reached their destination.
Both the terms "c.i.f." and "F.O.B." merely make
rules of presumption which yield to proof of
contrary intention.
With all due deference to the decision of the High
Court of Australia, we believe that the word Manila
in conjunction with the letters "c.i.f." must mean that
the contract price, covering costs, insurance, and
freight, signifies that delivery was to made at Manila.
(Meyer v. Yangco)
it is clear that MOELCI agreed that the power
transformer would be delivered and that the freight,
handling, insurance, custom duties, and incidental
expenses shall be shouldered by it.
Thus, the delivery made by David to William Lines,
Inc., as evidenced by the Bill of Lading, was deemed
to be a delivery to MOELCI. David was authorized
to send the power transformer to the buyer pursuant
to their agreement. When David sent the item
Sales | VENTEROSO
through the carrier, it amounted to a delivery to
MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.)
v. Yangco, it was pointed out that a specification in a
contract relative to the payment of freight can be
taken to indicate the intention of the parties with
regard to the place of delivery. (David v. Misamis
Occidental)
Article 1523. Where, in pursuance of a contract of
sale, the seller is authorized or required to send the
goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for
the purpose of transmission to the buyer is
deemed to be a delivery of the goods to the
buyer, except in the cases provided for in Articles
1503, first, second and third paragraphs, or unless a
contrary intent appears. xx
Article 1503. When there is a contract of sale of
specific goods, the seller may, by the terms of the
contract, reserve the right of possession or
ownership in the goods until certain conditions have
been fulfilled. xxx
Where goods are shipped, and by the bill of lading
the goods are deliverable to order of the buyer
or of his agent, but possession of the bill of lading
is retained by the seller or his agent, the seller
thereby reserves a right to the possession of the
goods as against the buyer. xxx
Articles 1523 and 1503 do not apply to a contract
of carriage between the shipper and the
common carrier. The third paragraph of Article
1503, upon which DBI relies, does not oblige the
common carrier to withhold delivery of the goods in
the event that the bill of lading is retained by the
seller. Rather, it only gives the seller a better
right to the possession of the goods as against
the mere inchoate right of the buyer. Thus,
Articles 1523 and 1503 find no application here
(Designer Baskets v. Air Sea Transport)
Here, the Deed of Sale executed by Banta on March
21, 2005 and the Deed of Sale executed by Arcaina
on April 13, 2005 both show that the property was
conveyed to Ingram at the predetermined price of
₱1,860,000.00. There was no indication that it was
bought on a per-square-meter basis.
Article 1542. In the sale of real estate, made for a
lump sum and not at the rate of a certain sum for a
unit of measure or number, there shall be no
increase or decrease of the price, although there be
a greater or less area or number than that stated in
the contract.
The same rule shall be applied when two or more
immovables as sold for a single price; but if, besides
mentioning the boundaries, which is indispensable
in every conveyance of real estate, its area or
number should be designated in the contract,
the vendor shall be bound to deliver all that is
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
included within said boundaries, even when it
exceeds the area or number specified in the
contract; and, should he not be able to do so, he
shall suffer a reduction in the price, in proportion
to what is lacking in the area or number, unless
the contract is rescinded because the vendee does
not accede to the failure to deliver what has been
stipulated. (1471)
The provision teaches that where both the area
and the boundaries of the immovable are
declared in a sale of real estate for a lump sum,
the area covered within the boundaries of the
immovable prevails over the stated area. The
vendor is obliged to deliver all that is included within
the boundaries regardless of whether the actual area
is more than what was specified in the contract of
sale; and he/she shall do so without a corresponding
increase in the contract price. This is particularly
true when the stated area is qualified to be
approximate only, such as when the words
"more or less" were used.
The Court, however, clarified that the rule laid down
in Article 1542 is not hard and fast and admits of an
exception. A caveat is in order, however. The use
of "more or less" or similar words in
designating quantity covers only a reasonable
excess or deficiency. A vendee of land sold in
gross or with the description "more or less" with
reference to its area does not thereby ipso facto take
all risk of quantity in the land.
Black's Law Dictionary defines the phrase "more or
less" to mean:
The words are intended to cover slight or
unimportant inaccuracies in quantity, and are
ordinarily to be interpreted as taking care of
unsubstantial differences or differences of small
importance compared to the whole number of items
transferred.
GR: In a lump sum contract, a vendor is generally
obligated to deliver all the land covered within
the boundaries, regardless of whether the real area
should be greater or smaller than that recited in the
deed.
XPN: However, in case there is conflict between
the area actually covered by the boundaries and
the estimated area stated in the contract of sale,
he/she shall do so only when the excess or
deficiency between the former and the latter is
reasonable.
Applying Del Prado to the case before us, we find
that the difference of 5,800 sq. m. is too substantial
to be considered reasonable. We note that only 6,200
sq. m. was agreed upon between petitioners and
Ingram. Declaring Ingram as the owner of the whole
12,000 sq. m. on the premise that this is the actual
area included in the boundaries would be ordering
the delivery of almost twice the area stated in the
deeds of sale.
Therefore, we rule that Ingram is entitled only to
6,200 sq. m. of the property. An area of 5,800 sq. m.
Sales | VENTEROSO
more than the area intended to be sold is not a
reasonable excess that can be deemed included in the
sale. (Arcaina vs. Ingram)
SALE BY DESCRIPTION AND/OR SAMPLE
Article 1481
In the contract of sale of goods by description or by
sample, the contract may be rescinded if the bulk
of the goods delivered do not correspond with the
description or the sample, and if the contract be
by sample as well as description, it is not sufficient
that the bulk of goods correspond with the sample
if they do not also correspond with the description.
The buyer shall have a reasonable opportunity of
comparing the bulk with the description or the
sample. (n)
A “sale by description and/or sample”, by its very
nature, should allow the buyer a reasonable
opportunity of inspection or of comparing the bulk
with the sample or the description before accepting
delivery.
SALE OR RETURN AND SALE ON TRIAL
Article 1502
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 he may revest
the ownership in the seller by returning or tendering
the goods within the time fixed in the contract, or, if
no time has been fixed, within a reasonable time. (n)
When goods are delivered to the buyer on approval
or on trial or on satisfaction, or other similar terms,
the ownership therein passes to the buyer:
(1) When he signifies his approval or acceptance to
the seller or does any other act adopting the
transaction;
(2) If he does not signify his approval or acceptance
to the seller, but retains the goods without giving
notice of rejection, then if a time has been fixed for
the return of the goods, on the expiration of such
time, and, if no time has been fixed, on the
expiration of a reasonable time. What is a reasonable
time is a question of fact. (n)
A “sale or return” is a contract by which property is
sold but the buyer, who becomes the owner of the
property on delivery, has the option to return the
same to the seller instead of paying the price.
Under this contract, the option to purchase or return
the goods rests entirely on the buyer without
reference to the quality of the goods.
A “sale on trial or approval or satisfaction” on the
other hand is a contract in the nature of an option to
purchase if the goods prove satisfactory, the
approval of the buyer being a condition precedent.
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

Basis Sale or Return Sale on

approval In interpreting this provision, the Court declared that
Premise It depends It depends the governing principle is Primus Tempore, Potior Jure
upon the will upon the which means “First in Time, Stronger in Right”.
of the buyer. suitability,
quality or Application
character of the 1) The vendor has an existing right over the
goods
property and power of disposal;
Transfer of Ownership Ownership
2) There are at least two (2) sales executed by
ownership immediately does not
passes to the immediately the same vendor;
buyer on pass to the 3) The sales involve the same property; and
delivery buyer. It passes 4) There are two (2) or more vendees of the
only upon same property sold by the vendor.
approval or
satisfaction of Rules in knowledge or notice
the buyer duly 1) knowledge gained by the first buyer of the
manifested second sale cannot defeat the first buyer’s
after trial rights
Revesting of Ownership is There is no XPN: where the second buyer registers in
ownership revested in the revesting of good faith the second sale ahead of the first as
seller if the ownership provided by the afore-quoted provision of the
buyer so because it is
Civil Code
decides. retained by the
seller until the 2) knowledge gained by the second buyer of the
sale becomes first sale defeats his rights even if he is first to
absolute register the second sale, since such
Risk of loss The risk rests The risk knowledge taints his prior registration with
on the buyer remains in the bad faith.
before the seller while the
revestment of goods are on Good faith - status, state or condition of honesty
ownership. trial. which presupposes that the buyer of a property
belonging to another, is without notice or awareness
DOUBLE SALE that some other person has a right to, or interest in,
Article 1544. If the same thing should have been sold such property.
to different vendees, the ownership shall be
transferred to the person who may have first taken GR: Good faith is presumed
possession thereof in good faith, if it should be Article 527. Good faith is always presumed, and upon
movable property. him who alleges bad faith on the part of a possessor
rests the burden of proof. (434)
Should it be immovable property, the ownership
shall belong to the person acquiring it who in good
The presumption is rebuttable by the opposite party by
faith first recorded it in the Registry of Property.
presenting clear, strong, and convincing evidence to
Should there be no inscription, the ownership shall overcome the presumption.
pertain to the person who in good faith was first in XPN: In Art 1544, the buyer does NOT enjoy the
the possession; and, in the absence thereof, to the presumption of good faith, because it is he who has the
person who presents the oldest title, provided there burden of proof to establish that he was in good faith.
is good faith. (1473)
Buyer in good faith
A buyer in good faith is not only one who buys the
Movable property property of another without notice that some other
The ownership shall be transferred to the person who person has a right to, or interest in, such property but
may have first taken possession thereof in good faith also pays a full and fair price for the same at the time
of such purchase or before he has notice of the claim
Immovable property or interest of some other person in the property.
1) The first to register the property in good faith
2) The first to possess the property in good faith When double sale cannot be invoked
3) The one who presents the oldest title in good 1) Where there are two (2) different contracts of
faith sale made by two (2) different persons, one of
whom not being the owner of the property
Good faith must be present in the three instances sold;
1) First buyer – primus tempore poture jure 2) When the earlier transaction is a pacto de retro
2) Second buyer – Uraca case sale of an unregistered land and the subsequent
37

Sales | VENTEROSO
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
conveyance is a donation of the land in favor
of another by the vendor a retro;
3) Where one of the deeds of sale is a forgery or
if one sale is simulated and the other is genuine;
4) Where one sale is absolute and the other is a
pacto de retro transaction where the period to
redeem has not yet expired;
5) Where one of the sales is subject to a
suspensive condition which condition was not
complied with and the other is an absolute sale
being that a conditional sale is not a full-fledged
sale before the condition had been performed;
6) Where one contract is a sale of the land itself
and the other contract was either a mere
promise to assign or at most, an actual
assignment of the right to repurchase the same
property;
7) Where one transaction is a sale and the other is
a mortgage;
8) Where one claim is based on prescription and
the other is on sale; and
9) In a contract to sell, there being no previous
sale of the property.
SALE BY A NON-OWNER
Article 1505
Subject to the provisions of this Title, 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, unless
the owner of the goods is by his conduct precluded
from denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws,
or any other provision of law enabling the apparent
owner of goods to dispose of them as if he were the
true owner thereof;
(2) The validity of any contract of sale under
statutory power of sale or under the order of a court
of competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs,
or markets, in accordance with the Code of
Commerce and special laws. (n)
Q: Can you sell what you do not own?
A: Yes, as long as you own it during consummation
stage. A valid sale exists to bind both parties even if at
the at the time of perfection, the seller was not the
owner thereof. It is the consummation stage that
concerns itself with the actual transfer of ownership of
the subject matter and the payment of the price;
perfection merely concerns itself with the creation of
the obligations to transfer and to pay.
Nemo dat quod non habet
It is at the consummation stage where the principle of
nemo dat quod non habet applies.
Sale of a non-owner
Sales | VENTEROSO
GR: Nemo dat quod non habet. 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.
XPNs:
1) Under Article 1505 of the Civil Code, when the
owner is, by his conduct, precluded from
denying the seller’s authority to sell;
 the owner must, by word or conduct,
have caused or allowed it to appear that
the title or authority to sell is with the
seller and the buyer must have been
misled to his damage.
2) Under Article 1505 of the Civil Code, when the
contrary is provided for in recording laws;
 Recording laws - refer to the Property
Registration Decree and related
statutes
3) Under Article 1505 of the Civil Code, sales
made under statutory power of sale or under
the order of a court of competent
jurisdiction;
 Judgment 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.
4) Under Article 1505 of the Civil Code, sales
made in a merchant’s store in accordance
with the Code of Commerce and special laws;
 acquires a valid title to the thing
although his predecessors-in-interest
did not have any right of ownership
over it.
 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.
5) Special rights of an unpaid seller of goods
under Articles 1526 and 1533 of the Civil Code;
Article 1526. Subject to the provisions of this Title,
notwithstanding that the ownership in the
goods may have passed to the buyer, the unpaid
seller of goods, as such, has:
(1) A lien on the goods or right to retain them for
the price while he is in possession of them;
(2) 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;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by
this Title.
Where the ownership in the goods has not passed to
the buyer, the unpaid seller has, in addition to his
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
other remedies a right of withholding delivery
similar to and coextensive with his rights of lien
and stoppage in transitu where the ownership
has passed to the buyer. (n)
Article 1533. Where the goods are of perishable
nature, or where the seller expressly reserves the
right of resale in case the buyer should make default,
or where the buyer has been in default in the
payment of the price for an unreasonable time, an
unpaid seller having a right of lien or having
stopped the goods in transitu may resell the
goods. He shall not thereafter be liable to the
original buyer upon the contract of sale or for any
profit made by such resale, but may recover from the
buyer damages for any loss occasioned by the breach
of the contract of sale.
Where a resale is made, as authorized in this article,
the buyer acquires a good title as against the original
buyer.
It is not essential to the validity of 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 contract
of 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.
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. (n)
6) Under Article 1506 of the Civil Code, the sale
by a seller who at the time of delivery had
voidable title to the thing delivered; and
7) In case of movables, under Article 559 of the
Civil Code, acquisition of possession in good
faith under a claim of ownership where the real
owner has NOT lost or has NOT been
unlawfully deprived of the movable makes
the possessor the rightful owner of the
movable.
Sale by one having a voidable title
Article 559. The possession of movable property
acquired in good faith is equivalent to a title.
Nevertheless, 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 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. (464a)
Sales | VENTEROSO
Doctrine/theory of irreivindicability
GR: possession of movable property acquired in good
faith is equivalent to title.
XPN: one who has either lost any movable or has been
unlawfully deprived thereof may recover it from the
person in possession of the same.
XPN of XPN: if acquired in a public sale or merchant
store, the one unlawfully deprived cannot recover
if the buyer acquired it in good faith at a public
sale unless he reimburses the buyer for the price
paid.
Article 1506. Where the seller of goods has a
voidable title thereto, but his title has not been
avoided at the time of the sale, the buyer acquires
a good title to the goods, provided he buys them
in good faith, for value, and without notice of the
seller's defect of title. (n)
Seller with voidable title
If the seller of the goods has a voidable title thereto,
the buyer can still acquire a good title thereof.
Application
The Article applies only if the seller has a title to the
property although it may be voidable. It cannot apply
to a situation where the seller has no title at all to the
property which he is selling.
Requisites for buyer to acquire good title
1) He is in good faith; (GOOD FAITH)
2) He paid something of value for the property;
and (FOR VALUE)
3) He is not aware of the seller’s defect or flaw on
the title. (NO KNOWLEDGE)
Rationale
1) A voidable contract is valid until it is duly
annulled; and
2) Where one of two (2) innocent parties must
suffer, he who places the offender in a position
to do wrong must be the one to suffer the
consequences of his actions.
COMPARISON OF CASES
Aznar EDCA Tagatac
Possessor is in good faith
Not acquired in a public sale
Unlawfully Not unlawfully deprived
deprived
No transfer of There is transfer of ownership
ownership
Remedy is Remedy is an ordinary action for
Article 559; collection of sum of money
Can recover
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
without against the buyer, with recovery
indemnity of damages
Sale by a co-owner
Rules
1) Every co-owner has the right to sell his pro-
indiviso share in the co-owned property even
without the consent of the other co-owners;
2) But that none of the co-owners may claim
any right, title or interest to a particular
portion of the thing owned in common; and
3) Therefore, a co-owner has no right to sell a
divided part of the real estate.
Loss, deterioration, fruits and other benefits
Application
Only contracts of sale where the subject matter is
determinate or specific pursuant to the maxim Genus
Nunquam Perit (generic thing never perishes)
During negotiation stage/before perfection
Res perit domino – The thing perishes with its owner
At time of perfection
Article 1493. If at the time the contract of sale is
perfected, the thing which is the object of the
contract has been entirely lost, the contract shall be
without any effect.
But if the thing should have been lost in part only,
the vendee may choose between withdrawing from
the contract and demanding the remaining part,
paying its price in proportion to the total sum agreed
upon. (1460a)
Article 1494. Where the parties purport a sale of
specific goods, and the goods without the
knowledge of the seller have perished in part or have
wholly or in a material part so deteriorated in quality
as to be substantially changed in character, the buyer
may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much
thereof as have not deteriorated, and as binding the
buyer to pay the agreed price for the goods in which
the ownership will pass, if the sale was divisible. (n)
Totally lost – the contract shall be without any effect
Partially lost - the buyer may choose between
withdrawing from the contract and demanding the
remaining part, paying its price in proportion to the
total sum agreed upon.
After perfection but before delivery
Article 1504. Unless otherwise agreed, the goods
remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the
goods are at the buyer's risk whether actual delivery
has been made or not, except that:
Sales | VENTEROSO
(1) Where delivery of the goods has been made to
the buyer or to a bailee for the buyer, in pursuance
of the contract and the ownership in the goods has
been retained by the seller merely to secure
performance by the buyer of his obligations under
the contract, the goods are at the buyer's risk from
the time of such delivery;
(2) Where actual delivery has been delayed through
the fault of either the buyer or seller the goods are
at the risk of the party in fault. (n)
Rules governing loss
GR: the goods remain at the seller's risk until the
ownership therein is transferred to the buyer
XPN:
1) Where delivery of the goods has been made to
the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in
the goods has been retained by the seller merely
to secure performance by the buyer of his
obligations under the contract, the goods are at
the buyer's risk from the time of such delivery;
2) Where actual delivery has been delayed
through the fault of either the buyer or seller
the goods are at the risk of the party in fault
Article 1537. The vendor is bound to deliver the
thing sold and its accessions and accessories in the
condition in which they were upon the perfection of
the contract.
All the fruits shall pertain to the vendee from the
day on which the contract was perfected. (1468a)
Article 1538. In case of loss, deterioration or
improvement of the thing before its delivery, the
rules in article 1189 shall be observed, the vendor
being considered the debtor. (n)
Article 1189. When the conditions have been
imposed with the intention of suspending the
efficacy of an obligation to give, the following
rules shall be observed in case of the improvement,
loss or deterioration of the thing during the
pendency of the condition:
Xxx
(3) When the thing deteriorates without the fault of
the debtor, the impairment is to be borne by the
creditor;
(4) If it deteriorates through the fault of the debtor,
the creditor may choose between the rescission of
the obligation and its fulfillment, with indemnity for
damages in either case;
(5) If the thing is improved by its nature, or by time,
the improvement shall inure to the benefit of the
creditor;
(6) If it is improved at the expense of the debtor, he
shall have no other right than that granted to the
usufructuary. (1122)
Rules governing deterioration and improvement
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
1) When the thing deteriorates without the fault
of the seller, the impairment is to be borne by
the buyer;
2) If the thing deteriorates through the fault of
the seller, the buyer may choose between the
rescission of the obligation and its fulfillment,
with indemnity for damages in either case;
3) If the thing is improved by its nature, or by
time, the improvement shall inure to the
benefit of the buyer; and
4) If the thing is improved at the expense of the
seller, he shall have no other right than that
granted to the usufructuary.
The only logical and reasonable conclusion one can
derive from the foregoing discussion is that the rule
of Res Perit Domino provided in Article 1504 on
goods, applies only to “loss” and provides no
application to issues pertaining to “deterioration”,
“fruits” and “improvements over the subject matter
of the sale.
Upon consummation/after delivery
Article 1504. Unless otherwise agreed, the goods
remain at the seller's risk until the ownership therein
is transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are at
the buyer's risk whether actual delivery has been
made or not xxx
REMEDIES IN CASE OF BREACH
1) the remedies of the buyer;
2) the ordinary remedies of the seller;
3) the special remedies of an unpaid seller of
goods; and
4) the sale of movable on installments.
Caveat emptor
GR: Requires 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.
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.
XPN: Torrens title, an innocent buyer/purchaser
for value need only rely upon the title of a registered
land and has no obligation to look beyond such title
(the “Mirror Principle”), provided
1) must still ensure that he is dealing with the
actual registered owner.
2) must conduct an ocular examination of the
land or real estate he is purchasing and cannot
just rely upon the description in the title
Innocent purchaser for value
One who buys the property of another, without notice
that some other person has a right or interest in the
property, for which a full and fair price is paid by the
Sales | VENTEROSO
buyer at the time of the purchase or before receipt of
any notice of claims or interest of some other person
in the property. To successfully invoke and be
considered as a buyer in good faith, the presumption is
that first and foremost, the "buyer in good faith" must
have shown prudence and due diligence in the exercise
of his/her rights.
Information asymmetry
The “Caveat Emptor” principle arises primarily from
the asymmetry of information between a purchaser and
a seller. The information is asymmetric or
disproportionate because the seller tends to possess
more information regarding the product than the
buyer.
REMEDIES OF THE BUYER
1) file an action for specific performance with
damages in case of failure to deliver
Article 1598. Where the seller has broken a contract
to deliver specific or ascertained goods, a court may,
on the application of the buyer, 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. (n)
2) accept or reject the goods or rescind the
sale in case of breach of seller’s warranty
Article 1599. Where there is a breach of warranty
by the seller, the buyer may, at his election:
(1) 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;
(2) Accept or keep the goods and maintain an
action against the seller for damages for the
breach of warranty;
(3) Refuse to accept the goods, and maintain an
action against the seller for damages for the breach
of warranty;
(4) Rescind the contract of 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 anyone of these ways, no other remedy
can thereafter be granted, without prejudice to the
provisions of the second paragraph of article 1191.
Where the goods have been delivered to the buyer,
he cannot rescind the sale if he knew of the
breach of warranty when he accepted the goods
without protest, or if he fails to notify the seller
within a reasonable time of the election to
rescind, or if he fails to return or to offer to return
the goods to the seller in substantially as good
condition as they were in at the time the
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ownership was transferred to the buyer. But if
deterioration or injury of the goods is due to the
breach of warranty, such deterioration or injury
shall not prevent the buyer from returning or
offering to return the goods to the seller and
rescinding the sale.
Where the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the
price upon returning or offering to return the
goods. If the price or any part thereof has already
been paid, the seller shall be liable to repay so much
thereof as has been paid, concurrently with the
return of the goods, or immediately after an offer to
return the goods in exchange for repayment of the
price.
Where the buyer is entitled to rescind the sale and
elects to do so, if the seller refuses to accept an offer
of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee
for the seller, but subject to a lien to secure the
payment of any portion of the price which has
been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid
seller by article 1526.
(5) In the case of breach of warranty of quality, such
loss, in the absence of special circumstances
showing proximate damage of a greater amount, is
the difference between the value of the goods at
the time of delivery to the buyer and the value
they would have had if they had answered to the
warranty. (n)
In case the seller breaches his warranty, the buyer
may avail of the following remedies:
1) 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;
 reduction or extinction of the price of
the same item or unit sold and not to
a different transaction or contract of
sale. (First United Constructors
Corporation v. Bayanihan
Automotive Corporation)
 That there was a series of purchases
made by petitioners could not be
considered as a single transaction
(First United Constructors
Corporation v. Bayanihan
Automotive Corporation)
2) Accept or keep the goods and maintain an
action against the seller for damages for the
breach of warranty;
3) Refuse to accept the goods, and maintain an
action against the seller for damages for the
breach of warranty;
4) Rescind the contract of sale and refuse to
receive the goods or if the goods have already
been received, return them or offer to return
Sales | VENTEROSO
them to the seller and recover the price or any
part thereof which has been paid.
3) Suspension of payments in anticipation of
breach
Article 1590. Should the vendee 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 vendor 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 vendee
shall be bound to make the payment. A mere act of
trespass shall not authorize the suspension of
the payment of the price. (1502a)
When payments may be suspended
1) Vendee is disturbed in the possession or
ownership
 A mere act of trespass shall not
authorize the suspension of the
payment of the price.
2) Vendee has reasonable grounds to fear such
disturbance by a vindicatory action or
foreclosure of a mortgage
Exceptions
1) Seller gives security for the return of the price
in a proper case
2) It has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound
to make the payment.
ORDINARY REMEDIES OF A SELLER
1) File an action for specific performance for
non-payment of the price
Article 1595. Where, under a contract of sale, the
ownership of the goods has passed to the buyer and
he wrongfully neglects or refuses to pay for the
goods according to the terms of the contract of sale,
the seller may maintain an action against him for
the price of the goods.
Where, under a contract of sale, 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. But 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 contract
of sale on his part or an intention not to perform
it.
Although the ownership in the goods has not
passed, if they cannot readily be resold for a
reasonable price, and if the provisions of article
1596, fourth paragraph, are not applicable, the seller
may offer to deliver the goods to the buyer, and,
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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's and may
maintain an action for the price. (n)
2) File an action for damages in case of
wrongful refusal to accept the goods
Article 1596. 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 nonacceptance.
The measure of damages is the estimated loss
directly and naturally resulting in the ordinary
course of events from the buyer's breach of
contract.
Where there is an available market for the goods
in question, the measure of damages is, in the
absence of special circumstances showing proximate
damage of a different amount, the difference
between the contract price and the 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.
If, while labor or expense of material amount is
necessary on the part of the seller to enable him to
fulfill his obligations under the contract of sale, the
buyer repudiates the contract or notifies the seller to
proceed no further therewith, the buyer shall be
liable to the seller for labor performed or
expenses made before receiving notice of the
buyer's repudiation or countermand. The profit
the seller would have made if the contract or the sale
had been fully performed shall be considered in
awarding the damages. (n)
3) Recission in case the buyer has repudiated
the sale or manifested inability to perform
his obligations
Article 1597. Where the goods have not been
delivered to the buyer, and the buyer has repudiated
the contract of sale, or has manifested his inability to
perform his obligations thereunder, or has
committed a breach thereof, the seller may totally
rescind the contract of sale by giving notice of
his election so to do to the buyer. (n)
SPECIAL REMEDIES OF AN UNPAID
SELLER
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 the legal effects without need of seeking
the intervention of the courts.
Sales | VENTEROSO
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.
Doctrine of self-help
Article 429. The owner or lawful possessor of a thing
has the right to exclude any person from the
enjoyment and disposal thereof. For this purpose, he
may use such force as may be reasonably
necessary to repel or prevent an actual or
threatened unlawful physical invasion or
usurpation of his property. (n)
Unpaid seller
Article 1525. The seller of goods is deemed to be an
unpaid seller within the meaning of this Title:
(1) When the whole of the price has not been paid
or tendered;
(2) When a bill of exchange or other negotiable
instrument has been received as conditional
payment, and the condition on which it was
received has been broken by reason of the
dishonor of the instrument, the insolvency of the
buyer, or otherwise.
In articles 1525 to 1535 the term "seller" includes an
agent of the seller to whom the bill of lading has
been indorsed, or a 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.
(n)
Article 1526. Subject to the provisions of this Title,
notwithstanding that the ownership in the goods
may have passed to the buyer, the unpaid seller of
goods, as such, has:
(1) A lien on the goods or right to retain them for
the price while he is in possession of them;
(2) 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;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by
this Title.
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 coextensive with his rights of lien and
stoppage in transitu where the ownership has passed
to the buyer. (n)
1) Possessory lien
Article 1527. Subject to the provisions of this Title,
the unpaid seller of goods who is in possession of
them is entitled to retain possession of them until
payment or tender of the price in the following cases,
namely:
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(1) Where the goods have been sold without any
stipulation as to credit;
(2) Where the goods have been sold on credit, but
the term of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien
notwithstanding that he is in possession of the goods
as agent or bailee for the buyer. (n)
Article 1528. 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. (n)
Article 1529. The unpaid seller of goods loses his lien
thereon:
(1) When he delivers the goods to a carrier or other
bailee for the purpose of transmission to the buyer
without reserving the ownership in the goods or the
right to the possession thereof;
(2) When the buyer or his agent lawfully obtains
possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon,
does not lose his lien by reason only that he has
obtained judgment or decree for the price of the
goods. (n)
2) Stoppage in transitu
Article 1530. Subject to the provisions of this Title,
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. (n)
Article 1531. Goods are in transit within the meaning
of the preceding article:
(1) From the time when 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;
(2) 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.
Goods are no longer in transit within the meaning
of the preceding article:
(1) If the buyer, or his agent in that behalf, obtains
delivery of the goods before their arrival at the
appointed destination;
(2) If, after the arrival of the goods at the appointed
destination, the carrier or other bailee acknowledges
Sales | VENTEROSO
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;
(3) If the carrier or other bailee wrongfully refuses
to deliver the goods to the buyer or his agent in
that behalf.
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.
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. (n)
Article 1532. The unpaid seller may exercise his right
of stoppage in transitu either by obtaining actual
possession of the goods or by giving notice of
his claim to the carrier or other bailee in whose
possession the goods are. Such notice may be
given either to the person in actual possession of the
goods or to his principal. In the latter case the notice,
to be effectual, must be given at such time and
under such circumstances that the principal, by
the exercise of reasonable diligence, may
prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the
seller to the carrier, or other bailee in possession of
the goods, he must redeliver the goods to, or
according to the directions of, the seller. The
expenses of such delivery must be borne by the
seller. If, however, a negotiable document of title
representing the goods has been issued by the
carrier or other bailee, he shall not be obliged to
deliver or justified in delivering the goods to the
seller unless such document is first surrendered
for cancellation. (n)
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 transit. This remedy allows the
seller to resume possession of the goods at any time
while they are in transit. 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.
3) Special right of resale
Article 1533. Where the goods are of perishable
nature, or where the seller expressly reserves the
right of resale in case the buyer should make
default, or where the buyer has been in default in
the payment of the price for an unreasonable
time, an unpaid seller having a right of lien or
having stopped the goods in transitu may resell
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the goods. He shall not thereafter be liable to the
original buyer upon the contract of sale or for
any profit made by such resale, but may recover
from the buyer damages for any loss occasioned
by the breach of the contract of sale.
Where a resale is made, as authorized in this article,
the buyer acquires a good title as against the
original buyer.
It is not essential to the validity of 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
contract of 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.
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. (n)
The special right of resale can be made only when the
unpaid seller has previously exercised either his
1) right of possessory lien or
2) stoppage in transit
Conditions
1) The goods are of perishable nature;
2) The seller expressly reserves the right of resale
in case the buyer should make default; or
3) Where the buyer has been in default in the
payment of the price for an unreasonable time.
The seller can resell the subject matter herein
without need of first rescinding the contract
judicially. That is, he can effect these even without
judicial action.
4) Special right to rescind
Article 1534. 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 he expressly reserved the right to do
so in case the buyer should make default, or where
the buyer has been in default in the payment of
the price for an unreasonable time. The seller
shall not thereafter be liable to the buyer upon the
contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach of the
contract.
The transfer of title shall not be held to have been
rescinded by an unpaid seller until he has
Sales | VENTEROSO
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. (n)
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;
1) The expressly reserved the right to do so in
case the buyer should make default; or
2) The buyer has been in default in the payment
of the price for an unreasonable time.
*The four (4) remedies of an unpaid seller have a hierarchical
application
SALE OF MOVABLES ON INSTALLMENT
(“RECTO LAW”)
Article 1484. In a contract of sale of personal
property the price of which is payable in
installments, the vendor may exercise any of the
following remedies:
(1) Exact fulfillment of the obligation, should the
vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to
pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the vendee's
failure to pay cover two or more installments. In
this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void. (1454-
A-a)
Remedies
1) Exact fulfillment of the obligation, should the
vendee fail to pay;
2) Cancel or Rescind the sale, should the vendee's
failure to pay cover two or more installments;
or
3) Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee's failure to pay cover two or more
installments. In this case, he shall have no
further action against the purchaser to recover
any unpaid balance of the price. Any agreement
to the contrary shall be void.
 actual foreclosure is necessary to bar
the vendor from recovering the unpaid
balance.
First, the first remedy is available even after the first
default. However, the second and third remedies are
only available after failure to pay two (2) or more
installments. Second, when the third remedy is chosen,
there is an explicit provision that the seller can have no
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further action against the buyer to recover any unpaid
balance of the price. Any agreement to the contrary
shall be void.
GR: 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.
XPN: when you chose the first option (i.e., exact
fulfillment) and the vendee refuses to comply or the
same has become impossible, resort to rescission of the
contract will still be allowed. Also, the seller may still
recover from the buyer the unpaid balance of the
purchase price if after choosing the first remedy there
exists a deficiency.
Article 1485. The preceding article shall be applied 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. (1454-A-a)
Article 1486. In the case referred to in the two
preceding articles, 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. (n)
A stipulation for the forfeiture of the amounts paid by
the buyer even when the contract is rescinded is not
really contrary to the remedy of rescission since to a
great extent, it offers a means of restitution to the
obligee for the loss in value or deterioration of the
thing subject of the sale, or recompense for the lost
opportunity suffered by the seller due to the default of
the buyer.
The contract, in the instant case, while a sale of
personal property, is not, however, one on
installments, but on straight term, in which the
balance, after payment of the initial sum, should be
paid in its totality at the time specified in the
promissory note. The transaction is not, therefore,
the one contemplated in Act No. 4122 and
accordingly the mortgagee is not bound by the
prohibition therein contained as to the right to the
recovery of the unpaid balance.
Undoubtedly, the law is aimed at those sales where
the price is payable in several installments, for,
generally, it is in these cases that partial payments
consist in relatively small amounts, constituting thus
a great temptation for improvident purchasers to
buy beyond their means. There is no such
temptation where the price is to be paid in cash, or,
as in the instant case, partly in cash and partly in one
term, for, in the latter case, the partial payments are
not so small as to place purchasers off their guard
and delude them to a miscalculation of their ability
to pay. (Levy Hermanos, Inc. v. Lazaro
Gervacio)
SALE OF IMMOVABLE PROPERTIES
Governing laws
Sales | VENTEROSO
1) The Maceda Law” (Republic Act 6552)
2) The Subdivision and Condominium Buyers’
Protective Decree” (Presidential Decree No.
957).
Remedies of seller
1) Sue for rescission of the sale in anticipation of
breach
2) Action to collect the balance or to rescind the
contract in case of failure to pay the price
Sue for rescission of the sale in anticipation of breach
Article 1591
Should the vendor have reasonable grounds to
fear the loss of immovable property sold and its
price, he may immediately sue for the rescission
of the sale.
Should such ground not exist, the provisions of
article 1191 shall be observed. (1503)
Article 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent
upon him.
The injured party may choose between the
fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment,
if the latter should become impossible.
The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the
rights of third persons who have acquired the thing,
in accordance with articles 1385 and 1388 and the
Mortgage Law. (1124)
RULES
1) If the seller has reasonable grounds to fear the
loss of the immovable property and its price,
he may immediately sue for the rescission of
the sale.
2) Should such grounds not exist, 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.
Action to collect the balance or to rescind the contract
in case of failure to pay the price
Article 1592. 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 vendee 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.
After the demand, the court may not grant him a
new term. (1504a)
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Application
The rule under Article 1592 does not apply to a sale of
immovable on installment as the procedure to be
followed therein is the Maceda Law.
Nuñez v. Moises-Palma
What is the legal effect of the non-payment of the
purchase price?
1) Art 1595 - Where, under a contract of sale, the
ownership of the goods has passed to the
buyer, and he wrongfully neglects or refuses to
pay for the goods according to the terms of the
contract of sale, the seller may maintain an
action against him for the price of the
goods.
2) Art 1596 - 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 nonacceptance.
The measure of damages is the estimated loss
directly and naturally resulting in the
ordinary course of events from the buyer's
breach of contract.
With respect to the sale of immovable properties,
the remedies of the vendor are provided in the
following Civil Code provisions:
1) Art 1591 - Should the vendor have reasonable
grounds to fear the loss of immovable
property sold and its price, he may
immediately sue for the rescission of the sale.
Should such ground not exist, the provisions of
Article 1191 shall be observed.
2) Art 1592 - 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 vendee 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. After the demand, the court may
not grant him a new term.
3) Art 2242 - With reference to specific
immovable property and real rights of the
debtor, the following claims, mortgages and
liens shall be preferred, and shall constitute an
encumbrance on the immovable or real right:
xxx (2) For the unpaid price of real property
sold, upon the immovable sold. Xxx
The remedies of the unpaid seller, after ownership of
the real property not covered by Republic Act No.
6552 or the Maceda Law, has been vested to the
buyer, are:
1) To compel specific performance by filing
an action against the buyer for the agreed
purchase price; or
Sales | VENTEROSO
2) To rescind or resolve the contract of sale
either judicially or by a notarial act; and
3) In either (1) or (2), to recover damages for
the breach of the contract.
Remedies of buyer
1) Suspension of payment in case of
disturbance
2) Reimbursement of the total amount paid in
case of subdivision or condominium
projects
Suspension of payment in case of disturbance
Article 1590
Should the vendee 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
vendor 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 vendee shall be bound to make
the payment. A mere act of trespass shall not
authorize the suspension of the payment of the
price. (1502a)
Reimbursement of the total amount paid in case of
subdivision or condominium projects
THE SUBDIVISION AND
CONDOMINIUM BUYERS’ PROTECTIVE
DECREE PRESIDENTIAL DECREE
(P.D.) NO. 957
Section 1. Title. This Decree shall be known as THE
SUBDIVISION AND CONDOMINIUM
BUYERS' PROTECTIVE DECREE. xxx
Section 23. Non-Forfeiture of Payments. No installment
payment made by a buyer in a subdivision or
condominium project for the lot or unit he contracted
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. Such buyer may,
at his option, be reimbursed the total amount paid
including amortization interests but excluding
delinquency interests, with interest thereon at the
legal rate.
Section 24. Failure to pay installments. The rights of the
buyer in the event of this failure to pay the
installments due for reasons other than the failure of
the owner or developer to develop the project shall be
governed by Republic Act No. 6552.
Where the transaction or contract was entered into
prior to the effectivity of Republic Act No. 6552 on
August 26, 1972, the defaulting buyer shall be entitled
to the corresponding refund based on the
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installments paid after the effectivity of the law in
the absence of any provision in the contract to the
contrary.
The buyer’s cause of action ripens only when the
developer fails to complete the project on the lapse
of the completion period stated on the sale
contract or the developer’s Licenses to Sell.
However, the mere dissatisfaction of the buyer as
to the completion date of the project does not itself
constitute substantial breach as to authorize the
buyer to rescind the contract and ask for refund of the
amounts paid to the seller.
This decree, aptly entitled "The Subdivision and
Condominium Buyers' Protective Decree", was
issued in the wake of numerous reports that many
real estate subdivision owners, developers, operators
and/or sellers "have reneged on their
representations and obligations to provide and
maintain properly subdivision roads, drainage,
sewerage, water systems, lighting systems and other
basic requirements" for the health and safety of
home and lot buyer's. It was designed to stem the
tide of "fraudulent manipulations perpetrated by
unscrupulous subdivision and condominium sellers
and operators, such as failure to deliver titles to
buyers or titles free from liens and encumbrances."
(Casa Filipina Realty Corporation v. Office of
the President)
On this score, it is apt to mention that it is the intent
of PD 957 to protect the buyer against unscrupulous
developers, operators and/or sellers who reneged on
their obligations. Thus, in order to achieve this
purpose, equity and justice dictate that the injured
party should be afforded full recompense and as
such, be allowed to recover the prevailing market
value of the undelivered lot which had been fully
paid for. (Gotesco Properties, Inc. v. Spouses
Eugenio and Angelina Fajardo)
SALE OF REAL PROPERTY IN
INSTALLMENTS OR “THE MACEDA LAW”
REPUBLIC ACT No. 6552
AN ACT TO PROVIDE PROTECTION TO
BUYERS OF REAL ESTATE ON
INSTALLMENT PAYMENTS
Section 1. This Act shall be known as the "Realty
Installment Buyer Act."
Section 2. It is hereby declared a public policy to
protect buyers of real estate on installment payments
against onerous and oppressive conditions.
Section 3. In all transactions or contracts involving the
sale or financing of real estate on installment
payments, including residential condominium
apartments but excluding industrial lots,
commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eight hundred forty-
four, as amended by Republic Act Numbered Sixty-
three hundred eighty-nine, where the buyer has paid
Sales | VENTEROSO
at least two years of installments, the buyer is
entitled to the following rights in case he defaults in the
payment of succeeding installments:
A) To pay, without additional interest, the
unpaid installments due within the total grace
period earned by him which is hereby fixed
at the rate of one month grace period for
every one year of installment payments
made: Provided, That this right shall be
exercised by the buyer only once in every five
years of the life of the contract and its
extensions, if any.
B) If the contract is canceled, the seller shall
refund to the buyer the cash surrender value
of the payments on the property equivalent
to fifty per cent (50%) of the total payments
made, and, after five years of installments,
an additional five per cent (5%) every year
but not to exceed ninety per cent (90%) of
the total payments made: Provided, That 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.
Down payments, deposits or options on the
contract shall be included in the computation of
the total number of installment payments made.
(DON’T YOU FORGET!!! 😊)
Section 4. In case where less than two years of
installments were paid, the seller shall give the buyer
a grace period of not less than 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.
Section 5. Under Section 3 and 4, the buyer shall have
the right 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 or assignment shall be done by notarial act.
Section 6. The buyer shall have the right 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.
Section 7. Any stipulation in any contract hereafter
entered into contrary to the provisions of Sections 3,
4, 5 and 6, shall be null and void.
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Section 8. If any provision of this Act is held invalid
or unconstitutional, no other provision shall be
affected thereby.
Section 9. This Act shall take effect upon its approval.
Approved: August 26, 1972.
Objectives of the Maceda Law (Active Realty &
Development Corporation v. Daroya)
The law seeks to address the acute housing shortage
problem in our country that has prompted thousands
of middle and lower class buyers of houses, lots and
condominium units to enter into all sorts of contracts
with private housing developers involving installment
schemes. Lot buyers, mostly low-income earners eager
to acquire a lot upon which to build their homes,
readily affix their signatures on these contracts, without
an opportunity to question the onerous provisions
therein as the contract is offered to them on a "take it
or leave it" basis. Most of these contracts of adhesion,
drawn exclusively by the developers, entrap innocent
buyers by requiring cash deposits for reservation
agreements which oftentimes include, in fine print,
onerous default clauses where all the installment
payments made will be forfeited upon failure to pay any
installment due even if the buyers had made payments
for several years. Real estate developers thus enjoy an
unnecessary advantage over lot buyers who they often
exploit with iniquitous results. They get to forfeit all
the installment payments of defaulting buyers and
resell the same lot to another buyer with the same
exigent conditions.
Application
1) The Maceda Law does not cover all sales of
realty on installments but primarily
residential real estate.
2) The Maceda Law covers not only sales but
also financing of such acquisitions
3) Excludes industrial lots, commercial buildings
and sales to tenants.
4) The Maceda Law clearly includes in its
provisions both contracts of sale and contracts
to sell.
5) The rights granted to a buyer under the Maceda
Law depends upon the number of installments
already paid.
Less than 2 years of installment paid
1) The vendor shall give the vendee a grace period
of not less than sixty (60) days from the date
the installment became due, without additional
interest.
2) If despite the grant of the grace period the
vendee still fails to pay the installments due,
the vendor may cancel the contract after
thirty days (30) days from receipt by the
vendee of the notice of cancellation or the
demand for rescission of the contract by a
notarial act.
Sales | VENTEROSO
At least two years of installment paid
1) If not canceled - Entitled to one (1) month
grace period for every one (1) year of
installment payments made: Provided, That
this right shall be exercised by the buyer only
once in every five (5) years of the life of the
contract and its extensions, if any.
2) If canceled –
a) refund to the buyer the cash surrender
value of the payments on the property
equivalent to fifty per cent (50%) of the
total payments made,
b) after five (5) years of installments, an
additional five per cent (5%) every year
but not to exceed ninety per cent (90%)
of the total payments made
c) Actual cancellation must be
 thirty (30) days from receipt by
the buyer of a notice of
cancellation or the demand for
rescission by a notarial act
 upon full payment of the cash
surrender value to the buyer.
*Until and unless the seller complies with these
twin mandatory requirements, the contract
remains valid and subsisting.
Other rights granted to the buyer
1) The right 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. (Section 5 of the Maceda
Law)
2) The right 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.
(Section 6 of the Maceda Law)
CONDITIONS AND WARRANTIES
CONDITIONS
Article 1545
Where the obligation of either party to a contract of
sale is subject to any condition which is not
performed, such party may refuse to proceed with
the contract or he may waive performance of the
condition. If the other party has promised that the
condition should happen or be performed, such
first mentioned party may also treat the
nonperformance of the condition as a breach of
warranty.
Where the ownership in the thing 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 a condition of the obligation
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of the buyer to perform his promise to accept

and pay for the thing. (n) A perfected contract of sale may either be absolute
or conditional depending on whether the agreement
Condition v. warranty is devoid of, or subject to, any condition imposed on
Condition Warranty the passing of title of the thing to be conveyed or on
The non-happening of The non-fulfillment of the obligation of a party thereto. When ownership is
the condition, although a warranty would retained until the fulfillment of a positive condition
it may extinguish the constitute a breach of the breach of the condition will simply prevent the
obligation upon which the contract duty to convey title from acquiring an obligatory
it is based, generally force. If the condition is imposed on an obligation
does not amount to a of a party which is not complied with, the other party
breach of the contract may either refuse to proceed or waive said condition
of sale. (XPN: Art 1545, (Art. 1545, Civil Code). Where, of course, the
par 2) condition is imposed upon the perfection of the
Generally, goes into the Goes into the contract itself, the failure of such condition would
root of the existence of performance of such prevent the juridical relation itself from coming into
the obligation. obligation, and in fact existence.
may constitute an
obligation in itself From the moment the contract is perfected, the
Must be stipulated by May form part of the parties are bound not only to the fulfillment of what
the parties in order to obligation or the has been expressly stipulated but also to all the
form part of an contract by provision of consequences which, according to their nature, may
obligation law, without the parties be in keeping with good faith, usage and law. Under
having expressly the agreement, private respondent is obligated to
agreed thereto evict the squatters on the property. The ejectment
May attach itself either to Whether express or of the squatters is a condition the operative act
the obligations of the implied, related to the of which sets into motion the period of
seller or the buyer subject matter itself or compliance by petitioner of his own obligation,
the obligations of the i.e., to pay the balance of the purchase price. Private
seller as to the subject respondent's failure "to remove the squatters from
matter of the sale. the property" within the stipulated period gives
petitioner the right to either refuse to proceed with
the agreement or waive that condition in
Condition imposed on Condition imposed in
consonance with Article 1545 of the Civil Code.
the perfection of a the performance of an
contract obligation
In contracts of sale particularly, Article 1545 of the
Failure to comply results Merely gives the other
Civil Code, aforementioned, allows the obligee to
in the failure of a party the option to either
choose between proceeding with the agreement
contract refuse to proceed with
or waiving the performance of the condition. It
the sale or to waive the
is this provision which is the pertinent rule in the
condition
case at bench. Here, evidently, petitioner has waived
the performance of the condition imposed on
The alleged "failure" of respondent spouses to eject private respondent to free the property from
the lessees from the lot in question and to deliver squatters. (Romero v. CA)
actual and physical possession thereof cannot be
considered a substantial breach of a condition for
In the case at bar, respondents obviously did not
two reasons: first, such "failure" was not
choose the first option as they proceeded with
stipulated as a condition — whether resolutory
their contract with petitioner despite the latter's
or suspensive — in the contract; and second, its
non-fulfillment of the condition in the
effects and consequences were not specified
agreement. In fact, in their comment, they stated
either. (Power Commercial v. CA)
that they "took possession of the properties and
caused extensive improvement and installed facilities
and equipment" thereon.
Effect of non-fulfillment of condition
1) If the obligation of either party is subject to Did respondents, however, waive fulfillment of the
any condition and such condition is not condition? Yes. The records reveal that respondents
fulfilled, such party may either: negotiated directly with Tanglaw for a new lease
 Refuse to proceed with the contract contract even without the required official
 Proceed with the contract, waiving the communication that petitioner was supposed to
performance of the condition obtain for them, a condition in the "Agreement"
2) If the condition is in the nature of a which they themselves imposed on the latter.
promise that it should happen, the non- Although they had the right to require his
compliance with the condition or compel his
performance of such condition may be
performance of the undertaking, they opted
treated by the other party as a breach of
otherwise.
warranty.
50

Sales | VENTEROSO
 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
Moreover, respondents' contention that the
condition did not preclude them from dealing with
Tanglaw or that they were "to refrain from
negotiating directly" can only mean that they did not
really expect petitioner to comply strictly and
absolutely with it. Respondents' conduct showed
that they did not only disregard the condition
but also placed petitioner in a position that his
compliance was no longer necessary. We are
thus constrained to rule that they had effectively
waived compliance with the condition.
(Gonzales v. Lim)
Paragraph 1(b) of the Conditional Deed of Sale,
stating that respondent shall pay the balance of the
purchase price when he has successfully negotiated
and secured a road right of way, is not a condition
on the perfection of the contract nor on the validity
of the entire contract or its compliance as
contemplated in Article 1308. It is a condition
imposed only on respondent’s obligation to pay the
remainder of the purchase price. In our view and
applying Article 1182, such a condition is not purely
potestative as petitioners contend. It is not
dependent on the sole will of the debtor but also on
the will of third persons who own the adjacent land
and from whom the road right of way shall be
negotiated (Catungal v. Rodriguez)
WARRANTIES
Article 1546
Any affirmation of fact or any promise by the
seller relating to the thing is an express warranty if
the natural tendency of such affirmation or promise
is to induce the buyer to purchase the same, and
if the buyer purchases the thing relying thereon.
No affirmation of the value of the thing, nor any
statement purporting to be a statement of the
seller's opinion only, shall be construed as a
warranty, unless the seller made such affirmation
or statement as an expert and it was relied upon
by the buyer. (n)
Warranty
Any representation made by the seller of the thing with
respect to its character, quality, or ownership by which
he induces the buyer to purchase the same relying on
said representation.
A warranty is a collateral undertaking in a sale of either
real or personal property, express or implied; that if the
property sold does not possess certain incidents or
qualities, the purchaser may either consider the sale
void or claim damages for breach of warranty. Thus, a
warranty may either be express or implied. (Pilipinas
Makro v. Coco Charcoal)
Kinds of warranties
1) Express – Art 1546; They are stipulated by the
parties. Hence, even if the law does not provide
for this certain warranty but the seller still
provided it, and the buyer relied on the
promise, the seller is liable for damages.
Sales | VENTEROSO
2) Implied – Art 1547; 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.
(Pilipinas Makro vs. Coco Charcoal)
Express Implied
Any affirmation of fact One which the law
or any promise by the derives by application or
seller relating to the inference from the
thing, the natural nature of transaction or
tendency of which is to the relative situation or
induce the buyer to circumstances of the
purchase the same. parties, irrespective of
any intention of the
seller to create it
includes all warranties
derived from the
language of the contract
Requisites of express warranty
1) It must be an affirmation of fact or any
promise by the seller relating to the subject
matter of the sale;
2) The natural tendency of such affirmation or
promise is to induce the buyer to purchase the
thing; and
3) The buyer purchases the thing relying on such
affirmation or promise thereon.
Exceptions
Article 1340. The usual exaggerations in trade, when
the other party had an opportunity to know the facts,
are not in themselves fraudulent. (n)
Article 1341. A mere expression of an opinion does
not signify fraud, unless made by an expert and
the other party has relied on the former's special
knowledge. (n)
Article 1343. Misrepresentation made in good faith is
not fraudulent but may constitute error. (n)
1) Affirmation of the value of the thing
2) Any statement purporting to be a statement of
the seller’s opinion only
XPN of XPN:
1) When the seller made such affirmation or
statement as an expert.
2) The buyer relied
Remedies in case of breach
In case the seller breaches his warranty, the buyer
may avail of the following remedies:
1) 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;
 reduction or extinction of the price of
the same item or unit sold and not to
a different transaction or contract of
sale. (First United Constructors
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
Corporation v. Bayanihan
Automotive Corporation)
 That there was a series of purchases
made by petitioners could not be
considered as a single transaction
(First United Constructors
Corporation v. Bayanihan
Automotive Corporation)
2) Accept or keep the goods and maintain an
action against the seller for damages for the
breach of warranty;
3) Refuse to accept the goods, and maintain an
action against the seller for damages for the
breach of warranty;
4) Rescind the contract of 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.
It is true that the ownership of the trucks shifted to
private respondent after the sale. But petitioner must
remember that prior to its consummation it
expressly intimated to her that it had already paid the
taxes and customs duties. Such representation shall
be considered as a seller's express warranty under
Art. 1546 of the Civil Code which covers any
affirmation of fact or any promise by the seller which
induces the buyer to purchase the thing and actually
purchases it relying on such affirmation or promise.
It includes all warranties which are derived from
express language, whether the 7 language is in the
form of a promise or representation. Presumably,
therefore, private respondent would not have
purchased the two (2) Elf trucks were it not for
petitioner's assertion and assurance that all taxes on
its imported parts were already settle. (Harrison
Motors v. Navarro)
All in all, these "vague oral statements" were express
affirmations not only of the costs that could be
saved if the buyer used PhilSteel's G.I. sheets, but
also of the compatibility of those sheets with the
acrylic painting process customarily used in
Amianan Motors. Angbengco did not aimlessly utter
those "vague oral statements" for nothing, but with
a clear goal of persuading Quinones to buy
PhilSteel's product.
Since what was proven was express warranty, the
remedy for implied warranties under Article 1567 of
the Civil Code does not apply to the instant case.
Instead, following the ruling of this Court in Harrison
Motors Corporation v. Navarro, Article 1599 of the Civil
Code applies when an express warranty is breached.
(Philippine Steel Coating v. Quiñones)
On the basis of the foregoing circumstances, the
inescapable conclusion is that private respondent is
indeed bound by the express warranty he executed
in favor of herein petitioner.
We disagree with respondent court that private
respondents express warranty as to the A-1
Sales | VENTEROSO
condition of the machine was merely dealer's talk.
Private respondent was not a dealer of printing
or linotype machines to whom could be ascribed
the supposed resort to the usual exaggerations
of trade in said items. His certification as to the
condition of the machine was not made to induce
petitioner to purchase it but to confirm in writing for
purposes of the financing aspect of the transaction
his representations thereon. Ordinarily, what does
not appear on the face of the written instrument
should be regarded as dealer's or trader's talk;
conversely, what is specifically represented as true in
said document, as in the instant case, cannot be
considered as mere dealer's talk. (Moles v. IAC)
Sale of secondhand items
It is generally held that in the sale of a designated and
specific article sold as secondhand, there is no
implied warranty as to its quality or fitness for the
purpose intended, at least where it is subject to
inspection at the time of the sale. On the other hand,
there is also authority to the effect that in a sale of a
secondhand articles there may be, under some
circumstances, an implied warranty of fitness for the
ordinary purpose of the article sold or for the
particular purpose of the buyer. (Moles v. IAC)
Article 1547
In a contract of sale, unless a contrary intention
appears, there is:
(1) An implied warranty on the part of the seller that
he has a right to sell the thing at the time when
the ownership is to pass, and that the buyer shall
from that time have and enjoy the legal and
peaceful possession of the thing;
(2) An implied warranty that the thing shall be free
from any hidden faults or defects, or any charge
or encumbrance not declared or known to the
buyer.
This article shall not, however, be held to render
liable a sheriff, auctioneer, mortgagee, pledgee,
or other person professing to sell by virtue of
authority in fact or law, for the sale of a thing in
which a third person has a legal or equitable interest.
(n)
Types of implied warranties
Warranty that seller has right to sell (Art 1547, par
1)- AT THE TIME THE OWNERSHIP IS TO
PASS
- there can be no legal waiver of such
warranty without changing the basic nature
of the relationship, for the warranty on the
part of the seller that he has the capacity to
sell, i.e., to transfer ownership of the
subject matter pursuant to the sale, is the
essence of sale
Warranty against eviction (Art 1548 – 1559) – TO
ENJOY THE LEGAL AND PEACEFUL
POSSESSION OF THE THING
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Article 1548. Eviction shall take place whenever by a
final judgment based on a right prior to the sale
or an act imputable to the vendor, the vendee is
deprived of the whole or of a part of the thing
purchased.
The vendor shall answer for the eviction even
though nothing has been said in the contract on the
subject.
The contracting parties, however, may increase,
diminish, or suppress this legal obligation of the
vendor. (1475a)
Article 1549. The vendee need not appeal from the
decision in order that the vendor may become liable
for eviction. (n)
Article 1550. When adverse possession had been
commenced before the sale but the prescriptive
period is completed after the transfer, the vendor
shall not be liable for eviction. (n)
Article 1551. If the property is sold for nonpayment
of taxes due and not made known to the vendee
before the sale, the vendor is liable for eviction.
(n)
Article 1552. The judgment debtor is also
responsible for eviction in judicial sales, unless it is
otherwise decreed in the judgment. (n)
Article 1553. Any stipulation exempting the vendor
from the obligation to answer for eviction shall be
void, if he acted in bad faith. (1476)
Article 1554. If the vendee has renounced the right
to warranty in case of eviction, and eviction
should take place, the vendor shall only pay the
value which the thing sold had at the time of the
eviction. Should the vendee have made the waiver
with knowledge of the risks of eviction and
assumed its consequences, the vendor shall not
be liable. (1477)
Article 1555. When the warranty has been agreed
upon or nothing has been stipulated on this point, in
case eviction occurs, the vendee shall have the right
to demand of the vendor:
(1) The return of the value which the thing sold had
at the time of the eviction, be it greater or less than
the price of the sale;
(2) The income or fruits, if he has been ordered to
deliver them to the party who won the suit against
him;
(3) The costs of the suit which caused the eviction,
and, in a proper case, those of the suit brought
against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has
paid them;
Sales | VENTEROSO
(5) The damages and interests, and ornamental
expenses, if the sale was made in bad faith. (1478)
Article 1556. Should the vendee lose, by reason of
the eviction, a part of the thing sold of such
importance, in relation to the whole, that he would
not have bought it without said part, he may demand
the rescission of the contract; but with the
obligation to return the thing without other
encumbrances that those which it had when he
acquired it.
He may exercise this right of action, instead of
enforcing the vendor's liability for eviction.
The same rule shall be observed when two or more
things have been jointly sold for a lump sum, or for
a separate price for each of them, if it should clearly
appear that the vendee would not have purchased
one without the other. (1479a)
Article 1557. The warranty cannot be enforced until
a final judgment has been rendered, whereby the
vendee loses the thing acquired or a part thereof.
(1480)
Article 1558. The vendor shall not be obliged to
make good the proper warranty, unless he is
summoned in the suit for eviction at the
instance of the vendee. (1481a)
Article 1559. The defendant vendee shall ask, within
the time fixed in the Rules of Court for answering
the complaint, that the vendor be made a co-
defendant. (1482a)
Requisites (Pilipinas Makro v. Coco Charcoal)
(Escaler v. CA)
1) Purchaser has been deprived of, or evicted
from, the whole or part of the thing sold;
2) Eviction is by a final judgment;
3) Basis thereof is by virtue of a right prior to
the sale made by the seller; and
XPN: execution sales
In execution sales, the rule of caveat
emptor applies; the sheriff does not
warrant the title to the property sold by
him, and it is not incumbent on him to
place the purchaser in possession of the
property.
4) Seller has been summoned and made co-
defendant in the sui for eviction at the
instance of the buyer.
1) by way of asking that the former be
made a co-defendant; or
2) by the filing of a third-party complaint
against said vendors (Escaler v. CA)
Obvious to us in the ambivalent stance of petitioner
is its failure to establish any breach of the warranty
against eviction. Despite its protestation that its
acquisition of the lot was to enable it to set up a
warehouse for its asbestos products and that
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
failure to deliver actual possession thereof
defeated this purpose, still no breach of warranty
against eviction can be appreciated because the facts
of the case do not show that the requisites for
such breach have been satisfied.
xxxPetitioner argues in its memorandum that it has
not yet ejected the occupants of said lot, and not that
it has been evicted therefrom. As correctly pointed
out by Respondent Court, the presence of lessees
does not constitute an encumbrance of the land, nor
does it deprive petitioner of its control thereof.
We note, however, that petitioner's deprivation of
ownership and control finally occurred when it
failed and/or discontinued paying the
amortizations on the mortgage, causing the lot
to be foreclosed and sold at public auction. But
this deprivation is due to petitioner's fault, and
not to any act attributable to the vendor-
spouses. (Power Commercial v. CA)
In the case at bar, the fourth requisite—that of
being summoned in the suit for eviction (Case
No. 4252) at the instance of the vendee—is not
present. All that the petitioners did, per their very
admission, was to furnish respondents, by registered
mail, with a copy of the opposition they (petitioners
filed in the eviction suit. Decidedly, this is not the
kind of notice prescribed by the aforequoted Articles
1558 and 1559 of the New Civil Code. The term
"unless he is summoned in the suit for eviction at
the instance of the vendee" means that the
respondents as vendor/s should be made parties to
the suit at the instance of petitioners-vendees, either
by way of asking that the former be made a co-
defendant or by the filing of a third-party
complaint against said vendors. Nothing of that
sort appeared to have been done by the petitioners
in the instant case. (Escaler v. CA)
Amount for which seller is liable (VICED) [Art 1555]
1) Return of the value which the thing sold had
at the time of the eviction, be it greater or lesser
than the price of the sale;
2) Income or fruits, if buyer has been ordered to
deliver them to the party who won the suit
against him;
3) Costs of the suit which caused the eviction,
and, in a proper case, those of the suit brought
against the seller for the warranty;
4) Expenses of the contract, if the buyer has
paid them; and
5) Damages and interests and ornamental
expenses, if the sale was made in bad faith.
Waiver of the right to warranty against eviction [Art
1554]
1) General waiver - If the vendee has renounced
the right to warranty in case of eviction
(without knowledge of a particular risk), and
eviction should take place
Sales | VENTEROSO
EFFECT: the vendor shall only pay the value
which the thing sold had at the time of the
eviction
2) Specific waiver - Should the vendee have
made the waiver with knowledge of the risks of
eviction and assumed its consequences
EFFECT: the vendor shall not be liable.
As stated, the provision adverted to in the contract
pertains to the usual warranty against eviction,
and not to a condition that was not met.
The terms of the contract are so clear as to leave no
room for any other interpretation.
Furthermore, petitioner was well aware of the
presence of the tenants at the time it entered into the
sales transaction. As testified to by Reynaldo,
petitioner's counsel during the sales negotiation even
undertook the job of ejecting the squatters. In fact,
petitioner actually filed suit to eject the occupants.
Finally, petitioner in its letter to PNB of December
23, 1980 admitted that it was the "buyer(s) and new
owner(s) of this lot." (Power Commercial v. CA)
Warranty against non-apparent servitudes (Art
1560)
Article 1560
If the immovable sold should be encumbered with
any non-apparent burden or servitude, not
mentioned in the agreement, of such a nature that it
must be presumed that the vendee would not have
acquired it had he been aware thereof, he may ask
for the rescission of the contract, unless he should
prefer the appropriate indemnity. Neither right
can be exercised if the non-apparent burden or
servitude is recorded in the Registry of Property,
unless there is an express warranty that the thing
is free from all burdens and encumbrances.
Within one year, to be computed from the
execution of the deed, the vendee may bring the
action for rescission, or sue for damages.
One year having elapsed, he may only bring an
action for damages within an equal period, to be
counted from the date on which he discovered the
burden or servitude. (1483a)
Rules on warranty against non-apparent
servitudes
GR: If the immovable sold should be encumbered with
any non-apparent burden or servitude, not mentioned
in the agreement, of such a nature that it must be
presumed that the vendee would not have acquired it
had he been aware thereof, he may ask for
1) the rescission of the contract
2) unless he should prefer the appropriate
indemnity
XPN: The non-apparent burden or servitude is
recorded in the Registry of Property.
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
XPN of XPN: There is an express warranty that the
thing is free from all burdens and encumbrances.
Remedies and prescriptive period
1) Within one year from the execution of the
deed - the vendee may bring the action for
rescission, or sue for damages.
2) After one year – may bring action for
damages for 1 year counted from the date on
which he discovered the burden or servitude.
Warranty against hidden effects (Art 1561 –
Article 1561. The vendor shall be responsible for
warranty against the hidden defects which the
thing sold may have, should they render it unfit for
the use for which it is intended, or should they
diminish its fitness for such use to such an extent
that, had the vendee been aware thereof, he would
not have acquired it or would have given a lower
price for it; but said vendor shall not be
answerable for patent defects or those which
may be visible, or for those which are not visible
if the vendee is an expert who, by reason of his
trade or profession, should have known them.
(1484a)
Article 1562. In a sale of goods, there is an implied
warranty or condition as to the quality or fitness of
the goods, as follows:
(1) Where the buyer, expressly or by implication,
makes known to the seller the particular
purpose for which the goods are acquired, and it
appears that the buyer relies on the seller's skill or
judgment (whether he be the grower or
manufacturer or not), there is an implied warranty
that the goods shall be reasonably fit for such
purpose;
(2) Where the goods are brought by description
from a seller who deals in goods of that
description (whether he be the grower or
manufacturer or not), there is an implied warranty
that the goods shall be of merchantable quality. (n)
Article 1563. In the case of contract of sale of a
specified article under its patent or other trade
name, there is no warranty as to its fitness for any
particular purpose, unless there is a stipulation to
the contrary. (n)
Article 1564. An implied warranty or condition as to
the quality or fitness for a particular purpose may be
annexed by the usage of trade. (n)
Article 1565. In the case of a contract of sale by
sample, if the seller is a dealer in goods of that kind,
there is an implied warranty that the goods shall be
free from any defect rendering them
unmerchantable which would not be apparent
on reasonable examination of the sample. (n)
Article 1566. The vendor is responsible to the vendee
for any hidden faults or defects in the thing sold,
even though he was not aware thereof.
Sales | VENTEROSO
This provision shall not apply if the contrary has
been stipulated, and the vendor was not aware of
the hidden faults or defects in the thing sold.
(1485)
Article 1567. In the cases of articles 1561, 1562, 1564,
1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a
proportionate reduction of the price, with
damages in either case. (1486a)
Article 1568. If the thing sold should be lost in
consequence of the hidden faults, and the vendor
was aware of them, he shall bear the loss, and
shall be obliged to return the price and refund the
expenses of the contract, with damages. If he was
not aware of them, he shall only return the price and
interest thereon, and reimburse the expenses of
the contract which the vendee might have paid.
(1487a)
Article 1569. If the thing sold had any hidden fault
at the time of the sale, and should thereafter be lost
by a fortuitous event or through the fault of the
vendee, the latter may demand of the vendor the
price which he paid, less the value which the
thing had when it was lost.
If the vendor acted in bad faith, he shall pay
damages to the vendee. (1488a)
Article 1570. The preceding articles of this
Subsection shall be applicable to judicial sales,
except that the judgment debtor shall not be
liable for damages. (1489a)
Article 1571. Actions arising from the provisions of
the preceding ten articles shall be barred after six
months, from the delivery of the thing sold.
(1490)
Requisites for warranty against hidden defects
(Nutrimix Feeds Corp v. CA)
1) Defect must be hidden;
2) Defect must exist at the time the sale was made;
3) Defect must ordinarily have been excluded
from the contract;
4) Defect, must be important (render the thing
unfit or considerably decreases fitness);
5) Action must be instituted within the statute of
limitations.
Conditions that must be med for the implied
warrant against hidden defects to be applicable
(Spouses Batalla v. Prudential Bank)
1) Defect is Important or Serious
 The thing sold is unfit for the use
which it is intended
 Diminishes its fitness for such use or to
such an extent that the buyer would not
have acquired it had he been aware
thereof
2) Defect is Hidden
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
3) Defect Exists at the time of the sale
4) Buyer gives Notice of the defect to the seller
within reasonable time
Defect (Nutrimix Feeds Corp v. CA)
The defect must be present
1) upon the delivery or manufacture of the
product; or
2) when the product left the seller’s or
manufacturer’s control; or
3) when the product was sold to the purchaser; or
4) the product must have reached the user or
consumer without substantial change in the
condition it was sold.
Remedies of buyer and obligation of seller for
breach of warranty [Art 1567]
If the thing has not been lost
1) Accion redhibitoria – withdraw from the
contract
2) Accion quanti minoris - to demand a
proportionate reduction of the price with
damages in either case
If the thing has been lost
As a consequence of hidden faults
1) If the seller was aware of them, he shall bear
the loss, and shall be obliged to return the
price and refund the expenses of the contract,
with damages; or
2) If seller was not aware of them, the seller is
obliged only to return the price and interest
thereon, and reimburse the expenses of the
contract which the buyer might have paid, but
not for damages.
As a consequence of fortuitous event or through fault of buyer
1) If the seller was not aware of the hidden
defects, the buyer may demand from the seller
the price which he paid, less the value which
the thing had when it was lost;
2) If the seller acted in bad faith, in addition he
shall pay damages to the buyer.
Waiver of warranty
If there has been a stipulation exempting the seller
from hidden defects, then:
1) If the seller was not aware of the hidden
defects, the loss of the thing by virtue of such
defect will not make the seller liable at all to
the buyer; or
2) If the seller was fully aware of such defect, such
waiver is in bad faith, and the seller would still
be liable for the warranty.
Applicability to judicial sales
GR: Applicable to judicial sales
XPN: The judgment debtor shall not be liable for
damages
Prescription
Sales | VENTEROSO
Actions on warranties against hidden defects shall be
barred after six (6) months from the delivery of the
thing sold.
In the sale of animal feeds, there is an implied
warranty that it is reasonably fit and suitable to be
used for the purpose which both parties
contemplated. To be able to prove liability on the
basis of breach of implied warranty, three things
must be established by the respondents.
1) The first is that they sustained injury
because of the product;
2) the second is that the injury occurred
because the product was defective or
unreasonably unsafe; and
3) finally, the defect existed when the
product left the hands of the petitioner.
A manufacturer or seller of a product cannot be held
liable for any damage allegedly caused by the product
in the absence of any proof that the product in
question was defective. The defect must be present
upon the delivery or manufacture of the product;
or when the product left the seller’s or
manufacturer’s control; or when the product was
sold to the purchaser; or the product must have
reached the user or consumer without
substantial change in the condition it was sold.
Tracing the defect to the petitioner requires some
evidence that there was no tampering with, or
changing of the animal feeds. The nature of the
animal feeds makes it necessarily difficult for the
respondents to prove that the defect was existing
when the product left the premises of the petitioner.
A review of the facts of the case would reveal that
the petitioner delivered the animal feeds, allegedly
containing rat poison, on July 26, 1993; but it is
astonishing that the respondents had the animal
feeds examined only on October 20, 1993, or barely
three months after their broilers and hogs had died.
(Nutrimix Feeds Corp v. CA)
Neither could the alleged defects of the car door be
sufficient basis to prove that what was delivered to
Spouses Batalla was a secondhand car. As they
admitted, they immediately had a remote-control
door mechanism installed. It could not be readily
ascertained whether the defects in the car door were
existing at the time of the car's manufacture or was
caused by the installation of the remote-control door
system. Thus, the defects in the car door or in the
paint, neither establish that the car was second hand
nor could it be attributed, to the fault of Honda.
In case of a breach of an implied warranty against
hidden defects, the buyer may either elect between
withdrawing from the contract and demanding a
proportionate reduction of the price, with damages
in either case. Here, Spouses Batalla opted to
withdraw from the contract of sale after their
demand for a replacement car was not granted.
As can be seen, the redhibitory action pursued by
Spouses Batalla was without basis. For one, it was
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
not sufficiently proven that the defects of the car
door were important or serious. The hidden defect
contemplated under Article 1561 of the Civil Code
is an imperfection or defect of such nature as to
engender a certain degree of importance and
not merely one of little consequence. Spouses
Batalla failed to prove that such defect had severely
diminished the roadworthiness of the motor vehicle.
In fact, they admitted that they had no problem as
to the road worthiness of the car.
In addition, it cannot be ascertained whether the
defects existed at the time of the sale.1âшphi1 As
previously mentioned, a remote control door
mechanism was immediately installed after the car
was delivered to Spouses Batalla. (Spouses Batalla
v. Prudential Bank)
Respondent's complaint filed with the RTC seeks to
recover from petitioner the money he paid for the
vehicle due to the latter's breach of his warranty
against hidden defects under Articles 1547,13
1561,14 and 156615 of the Civil Code. The vehicle,
after it was delivered to respondent, malfunctioned
despite repeated repairs by petitioner. Obviously, the
vehicle has hidden defects. A hidden defect is one
which is unknown or could not have been known to
the vendee.
"The evidence clearly shows that Flores [now
respondent] was justified in opting to rescind the
sale given the hidden defects of the vehicle,
allowance for the repair of which he patiently
extended, but which repair did not turn out to be
satisfactory.
It is well within respondent's right to recover
damages from petitioner who committed a breach of
warranty against hidden defects. Article 1599 of the
Civil Code partly provides:
"Article 1599. Where there is a breach of warranty
by the seller, the buyer may, at his election:
xxx
(4) Rescind the contract of 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 anyone of these ways, no other remedy
can thereafter be granted, without prejudice to the
provisions of the second paragraph of Article 1191.
(Supercars v. Flores)
Redhibitory defects of animals
Article 1572. If two or more animals are sold
together, whether for a lump sum or for a separate
price for each of them, the redhibitory defect of
one shall only give rise to its redhibition, and not
that of the others; unless it should appear that the
Sales | VENTEROSO
vendee would not have purchased the sound
animal or animals without the defective one.
The latter case shall be presumed when a team,
yoke pair, or set is bought, even if a separate price
has been fixed for each one of the animals
composing the same. (1491)
Article 1573. The provisions of the preceding article
with respect to the sale of animals shall in like
manner be applicable to the sale of other things.
(1492)
Article 1574. There is no warranty against hidden
defects of animals sold at fairs or at public
auctions, or of live stock sold as condemned.
(1493a)
Article 1575. The sale of animals suffering from
contagious diseases shall be void.
A contract of sale of animals shall also be void if the
use or service for which they are acquired has
been stated in the contract, and they are found to
be unfit therefor. (1494a)
Article 1576. If the hidden defect of animals, even in
case a professional inspection has been made, should
be of such a nature that expert knowledge is not
sufficient to discover it, the defect shall be
considered as redhibitory.
But if the veterinarian, through ignorance or bad
faith should fail to discover or disclose it, he shall
be liable for damages. (1495)
Article 1577. The redhibitory action, based on the
faults or defects of animals, must be brought within
forty days from the date of their delivery to the
vendee.
This action can only be exercised with respect to
faults and defects which are determined by law or by
local customs. (1496a)
Article 1578. If the animal should die within three
days after its purchase, the vendor shall be liable
if the disease which cause the death existed at
the time of the contract. (1497a)
Article 1579. If the sale be rescinded, the animal
shall be returned in the condition in which it was
sold and delivered, the vendee being answerable
for any injury due to his negligence, and not arising
from the redhibitory fault or defect. (1498)
Article 1580. In the sale of animals with redhibitory
defects, the vendee shall also enjoy the right
mentioned in article 1567; but he must make use
thereof within the same period which has been
fixed for the exercise of the redhibitory action.
(1499)
Article 1581. The form of sale of large cattle shall
be governed by special laws. (n)
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
DOCUMENTS OF TITLE
Article 1636
In the preceding articles in this Title governing the
sale of goods, unless the context or subject matter
otherwise requires:
(1) "Document of title to goods" includes any bill of
lading, dock warrant, "quedan," or warehouse
receipt or order for the delivery of goods, or any
other document used in the ordinary course of
business in the sale or transfer of goods, as proof
of the possession or control of the goods, or
authorizing or purporting to authorize the
possessor of the document to transfer or receive,
either by indorsement or by delivery, goods
represented by such document. xxx
Purposes
1) as evidence of the possession or control of the
goods described therein
2) as the medium of transferring title and
possession over the goods described therein,
without having to effect actual delivery thereof
A warehouse receipt represents the goods, but the
entrusting of the receipt is more than the mere
delivery of the goods; it is a representation that the
one to whom the possession of the receipt has been
so entrusted has the title to the goods. (Siy Cong
Bieng v. Hongkong & Shanghai Bank)
Article 1495. The vendor is bound to transfer the
ownership of and deliver, as well as warrant the
thing which is the object of the sale. (1461a)
Transfer through documents of title
The seller is allowed, by fiction of law, to deal with the
goods described therein as though he had physically
delivered them to the buyer; and the buyer may take
the document of title as though he had actually taken
possession and control over the goods described
therein. It is the title to the goods that is being the
subject of transfer, unlike traditional delivery where
the actual or constructive delivery of the actual
object of the sale is pertained to.
Examples of documents of title
1) bill of lading
2) dock warrant
3) quedan
4) warehouse receipt
5) order for the delivery of goods
6) any other document used in the ordinary
course of business in the sale or transfer of
goods
Types
1) Negotiable documents of title - It is a
document of title in which it is stated that the
goods referred to therein are deliverable “to
bearer,” or “to order” of any person named in
such document. (Art 1507)
Sales | VENTEROSO
2) Non-negotiable document of title - It is a
document of title which does not state that the
goods referred to therein are deliverable either
to bearer or to the order of any person named
therein. It cannot be negotiated and the
endorsement of such a document gives the
transferee no additional right.
EFFECT: its sale constitutes actually an
assignment which under Article 1624 is
perfected by mere consent, but which under
Article 1625 would require its appearance in a
public instrument, otherwise it “shall produce
no effect as against third persons”
Warranties on negotiation and assignment of
documents of title
1) The document is genuine;
2) He has a legal right to negotiate or transfer
it;
3) He has no knowledge of any fact which
would impair the validity or worth of the
document;
4) He has a right to transfer the title to the
goods; and
5) The goods are merchantable or fit for a
particular purpose, whenever such warranties
would have been implied if the contract of the
parties had been to transfer without a
document of title the goods represented
thereby
The warranties of one who negotiates a negotiable
document of title, and one who assigns a non-
negotiable document of title are the same.
DELIVERY THROUGH CARRIER
GR: Delivery to carrier is deemed delivery to the buyer,
the premise being that the carrier acts as an agent of
the buyer.
XPN: Stipulation or circumstance to the contrary.
Article 1523. Where, in pursuance of a contract of
sale, the seller is authorized or required to send
the goods to the buyer, delivery of the goods to
a carrier, whether named by the buyer or not, for
the purpose of transmission to the buyer is
deemed to be a delivery of the goods to the
buyer, except in the cases provided for in article
1503, first, second and third paragraphs, or unless a
contrary intent appears.
Unless otherwise authorized by the buyer, the
seller must make such contract with the carrier on
behalf of the buyer as may be reasonable, having
regard to the nature of the goods and the other
circumstances of the case. If the seller omit so to
do, and the goods are lost or damaged in course
of transit, the buyer may decline to treat the
delivery to the carrier as a delivery to himself, or
may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by
the seller to the buyer under circumstances in which
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
the seller knows or ought to know that it is usual to
insure, the seller must give such notice to the buyer
as may enable him to insure them during their
transit, and, if the seller fails to do so, the goods shall
be deemed to be at his risk during such transit. (n)
ARTICLES 66 TO 73 OF THE CONSUMER
ACT OF THE PHILIPPINES
REPUBLIC ACT No. 7394
Consumer Act of the Philippines
ARTICLE 66. Implementing Agency. — The
Department of Trade and Industry, shall strictly
enforce the provision of this Chapter and its
implementing rules and regulations.
ARTICLE 67. Applicable Law on Warranties. — The
provisions of the Civil Code on conditions and
warranties shall govern all contracts of sale with
conditions and warranties.
ARTICLE 68. Additional Provisions on Warranties. — In
addition to the Civil Code provisions on sale with
warranties, the following provisions shall govern
the sale of consumer products with warranty:
a) Terms of express warranty. — Any seller or
manufacturer who gives an express warranty
shall:
1) set forth the terms of warranty in clear and
readily understandable language and
clearly identify himself as the
warrantor;
2) identify the party to whom the warranty
is extended;
3) state the products or parts covered;
4) state what the warrantor will do in the
event of a defect, malfunction of failure
to conform to the written warranty and at
whose expense;
5) state what the consumer must do to
avail of the rights which accrue to the
warranty; and
6) stipulate the period within which, after
notice of defect, malfunction or failure to
conform to the warranty, the warrantor will
perform any obligation under the warranty.
b) Express warranty — operative from moment of sale.
— All written warranties or guarantees issued
by a manufacturer, producer, or importer shall
be operative from the moment of sale.
1) Sales Report. — All sales made by
distributors of products covered by this
Article shall be reported to the
manufacturer, producer, or importer of
the product sold within thirty (30) days
from date of purchase, unless otherwise
agreed upon. The report shall contain,
among others, the date of purchase, model
of the product bought, its serial number,
name and address of the buyer. The report
made in accordance with this provision
Sales | VENTEROSO
shall be equivalent to a warranty
registration with the manufacturer,
producer, or importer. Such registration
is sufficient to hold the manufacturer,
producer, or importer liable, in appropriate
cases, under its warranty.
2) Failure to make or send report. — Failure of
the distributor to make the report or send
them the form required by the
manufacturer, producer, or importer shall
relieve the latter of its liability under the
warranty: Provided, however, That the
distributor who failed to comply with its
obligation to send the sales report shall be
personally liable under the warranty.
For this purpose, the manufacturer shall be
obligated to make good the warranty at the
expense of the distributor.
3) Retail. — The retailer shall be subsidiarily
liable under the warranty in case of
failure of both the manufacturer and
distributor to honor the warranty. In
such case, the retailer shall shoulder the
expenses and costs necessary to honor the
warranty. Nothing therein shall prevent
the retailer from proceeding against the
distributor or manufacturer.
SUMMARY
Hierarchy of liability
1) manufacturer, producer, or importer of
the product sold – liable if a sales report is
presented by the distributor
2) distributor – personally liable if there is
failure to make or send report
3) retailer - subsidiarily liable under the
warranty in case of failure of both the
manufacturer and distributor to honor the
warranty.
4) Enforcement of warranty or guarantee. — The
warranty rights can be enforced by
presentment of a claim. To this end, the
purchaser needs only to present to the
immediate seller either the warranty card
or the official receipt along with the
product to be serviced or returned to
the immediate seller. No other
documentary requirement shall be
demanded from the purchaser. If the
immediate seller is the manufacturer’s
factory or showroom, the warranty shall
immediately be honored. If the product
was purchased from a distributor, the
distributor shall likewise immediately
honor the warranty. In the case of a
retailer other than the distributor, the
former shall take responsibility without
cost to the buyer of presenting the
warranty claim to the distributor in the
consumer’s behalf.
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
5) Record of purchases. — Distributors and
retailers covered by this Article shall keep a
record of all purchases covered by a
warranty or guarantee for such period of
time corresponding to the lifetime of
the product’s respective warranties or
guarantees.
6) Contrary stipulations — null and void. — All
covenants, stipulations or agreements
contrary to the provisions of this Article
shall be without legal effect.
c) Designation of warranties. — A written warranty
shall clearly and conspicuously designate such
warranty as:
1) “Full warranty” if the written warranty
meets the minimum requirements set
forth in paragraph; or
2) “Limited warranty” if the written
warranty does not meet such minimum
requirements.
d) Minimum standards for warranties. — For the
warrantor of a consumer product to meet the
minimum standards for warranty, he shall:
1) remedy such consumer product within
a reasonable time and without charge in
case of a defect, malfunction or failure
to conform to such written warranty;
2) permit the consumer to elect whether to
ask for a refund or replacement without
charge of such product or part, as the
case may be, where after reasonable
number of attempts to remedy the
defect or malfunction, the product
continues to have the defect or to
malfunction.
The warrantor will not be required to perform the
above duties if he can show that the defect,
malfunction or failure to conform to a written warranty
was caused by damage due to unreasonable use thereof.
SUMMARY
GR: Minimum standards for warranties
1) remedy the defect or malfunction
2) where after reasonable number of attempts
to remedy the defect or malfunction, the
product continues to have the defect or to
malfunction.
 Ask for a refund
 Ask for a replacement without
charge
XPN: if he can show that the defect, malfunction or
failure to conform to a written warranty was caused
by damage due to unreasonable use thereof
e) Duration of warranty. — The seller and the
consumer may stipulate the period within
which the express warranty shall be
enforceable. If the implied warranty on
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merchantability accompanies an express
warranty, both will be of equal duration.
Any other implied warranty shall endure not less
than sixty (60) days nor more than one (1) year
following the sale of new consumer products.
SUMMARY
Duration of warranty
1) Express warranty – seller and consumer
may stipulate the period
2) Implied warranty – not less than 60 days
nor more than 1 years following the sale of
new consumer products
3) Express warranty with implied warranty
on merchantability – both will be of equal
duration
f) Breach of warranties. — 1) In case of breach of
express warranty, the consumer may elect to
have the goods repaired or its purchase price
refunded by the warrantor. In case the repair
of the product in whole or in part is elected,
the warranty work must be made to
conform to the express warranty within
thirty (30) days by either the warrantor or
his representative. The thirty-day period,
however, may be extended by conditions
which are beyond the control of the
warrantor or his representative. In case the
refund of the purchase price is elected, the
amount directly attributable to the use of
the consumer prior to the discovery of the
non-conformity shall be deducted. 2) In
case of breach of implied warranty, the
consumer may retain in the goods and recover
damages, or reject the goods, cancel and
contract and recover from the seller so much
of the purchase price as has been paid,
including damages.
SUMMARY
Remedies
1) Express warranty
 Have the goods repaired - the
warranty work must be made to
conform to the express warranty within
thirty (30) days by either the
warrantor or his representative.
o may be extended by conditions
which are beyond the control of the
warrantor or his representative
 Have the refund of the purchase
price - amount directly attributable to
the use of the consumer prior to the
discovery of the non-conformity shall
be deducted
2) Implied warranty
 Retain and recover damages
 Reject the goods, cancel the contract
and recover from the seller so much of
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
the purchase price as has been paid,
including damages.
ARTICLE 69. Warranties in Supply of Services. —
a) In every contract for the supply of services to
a consumer made by a seller in the course of a
business, there is an implied warranty that the
service will be rendered with due care and
skill and that any material supplied in
connection with such services will be
reasonably fit for the purpose for which it
is supplied.
b) Where a seller supplies consumer services in
the course of a business and the consumer,
expressly or by implication, makes known to
the seller the particular purpose for which
the services are required, there is an implied
warranty that the services supplied under
the contract and any material supplied in
connection therewith will be reasonably fit
for that purpose or are of such a nature or
quality that they might reasonably be expected
to achieve that result, unless the circumstances
show that the consumer does not rely or that it
is unreasonable for him to rely, on the seller’s
skill or judgment.
ARTICLE 70. Professional Services. — The provisions
of this Act on warranty shall not apply to
professional services of certified public
accountants, architects, engineers, lawyers,
veterinarians, optometrists, pharmacists, nurses,
nutritionists, dietitians, physical therapists,
salesmen, medical and dental practitioners and
other professionals engaged in their respective
professional endeavors.
ARTICLE 71. Guaranty of Service Firms. — Service
firms shall guarantee workmanship and replacement of
spare parts for a period not less than ninety (90) days
which shall be indicated in the pertinent invoices.
ARTICLE 72. Prohibited Acts. — The following acts
are prohibited:
a) refusal without any valid legal cause by the
total manufacturer or any person obligated
under the warranty or guarantee to honor a
warranty or guarantee issued;
b) unreasonable delay by the local manufacturer
or any person obligated under the warranty or
guarantee in honoring the warranty;
c) removal by any person of a product’s
warranty card for the purpose of evading said
warranty obligation;
d) any false representation in an advertisement
as to the existence of a warranty or guarantee.
ARTICLE 73. Penalties. — a) Any person who shall
violate the provisions of Article 67 shall be subject to
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fine of not less than Five hundred pesos (P500.00) but
not more than Five thousand pesos (P5,000.00) or an
imprisonment of not less than three (3) months but
not more than two (2) years or both upon the
discretion of the court. A second conviction under this
paragraph shall also carry with it the penalty or
revocation of his business permit and license.
b) Any person, natural or juridical, committing any of
the illegal acts provided for in Chapter III, except with
respect to Article 67, shall be liable for a fine of not
less than One thousand pesos (P1,000.00) but not
more than Fifty thousand pesos (P50,000.00) or
imprisonment for a period of at least one (1) year but
not more than five (5) years, or both, at the discretion
of the court.
The imposition of any of the penalties herein provided
is without prejudice to any liability incurred under the
warranty or guarantee.
GROUNDS FOR EXTINGUISHMENT OF
SALE
Article 1600
Sales are extinguished by the same causes as all other
obligations, by those stated in the preceding articles
of this Title, and by conventional or legal
redemption. (1506)
Causes for extinguishment of sale
1) Common - those causes that are also the
means of extinguishing all other contracts.
Article 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of
creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such
as annulment, rescission, fulfillment of a
resolutory condition, and prescription, are
governed elsewhere in this Code. (1156a)
Payment or performance only extinguishes the
obligations to which they pertain to in a contract of
sale, but not necessarily the contract itself, since the
relationship between buyer and seller remains after
performance or payment, such as the continuing
enforceability of the warranties of the seller.
2) Special - causes that are recognized by the law
of sales
3) Extra-special - those causes that are given
special discussion by the Civil Code and these are
 conventional redemption; and
 legal redemption.
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Common Special Extra effectively on the

special buyer
As to causes This refers to This refers to This refers to As to effect Extinguishes an Results into the
causes which are causes which causes that existing contract of perfection of a
also the means are recognized are given sale contract of sale
of extinguishing by the law on special
all other sales. discussion by
contracts. the Civil Once the instrument of absolute sale is executed, the
Code and vendor can no longer reserve the right to repurchase,
these are
conventional
and any right thereafter granted the vendor by the
redemption vendee in a separate instrument cannot be a right to
and legal repurchase but some other right like an option to
redemption.
As to legal Article 1231 of Those covered Conventional
buy. (Torres v. CA)
basis the New Civil by Arts. 1484, redemption
Code 1532, 1539, (Arts. 1601- Article 1601
1540, 1542, 1618); and
1556, 1560, Legal Conventional redemption shall take place when the
1567, and 1591 Redemption vendor reserves the right to repurchase the thing
(Arts. 1619- sold, with the obligation to comply with the
1623)
As to Payment or Exact Conventional provisions of article 1616 and other stipulations
applicability performance, fulfillment of and legal which may have been agreed upon. (1507)
loss of the thing, the obligation, redemption.
condonation or cancellation of
remission, the sale, Article 1616
confusion or foreclosure of The vendor cannot avail himself of the right of
merger, the mortgage, repurchase without returning to the vendee the
compensation, stoppage in
and novation. transit, and etc. price of the sale, and in addition:

CONVENTIONAL REDEMPTION (1) The expenses of the contract, and any other
legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on
Conventional redemption - right which the vendor
the thing sold. (1518)
reserves to himself, to reacquire the property sold
provided he returns to the vendee the price of the Conventional redemption shall take place when the
sale, the expenses of the contract, any other seller reserved for himself the right to repurchase the
legitimate payments made therefor and the necessary thing sold, with the obligation to: (David v. David)
and useful expenses made on the thing sold (Art. 1) return the price of the sale,
1616.), and fulfills other stipulations which may have 2) the expenses of the contract,
been agreed upon.
3) any other legitimate payments made by reason
of the sale, and
Sale with right to repurchase - title and ownership of
4) the necessary and useful expenses made on the
the property sold are immediately vested in the vendee,
thing sold.
subject to the resolutory condition of repurchase by the
vendor within the stipulated period. A sale with right
ARTICLE 1602
to repurchase is governed by Article 1601 of the Civil The contract shall be presumed to be an equitable
Code. mortgage, in any of the following cases:
Right of Option to purchase
redemption
(1) When the price of a sale with right to
As to its nature Part of the main Generally a principal repurchase is unusually inadequate;
contract and cannot contract, albeit (2) When the vendor remains in possession as
exist unless reserved preparatory and may lessee or otherwise;
at the time of the be created
perfection of the independent of (3) When upon or after the expiration of the right
contract of sale another contract to repurchase another instrument extending the
As to its existence Must be embedded May exist prior to or period of redemption or granting a new period
in a contract of sale after the perfection
at its perfection of the sale, or be is executed;
embedded in another (4) When the purchaser retains for himself a part
contract upon that of the purchase price;
contract’s perfection
As to necessity of Does not need a Must have a (5) When the vendor binds himself to pay the
consideration separate consideration taxes on the thing sold;
consideration to be separate and distinct (6) In any other case where it may be fairly inferred
valid and effective from the purchase
price that the real intention of the parties is that the
As to period Redemption period An option right may transaction shall secure the payment of a debt or the
cannot exceed 10 exceed 10 years performance of any other obligation.
years
As to requirement of Required notice to Requires only a
notice be accompanied by a notice of such In any of the foregoing cases, any money, fruits, or
tender of payment or exercise be given the other benefit to be received by the vendee as rent
consignment when optioner
tender of payment
or otherwise shall be considered as interest which
cannot be made shall be subject to the usury laws. (n)
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
Equitable mortgage - one which although lacking in
some formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as
security for a debt, and contains nothing impossible or
contrary to law.
Requisites (Kings Properties v. Galido)
1) The parties entered into a contract
denominated as a contract of sale; and
2) Their intention was to secure existing debt by
way of a mortgage.
Presumption (Kings Properties v. Galido)
In order for the presumption of equitable mortgage to
apply, there must be:
1) something in the language of the contract; or
2) Something in the conduct of the parties which
shows clearly and beyond doubt that they
intended the contract to be a mortgage and not
a pacto de retro sale.
In case of doubt, a contract purporting to be a sale
with right to repurchase shall be considered as an
equitable mortgage. In a contract of mortgage, the
mortgagor merely subjects the property to a lien, but
the ownership and possession thereof are retained by
him. (Saclolo v. Marquito)
In determining whether a deed absolute in form is a
mortgage, the court is not limited to the written
memorials of the transaction. The decisive factor in
evaluating such agreement is the intention of the
parties, as shown not necessarily by the terminology
used in the contract but by all the surrounding
circumstances, such as the relative situation of the
parties at that time, the attitude acts, conduct,
declarations of the parties, the negotiations between
them leading to the deed, and generally, all pertinent
facts having a tendency to fix and determine the real
nature of their design and understanding. (Spouses
Raymundo v. Spouses Bandong)
The presence of even one of the circumstances
enumerated in Article 1602, and not a concurrence or
an overwhelming number thereof, suffices. (San
Pedro v. Lee)
Article 2088
The creditor cannot appropriate the things given by
way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void. (1859a)
Pactum commissorium - a stipulation empowering
the creditor to appropriate the thing given as guaranty
for the fulfillment of the obligation in the event the
obligor gails to live up to his undertakings, without
further formality, such as foreclosure proceedings, and
a public sale. It is explicitly prohibited under Article
2088 of the Civil Code, which provides that a creditor
cannot appropriate the things given by way of pledge
Sales | VENTEROSO
or mortgage, or dispose of them; any stipulation to the
contrary is null and void.
Elements of pactum commissorium
1) There should be a property mortgaged by
way of security for the payment of the
principal obligation;
2) There should be a stipulation for automatic
appropriation by the creditor of the thing
mortgaged in case of non-payment of the
principal obligation within the stipulated
period, and which thereby enable the
mortgagee to acquire ownership of the
mortgaged property without any foreclosure
proceedings.
Proper remedies (Montevirgin v. CA)
The proper remedy if the borrower refuses to pay the
“price” is to foreclose on the mortgage. In such a case,
the return of the redemption price would be equivalent
to the payment of the principal loan, which has the
effect of extinguishing the equitable mortgage as an
ancillary security contract.
Period of redemption
Article 1606
The right referred to in article 1601, in the absence
of an express agreement, shall last four years from
the date of the contract.
Should there be an agreement, the period cannot
exceed ten years.
However, the vendor may still exercise the right to
repurchase within thirty days from the time final
judgment was rendered in a civil action on the
basis that the contract was a true sale with right
to repurchase. (1508a)
Rules on period for conventional redemption
1) If agreed upon - the period cannot exceed
ten years; if it exceeds 10 years, the agreement
is only valid for the first 10 years.
2) If not agreed upon - four years from the
date of the contract
3) After finality of judgment of a civil action
filed – 30 days from the time of final
judgment
Effect of filing a civil action
The completion of the redemption process is tolled by
the filing of a civil action relating to the issue of such
redemption, provided that the exercise of redemption
right and the filing of the suit are done within the
redemption period.
The vendor may still exercise the right to repurchase
within 30 days from the time final judgment was
rendered in a civil action on the basis that the contract
was a true sale with right to repurchase.
Article 1607
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In case of real property, the consolidation of
ownership in the vendee by virtue of the failure of
the vendor to comply with the provisions of article
1616 shall not be recorded in the Registry of
Property without a judicial order, after the
vendor has been duly heard. (n)
Article 1607 abolished automatic consolidation of
ownership in the buyer a retro upon expiration of the
redemption period by requiring the buyer to institute
an action for consolidation where the vendor a retro
may be duly heard.
Other rules
Article 1608. The vendor may bring his action
against every possessor whose right is derived
from the vendee, even if in the second contract no
mention should have been made of the right to
repurchase, without prejudice to the provisions of
the Mortgage Law and the Land Registration Law
with respect to third persons. (1510)
Article 1609. The vendee is subrogated to the
vendor's rights and actions. (1511)
Article 1610. The creditors of the vendor cannot
make use of the right of redemption against the
vendee, until after they have exhausted the
property of the vendor. (1512)
Article 1611. In a sale with a right to repurchase, the
vendee of a part of an undivided immovable who
acquires the whole thereof in the case of article 498,
may compel the vendor to redeem the whole
property, if the latter wishes to make use of the right
of redemption. (1513)
Article 1612. If several persons, jointly and in the
same contract, should sell an undivided
immovable with a right of repurchase, none of
them may exercise this right for more than his
respective share.
The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which
case each of the latter may only redeem the part
which he may have acquired. (1514)
Article 1613. In the case of the preceding article, the
vendee may demand of all the vendors or co-
heirs that they come to an agreement upon the
repurchase of the whole thing sold; and should
they fail to do so, the vendee cannot be
compelled to consent to a partial redemption.
(1515)
Article 1614. Each one of the co-owners of an
undivided immovable who may have sold his
share separately, may independently exercise the
right of repurchase as regards his own share, and
the vendee cannot compel him to redeem the
whole property. (1516)
Article 1615. If the vendee should leave several heirs,
the action for redemption cannot be brought against
Sales | VENTEROSO
each of them except for his own share, whether
the thing be undivided, or it has been partitioned
among them.
But if the inheritance has been divided, and the thing
sold has been awarded to one of the heirs, the action
for redemption may be instituted against him for the
whole. (1517)
Article 1617. If at the time of the execution of the
sale there should be on the land, visible or
growing fruits, there shall be no reimbursement
for or prorating of those existing at the time of
redemption, if no indemnity was paid by the
purchaser when the sale was executed.
Should there have been no fruits at the time of the
sale and some exist at the time of redemption,
they shall be prorated between the redemptioner
and the vendee, giving the latter the part
corresponding to the time he possessed the land in
the last year, counted from the anniversary of the
date of the sale. (1519a)
SUMMARY
Rules on fruits
1) When there is a sharing agreement – shall
be respected
2) When there is no sharing agreement
 Existing at the time of the
execution of the sale - no
reimbursement for or prorating
of those existing at the time of
redemption, if no indemnity
was paid by the purchaser when
the sale was executed.
 no fruits at the time of the sale
and some exist at the time of
redemption - prorated between
the redemptioner and the vendee
Article 1618. The vendor who recovers the thing sold
shall receive it free from all charges or mortgages
constituted by the vendee, but he shall respect
the leases which the latter may have executed in
good faith, and in accordance with the custom of the
place where the land is situated. (1520)
LEGAL REDEMPTION
Legal redemption - right to be subrogated upon the
same terms and conditions stipulated in the contract,
in the place of one who acquires a thing by purchase or
dation in payment, or by any other transaction whereby
ownership is transmitted by onerous title.
Rationale
1) nature of a privilege created by law partly for
reasons of public policy and partly for the
benefit and convenience of the
redemptioner,
2) It is intended to minimize co-ownership.
Conventional Legal
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As to how it can be Can only be Does not have to be not exceed one hectare, is alienated, unless
constituted constituted by expressly reserved (it
express reservation is a right granted by the grantee does not own any rural land.
in a contract of sale law), and covers sales
at time of perfection and other “onerous This right is not applicable to adjacent lands
transfers of title”
As to who It is in favor of the Given to a third
which are separated by brooks, drains,
possesses the right seller party to the sale ravines, roads and other apparent servitudes
As to effect The exercise of the The exercise of the for the benefit of other estates.
right a retro legal right of
extinguishes the redemption,
underlying contract although it If two or more adjoining owners desire to
of sale as though extinguishes the exercise the right of redemption at the same
there was never any original sale, actually
contract at all constitutes a new
time, the owner of the adjoining land of
sale in substitution of smaller area shall be preferred; and should
the original sale. both lands have the same area, the one who
first requested the redemption. (1523a)
Rules under the Civil Code
1) Among co-heirs (Art 1088) In order for the right of redemption to apply,
Article 1088. Should any of the heirs sell his both lands sought to be redeemed and the
hereditary rights to a stranger before the adjacent property belonging to the person
partition, any or all of the co-heirs may be exercising the right of redemption must be
subrogated to the rights of the purchaser rural lands; if one or both are urban lands, the
by reimbursing him for the price of the right under Article 1621 cannot be invoked.
sale, provided they do so within the period
of one month from the time they were
4) Among adjoining owners of urban land
notified in writing of the sale by the
vendor. (1067a) ARTICLE 1622. Whenever a piece of urban
land which is so small and so situated that
a major portion thereof cannot be used
2) Among co-owners
for any practical purpose within a
Article 1620. A co-owner of a thing may reasonable time, having been bought
exercise the right of redemption in case merely for speculation, is about to be re-sold,
the shares of all the other co-owners or of the owner of any adjoining land has a
any of them, are sold to a third person. If right of pre-emption at a reasonable
the price of the alienation is grossly price.
excessive, the redemptioner shall pay only a
reasonable one. If the re-sale has been perfected, the owner
of the adjoining land shall have a right of
Should two or more co-owners desire to redemption, also at a reasonable price.
exercise the right of redemption, they may
only do so in proportion to the share they When two or more owners of adjoining
may respectively have in the thing owned in lands wish to exercise the right of pre-
common. (1522a) emption or redemption, the owner whose
intended use of the land in question
The right of redemption to be exercised, appears best justified shall be preferred.
co-ownership must exist at the time of the (n)
conveyance is made by a co-owner and the
redemption is demanded by the other co- 5) Sale of credit in litigation
owner or co-owners. When a credit or other incorporeal right in
litigation is sold, the debtor shall have a right
By a co-heir By a co-owner to extinguish it by reimbursing the
An heir may validly Redemption by a co- assignee for the price the latter paid
redeem for himself owner of the therefor, the judicial costs incurred by him,
alone the hereditary property owned in and the interest on the price from the day
rights sold by common, even when on which the same was paid. The debtor
another co-heir. he uses his own fund,
may exercise his right within 30 days from the
within the period
prescribed by law date the assignee demands payment from him.
inures to the benefit
of all the other co- When to exercise
owners Article 1623. The right of legal pre-emption or
redemption shall not be exercised except within
3) Among adjoining owners of rural lands thirty days from the notice in writing by the
Article 1621. The owners of adjoining lands prospective vendor, or by the vendor, as the case
shall also have the right of redemption when may be. The deed of sale shall not be recorded in the
a piece of rural land, the area of which does Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
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 FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
The right of redemption of co-owners excludes
that of adjoining owners. (1524a)
30 days from
1) from the notice in writing by the
prospective vendor, or
2) by the vendor
In stressing the mandatory character of the
requirement, the law states that the deed of sale shall
not be recorded in the Registry of Property unless
the same is accompanied by an affidavit of the
vendor that he has given notice thereof to all
possible redemptioners. The existence of a clause
in the deed of sale to the effect that the seller has
complied with the provisions of Article 1623
cannot be taken to being the written affirmation
under oath, as well as the evidence, that the
required written notice to petitioner under
Article 1623 has been met since party entitled to
redemption is not a party to the deed of sale and
has had no hand in the preparation and
execution of the deed of sale. It could not thus be
considered a binding equivalent of the obligatory
written notice prescribed by the Code. (Primary
Structures v. Valencia)
Written notice is indispensable, actual
knowledge of the sale acquired in some other
manners by the redemptioner, notwithstanding.
He or she is still entitled to written notice, as exacted
by the Code, to remove all uncertainty as to the sale,
its terms and its validity, and to quiet any doubt that
the alienation is not definitive.
Petitioner heirs, therefore, have not lost their right
to redeem the property, for in the absence of a
written notification of the sale by the vendors,
the 30-day period has not even begun to run.
(Garcia v. Calaliman)
Other rules
1) Notice must cover a perfected sale - to
avoid any controversy as to the terms and
conditions under which the right to redeem
may be exercised, it is best that the period
therefor should not be deemed to have
commenced unless the notice of the
disposition is made after the formal deed of
disposal has been duly executed.
2) Exceptions to the written notice
 Alonzo doctrine - As a matter of
exception in Alonzo and due to the
peculiar circumstances of the case
where the co-heirs only brought an
action for redemption of hereditary
right sold by another coheir only after
13 years after having actual knowledge
thereof, by their actuations, they are
deemed to have lost their right to
redeem. (Alonzo c. IAC)
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 Under free/homestead patent
provisions of the Public Land Act a
period of 5 years from the date of
conveyance is provided, to be reckoned
from the date of the sale and not from
the date of registration in the Register
of Deeds (Berin v. CA)
3) Other redemptions covered by law
 Redemption in tax sales - within one
(1) year from the date of sale (Sec 214,
NIRC)
 Redemptions by judgment debtor -
at any time within one (1) year from
the date of registration of the certificate
of sale; 365 days (Sec. 28, Rule 39 of
the 1997 Rules of Civil Procedure)
 Redemption in extrajudicial
foreclosure - within 1-year from the
date of auction sale (Sec 6, Act 3135)
 Redemption in judicial foreclosure -
No right to redeem from a judicial
foreclosure sale, except those granted
by banks or banking institutions.
 Foreclosure by banking institutions
within two (2) years from the date of
foreclosure or from the registration of
the sheriff's certificate of sale at such
foreclosure if the property is not
covered or is covered, respectively, by
Torrens title.
If the mortgagor fails to exercise such
right, he or his heirs may still
repurchase within five (5) years from
expiration of the two (2) year
redemption period pursuant to Sec.
119 of the Public Land Act (C.A. 141)
 Legal right to redeem under the
Agrarian Reform Code - within 180
days from notice in writing and at a
reasonable price and consideration
(Sec 12, RA 3844)
ASSIGNMENT
Article 1624
An assignment of creditors and other incorporeal
rights shall be perfected in accordance with the
provisions of article 1475. (n)
Article 1475. The 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.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts. (1450a)
Assignment - An assignment of credit is an act of
transferring, either onerously or gratuitously, the right
of an assignor to an assignee who would then be
capable of proceeding against the debtor for
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enforcement or satisfaction of the credit. The transfer 4) The copyright is not deemed assigned inter vivos
of rights takes place upon perfection of the contract, in whole or in part unless there is a written
and ownership of the right, including all appurtenant indication of such intention.
accessory rights, is thereupon acquired by the assignee. 5) where an assignor executed a Deed of
The assignment binds the debtor only upon acquiring Assignment covering her leasehold rights in
knowledge of the assignment but he is entitled, even order to secure the payment of promissory
then, to raise against the assignee the same defenses he notes covering the loan she obtained from the
could set up against the assignor. bank, the Court held that such assignment is
equivalent to an equitable mortgage, and the
Assignment Sale non-payment of the loan cannot authorize the
As to consideration Consideration is not Consideration is a
always a requisite requisite assignee to register the assigned leasehold
As to the parties Assignor and Vendor and vendee rights in its name as it would be a violation of
Assignee Article 2088 of the Civil Code against pactum
As to transfer of Tradition, except Tradition
ownership actual or physical commissorium. The proper remedy of the
delivery assignee-bank is to proceed to foreclose on the
As to subject Intangible Tangible
matter leasehold right assigned as security for the loan.
As to perfection Mere consent (DBP v. CA)
As to accessories Both include all the accessory rights, such as
and accessions a guaranty, mortgage, pledge or preference.
As to warranties Generally has no Applicable Warranties
against hidden application to an Article 1628. The vendor in good faith shall be
defects intangible because it
has no physical responsible for the existence and legality of the
existence credit at the time of the sale, unless it should have
been sold as doubtful; but not for the solvency of
Conventional Assignment of credit the debtor, unless it has been so expressly stipulated
subrogation or unless the insolvency was prior to the sale and of
Extinguishes the old There is mere transfer of common knowledge.
obligation and creates a the same right or credit
new one Even in these cases he shall only be liable for the
Requires the debtor’s Does not require the price received and for the expenses specified in No.
consent debtor’s consent 1 of article 1616.
(notification is
sufficient) The vendor in bad faith shall always be answerable
The defect of the old The defect in the credit for the payment of all expenses, and for damages.
obligation may be cured or right is not cured (1529)
in such a way that the simply by assigning the
new obligation becomes same Assignment does not make the assignor warrant the
entirely valid solvency of the debtor to the credit, unless:
There is no right to The debtor generally still 1) There is a stipulation to that effect; or
present against the new has the right to present 2) b. The insolvency of the debtor was prior to
creditor any defense against the new creditor the assignment and of common knowledge.
which he, the debtor, any defense available as
could have set up against against old creditor But even when the assignor warrants the solvency of
the creditor the debtor, the warranty should last for one (1) year
only, from the time of the assignment if the credit is
Rules
already due; otherwise, the warranty shall cease only
1) Where the assignment is on account of pure
one (1) year after the maturity of the credit.
liberality on the part of the assignor, the rules
on donation would likewise be pertinent;
Right to redeem
where valuable consideration is involved, the
The right to redeem can be exercised by the debtor
assignment partakes of the nature of a contract
within thirty (30) days from the demand by the
of sale or purchase.
assignee for payment. This right shall not exist with
2) The “binding effect” of an assignment as to
respect to the following assignments which the law
third persons is not present unless it appears in
considers not for speculation:
a public instrument, or the instrument is
1) Assignment of the credit or incorporeal right
recorded in the Registry of Property in case the
to the co-heir or co-owner of the rights
assignment involves real rights.
assigned;
3) When the assignment is still at the executory
2) Assignment to a creditor in payment for his
stage and not evidenced in writing, and since
own credit; and
assignment is merely a species of the genus
3) Assignment to the possessor of a tenement or
sale, it is covered by the Statute of Frauds.
piece of land which is subject to the right in
litigation assigned.
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LEASE
Contract of lease - an agreement whereby one person
(lessor) binds himself to grant temporarily the
enjoyment or use of a thing or to render some work or
service to another (lessee) who undertakes to pay rent,
compensation or price therefor.
Nature
1) Lease is only a personal right.
2) It is a real right only except as in the case of
lease of real estate recorded in the Registry of
Property which makes it binding upon third
persons.
3) The purpose of a contract of lease is for the
lessee to make use of the subject matter.
4) Ownership is not required for the perfection of
the contract of lease. What is important is that
the lessor has the right to lease it to other
persons.
5) The object of the lease must be within the
commerce of man
Kinds of lease
1) Lease of things
2) Lease of work and service
 contract for a piece of work involving
an obligation on the part of the
contractor (lessor) to execute a piece of
work for the employer (lessee) in
consideration of a certain price or
compensation (Art. 1713)
 involving an obligation on the part of
the housekeeper (Art. 1689),
 laborer or employee (Art. 1700),
 or common carrier (Art. 1732)
Lease of work Piece of work
the object is the work the object is the end
performed by the lessor result
Characteristics
1) Consensual
2) Bilateral
3) Onerous
4) Commutative
Elements
1) Cause
2) Object
3) Consent
Rights of the lessee
1) Demand delivery of the thing leased;
2) To be in peaceful and adequate enjoyment of
the thing leased for the duration of the
contract;
3) To sublease the property unless there is a
contrary stipulation;
4) If the thing leased was partially destroyed due
to a fortuitous event, to choose between
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proportional reduction of rent or rescission
of the contract of lease;
5) To suspend payment in case lessor fails to
make necessary repairs or to maintain peaceful
and adequate enjoyment;
6) To terminate lease if it brings imminent and
serious danger to the life or health of the lessee
or it becomes uninhabitable;
7) To also ask for proportional reduction for
urgent repairs made by lessor wherein the
repairs last for more than 40 days
Obligations of lessee [Art 1657]
1) Payment of the agreed price of the lease
2) Proper use of the thing leased – diligent father
of a family, devoting it to the use stipulated; in
absence, custom of the place
3) Payment of the expenses
Lease Sale
The obligation to The expenses for the
pay expenses for the execution in
deed of lease is on registration of the
the lessee unless deed of sale is borne
there is stipulation to by the seller unless
the contrary there is stipulation to
the contrary.
Other obligations
1) To notify the owner for urgent repairs;
2) To tolerate the work for urgent repairs;
3) To notify the lessor of every usurpation or
untoward act of third persons;
4) To return the thing leased at the end of the
lease;
5) Liable for loss or deterioration due to his own
fault/negligence, or due to the fault of the
members of his household or his own guests
and visitors
When and where to make lease payments
1) Stipulations
2) If not agreed –
 Place – Art 1251
o place designated in the lease
contract;
o in the absence of stipulation, at
the domicile of the lessee
or the place where the leased
premises are located, or
if the rent is payable in the form
of a determinate thing,
wherever the thing might be at
the moment the contract was
entered into.
 Time – custom of the place
Rule on reduction of rent
The reduction of rent in rural leases cannot be applied
analogously to ordinary leases because of its special
character. It is a provision of social justice designed to
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relieve poor farmers from harsh consequences of their
contracts with rich landowners.
Rules on sublease
Article 1649. The lessee cannot assign the lease
without the consent of the lessor, unless there is a
stipulation to the contrary. (n)
Article 1650. When in the contract of lease of things
there is no express prohibition, the lessee may
sublet the thing leased, in whole or in part,
without prejudice to his responsibility for the
performance of the contract toward the lessor.
(1550)
Article 1651. Without prejudice to his obligation
toward the sublessor, the sublessee is bound to the
lessor for all acts which refer to the use and
preservation of the thing leased in the manner
stipulated between the lessor and the lessee.
(1551)
Article 1652. The sublessee is subsidiarily liable to
the lessor for any rent due from the lessee. However,
the sublessee shall not be responsible beyond the
amount of rent due from him, in accordance with
the terms of the sublease, at the time of the extra-
judicial demand by the lessor.
Payments of rent in advance by the sublessee shall
be deemed not to have been made, so far as the
lessor's claim is concerned, unless said payments
were effected in virtue of the custom of the place.
(1552a)
Article 1653. The provisions governing warranty,
contained in the Title on Sales, shall be applicable
to the contract of lease.
In the cases where the return of the price is required,
reduction shall be made in proportion to the time
during which the lessee enjoyed the thing. (1553)
Remedies by the lessee
Article 1658. The lessee may suspend the payment
of the rent in case the lessor fails to make the
necessary repairs or to maintain the lessee in
peaceful and adequate enjoyment of the property
leased. (n)
Article 1659. If the lessor or the lessee should not
comply with the obligations set forth in articles 1654
and 1657, the aggrieved party may ask for the
rescission of the contract and indemnification for
damages, or only the latter, allowing the contract to
remain in force. (1556)
Art. 1658 of the Civil Code allows a lessee to postpone
payment of rent if the lessor fails to either: (Racelis v.
Javier)
1) Make the Necessary Repairs on the property;
or,
2) Maintain the Lessee in Peaceful an Adequate
Enjoyment of the property leased
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Lessees may suspend the payment of rent under Art.
1658 of the Civil Code only if their legal possession
is disrupted.
After termination, Racelis demanded that Sps. Javier
vacate the premises, but instead of surrendering the
premises to Racelis, Sps. Javier unlawfully withheld
the possession of the property. They continue to stay
in the premises until they move to their new
residence later. At that point, Racelis was no longer
obligated to maintain Sps. Javier in peaceful and
adequate enjoyment of the lease for the entire
duration of the contract. Therefore, they cannot use
the disconnection of electrical service as justification
to suspend the payment of rent. (Racelis v. Javier)
Extension of the lease period
Article 1670. If at the end of the contract the lessee
should continue enjoying the thing leased for
fifteen days with the acquiescence of the lessor,
and unless a notice to the contrary by either party
has previously been given, it is understood that there
is an implied new lease, not for the period of the
original contract, but for the time established in
articles 1682 and 1687. The other terms of the
original contract shall be revived. (1566a)
Article 1671. If the lessee continues enjoying the
thing after the expiration of the contract, over the
lessor's objection, the former shall be subject to
the responsibilities of a possessor in bad faith. (n)
Article 1682. The lease of a piece of rural land, when
its duration has not been fixed, is understood to
have been for all the time necessary for the gathering
of the fruits which the whole estate leased may yield
in one year, or which it may yield once, although
two or more years have to elapse for the purpose.
(1577a)
Article 1687. If the period for the lease has not
been fixed, it is understood to be from year to
year, if the rent agreed upon is annual; from month
to month, if it is monthly; from week to week, if
the rent is weekly; and from day to day, if the rent is
to be paid daily. However, even though a monthly
rent is paid, and no period for the lease has been set,
the courts may fix a longer term for the lease after
the lessee has occupied the premises for over one
year. If the rent is weekly, the courts may likewise
determine a longer period after the lessee has been
in possession for over six months. In case of daily
rent, the courts may also fix a longer period after the
lessee has stayed in the place for over one month.
(1581a)
A sublessee, much less a mere occupant, is not entitled
to the benefits in Art 1687
An implied new lease or tacita reconduccion will set in
when the following requisites are found to exist:
(Samelo v. Manotok)
1) The term of the original contract of lease has
expired;
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2) The lessor has not given the lessee a notice to
vacate; and
3) The lessee continued enjoying the thing leased
for fifteen days with the acquiescence of the
lessor;
4) Notice to the contrary by either party should
not have been previously given;
5) No express contract has been entered into after
the old contract has ended.
In this case, there was a contract of lease for one (1)
year with option to purchase. The contract of lease
expired without the private respondent, as lessee,
purchasing the property but remained in possession
thereof. Hence, there was an implicit renewal of the
contract of lease on a monthly basis. The other terms
of the original contract of lease which are revived in
the implied new lease under Article 1670 of the New
Civil Code are only those terms which are germane
to the lessee's right of continued enjoyment of the
property leased.
Therefore, an implied new lease does not ipso
facto carry with it any implied revival of private
respondent's option to purchase (as lessee
thereof) the leased premises. The provision
entitling the lessee the option to purchase the leased
premises is not deemed incorporated in the
impliedly renewed contract because it is alien to the
possession of the lessee. Private respondent's right
to exercise the option to purchase expired with the
termination of the original contract of lease for one
year. (Dizon v. CA)
Article 1677. The purchaser in a sale with the right of
redemption cannot make use of the power to
eject the lessee until the end of the period for the
redemption. (1572)
Lease CANNOT be terminated despite sale if:
1) The lease is recorded in the Registry of
Property
2) There is a stipulation in a contract of sale that
the purchases shall respect the lease
3) The purchaser knows the existence of the lease
4) The sale is fictitious
5) The sale is made with the right to repurchase
The defendant’s possession becomes illegal
only when the plaintiff demands the return of
the property, either because of the expiration of the
right to possess it or the termination of their
contract, and the defendant refuses to heed the
demand.
In the present case, Zosima, as plaintiff, bears the
burden of proving that Salimbagat has been in actual
possession of the property between April 2000 and
June 2003 when a demand to vacate was made.
Zosima cannot reason out that Salimbagat was
likewise not able to prove that she had not been in
possession of the property as the burden of
adducing proof arises only after Zosima, as plaintiff,
had proven that Salimbagat had been in possession
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during the relevant time. In this regard, we find it
significant that it was only on June 20, 2003, or three
(3) years after the last payment of the monthly
rentals, that Zosima filed the complaint for unlawful
detainer against Salimbagat. It does not help that
Zosima failed to adduce any additional evidence to
rebut the allegation that by April 2000, no office
building stood to be leased because it had been
demolished to pave way for the construction of the
LRT Line II Project. (Zosima v. Salimbagat)
REPUBLIC ACT NO. 9653
RENT CONTROL ACT OF 2009
Policy
Republic Act No. 9653, or the Rent Control Act of
2009, regulates housing rents in the Philippines and
serves as a level of security for Filipino tenants
around the country. Its purpose is to protect those in
the lowest income brackets against unjustified
increases in the monthly rent
Application
This law is only limited to regulating rents for
residential properties. It also only covers those rents
not exceeding P10,000.00/month for residential units
in the NCR or P5,000.00/month for other regions.
Rules
Section 4. Limit on Increases in Rent. - For a period of
one (1) year from its effectivity, no increase shall be
imposed upon the rent of any residential unit
covered by this Act: Provided, That after such
period until December 31, 2013, the rent of any
residential unit covered by this Act shall not be
increased by more than seven percent (7%)
annually as long as the unit is occupied by the same
lessee: Provided, further, That when the residential
unit becomes vacant, the lessor may set the initial
rent for the next lessee: Provided, however, That in
the case of boarding houses, dormitories, rooms and
bedspaces offered for rent to students, no increase
in rental more than once per year shall be allowed.
Section 5. Coverage of this Act. - All residential units
in the National Capital Region and other highly
urbanized cities, the total monthly rent for each of
which ranges from One peso (P1.00) to Ten
thousand pesos (P10,000.00) and all residential
units in all other areas, the total monthly rent for
each of which ranges from One peso (P1.00) to
Five thousand pesos (P5,000.00) as of the
effectivity date of this Act shall be covered, without
prejudice to existing contracts.
Comparison
Civil Code RA 9653
Assignment Prohibited without consent Prohibited without
of lease of lessor, unless there is a written consent
stipulation to the contrary (Section 8, RA
(Art 1649, NCC) 9653)
Sublease Allowed as long as there is Prohibited without
no stipulation to the contrary written consent
(Art 1650, NCC) (Section 8, RA
9653)
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Grounds for (1) When the period agreed (1) Assignment of

judicial upon, or that which is lease or sublease
ejectment fixed for the duration of without written
leases under articles 1682 consent
and 1687, has expired; (2) Failure to pay
required monthly
(2) Lack of payment of the rent for total of 3
price stipulated; months, subject to
conditions provided;
(3) Violation of any of the (3) The owner/lessor
conditions agreed upon in or his immediate
the contract; family members
have a legitimate
(4) When the lessee devotes need to use the unit
the thing leased to any use subject to
or service not stipulated conditions
which causes the provided;
deterioration thereof; or if he (4) If the unit is the
does not observe the subject of an order
requirement in No. 2 of of condemnation
article 1657, as regards the by appropriate
use thereof. authorities and the
owner/lessor needs
to do necessary
repairs to make the
property safe and
livable. subject to
conditions provided;
(5) Expiration of
the lease/rental
contract

END

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