EXTINGUISHMENT

OF SALE
Atty. Kaye Patrice Apuyan -Chong
2 nd Semester SY 2021 -2022
Law 13 – Business Laws and Regulations
CAUSES OF EXTINGUISHMENT
1. Same causes as all other obligations;

2. Causes stated in the preceding articles (Title VI – Sales)

o Cancellatio n of sale of personal property payable in installments (Art. 1484)

o Resale of the goods by the unpaid seller (Art. 1532)

o Rescission of the sale by the unpaid seller (Art.1534)

o Rescission by the buyer in case of partial eviction (Art.1556)

o Rescission by the buyer in case of breach of warranty against hidden defects (Art.
1567)

o Resale by the buyer of sale of animals with redhibitory defects (Art. 1580)

3. Conventional Redemption or Legal redemption.

CONVENTIONAL REDEMPTION
• Seller reserved the right to repurchase thing sold coupled with obligation
to return price of the sale , expenses of contract & other legitimate
payments and the necessary & useful expenses made on the thing sold
PERIOD OF REDEMPTION
• No period agreed upon – 4 years from date of contract

• When there is agreement – should not exceed 10 years; but if it exceeded,

valid only for the first 10 years.

• Where the period agreed upon is indefinite – within 10 years from the date
of contract.

• In case there is a civil action between the parties – 30 days from the time
the time the final judgement was rendered.
EFFECT OF FAILURE TO REDEEM
• Ownership is consolidated to the vendee.

• In case of real property, there must be judicial order before ownership of

real property is consolidated to the buyer a retro.
AGAINST WHOM RIGHT TO REPURCHASE AVAILABLE
• The vendee a retro (original vendee).

• Every possessor whose right is derived from the vendee a retro (original
vendee), even if no mention is made in the second contract of the right to
repurchase, provided the right has been recorded in the Register of
Deeds, or even if the right is not registered, but the possessor has
knowledge of the existence of the right.
WHO MAY AVAIL OF THE RIGHT TO REPURCHASE
• The vendor a retro

• Creditors of the vendor

-However, they cannot make use of the right of redemption against the
vendee, until after they have exhausted the property of thee vendor.
LEGAL REDEMPTION
• Also referred to as “retracto legal”, it is the right to be subrogated upon
the same terms and conditions stipulated in the contract, in the place of
one who acquires the thing by purchase or by dation in payment or by
other transaction whereby ownership is transmitted by onerous title.
INSTANCES OF LEGAL REDEMPTION
• Legal Redemption by a Co -Owner

- A co-owner of a thing may exercise the right of redemption in case the

shares of all the other co -owners or of any of them, are sold to a third
person.

- If two or more co-owners desire to exercise the right of redemption,

they may only do so in proportion to the share they may respectively
have in the thing owned in common.
INSTANCES OF LEGAL REDEMPTION
• Legal Redemption by Adjoining Owner of a Rural Land

- If a piece of rural land not exceeding one hectare is alienated, the

adjoining owner shall have the right of legal redemption unless the
grantee does not won any rural land.
INSTANCES OF LEGAL REDEMPTION
• Legal Redemption by Adjoining Owner of a Urban Land

- If a small piece of urban land which was bought for speculation has
been resold, the owner of the adjoining land has a right of redemption at
a reasonable price.
PERIOD OF REDEMPTION
• Within 30 days from written notice by vendor
EQUITABLE MORTGAGE
• One which lacks the proper formalities, form or words or other requisites
prescribed by law for a mortgage, but shows the intention of the parties
to make the property subject of the contract as security for a debt and
contains nothing impossible or contrary to law
ESSENTIAL REQUISITES OF EQUITABLE MORTGAGE
• Parties entered into a contract of sale

• Their intention was to secure an existing debt by way of a mortgage.

RULE ON THE PRESUMPTION OF AN EQUITABLE MORTGAGE
A sale with conventional redemption is deemed to be an equitable mortgage
in any of the following cases: (Art. 1602)

1. Price of the sale with right to repurchase is unusually Inadequate

2. Seller Remains in possession as lessee or otherwise

3. Upon or after the expiration of the right to repurchase Another

instrument extending the period of redemption or granting a new
period is executed
RULE ON THE PRESUMPTION OF AN EQUITABLE MORTGAGE
A sale with conventional redemption is deemed to be an equitable
mortgage in any of the following cases: (Art. 1602)

4. Purchaser Retains for himself a part of the purchase price

5. Seller binds himself to pay the Taxes on the thing sold

6. In any other case where the real intention of the parties is that the
transaction shall Secure the payment of a debt or the performance of
any other obligation.

7. Art. 1602 shall also apply to a contract purporting to be an Absolute

sale. (Art. 1604)
RULE IN CASE OF DOUBT
• A contract purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage. (Art. 1603)