LAW ON SALES

I. INTRODUCTION A. Definition of sale Art. 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) D. Sale as distinguished from other contracts 1. sale vs. contract for a piece of work Art. 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) Art. 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) Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale. (n) Art. 1715. The contract shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contract fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractor's cost. (n) a) In a contract for work, labor or materials or for a piece of work, the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it; while in a contract of sale, the thing transferred is one which would have existed and been the subject of sale to some other person, even if the order had not been given. (De Leon)

B. Characteristics of a contract of sale 1. Nominate ± it has a peculiar name and form as prescribed in the law 2. Consensual ± it is founded upon and completed by mere consent of the contracting parties (See Article 1475) Art. 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) 3. Commutative ± it is a contract in which each of the contracting parties gives a thing of value and receives an equivalent 4. Bilateral ± it is a contract in which both the contracting parties are bound to fulfill the obligations reciprocally towards each other (i.e. the vendor becomes bound to deliver the thing sold and the vendee to pay the price for it) 5. Onerous ± as opposed to gratuitous, because the thing is sold in consideration of a price and vice versa 6. Principal ± it can stand on its own; unlike an accessory contract C. Kinds of a contract of sale 1. Absolute ± where the sale is not subject to any condition whatsoever and where title passes to the buyer upon the delivery of the thing sold. 2. Conditional ± where the sale contemplates a contingency and in general, where the contract is subject to certain conditions (usually the full payment of the purchase price). Conditions are attached to the contract; the title will only pass once the conditions have been fulfilled.

b) This follows the Massachusetts Rule: 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

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LAW ON SALES
the general market, it is a contract for a piece of work. 2. sale vs. agency to buy and sell Art. 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) 3. sale vs. barter or exchange Art. 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) Art. 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the other's promise to give another thing. (1538a) Art. 1639. If one of the contracting parties, having received the thing promised him in barter, should prove that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in exchange, but he shall be entitled to damages. (1539a) Art. 1640. One who loses by eviction the thing received in barter may recover that which he gave in exchange with a right to damages, or he may only demand an indemnity for damages. However, he can only make use of the right to recover the thing which he has delivered while the same remains in the possession of the other party, and without prejudice to the rights acquired in good faith in the meantime by a third person. (1540a) Art. 1641. As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. (1541a) 4. sale vs. dacion en pago Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n) Dacion En Pago Presupposes a preexisting debt & extinguishes the debt Price is the value of the Sale Obligations are created from the perfection of the contract Fixing of the price is Sale 1. Intention of parties 2. Value of thing vs. Value of money Barter 1. Nature of business 2. Existence of thing 3. Market 4. Statute of frauds 4 Tests (but the ultimate test is: intention of the parties) 1. Risk of Loss Art. 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. Under Art 1471, when the price of the contract of sale is simulated, the sale may be void but the act may be shown to have been in reality a donation x x x On the other hand, a purported donation may have other considerations placed on the donee, thus it becomes critical to determine what rule applies (law on sales or law on donations) 6. summation: tests nature of the contract 4 Tests to determine the thing given 5. sale vs. donation more freely agreed upon

Sale = object: transfer of ownership

Ordinary Does not General Covered

Piece of Work = object: service (mental, physical labor) Extraordinary Depends on order Specific Clientele Not covered

Sale

Agency to Sell

Borne by seller Buyer

2. Payment 3. Exclusive Dealership 4. Return of unsold goods

Borne by principal, not agent Principal, not agent Remittance test Mandatory

None

Money > thing

Thing > Money

2 Tests

Sale

Dacion En Pago

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LAW ON SALES
1. Debt 2. Stage of contract None Perfection Pre-existing Extinguishment (6) Any others specially disqualified by law. (1459a) Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n) 1. absolute incapacity Those who have the legal capacity to give consent to contracts may validly enter into a contract of sale, unless specifically prohibited by law. However, when necessaries are sold and delivered to a minor or other incapacitated person, the latter must pay a reasonable price therefore. Necessaries are those indispensable for sustenance, clothing, dwelling, education, and medical treatment. 2. relative incapacity a) married persons (as regards contracts with third parties) Art. 73. Either spouse may exercise any legitimate profession, occupation, business or activity without the consent of the other. The latter may object only on valid, serious, and moral grounds. In case of disagreement, the court shall decide whether or not: (1) The objection is proper; and (2) Benefit has occurred to the family prior to the objection or thereafter. If the benefit accrued prior to the objection, the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent. The foregoing provisions shall not prejudice the rights of creditors who acted in good faith. (117a) 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

II. PARTIES TO A CONTRACT OF SALE A. Capacity of parties Art. 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) Art. 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 or property under Article 191. (1458a) Art. 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 entrusted 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 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.

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LAW ON SALES
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) 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) b) married persons (as regards contracts between spouses) Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. (133a) Art. 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 or property under Article 191. (1458a) There is a potential circumvention of the policy of the law if sales between spouses are allowed if there was a judicial separation of property, since undue influence is not completely erased by the separation of property. This prohibition also applies to commonlaw unions. c) special disqualifications (see Articles 1491 and 1492 in the previous page) 1) It is immaterial that no damage is suffered by the owner. The contract is void as the law seeks to prevent said persons from being tempted to take advantage of their position. They occupy a position of trust and confidence in relation to the property under their administration or jurisdiction. 2) Agents can not buy the property of their principalj without the consent of the latter. BROKERS, however, do not come within the prohibition, as their authority consists merely in looking for a buyer or seller, and to bring the latter and his principal together to consummate the transaction. Of course, after the agency is terminated, the agent can buy the property of the principal, which was formerly under his administration. 3) Although executors and administrators can not buy the property under their administration, an executor may buy the hereditary rights of an heir to the estate under his administration, because the buyer, in such case, can not get the share of the heir in the estate until after the administration is ended. 4) With regard to the lawyers, the prohibition does not apply to other properties of the client, nor to assignments of the property formerly in litigation when such assignment will take effect only after final judgment (compensation of lawyers payable on a contingent basis, unless unconscionable). 5) Examples of other persons especially disqualified by law are: (1) aliens purchasing private agricultural lands (Art XII, Secs 3 & 7, Consti); (2) an unpaid seller having a right of lien«(Art 133 par 5) (Baviera)

III. SUBJECT MATTER A. Requisites of a valid subject matter 1. must be existing, future, or contingent Art. 1348. Impossible things or services cannot be the object of contracts. (1272) Art. 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

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LAW ON SALES
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) Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a) Emption rei speratai ± If the parties make the contract depend upon the existence of a thing, so that if the thing does not come into existence the contract is considered as not made ad there is no obligation to pay the price, such contract is valid under [Art. 1461 (2), CC; it is what the Roman law designates as emptio rei speratae (purchase of an expected thing). Emptio spei ± If the parties intend the contract to exist at all events, so that the buyer will have to pay the price even if the thing does not actually came into existence . . . it is called emtio spei (purchase of hope or expectancy´. This contract is, however, void under Art. 1461. (Tolentino) Art. 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) Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a) a) Law prohibits sale of future inheritance. The rights to succession are transmitted from the moment of the death of the decedent so one cannot sell or promise to sell what he expects to inherit from a living person. But the law allows an heir to sell his interests in an inheritance b) The object of the contract of sale must be licit, meaning within the commerce of man, and determinate. Determinate has been expanded to cover generic things, future things and things in potential existence. c) Things subject to a resolutory condition may be the object of the contract of sale.(Article 1465) 2. must be licit Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a) Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. (n) Art. 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) a) The sale of narcotics or dangerous drugs except upon prescription, or any wild bird or mammal, or rare wild plants protected by law or of tubli or other poisonous plants or fruits, dynamited fish or other aquatic animals, gunpowder, dynamite, explosives or blasting supplies, firearms or ammunitions are prohibited by law therefore are illicit. b) Properties belonging to the State or its political subdivision which are intended for public use or public service or for the development of natural wealth are outside the commerce of man. c) Churches are also outside the commerce of man.

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the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. When the obligation consists in the delivery of an indeterminate or generic thing. 1) Sales of things under litigation entered into by defendants without the knowledge & approval of the litigants or of the court are rescissible. If the mass contains less than the number. capable of being made determinate without need of another agreement. It is determinable if it is capable of being determined via another agreement. Art. in this Title called "future goods. The sole owner of a thing may sell an undivided interest therein. or goods to be manufactured. 1464. The following contracts are inexistent and void from the beginning: (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. The goods which form the subject of a contract of sale may be either existing goods. though the seller purports to sell and the buyer to buy a definite number. weight or measure of the goods in the mass. (1167a) Art. the plaintiff may record in the office of the Registrar of Deeds of the Province which the property is situated. whose acquisition by the seller depends upon a contingency which may or may not happen. The following contracts are rescissible: (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. 2) However. whose quality and circumstances have not been stated. (n) c) sale of undivided interest or share Art. (n) Art. a notice of the pendency of the action. the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods d) sale of things in litigation Art. owned or possessed by the seller. the creditor cannot demand a thing of superior quality. Things subject to a resolutory condition may be the object of the contract of sale. things subject to a resolutory condition Art. determinable: a thing is determinate if it can be physically segregated. In the case of fungible goods. particularly designated. By such a sale the buyer becomes owner in common of such a share of the mass as the number. Generic things could also become subject matters of a contract of sale provided (1) they have been physically segregated / particularly designated. 1462. 1385. The requisite that a thing be determinate is satisfied if at the time the contract is entered into. 1381. 3rd persons are charged with notice of the litigation & take the property subject to the outcome of the litigation. The purpose of the obligation and other circumstances shall be taken into consideration. 1409. A thing is determinate when it is particularly designated or physical segregated from all other of the same class. and (2) they are capable of substitution b) future goods Art. 3. rescission cannot take place when the things are legally in the possession of 3rd persons who did not act in bad faith (& without knowledge of defect) 3) In an action affecting the title or the right of possession of real property. (n) 6 . weight or measure of the mass. 4." There may be a contract of sale of goods. 1460. weight or measure bought. there may be a sale of an undivided share of a specific mass.LAW ON SALES d) But public property when no longer intended for public use or service form part of the patrimonial property of the State and therefore can be leased or sold. (Baviera and De Leon) e. particular kinds a) generic things Art. and though the number. (n) a) Determinate v. 4) From the moment of the filing of such notice. weight or measure bought bears to the number. or acquired by the seller after the perfection of the contract of sale. 1465. 1463. weight or measure of the goods in the mass is undetermined. (2) Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. must be determinate Art. raised. 1246. Neither can the debtor deliver a thing of inferior quality.

"Specific goods" means goods identified and agreed upon at the time a contract of sale is made. constitutes "value" where goods or documents of title are taken either in satisfaction thereof or as security therefor. and who does not sell them under authority or with the consent of the owner. his conveyance is deemed valid & his title passes by operation of law to the buyer If the owner of the goods is precluded by his conduct from denying the seller¶s authority to sell. (n) 7 . "Quality of goods" includes their state or condition. if he should subsequently acquire ownership thereof. unless the context or subject matter otherwise requires: (1) "Document of title to goods" includes any bill of lading. whether for money or not. as proof of the possession or control of the goods. whether insolvency proceedings have been commenced or not. 559. where goods are sold by a person who is not the owner thereof. (3) Goods are in a "deliverable state" within the meaning of this Title when they are in such a state that the buyer would. the buyer acquires no better title to the goods than the seller had. although IV. buyer may acquire a better title. in accordance with the Code of Commerce and special laws. and cannot be denied or disproved as against the person relying thereon. under the contract. one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. or in fairs. dock warrant. General Rule: No one can transfer a better title than what he has over the property sold. 1636. (2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction. quantity of subject matter Art. (464a) Art.LAW ON SALES 5. (2) A person is insolvent within the meaning of this Title who either has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due. Nevertheless. An antecedent or pre-existing claim. 1431. (3) Purchases made in a merchant's store. shall affect: (1) The provisions of any factors' act. provided it is possible to determine the same. (n) Art. Sale by a person not the owner Art. or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof. Exceptions: 1. has acquired it in good faith at a public sale. the owner cannot obtain its return without reimbursing the price paid therefor. Nothing in this Title. "Order" relating to documents of title means an order by endorsement on the documents. goods represented by such document. unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. Only the owner of the goods or one authorized by the owner to sell can transfer title thereto to the buyer. "Goods" includes all chattels personal but not things in action or money of legal tender in the Philippines. In the preceding articles in this Title governing the sale of goods. "quedan. Through estoppel an admission or representation is rendered conclusive upon the person making it." or warehouse receipt or order for the delivery of goods. OBLIGATION OF THE SELLER TO TRANSFER OWNERSHIP A. without the need of a new contract between the parties. Estoppel (Art 1505) Even if the person who sold the thing was not the owner. or any other document used in the ordinary course of business in the sale or transfer of goods. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract. 1349. (1273) Art. however. or markets. recording laws. If the possessor of a movable lost or which the owner has been unlawfully deprived. or authorizing or purporting to authorize the possessor of the document to transfer or receive. be bound to take delivery of them. The term includes growing fruits or crops. The object of every contract must be determinate as to its kind. either by endorsement or by delivery. 1505. Subject to the provisions of this Title. The possession of movable property acquired in good faith is equivalent to a title.

3.g. Sale by one having a voidable title Art. So long as the goods are still in the possession of the 1st buyer. liquids. has acquired it in good faith at a public sale. as the may be. Thus a sale by the sheriff. 1473. the latter acquired a valid title. the contract is inefficacious. (n) Art. the courts may fix the price. PRICE Art 1469. law authorizing sale of patrimonial property to a specific person at auction) or of court to sell (judicial sale e. if the price parties is accepted by the perfected. grain. but his title has not been avoided at the time of the sale. The fixing of the left to the discretion of one parties. (1449a) price can never be of the contracting fixed by one of the other. the party not in may have such remedies against the party in as are allowed the seller or the buyer. None in the Phils. If the price is simulated. the buyer acquires a good title to the goods. or that the parties really intended a donation or some other act or contract. the contract shall be inefficacious. they may still be recovered by the vendor in an action for annulment. 559. The price of securities. when the price fixed is that which the thing sold would have on a definite day. However.g. or in any other manner. 3. or when an amount is fixed above or below the price on such day. is valid even if the owner did not authorize or consent to the sale (Baviera). Nevertheless. (n) Art. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. provided said amount be certain. WON for money constitutes ³value´ where goods or document of titloe are taken in satisfaction thereof or as security therefore V. (1448) Art. writ of execution levying upon the debtor¶s property at auction) 4. Where the price cannot be determined in accordance with the preceding articles. (n) 8 . (n) Art. Validity of sale under statutory power (legal sale ± e. 1470. Where the seller of goods has a voidable title thereto. 2. An antecedent or pre-existing claim.LAW ON SALES the seller had neither the title nor the authority to sell the goods. (1447a) are fault fault fault case Art. unless the parties subsequently agree upon the price. market or fair (2) To facilitate commercial sales in movables (3) To give stability to business transactions B. Gross inadequacy of price does not affect a contract of sale. except as it may indicate a defect in the consent. Should such person or persons be unable or unwilling to fix it. If the possessor of a movable lost or which the owner has been unlawfully deprived. for value. if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. Where such third person or persons prevented from fixing the price or terms by of the seller or the buyer. The possession of movable property acquired in good faith is equivalent to a title. one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. 2. and other things shall also be considered certain. (464a) 1. If the third person or persons acted in bad faith or by mistake. 1506. or by other execution or subject of foreclosure. Purchase at a merchant¶s store. But once it has been transferred to an innocent purchaser for value before the contract is annulled. unless title was annulled. and without notice of the seller's defect of title. the sale is Art. market or fair Purpose of the exception: (1) to protect innocent purchasers who buy at merchant stores. or in such exchange or market. Seller can transfer a valid title to an innocent purchaser for value. Torrens System ± PD 1529 4. But NCC relies on the general principle of law that one deals with an agent at his own risk. Court orders The general principle that the vendor must be the owner or the one authorized by the owner to sell the goods in order to pass title over them to the buyer does not apply when the sale takes place by virtue of a power granted by law or by a court. 1474. or some other act or contract. However. Recording Laws. but the act may be shown to have been in reality a donation. 1471. or in a particular exchange or market. the sale is void. 1472. the owner cannot obtain its return without reimbursing the price paid therefor. provided he buys them in good faith.

otherwise. if it should not be proved that they were founded upon another cause which is true and lawful. the transaction might be barter or an innominate contract. 3. 1458. 3. 1471. or in any other manner. There was a consideration although it was not found in the contract (Real consideration not stated) 2. Requisites of a valid price 1. 1468. must be in money or its equivalent Art. 2. if the thing or any part 9 . 1353. and the other to pay therefor a price certain in money or its equivalent. The parties merely said there was a price and ³created´ their own price (no consideration but stated) 2. The existence of a contract is permanent & incurable. or that the parties really intended a donation or some other act or contract. If the consideration of the contract consists partly in money. (n) Art. the sale is void. 1386. The statement of a false cause in contracts shall render them void. (1445a) may be absolute or Art. 1353) 4. (1291a) 1. unless the debtor proves the contrary.g. must be real Art. 1474. (1276) Art. (1277) Art. Fixing of the price is more or less arrived at with ample contractual freedom than the value of the thing given in dation. Gross inadequacy of price does not affect a contract of sale. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. Must be certain or ascertainable at time of perfection Art. the transaction shall be characterized by the manifest intention of the parties. and partly in another thing. the contract is inefficacious. Otherwise. 1381. (1446a) 1. 2. 1 and 2 of Article 1381 shall not take place with respect to contracts approved by the courts. it is presumed that it exists and is lawful. If such intention does not clearly appear. it is a sale. Although the cause is not stated in the contract. but the act may be shown to have been in reality a donation. (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. The statement of a false cause in contracts shall render them void if it should not be proven that were founded upon another cause which is true & lawful (1471. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. 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. 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. if the latter suffer the lesion stated in the preceding number. letters of credit & other negotiable instruments). By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing. However. False Price ± there is a true price but it was not written down or stipulated in the contract. Rescission referred to in Nos. If the price is simulated. 1470. except as it may indicate a defect in the consent. A contract of sale conditional.LAW ON SALES 1. 1354. (1296a) Art. 3. The price should be in money or its equivalent (e. (n) Art. A contract of sale is null & void and produces no effect whatsoever if the same is without cause or consideration or that the price which appears to have been paid has in fact never been paid. Property given to the creditor in satisfaction of a debt in money with the PRICE PAID IN ADVANCE is a sale. Where the price cannot be determined in accordance with the preceding articles. (2) Those agreed upon in representation of absentees. DATION IN PAYMENT Presupposes a prior existing credit & extinguishes the obligation SALE Obligations created from perfection of contract are the the (5) All other contracts specially declared by law to be subject to rescission. Simulated Price ± There was no price paid. or some other act or contract (1471) A.

Manner of Payment must be agreed upon 5. and other things shall also be considered certain. 1469. In order that the price may be considered certain. (n) Art. The price of securities. the courts may fix the price. If the price is simulated. (n) price can never be of the contracting fixed by one of the other. mistake or undue influence. However. Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer. or in such exchange or market. and other things shall also be considered certain. 1473. If the third person or persons acted in bad faith or by mistake. or when an amount is fixed above or below the price on such day. as the case may be. when the price fixed is that which the thing sold would have on a definite day. the contract shall be inefficacious. 1471. 1470. or in such exchange or market. Inadequacy of price Art. provided said amount be certain. the courts may fix the price. 1473. particular Art. In order that the price may be considered certain. if the price fixed by one of the parties is accepted by the other. Should such person or persons be unable or unwilling to fix it. or in a particular exchange or market. it shall be sufficient that it be so with reference to another thing certain. lesion or inadequacy of cause shall not invalidate a contract. or that the determination thereof be left to the judgment of a special person or persons. unless there has been fraud. (1448) Art. (1447a) Art. it shall be sufficient that it be so with reference to another thing certain. the sale is void. (1447a) a) by a third person b) by the courts Art. if the price parties is accepted by the perfected. as the case may be. (n) Art. or when an amount is fixed above or below the price on such day. Art. The fixing of the price can never be left to the discretion of one of the contracting parties. except as it may indicate a defect in the consent. c) by reference exchange market to definite day. 1355. or that the determination thereof be left to the judgment of a special person or persons. 1472. or that the parties really intended a donation or some other act or contract. the sale is perfected. but the act may be shown to have been in reality a donation. grain. 1381. Should such person or persons be unable or unwilling to fix it. or in a particular exchange or market. (1448) d) by reference to another thing certain e) never by one party Art. (3) If the third person or persons acted in bad faith or by mistake. liquids. the courts may fix the price. or that the parties really intended a donation or some other act or contract. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer. the sale is (1) Those which are entered into by guardians whenever the wards whom they represent suffer 10 . liquids. unless the parties subsequently agree upon the price. (1449a) 4. Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer. However. unless the parties subsequently agree upon the price. (n) Art. the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer. or some other act or contract. when the price fixed is that which the thing sold would have on a definite day. grain. (1449a) 6. 1470. 1469. Gross inadequacy of price does not affect a contract of sale. the contract shall be inefficacious. Except in cases specified by law. except as it may indicate a defect in the consent.LAW ON SALES thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. The fixing of the left to the discretion of one parties. The price of securities. 1472. How price is determined Art. 1469. rescissible: The following contracts are If the third person or persons acted in bad faith or by mistake. (n) Art. Gross inadequacy of price does not affect a contract of sale. provided said amount be certain.

without them. (2) Those agreed upon in representation of absentees. unless otherwise stated. it should refer to the substance of the thing which is the object of the contract. (1269) VI. There is fraud when. any money. (n) Art. subject to the provisions of the law governing the form of contracts. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. or fraud is voidable. (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. From that moment. c) vices vitiating consent Art. 11 . (4) When the purchaser retains for himself a part of the purchase price. but mere invitations to make an offer. 1331. 1475. in any of the following cases: 1) When the price of a sale with right to repurchase is unusually inadequate. the offer lapsed even though the offeree later on was willing to accept the terms and conditions of the offer. or to those conditions which have principally moved one or both parties to enter into the contract. 1325. (1291a) Art. A contract where consent is given through mistake. violence. offer Art. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. 1602. Unless it appears otherwise. The acceptance must be plain and unconditional. and the advertiser is not bound to accept the highest or lowest bidder. (5) All other contracts specially declared by law to be subject to rescission.LAW ON SALES lesion by more than one-fourth of the value of the things which are the object thereof. 1319. The contract shall be presumed to be an equitable mortgage. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. Where the acceptance was not in accordance with the terms and conditions of the offer. (2) When the vendor remains in possession as lessee or otherwise. the parties may reciprocally demand performance. (1266a) Art. (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed. 1338. if the latter suffer the lesion stated in the preceding number. business advertisements of things for sale are not definite offers. unless the contrary appears. The offer must be certain and the acceptance absolute. (1262a) Art. (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. FORMATION OF THE CONTRACT OF SALE PREPARATORY STAGE 1. In any of the foregoing cases. In order that mistake may invalidate consent. (n) b) form of acceptance 1. 3. To bind the offeror. Advertisements for bidders are simply invitations to make proposals. 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. A simple mistake of account shall give rise to its correction. (5) When the vendor binds himself to pay the taxes on the thing sold. (n) Art. (1450a) a) form of offer The offer must be certain. the offeree must comply with the conditions of the offer. is presumed to have been entered into in the place where the offer was made. 1326. A qualified acceptance constitutes a counter-offer. or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. intimidation. The contract. the other is induced to enter into a contract which. 1330. (1265a) Art. in such a case. 2. The acceptance must be absolute. fruits. undue influence. through insidious words or machinations of one of the contracting parties. Business advertisements/advertisements for bidders are mere invitations to make an offer. he would not have agreed to.

it is necessary that the thing be determinate and the price already fixed. 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. (n) Elements of a valid option contract 1. 2. 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. When the offerer has allowed the offeree a certain period to accept. (3) A right to bid may be reserved expressly by or on behalf of the seller. illegal. 2. (1) Where goods are put up for sale by auction in lots. the offer will still be converted into a valid and binding contract. when deviation allowed The rule that ³acceptance must be absolute´ is not really absolute because certain deviations may be made in the acceptance. earnest money (cf. 2. including the manner of payment thereof PRESTATION: a consideration separate and distinct from the purchase price for the option given It must be in writing. Contract is perfected when the auctioneer accepts the bid by the fall of the hammer or gavel or in any other customary manner. [NOTE that the prescription of written contracts is 4 years. (n) 1. it shall be considered as part of the price and as proof of the perfection of the contract. In a bilateral promise. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. By taking part in the auction and offering bidding. proof of perfection of the contract. 3. except when the option is founded upon a consideration. or an option right or accepted unilateral offer to sell a determinate object for a price certain.] 3. unless otherwise provided by law or by stipulation. 2. Both parties are bound by his promise. CA ± FOOTNOTE 24) OPTION MONEY PERFECTION STAGE 1. (4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller. the offer may be withdrawn at any time before acceptance by communicating such withdrawal. may be given as a guarantee that the vendee would not back out. option contract Art.LAW ON SALES 2. right of first refusal 4. the buyer voluntarily submitted to the terms and conditions of the auction sale announced in the notice. (1454a) Payment of earnest money ± considered payment of part of the price. sale by auction Art. option money) Art. each lot is the subject of a separate contract of sale. Even with such deviations. 4. It gives the right to demand fulfillment of the contract but does not pass title or dominion over the property. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 3. although nothing has been paid or delivered. any bidder may retract his bid. bilateral promise to buy and sell (See Article 1479 supra) 1. 4. 1479. Whenever earnest money is given in a contract of sale. and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. 1482. Any sale contravening this rule may be treated as fraudulent by the buyer. In the case of a sale by auction: 12 . CONSENT SUBJECT MATTER: an option right or accepted unilateral offer to buy. 1324. or in other customary manner. 3. (2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer. EARNEST MONEY (LIMSON V. If auction is announced to be ³without reserve. 1476. as something paid or promised. Until such announcement is made. 3. Puffing/by-bidding ± means employed by owner to increase the price of the bids. An executory contract of sale the promise of one is the consideration for the promise of the other. (1451a) Art.´ goods cannot be withdrawn from the sale after the bid is made.

General rule: form not important Art. No. unless the same. but large cattle under two years of age may be registered and branded gratis for the purpose of effecting a valid transfer are made at the same time. he may even forfeit it (d) An agreement for the sale of goods. the buyer is bound to pay the balance Distinct consideration for an option contract Given when the sale is not yet perfected When given. repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains. Subject to the provisions of the Statute of Frauds and of any other applicable statute. sales of real property or of an interest therein a governed by Articles 1403. 2. at a price not less than five hundred pesos. is made with the municipal 4. or the evidences. Contracts infringing the Statute of Frauds. (e) An agreement of the leasing for a longer period than one year. 2 of Article 1403. or some of them. chattels or things in action. Sales through electronic commerce b) sale of realty through an agent Art. void. be in writing. place of perfection (See Art. transmission. Exceptions a) Statute of Frauds Art. otherwise. 1874. and subscribed by the party charged or his agent b. referred to in No. When there is a note or memorandum thereof in writing. 1358. modification or extinguishment of real rights over immovable property. or some note or memorandum. the authority of the latter shall be in writing. 1403. 1483. of the agreement cannot be received without the writing. the sale shall be void. at the time of the sale. or partly in writing and partly by word of mouth. are ratified by the failure to object to the presentation of oral evidence to prove the same. No transfer of large cattle shall be valid unless the same is registered and a certificate of transfer obtained as herein provided. price. or may be inferred from the conduct of the parties. When there has been partial consummation c. or by word of mouth. 1319 at page 11) ± where the offer was made FORMALITIES OF THE CONTRACT 1. a contract of sale may be made in writing. it is a sufficient memorandum. (4) The cession of actions or rights proceeding from an act appearing in a public document. When a sale of a piece of land or any interest therein is through an agent. unless the buyer accept and receive part of such goods and chattels. (3) The power to administer property. The following must appear in a public document: (1) Acts and contracts which have for their object the creation. the wouldbe buyer is not bound to pay the balance. Revised Administrative Code. or by his agent. 529. The following contracts are unenforceable. c) sale of large cattle Sec. Art. or any other power which has for its object an act appearing or which should appear in a public document. PURPOSE OF STATUTE: to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses. and subscribed by the party charged. 2. EXCEPTIONS TO STATUTE OF FRAUDS a. names of the purchasers and person on whose account the sale is made. 1405.LAW ON SALES Part of the purchase price Given only when there is already a sale When given. of the amount and kind of property sold. 13 . 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. or for the sale of real property or of an interest therein. When there has been a failure to object to the presentation of evidence d. In the following cases an agreement hereafter made shall be unenforceable by action. (2) The cession. but when a sale is made by auction and entry is made by the auctioneer in his sales book. therefore. or by the acceptance of benefit under them. (n) Art. or should prejudice a third person. Registration treasurer. otherwise. (n) The agent¶s authority to sell should be in writing. thereof. unless they are ratified: (2) Those that do not comply with the Statute of Frauds as set forth in this number. terms of sale. and 1405. evidence. of such things in action or pay at the time some part of the purchase money.

(c) It is necessary for the party sought to be bound.LAW ON SALES d) secondary evidence 1. That no provision of this Act shall apply to vary 14 . and (d) The other party is authorized and enable to verify the electronic signature and to make the decision to proceed with the transaction authenticated by the same. Sec. or by a person to whom the parties to the instrument had previously confessed the execution thereof.An electronic signature on the electronic document shall be equivalent to the signature of a person on a written document if the signature is an electronic signature and proved by showing that a prescribed procedure. character. Legal Recognition of Electronic documentsElectronic documents shall have the legal effect. 11. or another entity is an information or communication system. and ii. substantiating and validating a claimed identity of a user. For evidentiary purposes.. saw it and recognized the signatures. storage and display. among other ways.Until the Supreme Court by appropriate rules shall have so provided. The electronic document is reliable in the light of the purpose for which it was generated and in the light of all relevant circumstances. 7. Sec. due execution and subsequent loss of the original instrument must be proved. electronic data messages and electronic signatures.. This Act does not modify any statutory any statutory rule relating to admissibility of electronic data massages or electronic documents. validity or enforceability as any other document or legal writing. (b) Paragraph (a) applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the document not being presented or retained in its original from. that requirement is met by an electronic document ifi. after its execution and delivery. including any relevant agreement. as follows. existed under which(a) A method is used to identify the party sought to be bound and to indicate said party's access to the electronic document necessary for his consent or approval through the electronic signature. Authentication of Electronic Data Messages and Electronic Documents.Electronic Commerce Act provisions provided infra) (pertinent any and all requirements of existing laws on formalities required in the execution of documents for their validity. The electronic document has remained complete and unaltered. 2. or whom. and ii. except the rules relating to authentication and best evidence. That document is capable of being displayed to the person to whom it is to be presented: Provided. 8. device. shall be authenticated by demonstrating. number or other symbol in electronic form representing the persons Sec. an electronic document shall be the functional equivalent of a written document under existing laws. Legal Recognition of Electronic Signatures. in or order to proceed further with the transaction to have executed or provided the electronic signature. (a) The electronic signatures shall be authenticated by proof that a letter. (b) Said method is reliable and appropriate for the purpose for which the electronic document was generated or communicated. or any person who was present and saw it executed and delivered. Before secondary evidence may be introduced of the terms of the sale. electronic documents. Due execution ± may be proved by the testimony of the person who executed it. and(a) Where the law requires a document to be in writing. in that± i. apart from the addition of any endorsement and any authorized change. or any change which arises in the normal course of communication. e) RA 8792 -. that requirement is met by an electronic document if the said electronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent reference. There exists a reliable assurance as to the integrity of the document from the time when it was first generated in its final from. not alterable by the parties interested in the electronic document. the person before whom its execution was acknowledged. (c) Where the law requires that a document be presented or retained in its original form. in the light of all circumstances.

within a reasonable time. or detecting error or alteration in the communication. electronic document. Exceptions a) sale on approval. including the use of electronic notarization systems as necessary and advisable. 1496) a. (n) Art. using algorithms or codes. General rule Ownership of thing shall transfer to the vendee upon the ACTUAL or CONSTRUCTIVE DELIVERY of the thing sold OR: any manner signifying an agreement that possession is transferred from vendor to vendee (Art. trial. as well as the certificate of authentication on printed or hard copies of the electronic documents or electronic data messages by electronic notaries. the ownership passes to the buyer of delivery. and there are no other reasonable grounds to doubt the integrity of the information and communication system. TRANSFER OF OWNERSHIP A. but retains the goods without giving notice of rejection. then if a time 15 . with the intention of authenticating or approving in an electronic data message or electronic document. or that the appropriate methodology or security procedures. or similar security devices. Contract of sale constitutes a RIGHT to TRANSFER or ACQUISITION of OWNERSHIP Delivery is the method of accomplishing this right b. In the absence of evidence to the contrary. or satisfaction Art. service providers and other duly recognized or appointed certification authorities. but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract. 1496. or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. encryptions. 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. (b) The electronic data message or electronic document shall be authenticated by proof that an appropriate security procedure. answers back or acknowledgement procedures. the integrity of the information and communication system in which an electronic data message or electronic document is recorded or stored may be established in any legal proceeding ± a. 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. if no time has been fixed. 2. which.LAW ON SALES named in and attached to or logically associated with an electronic data message. The person seeking to introduce an electronic data message or electronic document in any legal proceeding has the burden of proving its authenticity by evidence capable of supporting a finding that the electronic data message or electronic document is what the person claims it on be. (2) If he does not signify his approval or acceptance to the seller. (n) When goods are delivered to the buyer on approval or on trial or on satisfaction. 1502. VII.) By evidence that at all material times the information and communication system or other similar device was operating in a manner that did not affect the integrity of the electronic data message or electronic document. when applicable. (n) 1. or. b. or other similar terms. identifying words or numbers.) By showing that the electronic data message or electronic document was recorded or stored in the usual and ordinary course of business by a person who is not a party to the proceedings and who did not act under the control of the party using the record. were employed or adopted by such person. Manner of transfer Art.) By showing that the electronic data message or electronic document was recorded or stored by a party to the proceedings who is adverse in interest to the party using it. 1477. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501. when applicable was adopted and employed for the purpose of verifying the originator of an electronic data message or electronic document. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. or c. content or storage of an electronic document or electronic data message from a specific point. The Supreme Court may adopt such other authentication procedures.

and. Ownership of the thing shall not pass until the price is fully paid Seller may reserve the right of possession or ownership in the goods until certain conditions have been fulfilled  b) constructive delivery b. the seller may. reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. title passes on delivery a. (1463a) Traditio Longa Manu ± delivery takes place when the thing is placed in the sight of the purchaser so that he can take possession of it at pleasure iii) Traditio brevi manu Traditio Brevi Manu ± delivery of movable property takes place when the vendee had the thing already in his possession before the sale 16 . When the sale is made through a public instrument. Title passes ± in case of goods sent to the buyer on the hope that the latter will find them satisfactory and order that type of goods ± when the goods are used or when they were retained beyond a reasonable time a. a. ii. on the expiration of a reasonable time.b) sale on approval i. The thing sold shall be understood as delivered. the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. b) express reservation Art. if the thing sold cannot be transferred to the possession of the vendee at the time of the sale. 1478. or if the latter already had it in his possession for any other reason. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. With regard to movable property. 1503. in sale on return. 1498. 1499. Kinds of delivery a) real delivery Art. 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.a) symbolic Art. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties. the EXECUTION thereof shall be equivalent to delivery IF from the deed the contrary does not appear o operates as formal/symbolic delivery o authorizes buyer to use such document as proof of ownership Symbolic delivery may produce the effect of tradition if vendor have had such control over the thing sold that at the moment of the sale. by the terms of the contract. its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. its material delivery could have been made GENERAL RULE: he who purchases through a public instrument should be deemed a ³possessor in fact´ and this presumption should give way before proof to the contrary A person must be in ACTUAL POSSESSION to be able to transfer CONSTRUCTIVE POSSESSION through public instrument ii) Traditio Longa Manu Art. when it is placed in the control and possession of the vendee.c) executory sales i. (1463a) i) delivery by public instrument  ii. (1462a) ³Delivered´ ± when placed in the control and possession of the vendee. 3. Ownership passes on delivery but buyer may revest such ownership to the seller by returning or tendering goods within the time fixed or within a reasonable time As opposed to a Conditional Sale (where title passes upon full payment or satisfaction of condition passing of legal title). if no time has been fixed.a) sale on return i. on the expiration of such time. (n) c) implied reservation Art. What is a reasonable time is a question of fact.LAW ON SALES has been fixed for the return of the goods. 1497. When there is a contract of sale of specific goods. if from the deed the contrary does not appear or cannot clearly be inferred. conveyance of ownership without prejudice to the right of vendor to claim payment of the price   When sale is made through a public instrument.

provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein. or is indorsed in blank. the ownership would have passed to the buyer on shipment of the goods. 1523. 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 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. by virtue of a lease agreement with the vendee. ³f. But. the seller is authorized or required to send the goods to the buyer. or unless contrary intent appears in the contract of sale a.s.s. 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. c. one who purchases in good faith. insurance. although the bill of exchange has not been honored.a. 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. ii. but possession of the bill of lading is retained by the seller or his agent. the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer. the bill of lading. and. When there is a contract of sale of specific goods. the seller may. delivery of the goods to a carrier.³free on board´ means that the seller bears expenses of transportation up to the f. and hence. 1500.o. If. title passed to the buyer at the point of shipment EXCEPTION: Seller may reserve title by the form of the bill of lading with intent to remain the owner for all purposes and not merely for the sole purpose of securing payment.o. the seller thereby reserves the ownership in the goods. the vendor remains in possession of the property sold. for value. the buyer is bound to return the bill of lading if he does not honor the bill of exchange. reserve the right of possession or ownership in the goods until certain conditions have been fulfilled.o. point.´. . (n) Art. in pursuance of a contract of sale. the seller thereby reserves a right to the possession of the goods as against the buyer. the seller must give such notice to the buyer as may enable him to insure them during their transit. ³c. if the seller fails to do so. or to the order of the seller or of his agent. Where goods are shipped. for the purpose of Unless otherwise agreed. then the buyer agrees to  17 . and by the bill of lading the goods are deliverable to the seller or his agent.f. however. 1503.f. if except for the form of the bill of lading. the legal possessor while the vendor is in material possession of the property in the name and representation of the vendee.  These terms may be used only in connection with fixing the price and will not be construed as fixing the place of delivery to the buyer Best indication of the intention of parties as to the place of delivery is the manner and place of payment agreed upon by the parties o Where price is payable upon proof of shipment. There may also be tradition constitutum possessorium. without notice of the facts making the transfer wrongful. the goods shall be deemed to be at his risk during such transit. iv) Traditio Constitutum Possessorium Art. ³f.b. freight´ signifies that the price quoted includes the costs of the goods. and by the bill of lading the goods are deliverable to order of the buyer or of his agent. whether named by the buyer or not. GENERAL RULE: Delivery of goods to carrier is considered delivery to the buyer. Where goods are shipped. by the terms of the contract. or of the goods.LAW ON SALES took place. (n)  y v) delivery to common carrier Art. ± ³free alongside´ means that the seller bears the expenses of transportation until he delivers the goods alongside a vessel at a named post.´.i. and if he wrongfully retains the bill of lading he acquires no added right thereby. Terms. or goods from the buyer will obtain the ownership in the goods. not as owner but as lessee. insurance.a. and freight charges on the goods up to the place of destination iii. borrower or depositary. f. (n) y In traditio constitutum possessorium.b. .´  f.b. or to the buyer by the consignee named therein. Vendee became as lessor. i.i.³cost.

if it should be movable property. conveyance. Sec. without knowledge of the existence of another alienation by the vendor to another POSSESSOR IN GOOD FAITH: one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it vi) effect of form of bill of lading y Ownership is retained: The seller may consign the goods to himself or to his agent and thus prevent title from passing to the buyer until the latter pays the price Mere possession is retained: The seller may consign the goods to the order of the buyer on the latter¶s agent but by retaining the bill of lading. e) Unregistered land P. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. and. If the same thing should have been sold to different vendees. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. prior unrecorded sale cannot prejudice execution sales if no third-party claim was presented before the execution sale took place. he thereby prevents the buyer from obtaining the goods from the carrier until price is paid o y o o 4. if it should be movable property. to ascertain the rights of the judgment debtor over the property. [Third persons are not required to go beyond the register and determine the condition of the property. hence. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. 113. burden of proof is on person alleging bad faith good faith of second buyer must continue until his contract ripens into ownership by tradition or recording as to Torrens title: it is enough that purchaser examines the latest certificate of title issued in the name of his vendor and he need not trace its origin to prior certificates of title d) Sale by virtue of execution or attachment 1. c) sale of immovables Art. the second buyer must not only show prior recording of his 18 .No deed. title or interests the judgment debtor may have over the property as of the time of levy. 1544 (1). Recording of instruments relating to unregistered lands. 3. or other voluntary instrument affecting land not registered under the Torrens system shall be valid. provided there is good faith. Double Sales Art. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. before bidding. prior jure b) sale of movables Art.D. unless such instrument shall have been recorded in the manner herein prescribed in the office of the To be entitled to priority. Should it be immovable property. lease. and is preferred only over claims contracted subsequent to its recording EXCEPTION TO THE EXCEPTION: Above rule does not apply to lands registered under Act 496 which provides that registration of instruments shall be the ³operative act to convey and affect the land´. in the absence thereof. a) General Rule ± Prior tempore.] EXCEPTION: Attachment or execution cannot prejudice prior unrecorded sales made by the judgment debtor. 1544 (2).] 2.LAW ON SALES o accept delivery at the point of shipment Where the price is payable only upon arrival of the goods at the point of destination. except as between the parties thereto. the question as to who of the latter acquired ownership depends on the nature of the thing sold. GENERAL RULE: Article 1544 not applicable to execution sales because the purchaser at such sales is substituted to or acquires whatever rights. . [It is the duty of the purchaser. mortgage.  good faith is always presumed. (1473) If the same thing should have been sold by the owner to different buyers. the ownership shall pertain to the person who in good faith was first in the possession. 1529. then that is the place of delivery to the buyer  deed but must have acted in good faith. to the person who presents the oldest title. 1544. Should there be no inscription. Should it be immovable property. If the same thing should have been sold to different vendees.

LAW ON SALES Register of Deeds for the province or city where the land lies. the one who can present the oldest title provided there is good faith. the file number and the date as well as the hour and minute when the document was received for recording as shown in the Primary Entry Book. with appropriate annotation. among other particulars. like a deed of sale or a receipt for the price. NOTE that the next 3 situations contemplate loss of specific things 1. the Register of Deeds shall endorse among other things. shall likewise be admissible to record under this section. after the same shall have been entered in the Primary Entry Book. donation. it appears that it is sufficient in law. even though the prior sale was unrecorded A person having a ³better right´ would be one who had previously acquired ownership thereof through the modes of acquiring ownership under the Civil Code: tradition as a result of sale. unless the contrary can be clearly inferred therefrom 2. the Register of Deeds shall forthwith record the instrument in the manner provided herein. notice of lis pendens. upon the original of the recorded instruments. It shall be understood that any recording made under this section shall be without prejudice to a third party with a better right. the date. adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands. In case the Register of Deeds refuses its administration to record. the loss or destruction of anything of the same kind does not extinguish the obligation. if made in the form sufficient in law. 3. This is because ownership is still with him. In an obligation to deliver a generic thing. hour and minute it was presented and received. the thing which is the object of the contract has been entirely lost. attachment and levy. The recording of the deed and other instruments relating to unregistered lands shall be effected by any of annotation on the space provided therefor in the Registration Book. has the better right. said official shall advise the party in interest in writing of the ground or grounds for his refusal. succession and prescription f) First in possession in good faith If neither vendee registered the sale in his favor or registration was done in bad faith. the names of the parties. When loss occurs before perfection When loss occurred before perfection. 1263. 19 . it is borne by the seller. (b) If. (d) Tax sale. RISK OF LOSS OR DETERIORATION A. 1493. When loss perfection occurs at the time of Registration requirement is understood to be without prejudice to third party with a better right Mere registration of sale in one¶s favor does not give him any right over the land: o if the vendor was not the owner of the land o if the vendor has already parted with his ownership before such sale in favor of third party who had previously taken possession of Art. he shall collect the same amount of fees prescribed for similar services for the registration of deeds or instruments concerning registered lands. the contract shall be without any effect. If neither of the vendees registered their deeds of sale nor acquired possession of the land sold.  (a) The Register of Deeds for each province or city shall keep a Primary Entry Book and a Registration Book. the nature of the document. 2. ³Older title´ means any document showing acquisition of the land in good faith. certifying that he has recorded the instrument after reserving one copy thereof to be furnished the provincial or city assessor as required by existing law. (c) After recording on the Record Book. If at the time the contract of sale is perfected. Public document is not included as there is delivery thru a public instrument. VIII. (n) An obligation to deliver a generic thing is not extinguished by loss because genus never perishes. and the latter may appeal the matter to the Commissioner of Land Registration in accordance with the provisions of Section 117 of this Decree. returning to the registrant or person in interest the duplicate of the instrument. General rule Art. on the face of the instrument.   the land. the entry number. (e) For the services to be rendered by the Register of Deeds under this section. the vendee who was first in possession in good faith acquired ownership of the land g) Oldest title 1. The Primary Entry Book shall contain.

the buyer may at his option treat the sale: (1) As avoided. 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. (n) When loss occurs after perfection but before delivery.LAW ON SALES But if the thing should have been lost in part only. (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. (6) If it is improved at the expense of the debtor. and a public document is necessary for its registration in the Registry of Deeds. the vendor being considered the debtor. the obligation shall be extinguished. 1406. (3) When the thing deteriorates without the fault of the debtor. (4) If it deteriorates through the fault of the debtor. The loss must have occurred before the contract was entered into. except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer. Art. the goods are at the buyer's risk from the time of such delivery. or (2) As valid in all of the existing goods or in so much thereof as have not deteriorated. 1494. the seller bears the risk of loss. 1189. and as binding the buyer to pay the agreed price for the goods in which the ownership will pass. the vendee may choose between withdrawing from the contract and demanding the remaining part. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501. or disappears in such a way that its existence is unknown or it cannot be recovered. This is because there can be no contract without an object. 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. with indemnity for damages in either case. The buyer does not bear the risk of loss until the goods are delivered. the creditor may choose between the rescission of the obligation and its fulfillment. (n) a) If at the time the sale is perfected. When ownership is transferred GENERAL RULES: b) c) 20 . paying its price in proportion to the total sum agreed upon. 1496. (n) Art. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. 1504. (2) If the thing is lost through the fault of the debtor. the improvement shall inure to the benefit of the creditor. the impairment is to be borne by the creditor. the parties may avail themselves of the right under Article 1357. Unless otherwise agreed. 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. the goods remain at the seller's risk until the ownership therein is transferred to the buyer. Options of buyer when there is partial loss and a loss which results in substantial change in character O Withdraw from the contract O Buy the remainder at a proportionate price 3. Where the parties purport a sale of specific goods. the contract shall be ineffective. he shall have no other right than that granted to the usufructuary. loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor. (1460a) Art. deterioration or improvement of the thing before its delivery. or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (1122) Art. and the Roman law requiring delivery to transfer ownership. In case of loss. or by time. it is understood that the thing is lost when it perishes. without the knowledge of both parties. or goes out of commerce. the rules in Article 1189 shall be observed. When loss occurs after perfection but before delivery Art. if the sale was divisible. (5) If the thing is improved by its nature. the following rules shall be observed in case of the improvement. the thing had been lost entirely. actually or constructively. When a contract is enforceable under the Statute of Frauds. This is because the rule is a combination of the common-law rule that the owner bears the risk of loss (res perit domino). B. 1538. (n) Art. he shall be obliged to pay damages.

1511. or other bailee issuing a document of title or placing thereon the words "not negotiable. warehouseman. A document of title in which it is stated that the goods referred to therein will be delivered to the bearer. 1512." "nonnegotiable" or the like. 1510. But nothing in this Title contained shall be construed as limiting or defining the effect upon the obligations of the carrier. such document may nevertheless be negotiated by the holder and is a negotiable document of title within the meaning of this Title. either by endorsement or by delivery. or (2) By any person to whom the possession or custody of the document has been entrusted by the owner. Negotiable documents of title Art. A non-negotiable document cannot be negotiated and the endorsement of such a document gives the transferee no additional right. if.LAW ON SALES 1. (n) Negotiable document of title ± a document of title in which it is stated that the goods referred to therein will be delivered to the bearer. DOCUMENTS OF TITLE Document of title ± a document used in the ordinary course of business in the sale or transfer of goods. goods represented by such document. and such person or a subsequent TERMS OF THE DOCUMENT  Goods are deliverable to bearer  Endorsed in blank by the person to whose order the goods were deliverable Goods are deliverable to the order of a specified person b) who may negotiate it HOW NEGOTIATED By delivery of the document to another By indorsement of such person Art. A negotiable document of title may be negotiated: (1) By the owner therefor. as proof of the possession or control of the goods. Ownership is transferred upon delivery. a) how negotiated Art. to a specified person or order of a specified person or which contains words of like import. and in such case the document shall thereafter be negotiated only by the endorsement of such endorsee. A document of title which is not in such form that it can be negotiated by delivery may be transferred by the holder by delivery to a purchaser or donee." or the like. 1509. or to the order of any person named in such document is a negotiable document of title. it may be again negotiated by the endorsement of such person in blank. (n) IX. Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document of title has been indorsed in blank or to bearer. 2. or (2) Where by the terms of the document the carrier. or authorizing or purporting to authorize the possessor of the document to transfer or receive. 1507. 2. A negotiable document of title may be negotiated by delivery: (1) Where by the terms of the document the carrier. at Contrary stipulation Security title Delay through the fault of the buyer or the seller ± the risk of the party at fault endorsee of the document has indorsed it in blank or to the bearer. any holder may indorse the same to himself or to any specified person. warehouseman or other bailee to deliver the goods to bearer. Subsequent negotiations may be made in like manner. warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer. If a document of title which contains an undertaking by a carrier. (n) Art." "non-negotiable. EXCEPTIONS: 1. A negotiable document of title may be negotiated by the endorsement of the person to whose order the goods are by the terms of the document deliverable. 1508. If indorsed to a specified person. (n) Art. 3. to bearer or to another specified person. or to the order of any person named in such document. (Art. (n) 1. has placed upon it the words "not negotiable. by the terms of the document the 21 . The risk of loss shall be borne by the owner. warehouseman or other bailee issuing the same undertakes to deliver the goods to the order of a specified person. 1636) The functions of documents of title are (1) Evidence of the possession or control of the goods described therein (2) Medium of transferring title and possession over the goods described therein without having to effect actual delivery thereof (Villanueva) Art. to bearer or to a specified person. Such endorsement may be in blank.

theft. theft. fraud. duress or conversion. d) Unauthorized negotiation Art. The bailee shall in no case be compelled to deliver up the actual possession of the goods until the document is surrendered to him or impounded by the court. 1513. (n) 22 . 1516. and (2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him. if the person to whom the document was negotiated or a person to whom the document was subsequently negotiated paid value therefor in good faith without notice of the breach of duty. fraud. the validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person making the negotiation. the genuineness and validity of the document. 1518 since under Art. 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. or if at the time of such entrusting the document is in such form that it may be negotiated by delivery. under Art. or by the fact that the owner of the document was deprived of the possession of the same by loss. The validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person making the negotiation. rights of the original consignee Thus. warrants: (1) That the document is genuine. (2) That he has a legal right to negotiate or transfer it. including one who assigns for value a claim secured by a document of title unless a contrary intention appears. the common carrier will fulfill its obligation to the deliver the goods. the previous indorsers will fulfill their obligation. 1512 and Art. accident.LAW ON SALES bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted. accident. and (4) That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose. rights of the vendor 2. 3. or loss. (n) A person who negotiates a document of title warrants 1. mistake. all the warranties of a vendor of goods. f) creditor¶s right against the goods Art. since he acquires the rights of the original consignee. or by the fact that the owner of the document was deprived of the possession of the same by loss. only the owner of the document or one to whom possession of the document has been entrusted may negotiate it. his right to negotiate it. However. (n) There is a conflict between Art. or conversion. The endorsement of a document of title shall not make the endorser liable for any failure on the part of the bailee who issued the document or previous endorsers thereof to fulfill their respective obligations. (n) c) rights acquired by negotiation Art. (Baviera) e) implied warranties Art. A person to whom a negotiable document of title has been duly negotiated acquires thereby: (1) Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value. be attached by garnishment or otherwise or be levied under an execution unless the document be first surrendered to the bailee or its negotiation enjoined. duress. (n) Art. 1519. 1512. accident. fraud. (n) A person to whom a document has been negotiated acquires 1. a buyer of a document of title may acquire a better title than his vendor. 1517. mistake. or conversion. (3) That he has knowledge of no fact which would impair the validity or worth of the document. theft. A person who for value negotiates or transfers a document of title by endorsement or delivery. 2. or 2. 1518. duress. If goods are delivered to a bailee by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner and a negotiable document of title is issued for them they cannot thereafter. But he does not warrant that 1. and. mistake. while in possession of such bailee. 1518.

A person to whom a document of title has been transferred. A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which cannot readily be attached or levied upon by ordinary legal process. or any other person who is in the position of a seller. (n) a) Unpaid seller ± if the whole price has not been paid or tendered. 2. such person also acquires the right to notify the bailee who issued the document of the transfer thereof.LAW ON SALES Art. or is directly responsible for the price. Where a negotiable document of title is transferred for value by delivery. or for the law to allow attachment on the goods. If the document is non-negotiable. The Art 1524. Prior to the notification to such bailee by the transferor or transferee of a non-negotiable document of title. Non-negotiable documents of title a) how transferred Art. as against the transferor. its negotiation be enjoined. or otherwise. impounded by the court. REMEDIES OF AN UNPAID SELLER negotiation shall take effect as of the time when the endorsement is actually made. (2) When a bill of exchange or other negotiable instrument has been received as conditional payment. or by a notification to such bailee by the transferor or a subsequent purchaser from the transfer of a subsequent sale of the goods by the transferor. the insolvency of the buyer. Transfer ± the assignment of rights of the consignee of a non-negotiable document of title to another ± where an order document of title was sold or assigned. acquires thereby. and the condition on which it was received has been broken by reason of the dishonor of the instrument. the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor. hence it is not allowable for a carrier to deliver the goods without the surrender of the bill of lading to them. b) seller ± includes the agent of the seller to whom the bill of lading was endorsed. or the consignor or agent who had paid the price or is responsible for the price. 1515. or a consignor or agent who has himself paid. and the endorsement of the transferor is essential for negotiation. or any other person who is in the position of a seller. UNLESS 1. without indorsement The transferee does not acquire a better title than his transferor [unlike in a negotiable document of title. or 3. the document be first surrendered to the carrier. but not negotiated. 1514. (n) The law makes a distinction between ³negotiation´ [negotiable document of title] and ³transfer´ [non-negotiable document of title]. or when the check received as conditional payment was dishonored by nonpayment or insolvency of the buyer. X. the transferee acquires a right against the transferor to compel him to endorse the document unless a contrary intention appears. or 2. where the buyer may acquire a better title]. REMEDIES OF AN UNPAID SELLER MEANING OF UNPAID SELLER 23 . 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. In Articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of lading has been indorsed. the title to the goods. 1520. (n) b) rights acquired by transfer of document of title Art. (n) Goods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon. and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document. subject to the terms of any agreement with the transferor. Rationale for the rule: A negotiable document of title represents the goods.

The lien is not lost by the mere fact that the seller had already obtained judgment for the price. As a consequence of his lien over the goods. without prejudice to his liability for damages for any breach of contract committed by him. he may exercise his right of 24 . consigning them to the buyer under a straight or non-negotiable bill of lading. the unpaid seller has. d) It is not lost on the remainder of the goods when only partial delivery was made. 2. The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer. 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. unless he agreed to sell on credit. Lien lien on the remainder. that is to say. he delivers the goods to the carrier or other bailee. (2) When the buyer or his agent lawfully obtains possession of the goods. (2) Where the goods have been sold on credit. without court order. (3) Where the buyer becomes insolvent. namely: (1) Where the goods have been sold without any stipulation as to credit. the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu. or if the term of the credit had expired and the price has not been paid. c) Loss of lien: the unpaid seller losses his lien when: 1. the unpaid seller of goods. as owner. when he waived his lien. (3) A right of resale as limited by this Title. (3) By waiver thereof. e) Revival of lien: the unpaid seller¶s lien is revived if the goods are returned by the buyer in wrongful repudiation of the contract. has: (1) A lien on the goods or right to retain them for the price while he is in possession of them. b) If the unpaid seller agrees to sell on credit. when the buyer of goods is or becomes insolvent. could retain the goods or resell them to another. does not lose his lien by reason only that he has obtained judgment or decree for the price of the goods. b) If ownership had passed to the buyer but the goods are still in the possession of the seller or are in transit to the buyer: the unpaid seller could withhold delivery or stop the goods in transit should the buyer become insolvent. unless such was intended to operate as symbolical delivery of the whole. when the goods were delivered to the buyer. (4) A right to rescind the sale as likewise limited by this Title. (n) a) The unpaid seller¶s lien implies that he has a right to retain possession of the goods until payment or tender of the whole price. 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. or 2. notwithstanding that the ownership in the goods may have passed to the buyer. as such. he may refuse to deliver them if the buyer becomes insolvent. he may resume possession of the goods at any time Art 1527. or 3. Where an unpaid seller has made part delivery of the goods. having a lien thereon. but the term of credit has expired. (n) Art 1529. Subject to the provisions of this Title. Subject to the provisions of this Title. Where the ownership in the goods has not passed to the buyer.LAW ON SALES Art 1526. (2) In case of the insolvency of the buyer. The unpaid seller of goods. (n) Art 1528. Subject to the provisions of this Title. 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. unless such part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention. and may still used the buyer for damages 1. a right of stopping the goods in transitu after he has parted with the possession of them. Stoppage in Transitu Art 1530. the unpaid seller could resell the goods to another or resume ownership over them. (n) a) If ownership over the goods had not yet passed to the buyer: the seller.

(n) Art 1533. or where the seller expressly reserves the right of resale in case the buyer should make default. and subject to this requirement may make a resale either by public or private sale. 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. or where the buyer has been in default in the payment of the price for an unreasonable time. where he expressly reserved the right to do so in case the buyer should make default. whether they are in the possession of the carrier as such or as agent of the buyer. directly or indirectly buy the goods. If. or air. obtains delivery of the goods before their arrival at the appointed destination. a negotiable document of title representing the goods has been issued by the carrier or other bailee. (n) Art 1532. the seller. even if the seller has refused to receive them back. He cannot. 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. Where the goods are of perishable nature. Goods are in transit within the meaning of the preceding article: (1) From the time when they are delivered to a carrier by land. or his agent in that behalf. Where a resale is made. may prevent a delivery to the buyer. after the arrival of the goods at the appointed destination. 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. as authorized in this article. may rescind the transfer of title and resume the ownership in the goods. or airplane chartered by the buyer. (n) Art 1531. and the carrier or other bailee continues in possession of them. If the goods are delivered to a ship. truck. he shall not obliged to deliver or justified in delivering the goods to the seller unless such document is first surrendered for cancellation. or his agent in that behalf. (n) Art 1534. 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. however. must be given at such time and under such circumstances that the principal. (2) If. (3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf. or where the buyer has 25 . until the buyer. He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale. or other bailee in possession of the goods. and it is immaterial that further destination for the goods may have been indicated by the buyer. the carrier or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent. the remainder of the goods may be stopped in transitu. the buyer acquires a good title as against the original buyer. When notice of stoppage in transitu is given by the seller to the carrier. The expenses of such delivery must be borne by the seller. If part delivery of the goods has been made to the buyer. 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. he must redeliver the goods to. Such notice may be given either to the person in actual possession of the goods or to his principal. or other bailee for the purpose of transmission to the buyer.LAW ON SALES while they are in transit. 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. takes delivery of them from such carrier or other bailee. it is a question depending on the circumstances of the particular case. The seller is bound to exercise reasonable care and judgment in making a resale. or according to the directions of. Goods are no longer in transit within the meaning of the preceding article: (1) If the buyer. but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. An unpaid seller having the right of lien or having stopped the goods in transitu. In the latter case the notice. by the exercise of reasonable diligence. (2) If the goods are rejected by the buyer. or his agent in that behalf. water. an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. 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. however. freight train. to be effectual.

) Where the document of title is a straight bill of lading. not to transport. but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. however. no seller's lien or right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom such document has been negotiated. (n) a) Old common law remedy which is an extension of the lien for the price and entitles the unpaid seller to resume possession of the goods while they are in transit before the goods come in possession of the vendee if the later is or becomes insolvent. He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale. Where the goods are of perishable nature. the latter shall not be obliged to deliver the goods unless such document is first surrendered for cancellation. b) Goods are considered to be in transit from the time they are delivered to a carrier or other bailee by the seller for the purpose of transmission to the buyer. the latte must redeliver the goods to. 3. If however. The seller shall not thereafter be liable to the buyer upon the contract of sale. Resale Art 1533. the remainder of the goods may be stopped in transitu. the seller¶s right of stoppage will not be cut off as the transferee acquires no greater or added rights than his transferor. unless such part delivery has been made under such circumstances as to show an agreement with the buyer to give up possession of the whole. by giving notice of his claim to the carrier or other bailee in whose possession the goods are. but may recover from the buyer damages for any loss occasioned by the breach of the contract. obtaining actual possession of the goods or 2. until the buyer or his agent takes delivery of them from the carrier. no seller¶s lien or right of stoppage in transitu cannot defeat the rights of any purchaser for value in good faith to whom such document has been negotiated. enters into a new contract with the buyer or his agent. unless the seller has assented thereto.LAW ON SALES been in default in the payment of the price for an unreasonable time. Right of Stoppage. To terminate the transit by delivery to a middleman. f) Sale of goods in transit: the unpaid seller¶s right of lien or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made unless the seller has assented thereto. How Exercised-The unpaid seller may exercise his right by 1. an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. or where the buyer has been in default in the payment of the price for an unreasonable time. If. there is constructive possession of the whole. e) If there was partial delivery of the goods to the buyer. (n) Art 1535. as authorized in this article. Where the buyer has taken some portion of the whole mass which was then susceptible of possession. Subject to the provisions of this Title. or other bailee who issued such document. or other disposition of the goods which the buyer may have made. whether such negotiation be prior or subsequent to the notification to the carrier. the buyer acquires a good title as against the original buyer. of the seller's claim to a lien or right of stoppage in transitu. When notice of stoppage in transit is given to the carrier. Where a resale is made. it must be delivery to keep. But 26 . The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other overt act an intention to rescind. or when the carrier. or when the goods arrived at the ultimate destination but the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent. 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. c) Goods are still considered to be in transit even if they reached their ultimate destination when the buyer rejects them and they remain in the possession of the carrier. upon arrival of the goods at the ultimate destination. It is not necessary that such overt act should be communicated to the buyer. a negotiable document of title has been issued for goods. the unpaid seller's right of lien or stoppage in transitu is not affected by any sale. 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. a negotiable document of title representing the goods has been issued by the carrier. 1) Where a negotiable document of title has been issued for the goods. or according to the directions of. or where the seller expressly reserves the right of resale in case the buyer should make default. the seller. d) Goods are no longer in transit if the buyer or his agent obtained delivery of the goods even before they reached their ultimate destination. 2.

The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other overt act an intention to rescind. the vendor. however. the place of delivery is the seller's place of business if he has one. or where the buyer has been in default in payment of the price for an unreasonable time. Rescission Art 1534. or usage of trade to the contrary. but may recover from the buyer damages for any loss occasioned by the breach of the contract. Where by a contract of sale the seller is bound to send the goods to the buyer. XI. The burden of showing it was exercised is on the vendor. As used in Art. b) The resale may be in a public or private sale. d) Damages recoverable: Whether the action is for damages or to recover loss from a resale. Apart from any such contract. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract. the seller may still recover damages from the buyer for breach of contract. express or implied. but no time for 27 . is entitled to resell. 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. may resell the goods and recover from the buyer damages for breach of contract. DELIVERY OF THE THING SOLD 1. where he expressly reserved the right to do so in case the buyer should make default. He cannot. and subject to this requirement may make a resale either by public or private sale. Thus. between the parties. then that place is the place of delivery. The seller shall not thereafter be liable to the buyer upon the contract of sale. e) Due diligence must be exercised to secure the highest price obtainable in the best available market. he is entitled to recover the difference from the original buyer. the term ³rescind´ is equivalent to return of the title over the undelivered goods to the seller and the right to recover damages for loss due to breach of contract.LAW ON SALES 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. express or implied. 1521. the buyer is liable for the difference. and if obliged to sell for less than the contract price. or where the seller expressly reserves the right of resale in case the buyer should default in payment. The transfer of title shall not be held to have been rescinded by the unpaid seller until he manifests by notice to the buyer or by some overt act an intention to rescind. if the purchaser fails to take delivery and pay the price. or where the buyer has been in default for an unreasonable length of time. An unpaid seller having the right of lien or having stopped the goods in transitu. which to the knowledge of the parties when the contract or the sale was made were in some other place. The seller is entitled to any profit he may make out of the resale. The seller is bound to exercise reasonable care and judgment in making a resale. 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. c) In case he sells them at a loss. (n) a) An unpaid seller having the right of lien or having stopped the goods in transitu may rescind the transfer of title and resume ownership in the goods where he expressly reserved the right to do so in case the buyer defaults. PERFORMANCE OF THE CONTRACT A. or where the buyer has been in default in the payment of the price for an unreasonable time. having a right of lien or having stopped the goods in transitu. It is not essential to the validity of a resale that previous notice of an intention to resell or notice of the time and place or resale be given to the original buyer. but the seller cannot buy them directly or indirectly. directly or indirectly buy the goods. may rescind the transfer of title and resume the ownership in the goods. 1534. the unpaid seller. It is not necessary that such overt act should be communicated to the buyer. Place. time. the purpose is to compensate the seller for loss for breach of contract. 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. After rescinding the transfer of title. without need of first rescinding the contract judicially. (n) a) When the goods are of perishable nature. and if not his residence. 4. but in case of a contract of sale of specific goods. and manner of delivery Art.

delay by the other begins. 4. are known to the parties to be in ANOTHER PLACE. and when through a fortuitous event they disappear. (3) When by his own acts he has impaired said guaranties or securities after their establishment. Absent stipulation to the contrary. Time is of the essence of the contract whenever the intention of the parties is clear that performance of its terms shall be accomplished exactly at the stipulated day or implied from the nature of the contract itself. at the time of the sale. if the vendee has not paid him the price. rules shall be observed: 1. 1198. he becomes insolvent. his residence. or if no period for the payment has been fixed in the contract. Where the goods at the time of the sale are in the possession of a THIRD PERSON. the buyer should take delivery from such place. 8. 1536. unless he immediately gives new ones equally satisfactory.LAW ON SALES sending them is fixed. payment and delivery of the thing sold are concurrent acts. gathering and preservation of the fruits. 1169. the subject matter or the circumstances under which the contract is made When not bound to deliver Art. (1466) Art. (2) When he does not furnish to the creditor the guaranties or securities which he has promised. 1524. the and the the 7. (n) Art. From the moment one of the parties fulfills his obligation. 1524. The vendor shall not be bound to deliver the thing sold. the ff. The vendor shall not be bound to deliver the thing sold. Where by agreement. the buyer should take delivery of the goods from the seller¶s place of business if he has one. (1466) a) Generally. the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. and if none. unless he gives a guaranty or security for the debt. within a reasonable time. 2. (1467a) Art. When time is of essence Art. if the vendee has not paid him the price. What is a reasonable hour is a question of fact. Unless otherwise agreed. EXPENSES of placing the goods in a DELIVERABLE STATE shall be borne by the SELLER unless otherwise stipulated. there is NO delivery UNLESS and UNTIL such their person 28 . REASONABLE TIME for delivery is determined by the circumstances attending the particular transaction (1) When after the obligation has been contracted. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the terms as provided in Article 1198. or if no time was fixed. If the sale involves a specific thing. The debtor shall lose every right to make use of the period: 3. vendor is bound to deliver the thing sold its accessions and accessories in condition in which they were upon perfection of the contract. the seller is bound to send the goods to the buyer. he is bound to send them within the time agreed upon. 6. (1100a) 5. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. In case of sale of specific goods which. DEMAND or TENDER of PAYMENT shall be made at a reasonable hour. Where the goods at the time of sale are in the possession of a third person. in consonance with the rule 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. the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges to the buyer that he holds the goods on the buyer's behalf. the seller is bound to send them within a reasonable time. All of the fruits of the thing shall pertain to the vendee from the time of the perfection of the contract but he does not acquire a real right over it until they are delivered to him. ACKNOWLEDGES to the buyer that the holds the goods on the latter¶s behalf. or if no period for the payment has been fixed in the contract. The vendee has the obligation to pay the expenses incurred by the vendor in the production. xxx In reciprocal obligations. Agreement of the parties determines whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer.

1198 which provides that the vendee shall lose the benefit of the term when. When the vendee becomes insolvent 2. 2. (n) a) GENERAL RULE: The buyer is not bound to accept delivery of a quantity of goods more or less than that agreed upon or to accept goods which are of a description different from that agreed upon. (5) When the debtor attempts to abscond. (1129a) a) GENERAL RULE: the buyer is not bound to accept delivery of goods by installments. 1522. knowing that the seller is not going to perform the contract in full. after the obligation has been contracted. ³Insolvency´ under this article cannot be understood in the sense of a judicially declared insolvency or suspension of payments. however. because the debtor cannot give a security or guaranty in such case. special agreement. if the subject matter is indivisible. the buyer may accept the goods included in the contract and reject the rest. When the vendee does not furnish the guaranties or securities he has promised 3. it depends in each case on the terms of the contract and the circumstances of the case. and the seller makes defective deliveries in respect of one or more installments. In the preceding two paragraphs. SEVERABILITY depends on whether the breach is so material as to justify the aggrieved party in refusing to proceed further with the entire contract or so immaterial that the breach is severable. Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract. (n) 29 . Where there is a contract of sale of goods to be delivered by stated installments. giving rise to a claim for compensation but not to a right to treat the whole contract as broken. EXCEPTION: There is usage of trade. no longer holds. the buyer may reject them. the buyer has used or disposed of the goods delivered before he knows that the seller is not going to perform his contract in full. unless he gives a guaranty or security. When the vendee violates any condition for which he was granted the term 5. or the buyer neglects or refuses without just cause to take delivery of or pay for one more installments. If the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate. 1583. the buyer may accept the goods which are in accordance with the contract and reject the rest. the buyer of goods is not bound to accept delivery thereof by installments. Art. When the vendee attempts to abscond NOTE: Art. giving rise merely to a claim for damages b. whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract. Unless otherwise agreed. the buyer may reject the whole of the goods. Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell. he must pay for them at the contract rate. Delivery of wrong quantity The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the stipulated term in the following cases: 1. The doctrine therefore in Visayan Distributors v Flores interpreting insolvency in Art 1467 old CC as something which must be judicially declared or something which involves suspension of payments. the terms of the contract and the circumstances surrounding the case would determine whether prompt payment or delivery is of the essence such that a delay or breach would entitle the aggrieved to treat the entire contract as broken OR to regard each breach as severable. which are to be separately paid for. but if the buyer accepts or retains the goods so delivered. or whether the breach is severable. If. in consideration of which the creditor agreed to the period. the buyer shall not be liable for more than the fair value to him of the goods so received. special stipulation or course of dealing to the contrary. or course of dealing between the parties.LAW ON SALES (4) When the debtor violates any undertaking. The provisions of this article are subject to any usage of trade. unless he gives new equally satisfactory guaranties or securities 4. he becomes insolvent. When the guaranties or securities given were impaired through the vendee¶s acts or were lost or destroyed through a fortuitous event. 1467 has been replaced by Art. EXCEPTION: When otherwise stipulated b) In case of a contract that calls for the delivery of the goods at stated intervals which are to be paid for separately. Sale of Goods a. Delivery by installment Art.

all that may have been stated in the contract. The rescission. which is indispensable in every conveyance of real estate. If. the buyer may reject the whole. at the rate of a certain price for a unit of measure or number. or even if the area is correct but part of the land is not of the quality stated in the contract EXCEPTION: Where the entire land is not of the quality stated in the contract. (NOTE: ³fair value´ means the price of the goods in the open market. in which case. If the buyer accepts or retains that goods delivered. If the buyer has used or disposed of the goods before knowing the inability of the seller to deliver the rest. (n) Art. its area or number should be designated in the contract.) 3. in the case of the preceding article. if any part of the immovable is not of the quality specified in the contract. but if. besides mentioning the boundaries. 1539. Where the seller delivers the goods mixed with goods of a different description not included in the contract. the buyer may reject the excess. provided that. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract. he must pay for the same at the contract rate. and reject the rest. absent any statement to the contrary. (1471) Art. the vendor shall be bound to deliver all that is included within said boundaries. Where the seller delivers a quantity less than that agreed upon. unless the subject matter is indivisible. Where price is at certain rate per unit of measure The seller is bound to deliver the entire land sold in accordance with the terms of the contract. unless the subject matter is indivisible. In the sale of real estate. Sale of Immovables Art. the vendor shall be obliged to deliver to the vendee. he shall suffer a reduction in the price. PRESUMPTION: Buyer knows that the seller might intend to not fully perform. in conformity with the following rules: If the sale of real estate should be made with a statement of its area. 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. in this case. 1543. (The law applies peculiarly to installment and divisible contracts. The same shall be done. unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. as in such a case. b) Delivery by the seller of only a part of an entire contract would itself be an indication that he might not intend to fully perform. and. the vendee may choose between a proportional reduction of the price and the rescission of the contract. even when the area is the same. the buyer shall pay not more than the fair value of the goods. the buyer may reject them. even when it exceeds the area or number specified in the contract. 30 . if the latter should demand it. 1541. the buyer may reject the whole. knowing the inability of the seller to deliver the rest. although there be a greater or less area or number than that stated in the contract. The actions arising from Articles 1539 and 1542 shall prescribe in six months. in which case. when the inferior value of the thing sold exceeds one-tenth of the price agreed upon. the lack in the area be not less than one-tenth of that stated. the buyer may accept the goods which are in accordance with the contract. 3. in the latter case. If he accepts the whole area. should he not be able to do so. 1540.LAW ON SALES REMEDIES: 1. but. counted from the day of delivery. (1469a) Art. The provisions of the two preceding articles shall apply to judicial sales. If the quantity delivered is more than that agreed upon. Nevertheless. (1470a) Art. 1542. shall only take place at the will of the vendee. if said purchaser accepts a partial delivery on an entire contract. the buyer is bound to pay for them at the contract rate. he may rescind the sale. (1472a) a. GENERAL RULE: The vendee has to option to demand a proportionate reduction of the price or rescission of the contract: if price is fixed at a certain rate per unit of measure and the area is delivered is less than that stated in the contract. The same rule shall be applied when two or more immovables as sold for a single price. in proportion to what is lacking in the area or number.) 2. should this be not possible. there is a greater area or number in the immovable than that stated in the contract. if the vendee would not have bought the immovable had he known of its smaller area of inferior quality. the vendee may accept the area included in the contract and reject the rest.

(n) Art. b) If besides mentioning the boundaries. the area should also be stated in the contract. 1585.) 4. taking them as they are or by any other similar act. He may however waive this right by simply refusing to inspect the goods. Where goods are delivered to the buyer. acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale. he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract if there is no stipulation to the contrary." or otherwise. Unless otherwise agreed. a) If the sale of real property is for a lump sum. 31 . he is under NO obligation to accept them. to enable him to determine whether to accept or reject the goods. he is bound. after the lapse of a reasonable time. b. he retains the goods without intimating to the seller that he has rejected them. the seller shall not be liable therefor. the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller 3. But. but only if necessary. there shall be no increase or decrease in the price. whether such terms are indicated by marking the goods with the words "collect on delivery. Sale for a lump sum Art. he retains the goods without intimating to the seller that he has rejected them. In the absence of express or implied agreement of the parties. in accordance with an order from or agreement with the buyer. whether the actual area delivered turned out to be greater or less than that stated in the contract. upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid the price. 1542. and until the examination is completed or waived. to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. if. 1584. 1586. the vendor shall be bound to deliver all that is included within said boundaries and there shall be no increase or decrease in the price whether the area so delivered be greater or less than that stated in the contract. on request. which he has not previously examined. The buyer is entitled to examine the goods to decide whether he will become the owner. or ought to know of such breach. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them. c) If the vendor fails to deliver all the land included within said boundaries. Where goods are delivered to a carrier by the seller. (n) a) The purpose of the notice of breach of warranty is to PROTECT the seller against belated damage claims which would prevent the seller from making an adequate and proper investigation of his alleged liability. making alterations in the goods or subjecting it to the process of manufacture. (n) a) The buyer is deemed to have accepted the goods when: 1. after the lapse of a reasonable time. c. he intimates to the seller that the has accepted them 2. and he does any act in relation to them which is inconsistent with the ownership of the seller. Right of inspection Art.LAW ON SALES the consent must have been obtained by mistake or fraud (contract may then be voidable. Breach of warranty Art. EXCEPTION: Buyer¶s right to make a test of goods. such as making use of them as owner. after acceptance of the goods. the vendee shall have the option to demand a reduction in the price in proportion to the deficiency in the area stated in the contract or a rescission of the contract (Actions prescribe in six months from date of delivery. or when the goods have been delivered to him. Exercise of acts of ownership over the goods is a manifestation of acceptance. 1539. in the absence of agreement or usage of trade permitting such examination. the buyer fails to give notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer knows. Inspections and Acceptance a. when the seller tenders delivery of goods to the buyer. the buyer is not entitled to examine the goods before the payment of the price. see above. see above. Manifestation of acceptance b.) Art. as where part of the land belongs to a third person. or when.

. or even if there is none. or if the buyer incurs in default from the time of judicial or extra-judicial demand for payment 1. the goods are at the buyer's risk from the time of such delivery. but not an assent that the goods fulfill the description and terms of the contract. from the time of judicial or extrajudicial demand for the payment of the price. b) However. when the buyer's refusal to accept the goods is without just cause. having the right so to do. 1589. If there is no stipulation as specified in the first paragraph of article 1523. PAYMENT OF PRICE 1. Refusal to accept Art. he is not bound to return them to the seller. 1589. Unless otherwise agreed. the payment must be made at the time and place of the delivery of the thing sold. Liability for interest Art. 1588. 1582. If he voluntarily constitutes himself a depositary thereof. b) If the third person claims a servitude on the thing sold. 1587. Unless otherwise agreed. (n) Art. and not through a mere threat or claim of a third person. (3) Should he be in default. c) In order that the buyer may have a right to suspend payment. e. unless the latter gives security for the return of the price in a proper case. and thereafter. 1504. If the time and place should not have been stipulated. The buyer shall owe interest on the price from the time the thing is delivered up to the time of payment if there is stipulation requiring interests. in the following three cases: (1) Should it have been so stipulated. but when the ownership 32 . it is absolutely necessary that the cause of disturbance or danger be based on a fact arising before the sale or if it arose after Art. where title already passed to the buyer and there was a breach of warranty. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract. (1500a) Art. notwithstanding any such contingency.LAW ON SALES b) Acceptance of delivery means an ASSENT to become OWNER of the goods on the part of the buyer. (1502a) a) ³disturbance´ or threat of disturbance ± must come through a vindicatory action or foreclosure of mortgage. he need not return them. 1582. except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer. he shall be liable as such. the vendee shall be bound to make the payment. but it is sufficient if he notifies the seller that he refuses to accept them. by a vindicatory action or a foreclosure of mortgage. (n) Art. 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. 1590. where goods are delivered to the buyer. d. or should he have reasonable grounds to fear such disturbance. Should the vendee be disturbed in the possession or ownership of the thing acquired. (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. he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease. the former becomes the depository of the rejected goods. (n) Art. if the thing delivered produces fruits or income. It is sufficient that the buyer notifies the seller that he refuses to accept the goods. and he refuses to accept them. the goods remain at the seller's risk until the ownership therein is transferred to the buyer. when the goods are delivered to the buyer and he has a right to refuse to accept them. the remedy of the buyer is to demand rescission of the contract or payment of the proper indemnity. See above. the buyer may RESCIND the contract by returning or offering to return the goods to the seller and recover the price which had been paid. Suspension of Payment a) Unless otherwise agreed. or it has been stipulated that. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price. (2) Should the thing sold and delivered produce fruits or income. the title thereto passes to him from the moment they are placed at his disposal. A mere act of trespass shall not authorize the suspension of the payment of the price. (1501a) B. Refusal to accept therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not.

even after the expiration of the period. in case of default in payment.D. even if there is a stipulation providing for ipso jure rescission. even after he has chosen fulfillment. the buyer could still pay the price EVEN after the expiration of the period to pay. the court may not grant him a new term. apartments. Neither right can be exercised if the non-apparent burden or servitude is recorded in the Registry of Property. In the sale of immovable property. If the buyer fails to pay within the grace period. as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. unless there be just cause authorizing the fixing of a period. or sue for damages. e) Down-payments. 1592. to be counted from the date on which he discovered the burden or servitude.A. unless he should prefer the appropriate indemnity. without additional interests. c) In the same case. in accordance with Articles 1385 and 1388 and the Mortgage Law. the Realty Installment Buyer Protection Act declared that it is a public policy to protect buyers of realestate on installments. Effect of Non-payment a) Approved on 26 Aug 1972. The lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased. the seller may cancel the contract within Art. 1191. to be computed from the execution of the deed. One year having elapsed. sec 2. (1504a) In absolute sales of real property. There is a mere act of trespass when the third person claims no right whatever. provides that in case such buyer defaults in the payment of the succeeding installments. he may only bring an action for damages within an equal period. 2. the grace period shall be not less than 60 days from the date the installment became due. After the demand. the seller shall refund to the buyer the case surrender value of payments made. if the latter should become impossible. if the contract is cancelled. the arrears within a grace period of one month for every year of installment payments made. 957 (Secs. (1483a) Art. 6553. he has a right to pay. The right to pay the arrears within the grace period could only be availed of by the buyer once in every five years of the life of the contract and its extensions. (1560a) a. d) Actual cancellation shall not take place until after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act. The court shall decree the rescission claimed. Sale of Real Property This is understood to be without prejudice to the rights of third persons who have acquired the thing. 33 . unless there is an express warranty that the thing is free from all burdens and encumbrances.A. 23 and 24) Art. The power to rescind obligations is implied in reciprocal ones. if any.LAW ON SALES the sale. in sale or financing of real estate on installment payments where the buyer has paid at least two years of installments. He may also seek rescission. if any. the vendee may bring the action for rescission. but the lessee shall have a direct action against the intruder. Otherwise. equivalent to 50% of total payments and an additional 5% for every year after five years of the life of the contract and its extensions. with the payment of damages in either case. f) In case of less than two years of installments were paid. against onerous and oppressive conditions b) R. including residential condominiums. 1664. deposits or options in the contract shall be included in the computation of the total number of installments made.A. 1560. R. excluding industrial lots. the cause is imputable to the vendor or his successor in interest. 3844 as amended. (1124) Art. If the immovable sold should be encumbered with any non-apparent burden or servitude. he may ask for the rescission of the contract. 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. not mentioned in the agreement. b. and only upon full payment of the cash surrender value to the buyer. of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof. in case one of the obligors should not comply with what is incumbent upon him. before such stipulation could be given effect. the law requires the seller to demand the resolution of the contract from the buyer judicially or by a notarial act. P. The injured party may choose between the fulfillment and the rescission of the obligation. 6552. the vendee may pay. Within one year. commercial buildings and lands sold under R.

such party may refuse to proceed with the contract or he may waive performance of the condition. 2004) Condition Generally goes the root of existence of obligation Warranty Goes into the performance of such obligation. pay in advance any installment or the full unpaid balance of the price without interest Where a condition is not performed. Distinguished from condition Must be stipulated by the parties in order to form part of an obligation May attach itself either to obligation of seller to deliver possession or transfer ownership over subject matter of sale 2. rescind + refuse to accept goods. but creates no right of action. the buyer may refuse to proceed with the contract. dealer¶s Art 1545. the buyer shall have the right to: 1. without parties having agreed thereto Whether express or implied. and failure of which gives rise to an action for its breach. 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 of the buyer to perform his promise to accept and pay for the thing. (n) a) Warranty ± an affirmation of fact or any promise by seller relating to the thing which has a natural tendency to induce the buyer to purchase the same. and if the buyer purchase the thing relying thereon. to a third person 2. Art 1546. or return (or offer to return) goods + recover price paid 1. or accept the goods and waive performance of the condition. EXPRESS WARRANTIES a) Warranty ± where one party promised that the contingency or some act fixed by the contract shall be performed. Distinguished talk from opinion. in which case it is a warranty. or whether it is merely an expression of an opinion or judgment on the part of the seller on a matter of which the seller has no special knowledge and on which the buyer 34 . relying on such promise of affirmation b) Opinion/dealer¶s talk ± an affirmation of the value of the thing or any statement of the seller¶s opinion shall not be construed as a warranty. the promise constitutes a warranty. nor any statement purporting to be a statement of the seller's opinion only.LAW ON SALES 30 days from receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act. such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. to be evidenced in a notarial instrument. like a promise that the goods are of a certain kind and character or that certain state of facts would exist. g) During the grace period or before the actual cancellation of the contract. shall be construed as a warranty. relates to subject matter itself or to the obligations of the seller as to the subject matter of the sale into the the XII. unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer. WARRANTIES A. If the other party has promised that the condition should happen or be performed. Breach: the buyer may 1. Where the ownership in the thing has not passed. unless the seller made such an affirmation as an expert and it was relied upon by the buyer Test: whether the vendor assumes to assert a fact of which the buyer is ignorant. Where the obligation of either party to a contract of sale is subject to any condition which is not performed. sell or assign his rights. accept goods + set up breach of warranty as a recoupment in diminution/ extinction of price 3. Distinctions according to Villanueva (Law on Sales . and failure of which permits the injured party to treat the contract as at an end. (n) Condition ± an uncertain event or contingency fixed by parties. No affirmation of the value of the thing. update his account 3. accept goods + maintain an action for damages 2. 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. the existence or happening of which was necessary to the efficacy of the contract. refuse to accept goods and maintain action for damages 4. and in fact may constitute an obligation in itself May form part of obligation by contract or provision of law.

if the sale was made in bad faith. He may exercise this right of action. (1477) Art 1555. or other person professing to sell by virtue of authority in fact or law. a part of the thing sold of such importance. (n) Art 1548. and eviction should take place.  ³In good condition´ v. (n) Art 1550. This Article shall not. and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing. the vendor is liable for eviction. kind or condition of the goods sold. if it should clearly appear that the vendee would not have purchased one without the other. it is an affirmation of fact or promise. or any charge or encumbrance not declared or known to the buyer. if he has been ordered to deliver them to the party who won the suit against him. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor. if the vendee has paid them. Implied warranty of title Art 1552. The same rule shall be observed when two or more things have been jointly sold for a lump sum. The vendor shall answer for the eviction even though nothing has been said in the contract on the subject. If the vendee has renounced the right to warranty in case of eviction. (1478) Art 1556. (5) The damages and interests. Should the vendee have made the waiver with knowledge of the risks of eviction and assumed its consequences. In a contract of sale. instead of enforcing the vendor's liability for eviction. (4) The expenses of the contract. that he would not have bought it without said part. The contracting parties. those of the suit brought against the vendor for the warranty. mere expression of an opinion 3. ³Excellent quality´ ± the first relates to the quantity. but with the obligation to return the thing without other encumbrances that those which it had when he acquired it. and not a mere expression of an opinion. for the sale of a thing in which a third person has a legal or equitable interest.LAW ON SALES may be expected also to have an opinion or exercise his judgment. Distinguished from false representation B. unless a contrary intention appears. (1475a) Art 1549. or for a separate price for each of them. Should the vendee lose. The vendee need not appeal from the decision in order that the vendor may become liable for eviction. The judgment debtor is also responsible for eviction in judicial sales. pledgee. the vendor shall not be liable for eviction. and ornamental expenses. be held to render liable a sheriff. (2) An implied warranty that the thing shall be free from any hidden faults or defects. in a proper case. (n) 35 . the second is not an express warranty and the purchaser must rely on the implied warranty that the goods are merchantable. and. (1476) Art 1554. mortgagee. however. 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. (1479a) Art 1547. he may demand the rescission of the contract. IMPLIED WARRANTIES 1. (3) The costs of the suit which caused the eviction. auctioneer. 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. When adverse possession had been commenced before the sale but the prescriptive period is completed after the transfer. (n) Art 1553. by reason of the eviction. unless it is otherwise decreed in the judgment. (2) The income or fruits. however. may increase. If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale. if he acted in bad faith. diminish. the vendee is deprived of the whole or of a part of the thing purchased. be it greater or less than the price of the sale. or suppress this legal obligation of the vendor. in case eviction occurs. in relation to the whole. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void. the vendor shall only pay the value which the thing sold had at the time of the eviction. When the warranty has been agreed upon or nothing has been stipulated on this point. (n) Art 1551. the vendor shall not be liable.

there is an implied warranty that the goods shall be reasonably fit for such purpose. The preceding articles of this Subsection shall be applicable to judicial sales. with damages in either case. had the vendee been aware thereof. The warranty cannot be enforced until a final judgment has been rendered. and the vendor was aware of them. (1488a) Art 1570. and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not). or for those which are not visible if the vendee is an expert who. expressly or by implication. he would not have acquired it or would have given a lower price for it. (1490) Warranties in sale of animals Art 1577. even though he was not aware thereof. he shall only return the price and interest thereon. (1485) Art 1567. (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). Implied warranty against encumbrances or defects hidden Art 1561. unless there is a stipulation to the contrary. In the case of contract of sale of a specified article under its patent or other trade name. In the cases of Articles 1561. there is an implied warranty that the goods shall be of merchantable quality. and shall be obliged to return the price and refund the expenses of the contract. 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. (1482a) 2. (n) Art 1563. The vendor shall not be obliged to make good the proper warranty. If the thing sold should be lost in consequence of the hidden faults. Actions arising from the provisions of the preceding ten articles shall be barred after six months. (1486a) Art 1568. 1562. within the time fixed in the Rules of Court for answering the complaint. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold. makes known to the seller the particular purpose for which the goods are acquired. he shall pay damages to the vendee. (1480) Art 1565. 1564. The redhibitory action. and should thereafter be lost by a fortuitous event or through the fault of the vendee. if the seller is a dealer in goods of that kind. whereby the vendee loses the thing acquired or a part thereof. (1489a) Art 1571. and the vendor was not aware of the hidden faults or defects in the thing sold. and reimburse the expenses of the contract which the vendee might have paid. The defendant vendee shall ask. must be brought within forty days from the date of their delivery to the vendee. (1487a) Art 1569. In a sale of goods. there is an implied warranty or condition as to the quality or fitness of the goods. he shall bear the loss. If the vendor acted in bad faith. less the value which the thing had when it was lost. except that the judgment debtor shall not be liable for damages. (n) Art 1566. If he was not aware of them. from the delivery of the thing sold. with damages. the latter may demand of the vendor the price which he paid. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade. Art 1558. or should they diminish its fitness for such use to such an extent that. should have known them. that the vendor be made a co-defendant. In the case of a contract of sale by sample. (n) 36 . but said vendor shall not be answerable for patent defects or those which may be visible. (n) Art 1564. If the thing sold had any hidden fault at the time of the sale. (1481a) Art 1559. should they render it unfit for the use for which it is intended. as follows: (1) Where the buyer.LAW ON SALES Art 1557. This provision shall not apply if the contrary has been stipulated. based on the faults or defects of animals. 1565 and 1566. (1484a) Art 1562. by reason of his trade or profession. there is no warranty as to its fitness for any particular purpose. the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price. unless he is summoned in the suit for eviction at the instance of the vendee.

If the price or any part thereof has Art 1562. Where the goods have been delivered to the buyer. In the case of a contract of sale by sample. Implied warranty of quality (whether he be the grower or manufacturer or not). (n) Art 1563. as follows: (1) Where the buyer. 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. expressly or by implication. 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 ownership was transferred to the buyer. In the contract of sale of goods by description or by sample. (n) Art. and if the contract be by sample as well as description. such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. the breach of warranty by way of recoupment in diminution or extinction of the price. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade. the buyer may. return them or offer to return them to the seller and recover the price or any part thereof which has been paid. In a sale of goods. But if deterioration or injury of the goods is due to the breach or warranty. it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description. and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not). In the case of contract of sale of a specified article under its patent or other trade name. but he must make use thereof within the same period which has been fixed for the exercise of the redhibitory action. If the animal should die within three days after its purchase. Where there is a breach of warranty by the seller. (1499) Sale by sample or description Art 1481. the vendee being answerable for any injury due to his negligence. if the seller is a dealer in goods of that kind. at his election: (1) Accept or keep the goods and set up against the seller. there is no warranty as to its fitness for any particular purpose. 1599. In the sale of animals with redhibitory defects. he shall cease to be liable for the price upon returning or offering to return the goods. without prejudice to the provisions of the second paragraph of Article 1191. no other remedy can thereafter be granted. the animal shall be returned in the condition in which it was sold and delivered. unless there is a stipulation to the contrary. there is an implied warranty that the goods shall be reasonably fit for such purpose. makes known to the seller the particular purpose for which the goods are acquired. the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample. and not arising from the redhibitory fault or defect. and maintain an action against the seller for damages for the breach of warranty. there is an implied warranty that the goods shall be of merchantable quality. (3) Refuse to accept the goods. there is an implied warranty or condition as to the quality or fitness of the goods. When the buyer has claimed and been granted a remedy in anyone of these ways. or if he fails to notify the seller within a reasonable time of the election to rescind. the vendor shall be liable if the disease which cause the death existed at the time of the contract. Where the buyer is entitled to rescind the sale and elects to do so. The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample. (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received. (n) 3.LAW ON SALES This action can only be exercised with respect to faults and defects which are determined by law or by local customs. (2) Where the goods are brought by description from a seller who deals in goods of that description 37 . (n) Art 1564. (1497a) Art 1579. he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest. (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty. (n) Art 1565. the vendee shall also enjoy the right mentioned in article 1567. If the sale be rescinded. (1496a) Art 1578. (1498) Art 1580.

(c) Designation of warranties. 38 .All covenants.The retailer shall be subsidiarily liable under the warranty in case of failure of both the manufacturer and distributor to honor the warranty. or importer liable. (4) state what the warrantor will do in the event of a defect. the purchaser needs only to present to the immediate seller either the warranty card of the official receipt along with the product to be serviced or returned to the immediate seller.LAW ON SALES already been paid. malfunction or failure to conform to the warranty. (1) Sales Report. Nothing therein shall prevent the retailer from proceeding against the distributor or manufacturer. . . .All sales made by distributors of products covered by this Article shall be reported to the manufacturer. (n) 4. concurrently with the return of the goods. the date of purchase. the distributor shall likewise immediately honor the 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. In such case. If the immediate seller is the manufacturer's factory or showroom. To this end. or importer shall relieve the latter of its liability under the warranty: Provided. (6) Contrary stipulations: null and void. . No other documentary requirement shall be demanded from the purchaser. the former shall take responsibility without cost to the buyer of presenting the warranty claim to the distributor in the consumer's behalf. (5) state what the consumer must do to avail of the rights which accrue to the warranty. unless otherwise agreed upon.operative from moment of sale. (3) Retail. Art. (3) state the products or parts covered. such loss. The report made in accordance with this provision shall be equivalent to a warranty registration with the manufacturer. model of the product bought. producer. producer. or importer shall be operative from the moment of sale.Failure of the distributor to make the report or send them the form required by the manufacturer. . and (6) stipulate the period within which. however. Such registration is sufficient to hold the manufacturer. (5) In the case of breach of warranty of quality. or importer. (b) Express warranty . (2) identify the party to whom the warranty is extended.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 (d). producer. the seller shall be liable to repay so much thereof as has been paid. but subject to a lien to secure payment of any portion of the price which has been paid. RA 7394. or immediately after an offer to return the goods in exchange for repayment of the price.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. . the manufacturer shall be obligated to make good the warranty at the expense of the distributor. the following provisions shall govern the sale of consumer products with warranty: (a) Terms of express warranty. In the case of a retailer other than the distributor. The report shall contain. the buyer shall thereafter be deemed to hold the goods as bailee for the seller. and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526. For this purpose. in appropriate cases. among others. after notice of defect. Additional Provisions on Warranties. its serial number. . malfunction of failure to conform to the written warranty and at whose expense. The warranty rights can be enforced by presentment of a claim. if the seller refuses to accept an offer of the buyer to return the goods. (2) Failure to make or send report. 68. the warrantor will perform any obligation under the warranty. That the distributor who failed to comply with its obligation to send the sales reports shall be personally liable under the warranty. in the absence of special circumstances showing proximate damage of a greater amount. under its warranty.In addition to the Civil Code provisions on sale with warranties. (5) Record of purchases. name and address of the buyer. the warranty shall immediately be honored. . 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. (4) Enforcement of warranty or guarantee. producer. stipulations or agreements contrary to the provisions of this Article shall be without legal effect. the retailer shall shoulder the expenses and costs necessary to honor the warranty.All written warranties or guarantees issued by a manufacturer. or importer of the product sold within thirty (30) days from date of purchase. . Additional warranties consumer products in sale of producer. If the product was purchased from a distributor. Where the buyer is entitled to rescind the sale and elects to do so. or (2) "Limited warranty" if the written warranty does not meet such minimum requirements.

may be extended by conditions which are beyond the control of the warrantor or his representative. (2) permit the consumer to elect whether to ask for a refund or replacement without charge of such product or part. 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. where after reasonable number of attempts to remedy the defect or malfunction. (n) 2. if the buyer refuses to receive them. injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. If the implied warranty on merchantability accompanies an express warranty.For the warrantor of a consumer product to meet the minimum standards for warranty. malfunction or failure to conform to a written warranty was caused by damage due to unreasonable use thereof. the measure of damages is. the seller may offer to deliver the goods to the buyer. including damages. . if they cannot readily be resold for a reasonable price. and. ± (1) In case of breach of express warranty. (f) Breach of warranties. 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. In case the repair of the product in whole or in part is elected. BREACH OF CONTRACTS A. But if deterioration or injury of the goods is due to the breach or warranty. and if the provisions of article 1596. 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 ownership was transferred to the buyer. Remedies of the Seller 1. the seller may maintain an action against him for damages for nonacceptance. (e) Duration of warranty. In case the refund of the purchase price is elected. xxx XII. or if he fails to notify the seller within a reasonable time of the election to rescind. the difference between the contract price and the Art. however. Thereafter the seller may treat the goods as the buyer's and may maintain an action for the price. the consumer may elect to have the goods repaired or its purchase price refunded by the warrantor. or reject the goods. the seller may maintain an action for the price although the ownership in the goods has not passed. SALE OF GOODS 1. cancel and contract and recover from the seller so much of the purchase price as has been paid. fourth paragraph. BUYER¶S WARRANTY WAIVER IN CASE OF BREACH OF Art 1596. Where. the seller may maintain an action against him for the price of the goods. Although the ownership in the goods has not passed. he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest. he shall: (1) remedy such consumer product within a reasonable time and without charge in case of a defect. the amount directly attributable to the use of the consumer prior to the discovery of the non-conformity shall be deducted. under a contract of sale. as the case may be. The thirty-day period.The seller and the consumer may stipulate the period within which the express warranty shall be enforceable. such deterioration or 39 . (2) In case of breach of implied warranty. under a contract of sale. the price is payable on a certain day. The warrantor will not be required to perform the above duties if he can show that the defect.LAW ON SALES (d) Minimum standards for warranties. 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. may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. in the absence of special circumstances showing proximate damage of a different amount. the warranty work must be made to conform to the express warranty within thirty (30) days by either the warrantor or his representative. both will be of equal duration. Action for damages C. xxx Where the goods have been delivered to the buyer. the product continues to have the defect or to malfunction. irrespective of delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such price. Where the buyer wrongfully neglects or refuses to accept and pay for the goods. Where. Action for the price Art 1595. 1599. are not applicable. 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. malfunction or failure to conform to such written warranty. the consumer may retain in the goods and recover damages. Where there is an available market for the goods in question. .

Where the buyer is entitled to rescind the sale and elects to do so. The judgment or decree may be unconditional. the buyer shall be liable to the seller for labor performed or expenses made before receiving notice of the buyer's repudiation or countermand. direct that the contract shall be performed specifically. in the absence of special circumstances showing proximate damage of a greater amount. Where the goods have not been delivered to the buyer. if no time was fixed for acceptance. he shall cease to be liable for the price upon returning or offering to return the goods. at his election: 40 . the breach of warranty by way of recoupment in diminution or extinction of the price. (3) Refuse to accept the goods. the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty. from the delivery of the thing sold. if the seller refuses to accept an offer of the buyer to return the goods. at his election: (1) Accept or keep the goods and set up against the seller. (5) In the case of breach of warranty of quality. or has committed a breach thereof. no other remedy can thereafter be granted. the buyer may. 1599. or has manifested his inability to perform his obligations thereunder. return them or offer to return them to the seller and Art. (n) Art 1571. on the application of the buyer. and maintain an action against the seller for damages for the breach of warranty. Where the seller has broken a contract to deliver specific or ascertained goods. or. (n) 3. Actions arising from the provisions of the preceding ten articles shall be barred after six months. without prejudice to the provisions of the second paragraph of Article 1191. without giving the seller the option of retaining the goods on payment of damages. Where there is a breach of warranty by the seller. But if deterioration or injury of the goods is due to the breach or warranty. and the buyer has repudiated the contract of sale. Rescission Art 1597.LAW ON SALES market or current price at the time or times when the goods ought to have been accepted. 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. he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest. then at the time of the refusal to accept. such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. the buyer may. the seller shall be liable to repay so much thereof as has been paid. payment of the price and otherwise. Where the buyer is entitled to rescind the sale and elects to do so. (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received. 1599. (n) 2. the buyer repudiates the contract or notifies the seller to proceed no further therewith. such loss. and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526. Breach of warranty Art. 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. If the price or any part thereof has already been paid. Where the goods have been delivered to the buyer. If. a court may. but subject to a lien to secure payment of any portion of the price which has been paid. Specific performance Art 1598. the buyer shall thereafter be deemed to hold the goods as bailee for the seller. concurrently with the return of the goods. Where there is a breach of warranty by the seller. The profit the seller would have made if the contract or the sale had been fully performed shall be considered in awarding the damages. When the buyer has claimed and been granted a remedy in anyone of these ways. Remedies of the Buyer 1. as the court may deem just. or if he fails to notify the seller within a reasonable time of the election to rescind. (1490) 3. or upon such terms and conditions as to damages. (n) 2. Rescission recover the price or any part thereof which has been paid. or immediately after an offer to return the goods in exchange for repayment of the price. 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 ownership was transferred to the buyer.

(3) Refuse to accept the goods. unless there be just cause authorizing the fixing of a period. concurrently with the return of the goods. no other remedy can thereafter be granted. (1124) Art. in accordance with Articles 1385 and 1388 and the Mortgage Law. or immediately after an offer to return the goods in exchange for repayment of the price. and each shall bear his own damages. SALE OF IMMOVABLES AND THINGS OTHER THAN GOODS Art 1191. (n) B. The injured party may choose between the fulfillment and the rescission of the obligation. Where the buyer is entitled to rescind the sale and elects to do so. (1295) Art 1591. In case both parties have committed a breach of the obligation. the buyer shall thereafter be deemed to hold the goods as bailee for the seller. return them or offer to return them to the seller and recover the price or any part thereof which has been paid. 1192. the liability of the first infractor shall be equitably tempered by the courts. Should such ground not exist. he may immediately sue for the rescission of the sale. consequently. In this case. (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty. He may also seek rescission. SALE OF MOVABLES ON INSTALLMENT 41 . and the price with its interest. together with their fruits. 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. and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526. such loss. such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. If the price or any part thereof has already been paid. even after he has chosen fulfillment. the same shall be deemed extinguished. 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 ownership was transferred to the buyer. if the seller refuses to accept an offer of the buyer to return the goods. without prejudice to the provisions of the second paragraph of Article 1191. (5) In the case of breach of warranty of quality. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. but subject to a lien to secure payment of any portion of the price which has been paid. Rescission creates the obligation to return the things which were the object of the contract.LAW ON SALES (1) Accept or keep the goods and set up against the seller. When the buyer has claimed and been granted a remedy in anyone of these ways. The court shall decree the rescission claimed. (n) Art 1385. Where the goods have been delivered to the buyer. in the absence of special circumstances showing proximate damage of a greater amount. But if deterioration or injury of the goods is due to the breach or warranty. the breach of warranty by way of recoupment in diminution or extinction of the price. he shall cease to be liable for the price upon returning or offering to return the goods. If it cannot be determined which of the parties first violated the contract. or if he fails to notify the seller within a reasonable time of the election to rescind. Where the buyer is entitled to rescind the sale and elects to do so. This is understood to be without prejudice to the rights of third persons who have acquired the thing. (1503) C. with the payment of damages in either case. and maintain an action against the seller for damages for the breach of warranty. if the latter should become impossible. Should the vendor have reasonable grounds to fear the loss of immovable property sold and its price. he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest. the seller shall be liable to repay so much thereof as has been paid. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. The power to rescind obligations is implied in reciprocal ones. the provisions of Article 1191 shall be observed. indemnity for damages may be demanded from the person causing the loss. (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received. in case one of the obligors should not comply with what is incumbent upon him.

If the remedy chosen is rescission. he may immediately sue for the rescission of the sale. Sec 24. the provisions of Article 1191 shall be observed. he shall have no further action against the purchaser to recover any unpaid balance of the price. 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. (1454-A-a) The seller is bound to exercise reasonable care and judgment in making a resale. at his option. Where the goods are of perishable nature. with interest thereon at the legal rate. Non-Forfeiture of Payments. the latter may likewise avail of the remedies under Art 1484 (assuming case is one of sale of movables on installment). as authorized in this article. Such buyer may. PD 957. (3) Foreclose the chattel mortgage on the thing sold. (1503) 2. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy. SALE OF IMMOVABLES ON INSTALLMENT 1. PD 957. the buyer acquires a good title as against the original buyer.LAW ON SALES Art 1484. if one has been constituted. Any agreement to the contrary shall be void. or where the seller expressly reserves the right of resale in case the buyer should make default. In the case referred to in two preceding articles. 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. when the lessor has deprived the lessee of the possession or enjoyment of the thing. 213 SCRA 259) D. (n) When the seller assigns his credit to another person. but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. directly or indirectly buy the goods. Should the vendor have reasonable grounds to fear the loss of immovable property sold and its price. an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. RA 6552 ³Maceda Law´: Sale Residential Realty on Installment of 4. (n) Art 1591. Sec 23. 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. (2) Cancel the sale. Failure to pay installments. should the vendee's failure to pay cover two or more installments. (1454A-a) Art 1485. be reimbursed the total amount paid including amortization interests but excluding delinquency interests. In a contract of sale of personal property the price of which is payable in installments. ± No installment payment made by a buyer in a subdivision or condominium project for a 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. In this case. He cannot. He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale. Anticipatory breach Art 1486. Where a resale is made. a stipulation in the contract that the installments paid shall not be returned to the vendee is valid insofar as the same may not be unconscionable under the circumstances (Villanueva citing Delta Motor v. 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. should the vendee's failure to pay cover two or more installments. ± The rights of the buyer in the event of his failure to pay the installments due for reasons other than failure of the owner or developer to develop the project shall be governed by Republic Act No. should the vendee fail to pay. 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. 6552 3. Niu Kim Duan. 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 vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation. and subject to this requirement may make a resale either by public or private sale. however. Section 23 & 24 Art 1533. Rescission on Sale on Non-Residential Realty on Installment 42 . Should such ground not exist. or where the buyer has been in default in the payment of the price for an unreasonable time. PD 957.

(1156a) A. in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate. with the obligation of returning the price of the sale the expenses of the contract. (6) By novation. although lacking in some formality or other requisites demanded by a statute. (1504a) Equitable mortgage ± one which. (1124) Art 1592. and contains nothing impossible or contrary to law Badges of an equitable mortgage Art. the creditors can do away with foreclosure proceedings] Remedy: reformation of the instrument [must be brought within 10 years] 1) If the agreement is construed to be an equitable mortgage. and by conventional or legal redemption. (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. the vendee may pay. Sales are extinguished by the same causes as all other obligations. the court may not grant him a new term. He may also seek rescission. (4) When the purchaser retains for himself a part of the purchase price. or other benefit to be received by the vendees as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (2) When the vendor remains in possession as lessee or otherwise. in case one of the obligors should not comply with what is incumbent upon him. Distinguished from equitable mortgage 43 . In the sale of immovable property. After the demand. in accordance with Articles 1385 and 1388 and the Mortgage Law. 1231. as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. (4) By the confusion or merger of the rights of creditor and debtor. Reason for the rule: To curtail the practice of creditors in making their agreement of mortgage appear in the form of a sale with pacto de retro. fulfillment of a resolutory condition. rescission. 1602. nevertheless reveals the intention of the parties to charge real property as a security for debt. (1506) Art. The creditor cannot appropriate the things given by way of pledge or mortgage. and prescription. the necessary and useful expenses made on the thing. Other causes of extinguishment of obligations. or dispose of them. CONVENTIONAL REDEMPTION Conventional redemption ± the vendor reserves the right to repurchase the thing sold. with the payment of damages in either case.´ shall be considered as ³interest. A contract shall be construed as an equitable mortgage when any of the circumstance in Art. in order to circumvent the prohibition of pactum commissorium in pledge and mortgage (Art. In any of the foregoing case. 2208. any money. The power to rescind obligations is implied in reciprocal ones.LAW ON SALES Art 1191. any money or other benefit received as ³rents. and other payments made by reason of the sale. (5) When the vendor binds himself to pay the taxes on the thing sold. This is understood to be without prejudice to the rights of third persons who have acquired the thing. fruits. such as annulment. The injured party may choose between the fulfillment and the rescission of the obligation. EXTINGUISHMENT OF THE SALE Art. 1602 is present. even after he has chosen fulfillment. The contract shall be presumed to be an equitable mortgage. (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed. (5) By compensation.´ XIV. 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. are governed elsewhere in this Code. The court shall decree the rescission claimed. Any stipulation to the contrary is null and void) [because in making it appear a pacto de retro sale. unless there be just cause authorizing the fixing of a period. even after the expiration of the period. if the latter should become impossible. 1600. by those stated in the preceding articles of this Title. 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.

The creditors of the vendor cannot make use of the right of redemption against the vendee. the period cannot exceed ten years. 1612. This must be accompanied with an actual or simultaneous tender of payment of the redemption price. the vendee cannot be compelled to consent to a partial redemption. (1508a) GENERAL RULE: Period starts running at the date of the execution of the contract. none of them may exercise this right for more than his respective share. Exercise of the right to redeem 44 . in the absence of an express agreement. In a sale with a right to repurchase. b) It is only when the vendee flatly refused that tender of payment is not necessary. until after they have exhausted the property of the vendor. CA. In the case of the preceding article. Should there be an agreement. the vendor may still exercise the right within 30 days from the time the judgment becomes final. the right may be exercised by filing a suit against him and consigning the amount in court. (1512) Art. Redemption price ± includes the amount of the sale. 1606. and should they fail to do so. the vendee may demand of all the vendors or co-heirs that they come to an agreement upon the purchase of the whole thing sold. jointly and in the same contract.Vendor Must have a consideration separate and distinct from purchase price May be beyond the 10 year period May be exercised by notice period: 4 years from the date of the contract 5. Reason for limitation: A pacto de retro is a suspension of title and it is against public interest to permit such uncertainty to continue for a long time. the expenses of the contract and other legitimate payments made by the vendee by reason of such sale. It includes other stipulations which may have been agreed upon (Villanueva citing Solid Homes v. but merely part of a main contract of sale. if the latter wishes to make use of the right of redemption. (1513) Art. EXCEPTION: when there is a suspensive condition. when no period agreed upon Option to buy Principal contract and may be created independent of another contract a) A vendor must manifest his right to redeem in writing. If several persons. shall last four years from the date of the contract. However.LAW ON SALES 2) Where the agreement is upheld as a pacto de retro sale. by whom exercised Art. the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 498. (1514) Art. 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. including consignment thereof if tender cannot be made effectively Period of redemption Art. Consignation of the redemption price in court is not necessary to preserve the right. The same rule shall apply if the person who sold an immovable alone has left several heirs. should sell an undivided immovable with a right of repurchase. The right referred to in Article 1601. In the absence of the vendee a retro. since said legal provision is not restrictive nor exclusive. 275 SCRA 267) a. when period agreed upon The period is binding and it may also be extended. 1613. 1611. and the necessary and useful expenses made on the thing by the vendee. 4. as long as it does not exceed 10 years. Distinguished from option to buy Right of redemption Not a separate contract. The exercise of redemption is not limited only to the total redemption price enumerated in Art 1616 of the CC. (1515) a) Who may redeem 1. in which case each of the latter may only redeem the part which he may have acquired. cannot exist unless reserved at the time of the perfection of the main contract of sale Need not have separate consideration in order to be valid and effective May not be beyond the 10 year period Requires tender of payment of amount required by law. may compel the vendor to redeem the whole property. 1610.

Should there have been no fruits at the time of the sale and some exist at the time of redemption. in the place of one who acquires a thing by purchase or dation in payment. If at the time of the execution of the sale there should be on the land. 1608. x x x However. after the vendor has been duly heard. or by any other transaction whereby ownership is transmitted by onerous title. 1615. The vendor may bring his action against every possessor whose right is derived from the vendee. or it has been partitioned among them. notwithstanding a stipulation in the contract for payment of damages. (1520) a) The vendor can eject a lessee only after the expiration of the period of lease or of the period for redemption. but he shall respect the leases which the latter may have executed in good faith. effect of redemption Art. (n) b. and the thing sold has been awarded to one of the heirs. effect of non-redemption Art. b) The vendor a retro is entitled to the return of the thing with damages for the use and occupation if the same. as the 45 . until after they have exhausted the property of the vendor. even if in the second contract no mention should have been made of the right to repurchase. His agent c. But if the inheritance has been divided. the time he possessed the land in the last year. and in accordance with the custom of the place where the land is situated. jointly and in the same contract. without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. in order to end the co-ownership. upon the same terms and conditions stipulated in the contract. counted from the anniversary of the date of the sale. if no indemnity was paid by the purchaser when the sale was executed. b) The vendee is not entitled to recover damages by virtue of non-redemption. (1510) From whom to redeem 1. In case of real property. 1607. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor. 1606. When period of legal redemption begins Art. d. there shall be no reimbursement for or prorating of those existing at the time of redemption. from whom to redeem Art. sold their interests absolutely to the same person who previously bought the share of a co-owner subject to a right of redemption. 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. visible or growing fruits. should sell an undivided immovable with a right of repurchase. none of them may exercise this right for more than his respective share. LEGAL REDEMPTION Legal redemption ± right to be subrogated. or by the vendor. they shall be prorated between the redemptioner and the vendee.LAW ON SALES 2. whether the thing be undivided. Vendee a retro 2. a) The ownership of the vendee becomes absolute and irrevocable by operation of law. B. The same rule shall apply if the person who sold an immovable alone has left several heirs. (1517) Art. 1618. the latter can be compelled to redeem the whole property. 1617. His heirs or assigns 3. If the vendee should leave several heirs. the action for redemption cannot be brought against each of them except for his own share. 1623. His agent b) The creditors of the vendor cannot make use of the right of redemption against the vendee. (1519a) Art. 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. giving the latter the part corresponding to Art. His heirs or assigns 3. the action for redemption may be instituted against him for the whole. c) When the co-owners of an indivisible immovable. b) If several persons. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee.

(Villanueva citing Alonzo v.. they may only do so in proportion to the share they may respectively have in the thing owned in common. is alienated. who is a stranger. The owners of adjoining lands shall also have the right of redemption when a piece of rural land. the owner whose intended use of the land in question appears best justified shall be preferred. The deed of sale shall not be recorded in the Registry of Property. 46 . If two or more adjoining owners desire to exercise the right of redemption at the same time. they may only do so in proportion to the share they may respectively have in the thing owned in common. (n) a) When the right may be exercised: when a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a other apparent servitudes for the benefit of other estates. (1522a) a) When the right may be exercised: when a share of a co-owner is sold to a third person. Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time. the owner of any adjoining land has a right of pre-emption at a reasonable price. Redemption among adjoining owners The law distinguishes between rural and urban lands. to consolidate scattered small agricultural lands under one ownership c) When the right is not available o Adjacent lands which are separated by brooks.LAW ON SALES case may be. (1523a) a) When the right may be exercised: when a piece of rural land not exceeding 1 ha. having been bought merely for speculation. If the re-sale has been perfected. to prevent the rural land not exceeding 1 ha. Rural lands Art. 1621. This right is not applicable to adjacent lands which are separated by brooks. the area of which does not exceed one hectare. Redemption among co-owners Art. unless the grantee does not own any rural land. ravines. roads and other apparent servitudes for the benefit of other estates [because owners cannot be said to be adjoining owners anymore] d) If two or more adjoining owners desire to exercise the right of redemption at the same time. b. If the price of the alienation is grossly excessive. roads and When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption. from passing into the hands of a person other than the adjacent owners who can make use of the alienated property for the development of their own lands 2. (1524a) Laches seems to be a special exception to notice rule under Art 1623. a. and should both lands have the same area. The distinction is based on the character of the community or vicinity in which it is found. 2. unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. Should two or more co-owners desire to exercise the right of redemption. The right of redemption of co-owners excludes that of adjoining owners. IAC) 1. c) When the right is not available 1) Where the share of the co-owner is sold to another co-owner 2) Where the share of a co-owner was merely mortgaged d) Should two or more co-owners desire to exercise the right. the owner of the adjoining land of smaller area shall be preferred. the one who first requested the redemption. the owner of the adjoining land shall have a right of redemption. are sold to a third person. ravines. drains. the redemptioner shall pay only a reasonable one. is about to be resold. 1620. and should both lands have the same area. This is to encourage the maximum development and utilization of lands. the one who first requested the redemption. drains. also at a reasonable price. Urban lands Art. b) Thrust of the law: to reduce the number of coowners until the community is done away with. the owner of the adjoining land of smaller area shall be preferred. 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. is alienated [unless the grantee does not own any rural land] b) Thrust of the law 1. 1622.

may be redeemed in the manner hereinafter provided. The debtor may exercise his right within thirty days from the date the assignee demands payment from him. or on some part thereof. shall be subject to repurchase by the applicant. Rule 39. (b) A creditor having a lien by virtue of an attachment. (1535) a) When the right may be exercised: when a credit or other incorporeal right in litigation is sold. when proper. 119. having been bought merely for speculation. Assignment of a chose in action Art. penalties and costs. c) When the right is not available: When the urban land is transferred under an ³exchange´ of properties [because there is no resale] d) When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption. the taxpayer. b) Thrust of the law: to discourage speculation in lawsuits which would make the courts an instrument for profit.LAW ON SALES reasonable time. by the following persons: (a) The judgment obligor. Sec. Who may redeem 1. or any one for him may redeem said property by paying to the Commissioner or the latter's Revenue Collection Officer the full amount of the taxes and penalties. Forfeiture to Government for Want of Bidder. the forfeiture shall become absolute. the Internal Revenue Officer conducting the sale shall declare the property forfeited to the Government in satisfaction of the claim in question and within two (2) days thereafter. legal heirs b) Period of redemption: within 5 years from the date of conveyance Redemption in tax sales NIRC of 1997. When a credit or other incorporeal right in litigation is sold. but if the property be not thus redeemed. anyone for him Period of redemption: within 1 year from the date of sale Redemption by a judgment debtor Rules of Civil Procedure. the debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor. or any part thereof sold separately. the delinquent taxpayer 2. his widow 3. the judicial costs incurred by him. Who may redeem real property so sold. Real property sold as provided in the last preceding section. shall make a return of his proceedings and the forfeiture which shall be spread upon the records of his office. the owner whose intended use of the land in question appears best justified shall be preferred. upon registration with his office of any such declaration of forfeiture. Every conveyance of land acquired under a free patent or homestead. (Art. 27. a) Who may redeem 1. or his successor in interest in the whole or any part of the property. 1634. together with interest thereon and the costs of sale. his widow or legal heirs within 5 years from the date of conveyance. Within one (1) year from the date of such forfeiture. 215. Sec. to transfer the title of the property forfeited to the Government without the necessity of an order from a competent court. subsequent to the lien under which the property 47 . to a creditor in payment of his credit. It shall be the duty of the Register of Deeds concerned.In case there is no bidder for real property exposed for sale as herein above provided or if the highest bid is for an amount insufficient to pay the taxes. Sec. judgment or mortgage on the property sold. is about to be resold b) Thrust of the law: to discourage speculation in real estate and aggravate the housing problem. the applicant 2. c) When the right is not available [because the assignee has a valid interest in the right or property assigned] 1. to the possessor of a tenement or land which is subject to the assigned credit. and the interest on the price from the day on which the same was paid. 1635) Redemption of homestead CA 141. . When the assignment of a credit was made before any litigation 2) Assignments made to a co-heir or co-owner of the credit. A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered.

his successors-in-interest. each shall be entitled to said right of redemption only to the extent of the area actually cultivated by him. That where there are two or more agricultural lessees. mortgage or assignment of goods. 47. a) Who may redeem 1. Provided. with interest thereon at rate specified in the mortgage. creditor having a lien attachment Notwithstanding Act 3135. BULK SALES LAW ACT NO. and all the costs and expenses incurred by the bank or institution from the sale and custody of said property less the income derived therefrom. 3952. the registration of the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3) months after foreclosure. shall have the right to redeem the property in accordance with this provision until. further. his successors-in-interest 3. but not after.] a) Who may redeem 1. In extrajudicial foreclosure of mortgage. 3135. Lessee¶s Right of Redemption. the debtor. Such redeeming creditor is termed a redemptioner.In the event of foreclosure. any judicial or judgment creditor of said debtor. provisions or materials. his successors. wares. An act to regulate the sale. a) Who may redeem: the lessee who has no knowledge of the sale to a third person b) Period of redemption: within 2 years from the registration the sale c) Conditions for redemption: landholding sold must be redeemed the entire by virtue of an Period of redemption: within 1 year from the date of registration of the certificate of sale Redemption in extrajudicial foreclosure of mortgages Act No.in-interest 3. [This provision is taken from Baviera only± not sure if this is the exact wording of the law. the debtor 2. . in bulk. each shall be entitled to said right of redemption only to the extent of the area actually cultivated by him XV. 12. judicial creditor/judgment creditor of debtor 4. Sec. and prescribing penalties for the violation of the provisions thereof. any person having a lien on the property the Period of redemption: within 1 year from the date of the sale Redemption in judicial foreclosure of mortgages RA 8791 (The General Banking of Law of 2000). or any junior encumbrancer may redeem the property within 1 year from the date of the sale. to redeem the property by paying the amount due under the mortgage deed. the latter shall have the right to redeem the same at a reasonable price and consideration. Any petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding. transfer. Sec. Sec. the judgment obligor 2. That the entire landholding sold must be redeemed: Provided. Legal right to redeem under the Agrarian Reform Code RA 3844.LAW ON SALES was sold. the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right within one year after the sale of the real estate. whichever is earlier.-In case the landholding is sold to a third person without the knowledge of the agricultural lessee. d) where there are two or more agricultural lessees. merchandise. juridical persons whose property is being sold pursuant to an extrajudicial foreclosure. whether judicially or extrajudicially. EXCEPTION: When the mortgagee is a bank or a banking institution. The right of redemption under this Section may be exercised within two years from the registration of the sale. of any mortgage on real estate which is security for any loan or other credit accommodation granted. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their expiration. the purchaser at the auction sale concerned whether in a judicial or extra-judicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. GENERAL RULE: No right to redeem is granted to the debtor-mortgagor when there has been judicial foreclosure of real estate mortgage. and shall have priority over any other right of legal redemption. 6. Foreclosure of Real Estate Mortgage. However. 48 .

Sec. treasurer. provisions or materials purchased upon credit or on account of money borrowed. to deliver to such vendee. and which shall become due and owing by _____________ (vendor or mortgagor) to such creditors. transferor. mortgagor. of the price. mortgagor. Sec. and any such sale. or sale. mortgagor. or any person acting for. or assignor. and that there are no creditors holding claims due or which shall become due. 5. transferor. ² Any sale. shall be deemed to be a sale and transfer in bulk. to carry on the business of which said goods. terms conditions of the sale. and shall receive any part of the purchase price. and in that case. in contemplation of this Act: Provided. Inventory. who shall knowingly or willfully make. transfer or execution of a mortgage upon any stock of goods. and notify every creditor whose name and address is set forth in the verified statement of the vendor. mortgagor. merchandise. merchandise. wares. the provisions of this section shall not apply. 2. the sworn statement provided for in section three hereof. as provided for in section three hereof. mortgage. personally appeared __________________ (vendor. Sec. or on behalf of any such vendor. which shall not include the names of all such creditors. which statement shall be verified by an oath to the following effect: PHILIPPINE ISLANDS PROVINCE OR CITY OF _________________} Before me. bearing cedula No. transferor. mortgagor. deposes and states that the foregoing statement contains the names of all of the creditors of ________________ (vendor. transferor. wares. ² It shall be the duty of every person who shall sell. transfer. mortgagee. wares. or shall contain any false or untrue 49 . by me being first duly sworn. provisions or materials are a part. ______________________ Subscribed and sworn to before me this __________ day of _________. and without applying the purchase or mortgage money of the said property to the pro rata payment of the bona fide claim or claims of the creditors of the vendor or mortgagor. or assign any stock of goods. in bulk. Any vendor. or deliver or cause to be made or delivered. with the correct amount due and to become due to each of them. provisions or materials. transferor. or of all. Sale and transfer in bulk. transferor. mortgagee. mortgagor or assignor of any stock of goods. mortgagee. merchandise. merchandise. together with the amount of indebtedness due or owing. or. transfer. the undersigned authority. or if the vendee. without having first delivered to the vendee or mortgagee or to his or its agent or representative. or agent. or assign any stock of goods. in bulk. or assignor. in bulk. or substantially all. as shown upon such sworn statement. to make a full detailed inventory thereof and to preserve the same showing the quantity and. provisions or materials. produces and delivers a written waiver of the provisions of this Act from his creditors as shown by verified statements. wares. is the amount now due and owing. agent or representative. before receiving from the vendee. mortgage or assignment of all. at least ten days before transferring possession thereof. and that the amount set opposite each of said respective names. he shall be deemed to have violated this Act. or assignor. wares. mortgagor or assignor of each article to be included in the sale. at _____________. or agent be a corporation. then to the president. provisions. Statement of creditors. then. however. or assignor. ² Whenever any person shall sell. of the fixtures and equipment used in and about the business of the vendor. or his. or any promissory note. provisions or materials in bulk. as the case may be). transfer or mortgage. for or on account of goods. of the business or trade theretofore conducted by the vendor. or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor. merchandise. transfer. Fraudulent and void sale. or assignment. of the names and addresses of all creditors to whom said vendor or mortgagor may be indebted. That if such vendor. or its agent or representative any part of the purchase price thereof. merchandise. mortgagor. memorandum. the cost price to the vendor. Sec. or any promissory note. for cash or on credit. wares. 4. or assignor. vice-president. transfer. mortgage. transfer or mortgage shall be fraudulent and void." Sec. transferor or assignor. or mortgagor) together with their addresses. for cash or on credit. a written statement. or to become due or owing by said vendor or mortgagor to each of said creditors. transferor. transfer or mortgage. other than as set forth in said statement. mortgagor. upon his oath. or other evidence of indebtedness for said purchase price or advance upon mortgage. mortgage or assignment of a stock of goods. then to a member thereof. transfer. at least ten days before the sale. 3. so far as is possible with the exercise of reasonable diligence. sworn to substantially as hereinafter provided. mortgagor. ² It shall be the duty of every vendor. a statement.LAW ON SALES Sec 1. personally or by registered mail. if such vendee or mortgagee be a partnership firm. or substantially all. ____________ issued at ___________ on the day of _____________ who. 6. wares. or assignor. This Act shall be known as "The Bulk Sales Law. 19____. merchandise. or other evidence therefor. mortgage. transferor. secretary or manager of said corporation. provisions or materials.

9. A. however. mortgage or assignment of all. 8. mortgagor. Sec. mortgage or assignment of all. b) The law penalizes any intentional omission of the names of the creditors in the required list. but kept up and replenished from time to time (with the extension of credit comes the presupposition of continuance in the business of merchandising) Types of transactions covered 1. that if such vendor. The sworn statement containing the names and addresses of all creditors of the vendor or mortgagor provided for in section three of this Act. fine of < P5. or of all. mortgagor. It shall be unlawful for any person. or both such imprisonment and fine. receivers. or public officers. merchandise. merchandise. acting under judicial process. the provisions of this section shall not apply. detailed inventory of the goods sold or mortgaged d) notification to creditors at least 10 days before delivery C. For the registration of each such sworn statement a fee of five pesos shall be charged to the vendor or mortgagor of the stock of goods. transfer. to prescribe and adopt from time to time such rules and regulations as may be deemed necessary for the proper and efficient enforcement of the provisions of this Act. and in that case. shall be deemed to be a sale and transfer in bulk. any sale. transfer. Sec. nor more than five years. etc. administrators. with the approval of the Department Head. transfer. or assignor. EFFECTS OF NON-COMPLIANCE a) If the purchase or mortgage money is not applied pro-rata to the payment of the bona fide claims of the creditors of the vendor/mortgagor. transfer. or substantially all. 10. mortgagor. Sec. 2. Sec. who is hereby empowered. etc. provisions. shall be deemed to have violated the provisions of this Act. penalty imposable to the debtor Sec. COMPLIANCE REQUIREMENT a) delivery of the list of creditors to the vendee or mortgagee before receiving the consideration b) application of the consideration to the prorata payment of the claims of creditors appearing in the list c) preparation of a full. to transfer title to the same without consideration or for a nominal consideration only. mortgage or assignment of a stock of goods. This Act shall take effect on its approval. or any false or untrue statement therein. merchandise. or assignor. in bulk. with the correct amount due or to become due. be punished by imprisonment not less than six months. provisions or materials. any sale. as owner of any stock of goods. mortgage or assignment of all. 3. transferor. transferor or assignor produces and delivers a written waiver of the provisions of this Act from his creditors as shown by verified statements. the sale. of the business or trade theretofore conducted by the vendor. or mortgage shall be fraudulent and void. Any sale. firm or corporation. or substantially all.000. in the discretion of the court. wares. transfer. 11. in contemplation of this Act: Provided. Stock ± common use when applied to goods in a mercantile house refers to those which are kept for sale B. then. transferor. or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor.LAW ON SALES statement. Any person violating any provision of this Act shall. Sec. mortgagor. or both. or substantially all. RA 3952 a) Thrust of the law: to protect persons who extended credit to merchants. shall be registered in the Bureau of Commerce. merchandise. upon conviction thereof. wares. provisions or materials otherwise than in the ordinary course of trade and the regular prosecution of the business 2. of the fixtures and equipment used in and about the business of the vendor. The law also penalizes any transfer of title in bulk. or substantially all. transferor or assignor. The provisions of this Act shall be administered by the Director of the Bureau of Commerce and Industry. any sale. 7. or any sale. of the fixtures and equipment used in and about the business of the vendor. 50 . mortgage or assignment of a stock of goods. transfer. assignees in insolvency. wares. of the business or trade theretofore conducted by the vendor. or fined in sum not exceeding five thousand pesos. Nothing in this Act contained shall apply to executors. provisions or materials. relying on the fact that their stock of merchandise was not to be sold in bulk. wares. in bulk. 12. without consideration or for a nominal consideration only PENALTY: 6 months ± 5 years imprisonment. Sec.

wearing apparel. 3. Category C . processed or assembled by a manufacturer through a single outlet. . . Unless the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines.LAW ON SALES Sec.Enterprises specializing in high-end or luxury products with a paid up capital of the equivalent in Philippine Pesos of Two Hundred Fifty Thousand US Dollars (US$250.500. Category D .000. the Philippine retail industry is hereby liberalized to encourage Filipino and foreign investors to forge an efficient and competitive retail trade sector in the interest of empowering the Filipino consumer through lower prices. 1.00) per store may be wholly-owned by foreigners. The foreign investor shall be required to maintain in the Philippines. promoting and welcoming productive investments that will bring down prices for the Filipino consumer.000.00) shall be reserved exclusively for Filipino citizens and corporations whollyowned by Filipino citizens. laborer.000. associations and corporations formed and organized under the laws of the Philippines may. electronics and other personal effects. 2.000. .00). and for other purposes. Sec. Definition. better services and wider choices. The actual use in Philippine operations of the inwardly remitted minimum capital requirements shall be monitored by the SEC. (c) Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital: Provided. branded or designer clothing and footwear.Enterprises with a minimum paidup capital of the equivalent in Philippine Pesos of Two Million Five Hundred Thousand US Dollars (US$2. subject to the following categories: Category A .It is the policy of the State to promote consumer welfare in attracting. or worker. the full amount of the prescribed minimum capital. Treatment of Natural-Born Citizen Who Has Lost His Philippine Citizenship. as amended.000. engage or invest in the retail trade business.500. stimulate economic growth and enable Philippine goods and services to become globally competitive through the liberalization of the retail trade sector. An act liberalizing the retail trade business. higher quality if goods. occupation or calling of habitually selling direct to the general public merchandise.Enterprises with a paid-up capital of the equivalent in Philippine Pesos of Seven Million Five Hundred Thousand US Dollars (US$7.00) may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to not more than (60%) of total equity. with the DTI. but are not limited to. Category B .500. commodities or goods for consumption. Title. Sec. .Foreignowned partnerships. leisure and sporting goods. that the restaurant is incidental to the hotel business.As used in this Act: (1) "Retail Trade" shall mean any act. however.A naturalborn citizen of the Philippines who has lost his Philippine citizenship but who resides in the Philippines shall be granted the same rights as Filipino citizens for purposes of this Act. RETAIL TRADE LIBERALIZATION ACT RA 8762.Enterprises with paid-up capital of the equivalent in Philippine Pesos of less than Two Million Five Hundred Thousand US Dollars (US$2. to the general public the products manufactured. Luxury goods shall include. 5. create more jobs. 4. processed or produced by him if his capital does not exceed One Hundred Thousand Pesos (P100. assist small manufacturers. that in no case shall the investments for establishing a store in Categories B and C be less than the equivalent in Philippine Pesos of Eight Hundred Thirty Thousand US Dollars (US$830. upon registration with the Securities and Exchange Commission (SEC) and the Department of Trade and Industry (DTI) or in case of foreign-owned single proprietorships. Declaration of Policy. (b) Sales by a farmer or agriculturist selling the products of his farm.000.00) or more maybe wholly owned by foreigners: Provided. 51 . irrespective of capitalization. but the restriction of this law shall not apply to the following: (a) Sales by a manufacturer. XVI." Sec.This Act shall be known as the "Retail Trade Liberalization Act of 2000. repealing for the purpose RA 1180. and (d) Sales which are limited only to products manufactured. Foreign Equity Participation. (2) "High-end or luxury goods" shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the highest income groups. products such as: jewelry.00). promote tourism. Sec. Pursuant to this policy. . processor.

.000. 12.000. Sec. restaurants and sari-sari stores and such other similar retailing activities: Provided. as amended. managers and other officers responsible for the violation. Public Offering of Shares of Stock. 52 .The monitoring and regulation of foreign sole proprietorships. or judicial entities formed or incorporated in. and all other laws.000. door-to-door selling. 11. associations or corporations allowed to engage in retail trade shall be the responsibility of the DTI. Prohibited Activities of Qualified Foreign Retailers. . .00) may purchase only up to a minimum of sixty percent (60%) of the equity thereof within the first two (2) years from the effectivity of this Act and thereafter. before they are allowed to conduct business in the Philippines. suffer dismissal and permanent disqualification from public office.No foreign retailer shall be allowed to engage in retail trade in the Philippines unless all the following qualifications are met: (a) A minimum of Two Hundred Million US Dollars (US$200. directors. at least thirty percent (30%) of the aggregate cost of the stock inventory of foreign retailers falling under Categories B and C and ten percent (10%) for Category D.00). which will verify or confirm inward remittance of the minimum required capital investment. In the case of associations. Qualifications of Foreign Retailers. partnerships. president. Sec.00). and Fifty Million US Dollars (US$50. Republic Act No. The DTI shall keep a record of qualified foreign retailers who may. Implementing Agency. 13. 3018. is hereby repealed. This shall include resolution of conflicts. . 1180.Any person who shall be found guilty of violation of any provision of this Act shall be punished by imprisonment of not less than six (6) years and one (1) day but not more than eight (8) years. upon compliance with law. shall be allowed to engage in retail trade in the Philippines.Republic Act No.000. 10. subject to the provisions of this Act. . Sec.000.000. . in addition to the penalty prescribed herein.000.000. . Rules and Regulations. 9. the NEDA and the BSP. in coordination with the SEC.LAW ON SALES Failure retail stores shall secure a certification from the Bangko Sentral ng Pilipinas (BSP) and the DTI. 8. 6. he shall.00) net worth in its parent corporation for Categories B and C.00) net worth in its parent corporation for Category D. . Sec.500. shall formulate and issue the implementing rules and regulations necessary to implement this Act within ninety (90) days after its approval. Penalty Clause. shall be made in the Philippines. Sec. It shall ensure that the parent retail trading company of the foreign investor complies with the qualifications on capitalization and track record prescribed in this section. as amended. The DTI.00) but not more than Twenty Million Pesos (P20. and a fine of not less than One Million Pesos (P1. If the Filipino offender is a public officer or employee. (c) Five (5)-year track record in retailing. The DTI is hereby authorized to pre-qualify all foreign retailers.000. 7.For ten (10) years after the effectivity of this Act. Sec. partnerships or corporations. Promotional of Locally Manufactured Products. he shall be deported immediately after service of sentence. Repealing Clause.Foreign Investors acquiring shares from existing retail stores whether or not publicly listed whose net worth is in excess of the peso equivalent of Two Million Five Hundred Thousand US Dollars (US$2. Sec. If the offender is not a citizen of the Philippines. and The Inter-Agency Committee on Tariff and Related Matters of the National Economic Development Authority (NEDA) Board shall formulate and regularly update a list of foreign retailers of high-end or luxury goods and render an annual report on the same to Congress. establish retail stores in the Philippines. the penalty shall be imposed upon its partners. Sec.000. (b) Five (5) retailing branches or franchises in operation anywhere around the world unless such retailers has at least one (1) store capitalized at a minimum of Twenty-Five Million US Dollars (US$25. countries which allow the entry of Filipino retailers. (d) Only nationals from. they may acquire the remaining percentage consistent with the allowable foreign participation as herein provided.Qualified foreign retailers shall not be allowed to engage in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or carts. that a detailed list of prohibited activities shall hereafter be formulated by the DTI.All retail trade enterprises under Categories B and C in which foreign ownership exceeds eighty percent (80%) of equity shall offer a minimum of thirty percent (30%) of their equity to the public through any stock exchange in the Philippines within eight (8) years from their start of operations. Foreign Investors Acquiring Shares of Stock of Local Retailers. the use of sales representatives.000.

5) RETAIL TRADE D. 12) IN THE E. enjoyed or acquired in violation of the provisions hereof but in no case less than P5000. sales by a manufacturer. commodities or goods for consumption EXCEPT: 1. SCOPE AND DEFINITION OF RETAIL TRADE The fact that the citizen of the Philippines or of any specific country charged with a violation of this Act had. privilege. Retail Trade ± any act. HOW ALIENS MAY INVEST IN RETAIL TRADE IN THE PHILIPPINES (Sec. or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens. Unlawful use. Simulation of minimum capital stock ² In all cases in which a constitutional or legal provision requires that. or association which. . franchise. franchise or privilege. franchises or privileges.LAW ON SALES executive orders. 2. RIGHTS OF FILIPINOS FORMER NATURAL-BORN Natural-born Filipinos who have lost their citizenship but who reside in the Philippines shall be given the same rights as Filipino citizens with respect to this law.. or leases. credit or other assets the value of which shall at least be equivalent to said holdings. Sec. sales by a farmer or agriculturist of the products of his farm 3. The president or managers and directors or trustees of corporations or associations convicted of a violation of this section shall be punished by imprisonment of not less than five nor more than fifteen years.g. at the time of the acquisition of his holdings in the corporations or associations referred to in section two of this Act. 2-A.This Act shall take effect fifteen (15) days after its approval and publication in at least two (2) newspapers of general circulation in the Philippines. 14. the other provisions not otherwise affected thereby shall remain in force and effect. 11. b) SEC Opinion No. and any alien or foreigner profiting thereby. 53 . F. operation of pharmacy by a hospital) within the purview of the Act (Villanueva) B. exploitation or enjoyment thereof by a person. Sec. Exploitation or enjoyment ² Any person. shall be evidence of a violation of this Act. permits or allows the use. not less than a certain per centum of its capital must be owned by citizens of the Philippines or of any other specific country. Penalty ² In all cases in which any constitutional or legal provisions requires Philippine or any other specific citizenship as a requisite for the exercise or enjoyment of a right. rules and regulations or parts thereof inconsistent with this Act are repealed or modified accordingly. An act to punish acts of evasion of the laws on the nationalization of certain rights. 15. in order that a corporation or association may exercise or enjoy a right. processor. occupation or calling of habitually selling direct to the general public merchandise. Sec.000 pesos 2. franchise or privilege. it shall be unlawful to falsely simulate the existence of such minimum stock or capital as owned by such citizens. corporation. Effectivity. or in any other way.2 Sec. Sec. Separability Clause. property or business. shall be punished by imprisonment for not less than five nor more than fifteen years. any citizen of the Philippines or of any other specific country who allows his name or citizenship to be used for the purpose of evading such provision. sales limited only to products manufactured. laborer or worker of products made by him if his capital is less than or equal to 100. series of 2003: Engaging in the selling of merchandise as an incident to the primary purpose of a corporation does not constitute retail trade (e. A.If any provision of this Act shall be held unconstitutional. which is enjoyed or acquired in violation of the provisions hereof but in no case less than P5000. CA 108 (Anti-Dummy Act). and by a fine of not less than the value of the right franchise or privilege. . no real or personal property. 8) RULES ON FOREIGN RETAILERS PHILIPPINES PENALTY CLAUSE (Sec. transfers or conveys said right. franchise. C. franchise or privilege. a right. corporation or association not possessing the requisites prescribed by a the Constitution or the laws of the Philippines. the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines or of any other specific country. and by a fine not less than the value of the right. 1. CATEGORIES OF ENTERPRISES (Sec. having in its name or under its control. for the purpose of evading said provision. processed or assembled by the manufacturer in a single outlet irrespective of capitalization a) ³General public´ : activities of seller must be such that the target clientele are not only a particular person or group of persons.

and any person who knowingly aids.3 Sec. That any person. or in any manner permits or allows any person. however. administration or control thereof. 4. property or business to a person. That the election of aliens as members of the board of directors or governing body of corporations or associations engaging in partially nationalized activities shall be allowed in proportion to their allowable participation or share in the capital of such entities. he shall be entitled to the reward hereof in the sum equivalent to twenty-five per centum of the fine actually paid to or received by the Government. 3. That the president. privilege. 6 Sec. property or business. resulting in the conviction of any person or corporation profiting thereby or involved therein. Reward to informer. franchise. associations or partnerships violating the provisions of this section shall be criminally liable in lieu thereof: Provided. be dissolved. Approved. upon proper court proceedings. This Act shall take effect upon its approval. ² In case of conviction under the provisions of this Act. employee or laborer therein with or without remuneration except technical personnel whose employment may be specifically authorized by the Secretary of Justice. further. and shall be exempted from the penal liabilities provided for in this Act. the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines. the exercise and enjoyment of which are expressly reserved by the Constitution or existing laws to citizens of the Philippines or of any other specific country. corporation or association shall. twentyfive per centum of any fine imposed shall accrue to the benefit of the informer who furnishes to the Government original information leading to said conviction and who shall be ascertained and named in the judgment of the court. 54 . The exercise. whether as an officer. forfeit such right. finally. not possessing the qualifications required by the Constitution. franchise. corporation or association not otherwise qualified under the Constitution. franchise or privilege enjoyed or acquired in violation of the provisions hereof but in no case less than five thousand pesos: Provided. If the informer is a dummy. 4 Sec. if both live together. 2-C. Sec. privilege. property or business. 3-A. exploit or enjoy a right. or existing laws to acquire. shall be cause for the dismissal of such public official. shall constitute a prima facie evidence of violation of the provisions of Section 2-A hereof. privilege. Any corporation or association violating any of the provisions of this Act shall.LAW ON SALES privilege. operation. to intervene in the management. 1936. 2-B. or the provisions of the existing laws. use. in addition to the penalty imposed herein.5 Sec. and the property or business enjoyed or acquired in violation of the provisions of this Act: And provided. managers or persons in charge of corporations. assists or abets in the planning consummation or perpetration of any of the acts herein above enumerated shall be punished by imprisonment for not less than five nor more than fifteen years and by a fine of not less than the value of the right. October 30. who shall voluntarily take the initiative of reporting to the proper authorities any violation of the provisions of this Act and assist in the prosecution. Any violation of the provisions of this Act by the spouse of any public official. possession or control by a Filipino citizen having a common-law relationship with an alien of a right.

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