SYLLABUS AND OUTLINE

SALES AND LEASE & CREDIT TRANSACTIONS

By: ATTY. RENE C. ESTOCAPIO

INTRODUCTION

Prologue: To be successful in life, we should know and

master the laws on business transactions

“Seven Steps to Success

1) Make a commitment to grow daily.
2) Value the process more than events.
3) Don't wait for inspiration.
4) Be willing to sacrifice pleasure for opportunity.
5) Dream big.
6) Plan your priorities.
7) Give up to go up.”
― John C. Maxwell

The greatest day in your life and mine is when we take total responsibility for our attitudes. That's the day
we truly grow up.”
― John C. Maxwell
“A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough
to correct them.”
― John C. Maxwell
“Life is 10% what happens to me and 90% of how I react to it.”
― John C. Maxwell
“If we are growing we are always going to be outside our
comfort zone.”
― John C. Maxwell

 “You don’t close a sale, you open a relationship if you want to build a long-term, successful
enterprise.” ~Patricia Fripp - Share this Quote!
 “Whenever an individual or a business decides that success has been attained, progress stops.”
~Thomas J. Watson Jr  – Share this Quote!
 “Everyone lives by selling something.” ~Robert Louis Stevenson – Share this Quote!
 “In order to succeed, we must first believe that we can.” ~Nikos Kazantzakis - Share this Quote!
 “How you think when you lose determines how long it will be until you win.” ~Gilbert K.
Chesterton - Share this Quote!
 “As you travel down life’s highway…whatever be your goal, you cannot sell a doughnut without
acknowledging the hole.” ~Harold J. Shayler
 “Every sale has five basic obstacles: no need, no money, no hurry, no desire, no trust.”  ~Zig
Ziglar - Share this Quote!
 “And old Dave, he’d go up to his room, y’understand, put on his green velvet slippers – I’ll never
forget – and pick up his phone and call the buyers, and without leaving his room, at the age of eighty-
four, he made his living. And when I saw that, I realized that selling was the greatest career a man could
want.” ~Arthur Miller (1915 – 2005), Death of a Salesman, 1949.
 “A mediocre idea that generates enthusiasm will go further than a great idea that inspires no one.”
~Mary Kay Ash  - Share this Quote!
 “Catch a man a fish, and you can sell it to him. Teach a man to fish, and you ruin a wonderful
business opportunity.” ~Karl Marx – Share this Quote!
 “On any given Monday I am one sale closer and one idea away from being a Millionaire.” ~Larry D.
Turner - Share this Quote!
 “It’s just called ‘The Bible’ now. We dropped the word ‘Holy’ to give it a more mass-market appeal.”
~Editor, Hodder & Stoughton The Daily Telegraph, 30 Dec 1989. - Share this Quote!
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 “It used to be that people needed products to survive. Now products need people to survive.”
~Nicholas Johnson - Share this Quote!
 “Most people think “selling” is the same as “talking”. But the most effective salespeople know that
listening is the most important part of their job.” ~Roy Bartell
 “If you work just for money, you’ll never make it. But if you love what you are doing,and always put
the customer first, success will be yours.” ~Ray Kroc
 “I have never worked a day in my life without selling. If I believe in something, I sell it, and I sell it
hard.” ~Estée Lauder - Share this Quote!
 “A smart salesperson listens to emotions not facts.” ~Unknown - Share this Quote!
 “Sales are contingent upon the attitude of the salesman, not the attitude of the prospect.” ~William
Clement Stone - Share this Quote!
 “Victory is sweetest when you’ve known defeat.” ~Malcolm Forbes - Share this Quote!
 “Day by day, what you do is who you become.” ~Heraclitus - Share this Quote!
 “The wise man puts himself last and finds himself first.” ~Lao Tsu – Share this Quote!
 “Good ideas are common – what’s uncommon are people who will work hard enough to bring them
about.” ~Ashleigh Brilliant
 “Falling down is how we grow. Staying down is how we die.” ~Brian Vaszily - Share this Quote!
 “Life is like riding a bicycle. To keep your balance, you must keep moving.” ~Albert Einstein
 “The difference between involvement and commitment is like ham and eggs. The chicken is involved;
the pig is committed.” ~Martina Navratilova

Importance: A weapon in business/ A contribution to

practical business sense/make us relevant and well-
equipped in our daily economic transactions

Grading system:

1. 50% exams;
2. 30% quizzes and projects
3. 20% class standing: recitation & attendance

Class policy:
1. Attendance
2. Projects
3. Recitation
4. Behavior
5. Coordinator

OBJECTIVE OF THE COURSE

1. To gain an adequate and thorough academic

appreciation of the subject matter;
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2. To know the rights and obligations involving

commercial transaction and proper procedure to
facilitate and execute the same;
3. To gain a practical benefit of the laws on sales
and credit transactions

OUTLINE

I. SALES

A. NATURE & FORM OF THE CONTRACT

1458
1. Concept of contract of sale- relationship of seller and buyer/ bound by co-
existence of offer and acceptance of a valid object/ price certain in money or
its equivalent

COS CTS
Effect of failure to pay Resolutory condition Positive suspensive
that puts an end to condition
transaction
Transfer of ownership Title passes to vendee Ownership is retained
after compliance of by vendor
obligation
Effect of delivery Ownership is loss Delivery does not affect
unless rescinded ownersship

2. Characteristics of a contract of sale : consensual, bilateral, commutative,

onerous, principal, nominate
3. Essential requisites of a contract of sale: consent, object, cause or
consideration
4. Natural (warranty against eviction/hidden defects) and accidental elements
(additional stipulations
5. Two kinds of contract of sale

Conditional sale Absolute sale

Vendor has right to rescind the Title to property passes to the
contract in case of vendee; vendor has no right to
nonfulfillment of condition rescind
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1459
1. Requisites concerning objects : determinate/or lawful/not be impossible >
within the commerce of man
@ what is the effect if the object is illicit?
@can there be a cos over: street, bridges, parks, right to vote, right to own
property, services
@can there be a cos over a right? – transmissible vs. intransmissible

2. Kinds of illicit things : per se (of its nature ) vs. per accidens (declared by law
to be illicit)
@ can there be a cos over a shabu, toxic foods, part of the body?
@ can a foreigner buy a media outfit in the Philippines?

3. Right of vendor to transfer ownership:

General Rule: one can sell only what he owns
Exception: need not be owner at the perfection of contract/ suffice if one
becomes the owner at the time of delivery
@example: future goods/ goods for contingency/ property to be adjudicated
by the court
1460
1. Subject matter must be determinate: particularly designated or physically
segregated

@ specific vs. generic things

@ can there be a sale over: a ton of sugarcane from a plantation/ a 1/4 of the
rice stocked in a bodega/ sell of a car/ ice cream in a supermarket
1461
1. Sale of things having potential existence: sale of future things is valid as long
as it has a potential existence and it will surely happen
@ can there be a cos? of wine in a vine; the colt to be born by the horse; the
child of a pregnant woman; crops to be produced in the farm
 Requisite: it must come into existence (suspensive) and it must be specific
and identified

2. Sale of hope or expectancy: subject to suspensive condition that it will come

into existence( this refers to “expected things”)
Exception: vain hope or expectancy: void
@cos of a lot under litigation/ sale of a lotto ticket/ sale of a ration to be
given by government during typhoon
1462
1. Goods which may be the object of sale: existing vs future goods: to be
manufactured, raised or to be acquired
@sale of a good manufactured solely for a buyer : contract of a piece of work
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2. Sale of future goods: valid only as an executory (vs. executed) contract

1463
1. Sale of undivided interest in a thing:
 A owned a 1 hectare lot, he may sell the whole lot or only a portion thereof
> if not segregated, the buyer becomes co-owner
 In case of a 1 hectare lot inherited by 3 heirs, they become co-owners, but
one can sell his undivided interest ( the vendor will receive a share after
partition of the property)
@ example
1464
1. Sale of an undivided share of a specific mass
 Fungible goods: any unit is treated as an equivalent of the other ( grain,
win, gasoline)
 Sale of undivided share is allowed provided it is specific or determinable
 Effect of sale: co-ownership ( the share of each is called aliquot share)
exception: If the amount is lacking, the buyer becomes the owner and
seller shall supply the balance
 Risk of loss: owner or co-owners are at risk of loss
 Subject matter is an incorporeal or intangible right
@Example: sale of good inside the grocery
1465
1. Sale of thing subject to a resolutory condition (vs. suspensive condition)
 Effect: happening of the condition: no transfer of ownership
@ example: sale of a car provided the same is still owned by the vendor/
sale of lot prior to sequestration by government
@example: sale by pacto de retro/sale in an action sale of property
subject to foreclosure
1466
1. Sale distinguished from agency to sell

COS CATS
Nature of receipt Buyer becomes Agent does not become the
of goods owner owner
Nature of Buyer to pay price Agent to account for the
obligation proceeds
Right to return No return unless yes
object there is rescission
Existence of yes No
warranty
Extent of right Can deal with it as Limited by instruction of
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over object he pleases principal

@example:
1467
1. Sale distinguished from contract for a piece of work
cos copw
Nature of Already in existence or has already Not yet in existence or
object been subject of sale to others object tnot suitable for
although not rxisting sale to others
Risk of Borne by worker or contractor and Borne by buyer
loss not by employer
before
delivery
Statute of Yes No
frauds

@Example
1468
1. Sale distinguished from barter- giving or a thing in consideration of another
thing

 Difference : in cos there is price certain in money or its equivalent

 Rule in the determination:
1. Manifest intention of parties based on their contemporaneous and
subsequent acts
2. If intention cannot be ascertained, money >things: sale/ money<
things: barter

@Example: A seller of bread, B seller of rice. A will deliver P100o worth of

bread to B in exchange for a sack of rice worth P1000 (barter). If B has only
½ sack of rice, he can deliver the half sack and P500 (barter). If B has no
rice, he can deliver P1000 (still barter since the money is in consideration of
the rice).If B has rice but he paid P1000 (sale). If in the contract B is to pay
P1000 or a sack of rice, if he paid P1,000 (sale), if he paid the rice (barter).
@ If there is no manifest intention: B paid ¼ sack and P750 (sale); B paid
2/3 sack and P250 (barter).

1469
1. When price considered certain

 Rule: no sale if price is not certain

 Kind of price:
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Money ( currency/legal tender)

Its equivalent: promissory note, checks, other mercantile instruments
 Cases of price certain: agreed upon/ certain with reference to another
thing certain ( market price/ consumer price index)/ determination if left
to the court

2. Effect where price fixed by third person designated: bound the parties
provided they agreed
 Exception: 3rd person acted in bad faith/ he fixed an arbitrary price
@ example: 3rd person acted in mistake

3. Effect where price not fixed by third person designated: contract is

ineffective, unless the parties agreed on a price.
 If the 3rd person was prevented to fix the price due to the fault of one
party, the party not at fault can file: rescission or fulfilment with damages
in either case. If there is fulfilment: court will fix the price.

1470
1. Sales : Voluntary ( agreed by parties) vs. involuntary (made by the court)
2. Effect of gross inadequacy of price in voluntary sales : due to commutative
and voluntary nature (price is based on the independent judgment of the
parties), sale remains valid
@ can you sell your P1M car for P100000?

 Exception: if there is defect in consent/ it is shocking to the court :”no

man in his right mind would accept”.
 Exception to the exception: Donation

3. Effect of gross inadequacy of price in involuntary or execution sales: will not

invalidate the sale

 If it is so low as to shock the conscience, it will be set aside.

 Valid and reasonable if the sale is with right to repurchase
1471
1. Effect where price simulated: the sale is void
 Exception: intention is to transfer the thing gratuitously
@ Example :gross inadequacy in price: vitiation of consent/donation
1472
1. Price on a given day at particular market: reference to determine the price
@Examples; comparison of various prices of different things
 Price must be certain otherwise it is inefficacious/ applicable in fungible
things
1473
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1. Fixing of price by one of the contracting parties not allowed: violation of

consent/it is unjust
 Exception: if the fixing is accepted or ratified by the other party

1474
1. Effect of failure to determine price
 Inefficacious: not producing the desired effect
 2 instances: if contract is executory-it has no effect and no obligation to
pay/ if delivery has already been made – a reasonable price must be paid
(based on prevailing market prices)
1475
1. Perfection of Contract of Sale: meeting of the minds (consensual)
 Remedy of non-compliance: rescission or fulfilment plus damages

2. Right of owner to fix his own price or to impose certain condition whether
reasonable or unreasonable
@ can you charge a person selling an object with unreasonable price?
 He may quote a small or nominal consideration

3. Effect of failure to pay price vs absence of price

 If there is failure to pay: contract remains valid, remedy is specific
performance or rescission with damages
 If no price is stipulated: contract is void for there is no cause or
consideration (essential requisites)
1476
1. Auction sale (involuntary sale)

2. Rules governing auction sale

 Sales of separate lots by auction are separate sales

 Sale perfected by the fall of the hammer
-putting up a goods for sale is just an invitation to bid, one of which will
be accepted
-before the hammer falls, auctioneer may withdraw if with reservation
- if without reservation: cannot withdraw
 Right of seller to bid in the auction
Req: reservation, notice that there is right to bid by the seller, right to bid
is not prohibited by law
Where there is no notice: unlawful for the seller to bid ( prevent a puffer)
Where there is notice: to inform the public, biddng by seller is not a fraud

1477-1478
1. Ownership of thing transferred by delivery (real right over the thing)
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2. Delivery may be: actual or constructive

3. Exception to the rule: condition or stipulation that ownership remains with
the seller until the price is fully paid
1479
1. Kinds of promise to buy and sell
 Promise to sell – the acceptor elects to buy
 Promise to buy – the acceptor elects to sell
 Bilateral promise : both parties elect to exact fulfilment

2. Effect of unaccepted unilateral promise: policitation- has no juridical effect

3. Meaning of option: privilege given to one person who paid a consideration

that he be given a period of time to buy the thing at a fixed price

4. Effect of accepted unilateral promise: OPTION

@Example

5. Effect of bilateral promise to buy and sell: it is a perfected contract of sale

1480
1. Risk of loss or deterioration
 Thing is loss before perfection: seller bears the loss (res perit domino:
thing perishes with owner)
 At the time of perfection of contract: contract is void
 After perfection of contract but before delivery: buyer bears the loss
(exception to res perit domino)
 After delivery: buyer bears the loss

2. Scope of Article 1480

1. Non-fungible things
2. Fungible things
1481
1. Sale of goods by description and/or sample
 Sale by description: buyer does not see the bulk of the goods but only the
description @example
 Sale by samples: exhibition of a sample of the goods @example
 By description and sample: goods must satisfy their warrantiness
1482
1. Meaning of earnest money: given to bind the bargain/ partial payment of the
purchase price/ should be deducted from the price

2. Earnest money and option money distinguished

EM OM
NATURE PART OF THE PRICE NOT PART OF THE PRICE BUT OF
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THE OPTTION CONTRACT

WHEN WHEN THERE IS SALE NOT YET PERFECTED
GIVEN ALREADY A PRICE
EFFECT BUYER BOUND TO BUYER NOT REQUIRED TO BUY
PAYTHE BALANCE

1483
1. Form of Contract of Sale : manner in which it is executed or manifested

 General Rule: COS may be entered into in any form provided all essential
requisites are present

 Compliance with statute of fraud: writing

1. Sale of PP at price not less than P500
2. Sale of RP or interest therein regardless of price involved
3. Sale of property not to be performed within a year regarless of nature
of property or price involved
@ is this oral sale enforceable: cellphone worth P495; tree planted on
the soil worth P450; 10% interest of lot worth P5000; sale of a watch
worth P500 by instalment for a period of 2 years; sale of lot by
installment for 5 years?

 Compliance with certain form, like that it shall be in a public instrument

@ is a marriage done orally binding? How about the sale of condominium
unit done orally?

 Requirement of form: for Validity or for Convenience of the parties

2. Sale of real property or an interest therein

 Agent authority to sell must be in writing otherwise sale is void
 Sale or RP must be registered in order to bind third persons
 For registration, the sale is not enough to be in writing, it must be
notarized
@what is the effect of sae of RP in a piece of paper without notarization?

3. Statute of Frauds applicable only to executory contracts (if there is partial

performance, it will be unjust to declare the contract unenforceable)
1484
1. Remedies of vendor in sale of personal property payable in instalments

Recto law Maceda law

applicabilit Sale on Sale on instalment basis of an immovable
y instalment
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basis of property
movable
property
Effect of Exact a. If buyer paid at least 2 years instalment:
default in fulfilment  Interest should be paid within grace
payment Cancel the period of 1 month for every year one year
sale of installment payment due.
Foreclose  If contract is cancelled, seller shall refund
the chattel equivalent to 50% of total payment
 After more than 5 years of instalment,
additional five percent every year by not
exceeding 90% of payment
b. If buyer paid less than 2 years instalment
 Grace period of not less than 60 days from
date of due
 If no compliance after end of grace period,
vendor may cancel the contract after 30
day notice of cancellation or demand for
rescission

2. Nature of the remedies: alternative

@ can you file rescission and fulfilment simultaneously?

3. Right of vendor to recover unpaid balance of purchase price

 Remedy of specific performance: proceeds of the sale, unpaid balance, other

properties not exempt from execution
 Remedy of cancellation: return of payment already made
 Remedy of foreclosure: selling of mortgaged property at public auction

4. Recovery of deficiency after foreclosure prohibited: mortgagee is limited to

the property included in the mortgage (he cannot anymore demand for the
balance in case the proceeds is less than the actual debt)
@example: A is indebted for 1ook to B, B sold the security in public auction
for 10k
1485
1. Lease of personal property with option to buy: it is in actuality sale of
personal property payable in instalment. The lease is a contravention of sale.
2. Lease vs. sale by instalment

@Example: Rent to own scheme

1486
1. Stipulation regarding forfeiture of instalments or rents paid: valid provided
it is not unconscionable under the circumstances.
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1487
1. Expenses for execution and registration: borne by the vendor
2. Expenses after registration: borne by the vendee
1488
1. Expropriation of property for public use: Power of eminent domain

B.CAPACITY TO BUY AND SELL

1489

1. Persons who may enter into a cos: natural and juridical persons
Unless suffering from absolute or relative incapacity

2. Kinds of incapacity: relative vs absolute

3. Liability for necessaries of minor (sale to minors)

 General rule: voidable/ Exception of necessaries : valid but minor

has right to recover excess

4. Sale by minors : under pretention of majority age: valid

1490

1. Relative Incapacity of husband and wife

 they cannot sale to each other :the sale is void
 They cannot make donation to each other (exception: moderate
gifts on occasion of any family rejoicing
2. Exception to incapacity: separation of property by agreement or
through judicial decree
3. Reason for prohibition:for the protection of third persons
4. Persons permitted to question the sale: heirs and creditors at the
time of transaction (not after the transaction); the government in
case of tax evasion

1491
1. Persons prohibited from acquiring property in private or public
sale:
a. Guardians
b. Agents
c. Executors
d. Public officers and employees
e. Judicial officers and employees
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f. Others disqualified by law

2. Reason: to prevent frauds

3. Other persons especially disqualified: aliens/ unpaid seller having

a right of lien/ officer conducting an execution sale

4. Effect of sale in violation of prohibition: 1 to 3 – voidable for only

private interest is affected/ 4-6: void for public interest is involved

1492

1. Prohibition extends to sales in legal redemption, compromises and

renunciation
2. Persons disqualified are also disqualified to become lessees of the
things

C. EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS

BEEN LOST
1493

1. Effect of loss of thing at the time of sale

 Entire is loss: cos is void
 Partial loss: withdrawal or demanding the remaining part, paying
its proportionate price

2. When a thing is considered loss : goes out of commerce/

disappears or perishes/ cannot be recovered

1494

1. Effect of loss in case of specific goods:

 Treated either as valid or void
 If sale is divisible: there is sale of remaining goods
 If sale is indivisible: proportionate price of what remained
@example

D. OBLIGATION OF THE VENDOR

1495
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1. Principal Obligations of vendor: transfer ownership/delivery of

the thing/warranty/ exercise of diligence pending delivery/ pay
expenses for execution and registration of deed of sale
2. Obligation to transfer and to deliver: required that the seller is
the owner > exception: one who sells things he does not yet
own is bound by the sale when he acquires the thing later

1496

1. Way of effecting delivery

 The ownership of the thing sold shall be transferred to the vendee

upon the delivery thereof (Art. 1477) which may be effected in the
following ways:
a. By actual or real delivery (Art. 1497)
b. By constructive or legal delivery (Arts. 1498-1501)
c. By delivery in any other manner signifying an
agreement that the possession is transferred to the
vendee (Arts. 1496-1499)
 Delivery is an indispensable requisite for the transfer of ownership
which under our law cannot be effected by mere consent.
 But to transfer ownership, the act of delivery must be made with
the intent of delivering the thing sold.

2. Ways of effecting constructive delivery.

(1) Equivalent to actual delivery.-Constructive or legal
delivery is equivalent to actual delivery. It may be
effected in any of the following ways:
a. By the execution of a public instrument. (Art. 1498,
par.1.);
b. By symbolical tradition or tradition symbolica (Ibid.
par.2);
c. By traditio longa manu (Art. 1499);
d. By traditio brevi manu (Ibid.);
e. By traditio constitutum possessorium (Art. 1500); or
f. By quasi-delivery or quasi-traditi. (Art. 1501)
(2) Exception- Contrary may be stipulated.-The parties,
however, may stipulate that ownership in the thing shall
pass to the purchaser only after he has fully paid the
price (Art. 4978) or fulfilled certain conditions.
(3) In a contract of Absolute Sale, ownership is transferred
simultaneously with the delivery of the thing sold.

1497
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1. Concept or tradition of delivery.

 Concept of Tradition - is a derivative mode of acquiring ownership
by virtue of which one who has the right and intention to alienate
a corporeal thing, transmits it by virtue of a just title to one who
accepts the same.

 Importance of tradition
Delivery of the thing, together with the payment of the price,
marks the consummation of the contract of the sale.
Delivery is also necessary to enable the vendee to enjoy
and make use of the property purchased.

It is only after the delivery, actual or constructive, that a

vendee acquires a real right or ownership over it. (Art.
1164, Civil Code) After delivery, the risk of loss of the
thing sold is borne by the vendee. (see Art. 1480)

2. Actual delivery of the thing sold

(1) When deemed made.-There is actual delivery when the
thing sold is placed in the control and possession of
the vendee. (Art. 1497) This involves the physical
delivery of the thing and is usually done by the passing
of the movable thing from hand to hand.
(2) Not always essential to passing of title. –Actual or
manual delivery of the thing sold is not always essential
to the passing of the title thereto. (Art. 1475) The
parties to the contract may agree when and on
what conditions the ownership in the subject of
the contract shall pass to the buyer.
@As for example, The parties may stipulate that the
ownership in the thing sold shall pass to the vendee only
after he has fully paid the price. (Art. 1478.)

1498

1. Execution of a public instrument or document – acknowledged

before a notary public or official authorized to administer oath

2. Execution in a public instrument is valid only where the thing is

subject to control of vendor. If not, the seller fails in his
obligation to deliver if others are in possession of the object of
the sale ( example: squatters)
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3. Symbolic tradition.
 Constructive delivery is symbolic when, to effect the delivery, the
parties make use of a token symbol to represent the thing
delivered.
@ examples: The delivery of the key where the thing sold is
stored or kept is equivalent to the delivery of the thing (par. 2.)
because the key represents the thing.
@Similarly, there is symbolic delivery of goods to vendee upon
delivery to him of delivery orders (see Art. 1636[1].) which
would authorize him to withdraw the goods from a warehouse.
Upon withdrawal, there is actual delivery (supra.) which
consummates the sale.

1499
1. Traditio longa manu. The first part of Article 1499 refers to
traditio longa manu. This mode of delivery takes place by the
mere consent or agreement of the contracting parties as
when the vendor merely points to the thing sold which shall
thereafter be at the control and disposal of the vendee. It
should be noted that delivery “by the mere consent or
agreement of the contracting parties” is qualified by the phrase
“if the thing sold cannot be transferred to the possession of the
vendee at the time of the sale.”
@example: sale of a car still used by the seller.

2. Traditio brevi manu. This mode of legal delivery happens when

the vendee has already the possession of the thing sold
by virtue of another title as when the lessor sells the thing
leased to the lessee. Instead of turning over the thing to the
vendor so that the latter may, in turn, deliver it, all these are
considered done by action of law.
@example: sale of rented car.

1500

1. Opposite of tradition brevi manu. Vendor continues to hold

possession of the property not as owner but in another capacity
@Example: vendor stays as tenant or usufructuary of the
property.

1501

1. Quasi-tradition

1502
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1. Contract of sale or return, and of sale on trial or approval or

satisfaction
@example: SOR: A gave B a calculator under sale or return up
to Dec 25. On delivery B becomes the owner and the ownership
becomes absolute if it will not be returned after Dec 25. If
returned before that date, ownership is revested to the seller.
@ A delivered to B a computer on ATS. The time frame for trial
is up to Dec 25. If it proves satisfactory, then sale is completed,
if not returned after the period, sale is likewise completed,
otherwise it is returned to seller.

2. “Sale or return” distinguished from sale on trial.

SOR ATS
CONDITIONS RESOLUTORY SUSPENSIVE
EXISTING
WHOM DEPEND WILL OF BUYER CHARACTER OF
GOODS
STATE OF BUYER BECOMES SELLER RETAINS
WONERSHIP UPON OWNER OWNERSHIP
DELIVERY
RISK OF LOSS BUYER SELLER

1503

1. General Rule: Delivery of specific goods sold generally passes

title from seller to buyer. @ examples
 Delivery to carrier and redelivery to seller himself

2. Exception: Reservation of right of possession or ownership when

specific goods are shipped.

 Contrary intention appears

 by terms of bill of lading, the goods are to be delivered to seller or

his agent or by order to s and agent
 By bol, delivered to order of buyer or agent but bol is retained by s
or agent
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 Drawing of a bill of exchange for the price of the goods and there
is transmittal of the bol and boe but buyer dishonors the boe.

3. Where seller or his agent is consignee- shipper or carrier

becomes the bailee/ seller may dispose the goods to 3rd person

4. Where seller’s title only for purpose of security. Buyers becomes

owner and bears the risk of loss

5. Where buyer or his agent is consignee but seller retains the bill
of lading. Right of possession is retained by seller.

6. Where bill of lading is sent forward with draft attached. Boi

must be returned if the boi is dishonoured.

7. Effect of buyer’s obtaining possession of bill of lading without

honouring draft > 3rd person may obtain ownership

1504

1. GR: Risk of loss generally attends title. Borne by the owner.

>seller reserves ownership for security> buyers bears the loss
> there is delay : the party at fault shall bears the risk of loss

2. EX: Risk of loss by fortuitous event after perfection but before

delivery. Buyer bears the loss.

1505

1. Sale by a person not the owner. : GR: No one can give what he
has not. A spring cannot rise higher than its source.
2. If things are sold by one who is not the owner:
 Owner is precluded from denying the seller’s authority to sell
 Sale by apparent owner
 Sale is sanctioned by judicial authority
 Sale at merchant store, fairs or markets.
 Sale of voidable title not voided
 Where seller subsequently acquires title
@ selling stolen merchandise/ sale of thing under safekeeping
(recitation)

1506

1. Sale by one having a voidable title.

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 Requisites: before the title is voided/in good faith and for

value/without notice of defect
@example; A minor sell a car to B and the latter sell the car to C
before the first sale was annulled.
: X stole a car from Y and sold it to Z. Y may recover without
paying indemnity. (exception: Acquired in a public sale)

1507

1. Nature and function of documents of title

 receipts of or orderd upon a bailee of goods represented. It refers
to goods not money.
 Evidence of transfer of title and possession: symbol of the goods
covered by it. Evidence of : transfer of title/possession/contract by
parties bound by its terms

2. Most common forms of documents of title; Bill of lading

(carrier/shipper/consignee) dock warrant/warehouse receipt

3. Classes of documents of titles: Negotiable (deliver to bearer or

order instrument) or non negotiable

1508

1. Negotiation of negotiable document by delivery. (two kinds of

negotiation by delivery)

 By delivery to bearer / endorsement in blank

Exception: if endorsed to a specific person, it becomes an order
instrument> negotiated by endorsement and delivery
:delivering of good to order
@Example: A deposited good to B who issued a DOT deliverable
to bearer. A may negotiate this to another by just delivery of the DOT.
:The same case: DOT . deliverable to order of D. D may
endorse it in blank, it is negotiated to another person by delivery.

 By indorsement plus delivery: (Three kinds of endorsement: Blank

endorsement/to bearer/ special endorsement) If endorsed to a
specific person, then it needs endorsement plus delivery.
@ Example: Same case. Deliverable to A.

1509
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1. Negotiation of negotiable document by indorsement.

@example : A endorsed a DOT in blank or to bearer to B. B may
negotiate it by delivery
: A endorsed a DOT to B’s name. B must endorsed it again in
blank or to bearer and he must deliver.

1510

1. Negotiable documents of title marked “non-negotiable.” Still it

becomes negotiable and such words will have no effect.

1511

1. Transfer of non-negotiable documents. It cannot be negotiated

but can only be transferred or assigned only to a purchaser or
donee. Endorsement will not give rise to additional right.

1512

1. Persons who may negotiate a document:

 Owner
@Example: A deposited goods in warehouse of B. B issued a DOT
to A. A can negotiate the sale of the goods.

 trustee of documents
@Example: same case. A may negotiate it to C or to any person if
it deliverable to bearer.

1513

1. Rights of person to whom document has been negotiated:

> Acquisition of title of the person negotiating the documents and
the title of the owner
> Acquires the direct obligation of the bailee (warehouseman or a
shipper)

1514

1. Rights of person to whom document has been transferred (not

duly negotiated: transferee of a non-negotiable DOT)

 Acquires title to the goods as against the transferor/ right to notify

bailee of the transfer/ right to acquire the obligation of the bailee
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@Example: X deposited goods with W who issued a DOT. X

assigned to the goods to Y (X and Y did not notify W of the
assignment). X sold the good to Z. Z notified W. Who has a better
right?

2. Rights of third person to goods where document has been

transferred.
 If it is a non-negotiate document, its transfer does not affect
delivery of goods ( before notification, bailee is not bound to the
transferee
 Right of transferee may be defeated by a levy or an attachment
or execution/ notification of subsequent sale of goods
 If negotiable: there is no attachment or levy (except when the Dot
is surrendered to the bailee or its negotiation is enjoined.
@ example: X assigned the DOT to Y and sold it againt to Z. Who
has a better right? Z for the transferee does not acquire the direct
obligation of the bailee. There must be notification.
:X endorsed the goods to Y and sold it to Z. Endorsement will
acquire the direct obligation of the bailee

1515

1. Transfer of order document without indorsement

 Transferee has a right to the goods as against the transferor/ right
to compel the transferor to endorse the goods

2. Subsequent indorsement of negotiable document

transferred.Negotiation is at the time of endorsement and not of
delivery.

1516

1. Warranties on sale of documents.

1. Document is genuine
2. He has legal right to negotiate or transfer
3. Knowledge of no fact that will impair validity of instrument
4. Right to transfer the goods

1517

1. Indorser not a guarantor of the goods. (Indorsement has a

double effect: conveyance of instrument and contract of
endorser to endorsee) It does not cover the obligation of the
bailee.
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@Example: D and W. Order negotiable warehouse receipt was

issued by D to A, B and C
a. If W failed to deliver the goods, DABC are not liable.
b. If the receipt was forged by A and W dishonoured it,
AB are liable to C.
c. If D stole the good and put it in the warehouse of W,
can C obtain delivery? No because the depositor has
no right to the goods
d. Who are liable in letter c? DAB to C because an
endorser warrants the right of transfer of goods.

1518

1. When negotiation not impaired by fraud, mistake, duress, etc.

 Person is a purchaser for value and ingood faith and without notice
of the defect.
@Example: S delivers goods to C and he was issued a DOT
deliverable to bearer. It was stolen by T who negotiated it to U
can U obtain the goods ? yes.

Thief of document (1518) vs thief of the goods (1512)

1519

1. Attachment or levy upon goods covered by a negotiable

document.
 Bailee is under obligation to hold the goods for the original owner
or to the person to whom a DOT is negotiated.
 In such case, the goods cannot be attached or levied upon
 Bailee can only deliver the goods upon the surrender of the DOT of
if it is impounded by the court. ( Done for the protection of the
bailee)

1520
1. Creditor’s remedies to reach negotiable documents. Since it is
difficult to attached the goods, the creditor has avail of
injunction.
2. If the injunction is issued but the DOT is negotiated to an
innocent person, the transfer to him is valid and effectual.
@ C loaned money to D who has goods deposited in W. D failed to
pay the loan. Can D attached the goods? No. His remedy is to ask
for injunction to stop the negotiation of the DOT over the goods.

1521
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1. Place of delivery of goods sold.

> Rules: if there is agreement: express or implied - place agreed
upon
: if there is no agreement: usage of trade
: if there is none, the seller’s place of business or the seller’s
residence
: specific goods: based on the knowledge at the time of the
contract where it was made
> it is presumed that the buyer must take the goods

2. Time of delivery of goods sold

>if not fixed: reasonable time which depends on the circumstances
attending a particular transaction
> if fixed: if time is of the essence - within such time/ if not - at
any reasonable time
3. Delivery of goods in possession of a third person: will not
discharge the obligation of the seller
4. Hour of delivery of goods sold: reasonable hour
5. The seller has the duty to put goods in deliverable condition.

1522
1. Delivery of goods less than quantity contracted.
> Option by the buyer: to reject the goods or to accept
> If he accepts: he must pay: price at the contract rate if he knew
that no more will be delivered/ reasonable price if he do not know
@example: delivery of 100 cellphones, only 50 were delivered

2. Delivery of goods more than quantity contracted.

> accept the quantity contracted and reject the others

3. Delivery of goods mixed with others: accept those in accordance

with the contract but reject the rest
@ can the buyer accepts all?

4. Effect of indivisibility of subject matter (larger/ smaller quantity,

mixed) the buyer may reject the whole
5.
6. Rules may be controlled by usage of trade or special agreement

1523

1. Delivery to carrier on behalf of buyer.

> general rule: delivery to the carrier is delivery to the buyer
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> exception: Article 1503

2. Seller’s duty after delivery to carrier: to enter into contract with

the carrier such as reasonable under the circumstances/ give
notice tot he buyer necessity to ensure goods

3. Definition of TRADE TERMS.

C.O.D./F.O.B./C.I.F./F.A.S./ EX FACTORE/ EX DOCK

1524

1. Delivery simultaneous with payment of price. RECIPROCAL

OBLIGATION
2. When delivery must be made before payment of price. It the
period to deliver is fixed.

1525

1. Meaning of unpaid seller - when the whole of the price is not yet
paid or tendered/ the bill of lading was recieved but the
conditions were broken due to a dishonored instrument or
insolvency of buyer

2. Seller includes the agent of the seller

3. Where whole of the price has not been paid. No tender of

payment ( tender of payment destroys the seller’s lien)/ partial
payment/ dishonored negotiable instrument

1526

1. Remedies of an unpaid seller. Lien on goods or right to retain

them/ in case of insolvency fo buyer, right of stoppage in
transitu/ right to resale/ right to rescind

2. Basis of rights of unpaid seller : there is inherent injustice if he

is deprived of goods without payment of price thereof

1527
1. When unpaid seller’s possessory lien may be exercised.
> Grounds: goods have been sold without stipulation as to credit/
when it was sold on credit but the terms have expired/buyer
becomes insolvent
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1528

1. Lien not generally lost by part delivery for he may still exercise
lien over the reminder except in case of symbolic delivery

1529

1. When unpaid seller losses possessory lien.

> Grounds: delivery of goods to carreir without reservation of
ownership/ buyer has lawfully obtained the goods/ waiver

1530

1. Right of seller to stop goods in transit. Available only when he

has parted with the goods. Effect: Seller will retain entitlement
to the goods.
2. Requisites for the exercise of right of stoppage in transit.
A. Seller must be unpaid/ B. Buyer must be insolvent/C. Goods must be
in transit/ D. Seller must take possession or give notice of his claim/ E.
Seller must surrender the negotiable document issued by carrier or
bailee/ F. Seller must bear expenses of delivery
3. Basis of right of stoppage in transit: to prevent injustice

1531
1. When goods in transit. After delivery to carrier/ if goods are
rejected by the buyer
2. When goods considered no longer in transit: after delivery to
buyer or his agent/ if buyer obtained possessionof the goods/ if
carirer acknowledged to hold the goods for the buyer/ carrier
wrongfully refuses to deliver goods tot eh buyer
3. Attornment by the bailee: holding goods for the buyer
4. Effect of refusal or carrier to attorn or deliver the goods.
5. Delivery to a ship, etc. chartered or owned by buyer.
> if chartered by the buyer: delivery is not delivery to the buyer
> if owned by the buyer: delivery is delivery to the buyer

6. Effect of partial delivery. Seller may exercise right over

remainder

1532

1. Ways of exercising the right to stop.

 By taking actual possession of the goods/ by giving notice of his
claim to the carrier or bailee
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 Such must be given under time and circumstances to prevent

delivery/no form of notice
2. Effect of outstanding bill of lading. Carrier will not deliver the
goods unless the nego document is surrendered for cancellation.
@ C issued a nego document to S and this was nego to A. C will
be forced to give the goods to A and not to B

1533

1. When resale allowable.

 Where the goods are perishable/it is expressly reserved in case
buyer defaulted/delay of payment for unreasonable time
2. Effect of resale.
@ Example: The S can demand from the B the difference in case the
goods are resold at lower price/ if more than the contract price, then
there is damnum absque injuria
3. Notice of resale not essential but the S may give notice to show
fairness in sale in case the ground is unreasonableness of time
to pay

1534

1. When the seller may rescind.

 The right is expressly reserved in case of default/ buyer delays
payment for unreasonable period of time
2. Effect of rescission: seller resumes ownership of goods and B
may be held liable for damages
3. How the seller may rescind: notice to the buyer is required if
the ground is unreasonableness of time

1535

1. Effect of sale of goods subject to lien or stoppage in transitu.

 Goods are covered by nego document of title: seller’s right of lein
is not affected any sale to be made by the B
 Goods are not covered: no seller’s lien can defeat the right of any
purchaser for value in good faith

1536

1. Right of vendor to withhold delivery in sale on credit if the buyer

losses the right to make use of the period (Art 1198)
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a. B becomes insolvent after the contract

b. B does not furnish creditor the guarantees or securities he
promised
c. B by his own act has impaired the guarantees
d. B violates any undertaking in consideration of which the S
agreed to the period
e. B attempts to abscond
@ Examples

1537

1. Condition of thing to be delivered. The seller is obliged to:

preserve the thing pending delivery/deliver the accessions and
accessories/ deliver the fruits
2. Right of vendee to the fruits: B has a right to the fruits of the
thing sold from the time the obligation to deliver arises which is
from the time of the perfection of the contract. (reminder of Art
1504).
@ Sale of the horse that gave birth to colt. Who has a right to it?

1538

1. Rules in case of loss, deterioration, or improvement of thing

before delivery. (Art 1189)
 Thing lost without fault of seller – obligation is extinguished
 Thing lost with fault of seller - he shall pay damages
 Thing deteriorates without fault of S – impairment is borne by B
 Thing deteriorates with fault of S – B may rescind or ask for
fulfillment with indemnity
 Thing is improved by nature – inured to the benefit of B
 Thing is improved at expense of S – he has a right as usufructuary

1539

1. Sale of real property by unit of measure or number.

 Entire area is stated in the contract
@ 200 square meters at P1,000/ sq. meter : the entire property
must be delivered
 Entire area could not be delivered:it is a ground for rescission of
contract/ or he may pay for a reduced price

2. When vendee entitled to rescind sale of realty:

a. If the lack in the area is at least 1/10 of that which is
stipulated
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b. If the deficiency in the quality specified in the contract

exceeds 1/10 of the agreed price
c. If the B would not have bought the immovable had he
known of its smaller are or inferior quality irrespective of
the extent of the lack in area or quality

1540

1. Where immovable of greater area or number: vendee may

accept the area included in the contract and reject the rest/ or
he may accept all but is liable to pay additional amount based
on contract price

1541

1. Rules in Articles 1539 and 1540 applicable to judicial sales.

1542

1. Lump sum: A Sale by A Cuerpo Cierto)

2. Sale of real estate made for a lump sum.
 Mistake in area stated in contract is immaterial: the cause is the
thing sold irrespective of its number or measure. Law presumes
that the B has already ascertained the area and quality
@example: S sold a lot to B; no area was described but they
presumed it is 100 sq m. if the actual area is 90 or 110 sq meters,
still that should be delivered without change in price
 Where area or number stated together with boundaries: It should
be delivered in whole otherwise, the B may rescind the contract or
pay a reduced price

1543

1. Prescription of actions: 6 months prescriptive period fro article

1539 to 42.

1544

1. Rules as to preference of ownership in case of a double sale.

 Movable: ownership shall be acquired by the B who first

possessed the property in good faith
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 Immovable:Ownership shall belong to:

a. The first to register the sale in good faith in the Registry of
Property
b. In the absence of registration, the first to take possession
in good faith
c. In absence of both registration and possession, the first to
present the oldest title in good faith

@ Examples:
1. A sold a cellphone to B1. S was allowed to take
possession thereof after the sale. He sold it
again to B2 in good faith. B2 has a better right
over B1 but B1 may recover the price from S
2. S sold a lot to B1 and later he sold the same to
B2 who registered the lot. B2 is the owner. B
may however sue S fro breach of warranty
against eviction. If both registered the lot, the
first to register will be the owner
3. B2 will still be the owner even if B1 is in
possession of the lot.
4. If B2 has knowledge of the sale to B1, such
knowledge is equivalent to registration and so he
is a purchaser in bad faith.
5. If neither sale is registered, B1 is the owner for
he is in possession of the lot. If there is no
possession, then the one that holds the older
title is the owner, B1.
6. If the land is sold to B1 and B2 who both acted
in good faith and B1 registered the lot after
knowledge of the sale to B2, he is still deemed to
have acted in good faith and he is entitled to the
lot.
7. If B2 registered the lot after knowledge of the
sale to B1, he is deemed to have acted in bad
faith in recording the sale. The rule on CAVEAT
EMPTOR applies. ( there is however, CAVEAT
VENDITOR warranty from the seller)

E.OBLIGATION OF THE VENDEE

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F.ACTIONS FRO BREACH OF CONTRACT OF

SALE OF GOODS

G. EXTINGUISHMENT OF SALE

H. ASSIGNMENT OF CREDITS & OTHER

INCORPOREAL RIGHTS

I. GENERAL PROVISIONS

J. BARTER OR EXCHANGE

K. THE BULK SALES LAW

II. AGENCY

III. CREDIT TRANSACTIONS