CHAPTER 7
given written notice thereof to all
Article 1619.
LEGAL REDEMPTION or Retracto Legal
● The right to be subrogated (you will
have the rights of another), upon the
same terms and conditions
stipulated in the contract, in the
place of one who acquires a thing by
purchase or dation in payment, or by
any other transaction whereby
ownership is transmitted by onerous
title.
● The right applies to both movable
and immovable property.
● It cannot occur in barter and in the
transmission of property by
hereditary title. Evidently, the right
is not available where there is only a
mortgage or lease.
Subrogation: one party has the right to "step
into the shoes" of another party to bring a
claim for damages.
INSTANCES OF LEGAL REDEMPTION
1. Sale of a co-owner of his share to a
stranger
2. When a credit or other incorporeal
right in litigation is sold
3. Sale of an heir of his hereditary
rights to a stranger
4. Sale of adjacent rural lands not
exceeding 1 hectare
5. Sale of adjacent small urban lands
bought merely for speculation
● The right of legal redemption shall
not be exercised except within 30
days from the notice in writing by the
prospective seller, or seller, as the
case may be. The deed of sale shall
not be recorded in the Registry of
Property unless accompanied by an
affidavit of the seller that he has
possible redemptioners.
● Written notice indispensable
● Mere knowledge does not satisfy the
requirement.
ILLUSTRATIVE EXAMPLE:
In Cabales, et al. v. CA, et al., G.R. No. 162421,
August 31, 2007, a property was the subject of
co-ownership. The co-owners sold their
undivided shares in 1978 and informed the
others, like Nelson, a minor of the same in 1993.
He signified his intention to redeem the subject
property during a barangay conciliation process
but filed an action for legal redemption only in
1995. Can he still exercise the right of
redemption? Why?
ANS: No, because he did it beyond the 30-day
period from the time he learned about the sale.
(Art. 1088 & 1623, NCC; Alonzo v. IAC, L-72873,
May 28, 1987, 150 SCRA 259).
To require strict proof of written notice of the sale
would be to countenance an obvious false claim
of lack of knowledge thereof, thus commending
the letter of the law over its purpose, i.e., the
notification of redemptioners.
There was sufficient notice of the sale to Nelson.
The thirty-day redemption period commenced in
1993, after Nelson sought the barangay
conciliation process to redeem his property. By
January 12, 1995, when he filed a complaint for
legal redemption and damages, it is clear that
the thirty-day period had already expired.
(Cabales, et al. v. CA, et al., G.R. No. 162421,
August 31, 2007).
Article 1620. A co-owner of a thing may
exercise the right of redemption in case
the shares of all the other co-owners or
of any of them, are sold to a third
person. If the price of the alienation is
grossly excessive, the redemptioner
shall pay only a reasonable one.
Should two or more co-owners desire to
exercise the right of redemption, they
may only do so in proportion to the
share they may respectively have in the
thing owned in common. (1522a)
REQUISITES OF LEGAL REDEMPTION
CATBTR
(1) There must be a co-ownership of a
thing.
(2) There must be an alienation of all or
any of the shares of the other co-owners;
(3) The sale must be to a third person or
stranger, i.e., a non-co-owner.
(4) The sale must be before partition.
(5) The right of redemption must be
exercised within a period of 30 days from
the notice in writing given by the vendor.
(6) The vendee must be reimbursed for the
price of the sale.
ILLUSTRATIVE EXAMPLE:
A, B, and C are co-owners of a lot. A sold
his interest to X for P20,000.
● B or C may redeem the interest from
X by paying P20,000 (price of sale)
● B and C may redeem the interest of
X by paying P10,000 each (half of
the share of A)
● If the price of P20,000 is grossly
excessive, the price may be
equitably reduced by the court.
Redemptioner (B or C) shall pay
only a reasonable price.
NOTE: The right of legal redemption is not
granted solely and exclusively to the original
co-owner but applies to those who
subsequently acquire their respective
shares while the co-ownership subsists.
PRICE IN LEGAL REDEMPTION
1. The purchase price paid by the owner to
the selling co-owner.
2. Reasonable price
● If the price of sale is grossly
excessive
3. Price understated in the deed of sale
● If the court rules that the
redemptioner shall pay the
UNDERSTATED price stated in the
deed of sale, although the buyer
paid much more originally.
4. Amount actually paid by the buyer
● If by false representations the
redemptioner pays an amount
greater (P100,000) than what the
buyer obtained it for (P80,000). The
redemptioner may recover from the
buyer the difference (P20,000) in an
appropriate action.
RULES OF APPLICATION
1. A co-owner’s right to redeem is
invoked only after the shares of the
other co-owners are sold to a third
person or stranger. Hence if the
purchaser is also a co-owner, there
is no legal redemption.
2. Should any of the heirs sell his
hereditary right to a stranger
before partition, any or all of the
co-heirs may be subrogated to the
rights of the purchaser by
reimbursing him for the purchase
price, provided it be done within the
period of one month to be counted
from the time they were notified in
writing of the sale by the vendor.
Once the portion corresponding to
each heir is fixed, the co-heirs turn
into co-owners and their right of
 legal redemption should be
governed by Articles 1620 and 1623.
3. The co-owner who desires to
redeem must tender the entire
amount of the real price or validity
and consign the same in court. This
is needed to show good faith.
WHEN THE RIGHT IS NOT AVAILABLE
1. A former co-owner has NO right to
redeem because he has lost the
status of co-owner.
2. Co-owners have no right to legal
redemption against each other, but
only against a third person.
3. If the sale is made AFTER partition,
the right of legal redemption by a
co-owner cannot be invoked, there
being no more co-ownership.
4. Some or one of the co-owners sells
their shares in the property owned in
common but not the case where all
the co-owners have sold their
shares.
Article 1621. The owners of adjoining
lands shall also have the right of
redemption when a piece of rural land,
the area of which does not exceed one
hectare, is alienated, unless the grantee
does not own any rural land.
This right is not applicable to adjacent
lands which are separated by brooks,
drains, ravines, roads and other
apparent servitudes for the benefit of
other estates.
If two or more adjoining owners desire to
exercise the right of redemption at the
same time, the owner of the adjoining
land of a smaller area shall be preferred;
and should both lands have the same
area, the one who first requested the
redemption. (1523a)
REQUISITES OF RIGHT OF LEGAL
REDEMPTION OF ADJACENT OWNERS
OF RURAL LANDS
1. Both the land of the one exercising the
right of redemption and the land sought to
be repurchased must be RURAL.
2. The land must be adjacent.
3. There must be an alienation.
4. The piece of rural land alienated must
not exceed one hectare.
5. The vendee must already own any other
rural land.
6. The rural land sold must not be
separated by brooks, drains, ravines,
roads, and other apparent servitudes from
the adjoining lands.
If two or more adjoining owners desire to
exercise the right of redemption:
1. The adjacent owner of the small area
shall be preferred.
2. If the lands have the same area, the one
who first requested the redemption shall
be preferred.
RULES OF APPLICATION
1. When the land exceeds one (1)
hectare, the adjacent owners are
not given the right of legal
redemption because this may lead to
the creation of big landed estates.
2. This right may be exercised only
against a stranger. For the right,
however, to be exercised against the
stranger, the right must already have
RURAL land (not an adjacent rural
one). The right cannot be exercised
against a vendee if he is also an
adjacent owner.
 3. In case 2 or more adjacent owners
desire to exercise the right of
redemption, the law gives
preference to the owner of the
adjoining land of a smaller area but if
both lands have the same area, to
the one who first requested the
redemption.
REASON AND PURPOSE OF THE LAW
● To foster the development of
agricultural areas by adjacent
owners who may desire the increase
for improvement of their own land.
Article 1622. 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, having been bought
merely for speculation, is about to be
re-sold, the owner of any adjoining land
has a right of pre-emption at a
reasonable price.
If the re-sale has been perfected, the
owner of the adjoining land shall have a
right of redemption, also at a reasonable
price. When two or more owners of
adjoining lands wish to exercise the right
of pre-emption or redemption, the owner
whose intended use of the land in
question appears best justified shall be
preferred. (n)
Pre-emption: Right of purchasing before
others. It is exercised when the land is
about to be resold against the ORIGINAL
buyer (new vendor).
● Adjacent owner
(redemptioner/original vendor) shall
pay a reasonable price.
Redemption: It is exercised after the resale
against the buyer.
● Adjacent owner
(redemptioner/original vendor) shall
pay a reasonable price.
REQUISITES OF RIGHT OF LEGAL
REDEMPTION OR PRE-EMPTION OF
ADJACENT OWNERS OF URBAN LANDS
UASSSRP
1. The land is urban land.
2. The one exercising the right must be
an adjacent owner.
3. The land sold must be so small and
so situated that a major portion
cannot be used for any practical
purpose within a reasonable time.
4. The urban land was bought by the
adjacent owner (redemptioner)
merely for speculation.
5. It is about to be resold (padung
ibaligya ni vendee), or its resale
(nabaligya na ni vendee) has been
perfected.
If two or more adjoining owners desire to
exercise the right of redemption or
pre-emption:
● The adjoining owner whose
intended use of the land appears
to be justified is preferred.
ILLUSTRATIVE EXAMPLE:
Having discovered that part of her ancestral
house was erected on an adjoining lot of 59
square meters, X wanted to exercise her
right of pre-emption but the lot owner asked
for the exorbitant sum of P9,000. Later, the
59-square-meter lot was sold to another
adjoining owner for only P1,500.
 ● X has a better right to the lord
because her intended use of the
land appears to be best justified. Her
house was occupying the lot through
no fault on her part.
RULES OF APPLICATION
1. The price to be paid is a reasonable
price.
2. In case two or more owners of
adjoining lands wish to exercise the
right of pre-emption or redemption,
the owner whose intended use of
the land in question appears best
justified shall be preferred.
REASON AND PURPOSE OF THE LAW
● To discourage speculation in real
estate and the consequent
aggravation of the housing problems
in centers of population.
Article 1623. 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, or by the vendor, as the case
may be. The deed of sale shall not be
recorded in the Registry of Property,
unless accompanied by an affidavit of
the vendor that he has given written
notice thereof to all possible
redemptioners.
The right of redemption of co-owners
excludes that of adjoining owners.
(1524a)
Period of pre-emption: Within 30 days
from written notice by the prospective
vendor.
Period of redemption: Within 30 days
from written notice by the vendor.
NOTE: The deed of sale cannot be
registered without an affidavit from the
vendor (original buyer) that he has given
written notice to all possible redemptioners.
NOTE: The right of redemption of
co-owners is preferred over that of adjoining
owners.
CHAPTER 8 - ASSIGNMENT OF CREDITS
AND OTHER INCORPOREAL RIGHTS
Article 1624. An assignment of creditors
and other incorporeal rights shall be
perfected in accordance with the
provisions of article 1475. (n)
Assignment of credits: A contract where a
person (assignor) transfers his credit, right,
or action against a third person (assignee)
for a consideration certain in money or its
equivalent.
● Contract for assignment or transfer
of credit and other incorporeal rights
is perfected (EVEN IF THERE IS
NO DELIVERY) from the moment
the parties agree upon:
1. the credit or right assigned and;
2. the price
3. the assignee will acquire ownership
only UPON DELIVERY.
Ex. D owes C P5,000. C assigns his credit
to T for consideration with notice to D. C is
the assignor while T is the assignee. D will
have to make his payment to T.
Article 1625. An assignment of credit,
right, or action shall produce no effect
against third persons unless it appears
in a public instrument, or the instrument
is recorded in the Registry of Property in
case the assignment involves real
property. (1526)
FORM OF ASSIGNMENT OF CREDITS
1. Between the parties
a. Valid and enforceable in any form
(oral, written, or partly oral and partly
written), as long as the law does not
require a specific form for its validity.
2. For binding effect (enforceable)
against third persons.
a. If personal property is involved, an
assignment must appear in a public
instrument.
b. If real property is involved, public
instruments must be recorded in
the Registry of Property.
NOTE: If the assignment only appears in
a private instrument, the assignment is
only enforceable among the parties and not
to third persons.
Article 1626. The debtor who, before
having knowledge of the assignment,
pays his creditor shall be released from
the obligation. (1527)
EFFECT OF PAYMENT BY THE DEBTOR
AFTER ASSIGNMENT OR CREDIT
1. Before notice WITHOUT knowledge of
the assignment
● The debtor is released from his
obligation if he pays his creditor
WITHOUT knowledge of the
assignment.
2. Before notice WITH knowledge of the
assignment
● If the debtor pays to his original
creditor, he is not released from his
obligation because he acted in bad
faith. He can be made to pay again
by the assignee.
3. After notice
● If the debtor pays to his original
creditor, the payment is not valid
against the assignee.
● The debtor is not released from
his obligation and can be made to
pay again by the assignee.
NOTE: Consent of the debtor is not
essential for the assignment to be effective.
So even if wala mingconsent si debtor sa
assignment after receiving notice, adto ra
gihapon siya sa assignee dapat mubayad.
NOTE: Actual notice of assignment MUST
be given to the debtor.
Article 1627. The assignment of credit
includes all the accessory rights, such
as a guaranty, mortgage, pledge, or
preference. (1528)
General Rule: The accessory follows the
principal.
Exception: Parties may stipulate that the
accessory rights shall not be included in
the assignment.
ILLUSTRATIVE EXAMPLE:
D obtained a loan from C amounting to
P200,000. The loan is secured by a
mortgage of D’s lot. If C assigns his credit
right to X with notice, the mortgage is also
considered assigned unless there is a
stipulation to the contrary.
 ● If D defaults in his payment, X can
ask for the foreclosure of the
mortgage. The property will be sold
and the proceeds applied to the
payment of the loan.
D owes C P200,000 with G as guarantor. C
assigned his credit to X with notice given to
D.
● If D defaults in his payment, X may
enforce the guaranty of G unless the
credit was transferred with the
express stipulation that G shall be
released from his obligation.
Article 1628. The vendor in good faith
shall be responsible for the existence
and legality of the credit at the time of
the sale unless it should have been sold
as doubtful; but not for the solvency of
the debtor, unless it has been so
expressly stipulated or unless the
insolvency was prior to the sale and of
common knowledge.
WARRANTIES OF THE ASSIGNOR
1. Legality and existence of the credit
at the time of sale.
Exception: There is no warranty if the
credit was sold as doubtful.
D owes C P10,000. The debt is evidenced
by a promissory note. Thereafter, C
assigned his credit right to X.
● If X cannot collect from D because
the note was issued for an illegal
gambling debt, C will be liable to X
for breach of warranty as to the
legality of the credit.
● If X cannot collect from D because
the debt had been prescribed, C will
be liable to X for breach of warranty
as to the existence of the credit.
● If the credit right is in litigation, the
credit is doubtful because whether D
is liable or not to C depends upon
the outcome of the case. If X cannot
collect from D because the court
released D from his liability, X
cannot hold C liable.
● If C lacks sufficient data to
determine whether the credit is still
enforceable or not and that fact was
fully disclosed upon assignment, X
cannot hold C liable.
2. Solvency of the debtor ONLY when:
a. There is a stipulation; or
b. The insolvency already existed prior
to the sale and of public knowledge.
D owes C P10,000. The debt is evidenced
by a promissory note. Thereafter, C
assigned his credit right to X.
● If X cannot collect from D because D
was insolvent, X can only hold C
liable if:
a. it was expressly stipulated;
b. the insolvency existed prior to the
sale and was of public knowledge
although C was not aware; or
c. the insolvency existed prior to the
sale and was known to C although
it was not of public knowledge.
Even in these cases, he shall only be liable
for the price received and for the expenses
specified in No. 1 of article 1616 (the price
of the sale; and expenses of the contract
and other legitimate expenses).
The vendor in bad faith shall always be
answerable for the payment of all expenses,
and for damages. (1529)
LIABILITY OF THE ASSIGNOR WHEN
WARRANTIES ARE VIOLATED
1. Assignor in good faith (PEL)
● Price received.
● Expenses of the contract.
● Other legitimate payments by
reason of the assignment.
2. Assignor in bad faith (PELD)
● Price received.
● Expenses of the contract.
● Other legitimate payments by
reason of the assignment.
● Damages.
Article 1629. In case the assignor in
good faith should have made himself
responsible for the solvency of the
debtor, and the contracting parties
should not have agreed upon the
duration of the liability, it shall last for
one year only, from the time of the
assignment if the period had already
expired.
If the credit should be payable within a
term or period which has not yet expired,
the liability shall cease one year after the
maturity. (1530a)
DURATION OF THE ASSIGNOR’S
LIABILITY IF THE ASSIGNOR
EXPRESSLY WARRANTED THE
SOLVENCY OF THE DEBTOR
1. The period stipulated
2. If there is no stipulation:
a. If the assignment was made
BEFORE maturity, 1 year from
maturity.
b. If the assignment was made AFTER
maturity, 1 year from the time of
assignment.
D owes C P5,000 payable on October 1,
2022. C assigned his credit to T with an
express warranty on the solvency of D.
● If the agreement is that the duration
of C’s liability shall last for two years
from Oct 1, 2022, then such shall be
followed.
● If there is no stipulation and the
assignment was made on
November 1, 2022, the liability is
limited to one year from the
assignment. (ASSIGNMENT AFTER
MATURITY)
If there is no stipulation and the
assignment was made on September 1,
2022, the liability is limited to exactly one
year after October 1, 2022, or October 1,
2023.
(ASSIGNMENT BEFORE MATURITY).
NOTE: Provision is inapplicable if the
assignor is in bad faith.
Article 1630. One who sells an
inheritance without enumerating the
things of which it is composed shall only
be answerable for his character as an
heir. (1531)
Warranty of Heirship: He shall only
warrant the facts of his heirship but not of
the things composing the inheritance,
unless such things were enumerated.
NOTE: Provision contemplates the sale of
successional right or the right to inheritance
before partition.
● Inheritance may be sold either with
or without specification of the
properties to be alienated.
B and C are the heirs of the estate left by A.
Before partition and without specifying his
definite share in the inheritance, B sold his
share to X for P100,000.
● B only warrants the fact that he is an
heir of A. B is not liable to X if his
inheritance after the partition has a
value of less than P100,000.
Article 1631. One who sells for a lump
sum the whole of certain rights, rents, or
products, shall comply by answering for
the legitimacy of the whole in general;
but he shall not be obliged to warrant
each of the various parts of which it may
be composed, except in the case of
eviction from the whole or the part of
greater value. (1532a)
VENDOR’S WARRANTY FOR LUMP SUM
SALE OF THE WHOLE OF CERTAIN
RIGHTS, RENTS OR PRODUCTS
● The vendor warrants the
legitimacy of the whole, but he is
not obliged to warrant each of the
parts of which it may be composed,
except when the vendee is evicted:
1. From the whole of the thing; or
2. From the part of the greater value.
S sold his receivables from more than 50
customers to B for P1,000,000.
● If B was deprived of the amount of
P20,000 representing an alleged
receivable from D, S shall not be
liable because the warranty of S is
on the legitimacy of the whole.
● If B was deprived of the whole
receivables or more than 50%
thereof, S shall be liable to B.
S, a partnership in a partnership, sold all his
interest to B for the lump sum of P150,000.
Upon dissolution of the partnership, B
received S’ share in assets consisting of
P50,000, office equipment, and a car.
● If a creditor of the partnership
recovered the car from B, S shall not
be liable to B.
● If a creditor of the partnership
recovered the entire share or only
the car which was worth P80,000, S
shall be liable to B. (Value of the car
exceeded 50% of the amount paid)
Article 1632. Should the vendor have
profited by some of the fruits or received
anything from the inheritance sold, he
shall pay the vendee thereof, if the
contrary has not been stipulated. (1533)
Article 1537: All fruits shall pertain to the
vendee from the day on which the contract
was perfected.
General Rule: The fruits of an
INHERITANCE are included in the sale
thereof, unless there is a contrary
stipulation.
● If the vendor merely received the
fruits, he must deliver them to the
vendee.
● If the vendor consumed the fruits, he
must reimburse the vendee.
● If the vendor sold the fruits, he must
deliver the price of the sale.
Article 1633. The vendee shall, on his
part, reimburse the vendor for all that the
latter may have paid for the debts of and
charges on the estate and satisfy the
credits he may have against the same,
unless there is an agreement to the
contrary. (1534)
 ● Any debts and charges on the estate
paid by the vendor shall be
reimbursed by the vendee unless
there is a contrary stipulation.
Article 1634. When a credit or other
incorporeal right in litigation is sold, the
debtor shall have a right to extinguish it
by reimbursing the assignee for the price
the latter paid therefor, the judicial costs
incurred by him, and the interest on the
price from the day on which the same
was paid.
A credit or other incorporeal right shall
be considered in litigation from the time
the complaint concerning the same is
answered.
The debtor may exercise his right within
thirty days from the date the assignee
demands payment from him. (1535)
WHEN RIGHT CONSIDERED IN
LITIGATION
● The credit or other incorporeal right
shall be considered in litigation from
the time the complaint concerning
the same is answered.
REQUISITES OF RIGHT OF LEGAL
REDEMPTION IN SALE OF CREDIT OR
OTHER RIGHT IN LITIGATION
(SALPDRP)
1. There must be a sale or
assignment of credit.
2. The credit or other incorporeal right
must be in litigation.
3. There must be a PENDING
LITIGATION at the time of the
assignment. The complaint by the
assignor must have been filed, and
answered by the debtor before the
sale of credit.
4. The assignee must have demanded
payment from the debtor.
5. Right of legal redemption of debtor
when a credit or other incorporeal
rights in litigation is sold:
● The debtor shall have the
right to extinguish his
obligation by reimbursing the
assignee of the following:
1. Price paid by the assignee
for the right purchased.
2. Judicial costs incurred by
him.
3. Interest on the price from
the day on which assignee
paid the assignor.
6. Period within which the debtor may
exercise the right/reimburse the
assignee
● Within thirty days from the
date the assignee demands
payment from him.
D borrowed P5,000 from C. When D
did not pay the debt upon demand
by C, C filed a complaint against him
to collect the debt and D answered
the complaint. Here, the credit right
is considered in litigation. Thereafter,
C sold his credit right to X for
P4,000.
● D may exercise his right of
legal redemption by
reimbursing the assignee of
the P4,000, judicial costs
incurred by D, and interest
on the P4,000 (from the day
X paid the amount to C).
 ● Reimbursement must be
done within 30 days from the
demand of X
Article 1635. From the provisions of the
preceding article shall be excepted the
assignments or sales made:
The debtor’s right of redemption shall not be
available when the assignment of the right
of litigation is made:
(1) To a co-heir or co-owner of the right
assigned
Ex. Nangutang si D ni X and Y. X and Y
sued D for collection and D answered the
complaint. While the case was pending, X
sold his share of credit to Y. D cannot
redeem the share of X from Y.
(2) To a creditor in payment of his credit
Ex. Nangutang si D ni X, unya si X naay
utang ni C. X sued D for collection and D
filed his answer. While the case was
pending, X assigned his credit right C. D
cannot redeem against C.
(3) To the possessor of a tenement or
piece of land which is subject to the right in
litigation assigned. (1536)
● Same ang person na gibaligyaan
and giassignan.
Ex. D obtained a loan from C, where D
mortgaged his lot to secure the debt. Then,
D sold his lot to X. When D could not pay, C
sued D. While the case was pending, C
assigned his credit to X. D has no right of
legal redemption against X.
CHAPTER 9 - GENERAL PROVISIONS
Article 1636. In the preceding articles in
this Title governing the sale of goods,
unless the context or subject matter
otherwise requires:
DEFINITION OF TERMS
(1) "Document of title to goods" includes
any bill of lading, dock warrant, "quedan," or
warehouse receipt or order for the delivery
of goods, or any other document used in the
ordinary course of business in the sale or
transfer of goods, as proof of the
possession or control of the goods, or
authorizing or purporting to authorize the
possessor of the document to transfer or
receive, either by indorsement or by
delivery, goods represented by such
document.
"Goods" includes all chattels personal but
not things in action or money of legal tender
in the Philippines. The term includes
growing fruits or crops.
Items not included in the term “Goods”
1. Thing/Chose in Action - Any claim or
right which may be pleaded in a suit of
law.
Ex. A claim of reparation for a torr or right
guaranteed under certain types of contracts.
2. Legal tender - Currency which a
debtor can legally compel a creditor to
accept in payment of a debt in money
when tendered by the debtor in the right
amount.
"Order" relating to documents of title
means an order by indorsement on the
documents.
"Quality of goods" includes their state or
condition.
"Specific goods" means goods identified
and agreed upon at the time a contract of
sale is made.
An antecedent or pre-existing claim,
whether for money or not, constitutes
"value" where goods or documents of title
are taken either in satisfaction thereof or as
security therefor.
(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, whether insolvency
proceedings have been commenced or not.
(3) Goods are in a "deliverable state"
within the meaning of this Title when they
are in such a state that the buyer would,
under the contract, be bound to take
delivery of them. (n)
Article 1637. The provisions of this Title
are subject to the rules laid down by the
Mortgage Law and the Land Registration
Law with regard to immovable property.
(1537a)
● Under the Mortgage Law and the
Land Registration Law, the
registration of documents or titles
pertaining to immovable property is
the operative act that binds the
property. Only after registration shall
the right of third persons be
adversely affected by the sale
TITLE VII - BARTER OR EXCHANGE
Article 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)
Barter: Where instead of paying a price in
money, another thing is given in lieu thereof.
Barter: A contract whereby one transfers
the ownership of non-fungible things to
another with the obligation on the part of the
latter to give things of the same kind,
quantity, and quality.
● Perfected from the moment there is
a meeting of minds upon the things
promised.
● Consummated from the time of
mutual delivery of the things
promised.
NOTE: View pages 227-228 for examples
on barter and usufruct. View Article 1468 for
the difference between sale and barter.
Article 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)
● Nakadawat si A sa thing promised
from B, pero na prove ni A na dili
diay to under the ownership of B ang
thing.
RIGHTS OF AGGRIEVED PARTY
1. He cannot be compelled to deliver
the thing he offered in the barter
2. He is entitled to damages.

Article 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)

REMEDIES OF PARTY WHO WAS

DEPRIVED OF THE THING RECEIVED IN
BARTER THROUGH EVICTION

1. Recover the thing given in exchange

with damages; or
2. Recover damages only

NOTE: Aggrieved party can only recover

the thing given when it is still in possession
of the other contracting party. If it has been
sold to a purchaser in good faith, the thing
can no longer be recovered.

Article 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)
● Provisions on sales are also
applicable to barter.