INTRODUCTION
GOVERNING LAW
● Civil Code - book IV, title VI, Arts. 1458 -
1637
SOURCES OF OUR LAW ON SALES
1. Admixture of Civil Law and Common Law
Principles
2. Uniform Sales Act of the US
Article 1458. By the contract of sale one of
the contracting parties obligates himself to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional.
CONCEPT OF CONTRACT OF SALE
● The contract of sale is an agreement
whereby one of the parties (called the seller
or vendor) obligates himself to deliver
something to the other (called the buyer or
purchaser or vendee) who, on his part,
binds himself to pay therefor a sum of
money or its equivalent (known as the
price).
● Seller’s obligation is merely to deliver the
thing
CHARACTERISTICS OF A CONTRACT OF SALE
(1) Consensual, because it is perfected by mere
consent without any further act;
(2) Bilateral, because both the contracting parties
are bound to fulfill correlative obligations towards
each other — the seller, to deliver and transfer
ownership of the thing sold and the buyer, to pay
the price;
(3) Onerous, because the thing sold is conveyed in
consideration of the price and vice versa;
(4) Commutative, because the thing sold is
considered the equivalent of the price paid and vice
versa. However, the contract may be aleatory as in
the case of the sale of a hope (e.g., sweepstakes
ticket);
(5) Nominate, because it is given a special name
or designation in the Civil Code, namely, “sale”; and
(6) Principal, because it does not depend for its
existence and validity upon another contract.
ESSENTIAL REQUISITES OF A CONTRACT OF
SALE
1. Consent or meeting of the minds - This
refers to the consent on the part of the seller
to transfer and deliver and on the part of the
buyer to pay.
2. Object or subject matter - The thing must
be determinate or at least capable of being
made determinate because if the seller and
the buyer differ in regard to the thing sold =
no meeting of the minds = NO SALE.
3. Cause or consideration - this refers to the
price certain in money or its equivalent such
as a check or a promissory note, which is
the consideration for the thing sold.
NATURAL AND ACCIDENTAL ELEMENTS
(1) Natural elements or those which are deemed
to exist in certain contracts, in the absence of any
contrary stipulations, like warranty against eviction
(Art. 1548.) or hidden defects (Art. 1561.); and
(2) Accidental elements or those which may be
present or absent depending on the stipulations of
the parties, like conditions, interest, penalty, time or
place of payment, etc
EFFECT OF ABSENCE OF
PRICE/NONPAYMENT OF PRICE
1. There can be no sale without a price.
2. Non-payment of the purchase price is a
resolutory condition for which the remedy is
either rescission or specific performance
under Art. 1191 of the NCC.
● An action to declare a contract void or
inexistent does not prescribe
TRANSFER OF TITLE TO PROPERTY FOR A
PRICE ESSENCE OF SALE
(1) Obligations to deliver and to pay. — The
transfer of title to property or agreement to transfer
title for a price actually paid or promised, not a
mere physical transfer of the property, is the
essence of sale.
● It is only upon the existence of the contract
of sale that the seller is obligated to transfer
ownership to the buyer and the buyer, to
pay the purchase price to the seller.
(2) Where transfer of ownership not intended by
the parties. — A contract for the sale or purchase
of goods/commodity to be delivered at a future
time, if entered into without the intention of having
any goods/commodity pass from one party to
another, but with an understanding that at the
appointed time, the purchaser is merely to receive
or pay the difference between the contract and the
market prices, is illegal.
KINDS OF CONTRACT OF SALE
(1) As to presence or absence of conditions. —
A sale may be either:
(a) Absolute - where the sale is not subject to
any condition whatsoever and where title
passes to the buyer upon delivery of the
thing sold.
(b) Conditional - where the sale contemplates
a contingency and in general, where the
contract is subject to certain conditions,
usually in the case of the vendee, the full
payment of the agreed purchase price and
in the vendor, the fulfillment of certain
warranties
2. Other Kinds - other kinds of sale depending on
one’s point of view
CONTRACT OF SALE AND CONTRACT TO
SELL WITH RESERVED TITLE DISTINGUISHED
1. Transfer of title - In a contract of sale, title
passes to the buyer upon delivery of the
thing sold, while in a contract to sell (or of
“exclusive right and privilege to
purchase”), where it is stipulated that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price
(Art. 1478.), ownership is reserved in the
seller and is not to pass until the full
payment of the purchase price.
2. Payment of price - In a contract of sale,
non-payment of the price is a negative
resolutory condition (see Art. 1179.), and
the remedy of the seller is to exact
fulfillment or to rescind the contract (see
Arts. 1191, 1592.), while in a contract to
sell, full payment is a positive suspensive
condition, the failure of which is not a
breach, casual or serious, of the contract
but simply an event that prevents the
obligation of the vendor to convey title from
acquiring binding force.
3. Ownership of vendor - In a contract of
sale, the vendor has lost and cannot
recover the ownership of the thing sold and
delivered, actually or constructively (see Art.
1497.), until and unless the contract of sale
itself is resolved and set aside. In a
contract to sell, however, the title remains
in the vendor if the vendee does not comply
with the condition precedent of making
payment at the time specified in the
contract.
CONTRACT TO SELL AND CONDITIONAL SALE
DISTINGUISHED
A contract to sell may be defined as a bilateral
contract whereby the prospective seller, while
expressly reserving the ownership of the
subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price.
1. Transfer of title to the buyer - a
conditional contract of sale where the seller
may likewise reserve title to the property
subject of the sale until the fulfillment of the
suspensive condition, because in a
conditional contract of sale, the first element
of consent is present, although it is
conditioned upon the happening of a
contingent event which may or may not
occur. If the suspensive condition is not
fulfilled, the perfection of the contract of sale
is completely abated.
● IF SUSPENSIVE CONDITION IS
FULFILLED = contract of sale is
perfected.
= in contract to sell, ownership will not
automatically transfer to the buyer.
Prospective seller still has to convey title
to the prospective buyer by entering into
a contract of absolute sale to
consummate the transaction.
2. Sale of subject property to a third person
 ● Contract to sell - a third person buying a
property despite the fulfillment of the
suspensive condition (full payment of the
purchase price) TITLE WILL TRANSFER
TO THE BUYER AFTER REGISTRATION.
● Contract of sale - upon the fulfillment of the
suspensive condition, the sale becomes
absolute. OWNERSHIP IS
AUTOMATICALLY TRANSFERRED TO
THE BUYER UPON DELIVERY.
OTHER CASES OF CONTRACT TO SELL
1. If the subject matter is not determinate
or the price is not certain = contract to sell
2. Sale of future goods even though the
contract is in the form of a present sale =
contract to sell
3. Where the stipulation of the parties is
that the deed of sale and certificate of
sale would be issued only after full
payment of the purchase price = contract
to sell
Article 1459. The thing must be licit and the
vendor must have a right to transfer the
ownership thereof at the time it is delivered.
REQUISITES CONCERNING OBJECT
1. Things:
a. Capable of having a potential
existence or must already exist at
the time of the contract and must not
be impossible
b. Licit or lawful and within the
commerce of men
c. Determinate
2. Rights
a. All rights which are not
intransmissible or not personal may
also be the object of sale (e.g. right
of conventional redemption; credit;
etc.)
b. Intransmissible rights by law are the
right to vote, right to public office,
and marital and parental rights -
these cannot be an object of sale
3. Services
a. Can be an object of a contract but
not an object of a contract of sale
THING MUST BE LICIT
● Subject matter is illicit or outside commerce
of man = void contract
● Other examples of void contracts:
○ Those whose object is contrary to
law
○ Those whose object is outside the
commerce of men
● Rights and obligations of those who engage
in such illicit contracts are subject to the
provisions of Art. 1411 and 1412 of the NCC
KINDS OF ILLICIT THINGS
● Illicit per se - of its nature
○ Decayed food unfit for consumption
(Art. 11459)
● Illicit per accidens - because dome
provisions of the law declare it illegal
○ Sale of an animal suffering from a
contagious disease (Art 1575)
○ Contracts entered upon future
inheritance (Art. 1347(2)) provided
the following requisites concur:
■ Succession has not yet been
opened
■ Object of contract forms part
of the inheritance
■ Promissor has, with respect
to the object, an expectancy
of a right which is purely
hereditary in nature
○ Lottery tickets (Art. 195, RPC) (but
allowed under specific
circumstances)
○ A contract which purports to
alienate, transfer, convey or
encumber any homestead within the
prohibitory period of 5 years from the
date of issuance of the patent
(Binayag vs. Ugaddan)
○ Land sold to aliens as prohibited by
the Constitution
ILLICIT THINGS AND THOSE BEYOND THE
COMMERCE OF MAN
● Beyond the commerce of man is broader
than illicit things
● Beyond the commerce of man:
 ○ The law prohibits them to be a
subject of a commercial transaction
○ Those freely available to everyone’s
use
○ Res communes omnium - things of
the entire community
○ Not owned by specific persons
THING MUST BE POSSIBLE
● Impossible thing = void contract for being
contrary to law
RIGHT OF VENDOR TO TRANSFER
OWNERSHIP
● Seller must be owner or authorized by
owner of thing sold
○ Essential for sale that the vendor
must be able to transfer ownership
○ Must be the owner or at least
authorized by the owner of the thing
being sold
○ Nemo dat quo non habet - one
cannot transmit or dispose of that
which does not belong to him
● Examples:
○ Sale of paraphernal (separate)
property of the deceased wife by the
husband who was neither an owner
or administrator at the time of the
sale of the property is void ab initio
(Manotok Realty vs. CA)
○ Only so much of the share of the
vendor co-owner can be validly
acquired by a vendee even if he
acted in good faith in buying shares
of the co-owners (Segura vs.
Segura)
○ Where the sale from one person to
another was fictitious as there was
no consideration, and therefore void
and inexistent the latter has no title
to convey to third persons (Traders
Royal Bank vs. CA)
● Seller need not be the owner of a thing sold
under the Spanish Civil Code
○ If the seller is the owner of the thing
the seler has the obligation to
transmit ownership.
○ If the seller is not the owner of the,
the seller must give peaceful
possession to the buyer
● Right of seller to transfer ownership must
exist at the time of the delivery
○ Art. 1459 does not require that the
vendor must have the right to
transfer ownership of the property
sold at the time of the perfection of
the contract
■ Sale being a consensual
contract is perfected by mere
consent and ownership by
the seller of the thing sold is
not an element for its
perfection
■ It is sufficient that the seller
has the right to transfer the
ownership of the thing at the
time it is delivered
■ Reason: since future goods
or goods whose acquisition
by the seller depends upon a
contingency may be the
subject matter of sale, it
would be inconsistent for Art.
1459 to require that the thing
sld ust be owned by the
seller at the time of the sale
inasmuch as it is not possible
for a person to own a thing or
right not inexistence.
● Where Property sold registered in name of
seller who employed fraud in securing his
title
○ GR: Forged or fraudulent deed is a
nullity and conveys no title
○ Expn:
■ Certificate of title was already
transferred from the name of
the true owner to the forger
and while it reamied that way
the land was subsequently
sold to an innocent
purchaser of value
■ Reason: The rights of an
innocent purchaser of value
must be respected and
 protected not withstanding
the fraud employed by the
seller in securing his title
● Where property sold in violation of a right of
first refusal of another
○ A contract of sale entered into in
violation of a right of first refusal of
another person, while valid, subject
to rescission
○ The basis of the right of first refusal
in a contract of sale must be the
current offer of the seller to sell or
offer to purchase of the prospective
buyer
○ No bad faith - contract cannot be
rescinded
Article 1460. A thing is determinate when it
is particularly designated or physical
segregated from all others of the same
class.
The requisite that a thing be determinate is
satisfied if at the time the contract is entered
into, the thing is capable of being made
determinate without the necessity of a new
or further agreement between the parties.
SUBJECT MATTER MUST BE DETERMINATE
(1) When thing determinate - a thing is
determinate or specific when it is particularly
designated or physically segregated from all
others of the same class.
- Determinate thing is identified by its
individuality (ex. My car)
(2) Sufficient if subject matter capable of
being made determinate - It is sufficient
that the thing is determinable or capable of
being made determinate without the
necessity of a new or further agreement
between the parties to ascertain its identity,
quantity, or quality.
Article 1461. Things having a potential
existence may be the object of the contract
of sale.
The efficacy of the sale of a mere hope or
expectancy is deemed subject to the
condition that the thing will come into
existence.
The sale of a vain hope or expectancy is
void.
SALE OF THINGS HAVING POTENTIAL
EXISTENCE
● Even a future thing not existing at the time
the contract is entered into may be the
object of sake provided it has a potential or
possible existence - it is reasonably certain
to come into existence as the natural
increment or usual incident of something in
existence already belonging to the seller,
and the title will vest in the buyer the
moment the thing comes into existence
SALE OF MERE HOPE OR EXPECTANCY
● deemed subject to the condition that the
thing contemplated or expected will come
into existence.
● Sale refers to an “expected thing” which is
not yet in existence, and not to the hope or
expectancy which already exist
● The sale of mere hope or expectancy is
valid even if the thing hoped or expected
does not come into existence, unless the
hope or expectancy us vain in which case,
the sale is VOID.
SALE OF THING EXPECTED AND SALE OF
HOPE ITSELF DISTINGUISHED
● Emptio rei speratae(sale of thing
expected) is the sale of a thing not yet in
existence subject to the condition that the
thing will exist and on failure of the
condition, the contract becomes ineffective
and hence, the buyer has no obligation to
pay the price.
● emptio spei is the sale of the hope itself
that the thing will come into existence,
where it is agreed that the buyer will pay the
price even if the thing does not eventually
exist.
(1) In emptio rei speratae, the future thing is
certain as to itself but uncertain as to its quantity
and quality. Such sale is subject to the condition
that the thing will come into existence (see Art.
1545, par. 2.), whatever its quantity or quality. In
emptio spei (like the sale of a sweepstake ticket),
it is not certain that the thing itself (winning a
prize) will exist, much less its quantity and quality.
(2) In the first, the contract deals with a future thing,
while in the second, the contract relates to a thing
which exists or is present — the hope or
expectancy.
(3) In the first, the sale is subject to the condition
that the thing should exist, so that if it does not,
there will be no contract by reason of the absence
of an essential element. On the other hand, the
second produces effect even though the thing does
not come into existence because the object of the
contract is the hope itself, unless it is a vain hope or
expectancy (like the sale of a falsified sweepstake
ticket which can never win).
PRESUMPTION IN CASE OF DOUBT
- In favor of emptio rei speratae
Article 1462. The goods which form the
subject of a contract of sale may be either
existing goods, owned or possessed by the
seller, or goods to be manufactured, raised,
or acquired by the seller after the perfection
of the contract of sale, in this Title called
"future goods."
There may be a contract of sale of goods,
whose acquisition by the seller depends
upon a contingency which may or may not
happen.
GOODS WHICH MAY BE THE OBJECT OF SALE
(1) Existing goods or goods owned or possessed
by the seller; or
(2) Future goods or goods to be manufactured
(like the sale of milk bottles to be manufactured
with the name of the buyer pressed in the glass),
raised (like the sale of the future harvest of palay
from a ricefield), or acquired (like the sale of a
definite parcel of land the seller expects to buy).
FUTURE GOODS AS OBJECT OF SALE
● A sale of future goods, even though the
contract is in the form of a present sale, is
valid only as an executory contract to be
fulfilled by the acquisition and delivery of the
goods specified.
● Paragraph 1 of Article 1462 does not apply
if the goods are to be manufactured
especially for the buyer and not readily
saleable to others in the manufacturer’s
regular course of business. The contract, in
such case, must be considered as one for a
piece of work.
Article 1463. The sole owner of a thing may
sell an undivided interest therein.
SALE OF UNDIVIDED INTEREST IN A THING
● The sole owner of a thing may sell the entire
thing; or only a specific portion thereof; or
an undivided interest therein and such
interest may be designated as an aliquot
part of the whole.
● Article 1463 covers only the sale by a sole
owner of a thing of an undivided share or
interest thereof.
Article 1464. In the case of fungible goods,
there may be a sale of an undivided share
of a specific mass, though the seller
purports to sell and the buyer to buy a
definite number, weight or measure of the
goods in the mass, and though the number,
weight or measure of the goods in the
mass, and though the number, weight or
measure of the goods in the mass is
undetermined. By such a sale the buyer
becomes owner in common of such a share
of the mass as the number, weight or
measure bought bears to the number,
weight or measure of the mass. If the mass
contains less than the number, weight or
measure bought, the buyer becomes the
owner of the whole mass and the seller is
bound to make good the deficiency from
goods of the same kind and quality, unless
a contrary intent appears
SALE OF AN UNDIVIDED SHARE OF A
SPECIFIC MASS
(1) Meaning of fungible goods. — It means goods
of which any unit is, from its nature or by mercantile
usage, treated as the equivalent of any other unit,
such as grain, oil, wine, gasoline, etc.
(2) Effect of sale. — The owner of a mass of
goods may sell only an undivided share thereof,
provided the mass is specific or capable of being
made determinate. (Art. 1460.)
(a) By such sale, the buyer becomes a co-owner
with the seller of the whole mass in the proportion
in which the definite share bought bears to the
mass.
(b) It must follow that the aliquot share of each
owner can be determined only by the measurement
of the entire mass. If later on it be discovered that
the mass of fungible goods contains less than what
was sold, the buyer becomes the owner of the
whole mass and furthermore, the seller shall supply
whatever is lacking from goods of the same kind
and quality, subject to any stipulation to the
contrary.
(3) Risk of loss. — If the buyer becomes a co-
owner, with the seller, or other owners of the
remainder of the mass, it follows that the whole
mass is at the risk of all the parties interested in it,
in proportion to their various holdings.
(4) Subject matter. — Take note that in the sale of
an undivided share, either of a thing (Art. 1463.) or
of that of mass of goods (Art. 1464.), the subject
matter is an incorporeal right. (Art. 1501.) Here,
ownership passes to the buyer by the intention of
the parties.
(5) Applicability of Article 1464 to non-fungible
goods. — goods that are not strictly fungible in
nature.
Article 1465. Things subject to a resolutory
condition may be the object of the contract
of sale.
SALE OF THING SUBJECT TO A RESOLUTORY
CONDITION
● A resolutory condition is an uncertain
event upon the happening of which the
obligation (or right) subject to it is
extinguished. Hence, the right acquired
in virtue of the obligation is also
extinguished.
Article 1466. In construing a contract
containing provisions characteristic of both
the contract of sale and of the contract of
agency to sell, the essential clauses of the
whole instrument shall be considered.
SALE DISTINGUISHED FROM AGENCY TO
SELL
By the contract of agency, a person binds
himself to render some service or to do
something in representation or on behalf of
another, with the consent or authority of the
latter. (Art. 1868.)
(1) In a sale, the buyer receives the goods as
owner; in an agency to sell, the agent receives the
goods as the goods of the principal who retains his
ownership over them and has the right to fix the
price and the terms of the sale and receive the
proceeds less the agent’s commission upon the
sales made;
(2) In a sale, the buyer has to pay the price; in an
agency to sell, the agent has simply to account for
the proceeds of the sale he may make on the
principal’s behalf;
(3) In a sale, the buyer, as a general rule, cannot
return the object sold; in an agency to sell, the
agent can return the object in case he is unable to
sell the same to a third person;
(4) In a sale, the seller warrants the thing sold (see
Arts. 1547, 1548, 1561.); in an agency to sell, the
agent makes no warranty for which he assumes
personal liability as long as he acts within his
authority and in the name of the seller; and
(5) In a sale, the buyer can deal with the thing sold
as he pleases being the owner; in an agency to
sell, the agent in dealing with the thing received,
must act and is bound according to the instructions
of his principal.
CONTRACT CREATING BOTH A SALE AND AN
AGENCY RELATIONSHIP
ESSENCE:
● Sale - transfer of title or agreement to
transfer it for a price paid or promise
● Agency to sell - delivery to an agent the
property of his principal
Article 1467. A contract for the delivery at a
certain price of an article which the vendor
in the ordinary course of his business
manufactures or procures for the general
market, whether the same is on hand at the
time or not, is a contract of sale, but if the
goods are to be manufactured specially for
the customer and upon his special order,
and not for the general market, it is a
contract for a piece of work.
SALE DISTINGUISHED FROM CONTRACT FOR
A PIECE OF WORK
Contract for 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 his labor or skill,
or also furnish the material.
● The distinction, labor or materials or for a
piece of work is tested by the inquiry
whether 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, or a thing which would have
existed and been the subject of sale to
some other person, even if the order had
not been given.
Article 1468. If the consideration of the
contract consists partly in money, and partly
in another thing, the transaction shall be
characterized by the manifest intention of
the parties. If such intention does not clearly
appear, it shall be considered a barter if the
value of the thing given as a part of the
consideration exceeds the amount of the
money or its equivalent; otherwise, it is a
sale.
SALE DISTINGUISHED FROM BARTER
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. (Art. 1638.)
● intention of the parties is paramount in
determining whether it is one of barter or of
sale and such intention may be ascertained
by taking into account the contemporaneous
and subsequent acts of the parties.
● “price certain in money or its
equivalent.” - only in a contract of sale
SALE DISTINGUISHED FROM LEASE
Lease of things - one of the parties binds himself
to give to another the enjoyment or use of a thing
for a price certain and for a period which may be
definite or indefinite.
● in a lease, the landlord or lessor transfers
merely the temporary possession and
enjoyment of the thing leased. In a sale, the
seller transfers ownership of the thing sold.
SALE DISTINGUISHED FROM DATION IN
PAYMENT
Dation in payment (dacion en pago) - is the
alienation of property to the creditor in satisfaction
of a debt in money.
Distinctions:
(1) In sale, there is no preexisting credit, while in
dation in payment, there is;
(2) In sale, obligations are created, while in dation
in payment, obligations are extinguished;
(3) In sale, the cause is the price paid, from the
viewpoint of the seller, or the thing sold, from the
viewpoint of the buyer, while in dation in payment,
the extinguishment of the debt, from the viewpoint
of the debtor, or the object acquired in lieu of the
credit, from the viewpoint of the creditor;
(4) In sale, there is more freedom in fixing the price
than in dation in payment; and
(5) In sale, the buyer has still to pay the price, while
in dation in payment, the payment is received by
the debtor before the contract is perfected.
Article 1469. In order that the price may be
considered certain, it shall be sufficient that
it be so with reference to another thing
certain, or that the determination thereof be
left to the judgment of a special person or
persons.
Should such person or persons be unable
or unwilling to fix it, the contract shall be
inefficacious, unless the parties
subsequently agree upon the price.
If the third person or persons acted in bad
faith or by mistake, the courts may fix the
price.
Where such third person or persons are
prevented from fixing the price or terms by
fault of the seller or the buyer, the party not
in fault may have such remedies against the
party in fault as are allowed the seller or the
buyer, as the case may be.
WHERE PRICE CONSIDERED CERTAIN
● It must be certain or capable of being
ascertained in money or its equivalent; and
money is to be understood as currency, and
its equivalent means promissory notes,
 checks and other mercantile instruments
generally accepted as representing money.
Under the above article, the price is certain if:
(1) The parties have fixed or agreed upon a
definite amount; or
(2) It be certain with reference to another thing
certain; or
(3) The determination of the price is left to the
judgment of a specified person or persons and
even before such determination
EFFECT WHERE PRICE FIXED BY THIRD
PERSON DESIGNATED
GENERAL RULE: the price fixed by a third person
designated by the parties is binding.
EXCEPTIONS:
(1) When the third person acts in bad faith or by
mistake as when the third person fixed the price
having in mind not the thing which is the object of
the sale, but another analogous or similar thing in
which case the court may fix the price. But mere
error in judgment cannot serve as a basis for
impugning the price fixed; and
(2) When the third person disregards specific
instructions or the procedure marked out by the
parties or the data given him, thereby fixing an
arbitrary price.
EFFECT WHERE PRICE NOT FIXED BY THIRD
PERSON DESIGNATED
1. If the third person designated by the
parties to fix the price refuses or cannot
fix it (without fault of the seller and the
buyer), the contract shall become
ineffective, as if no price had been
agreed upon unless, of course, the
parties subsequently agree upon the
price.
2. If such third person is prevented from
fixing the price by the fault of the seller
or the buyer, the party not in fault may
obtain redress against the party in fault
(par. 2.) which consists of a choice
between rescission or fulfillment, with
damages in either case. (Art. 1191, par.
2; see Art. 1594.) If the innocent party
chooses fulfillment, the court shall fix
the price.
Article 1470. Gross inadequacy of price
does not affect a contract of sale, except as
it may indicate a defect in the consent, or
that the parties really intended a donation or
some other act or contract.
EFFECT OF GROSS INADEQUACY OF PRICE IN
VOLUNTARY SALES
1) General rule. — While a contract of sale is
commutative, mere inadequacy of the price or
alleged hardness of the bargain generally does not
affect its validity when both parties are in a
position to form an independent judgment
concerning the transaction
(2) Where low price indicates a defect in the
consent. — The inadequacy of price, however,
may indicate a defect in the consent such as when
fraud, mistake, or undue influence is present (Art.
1355.) in which case the contract may be
annulled not because of the inadequacy of the
price but because the consent is vitiated.
Contracts of sale entered into by guardians or
representatives of absentees are rescissible
whenever the wards or absentees whom they
represent suffer lesion by more than 1/4 of the
value of the things which are the object thereof.
(3) Where seller is given the right to repurchase.
— The validity of the sale is not necessarily
affected where the law gives to the owner the right
to redeem, as when a sale is made at public
auction, upon the theory that the lesser the price,
the easier it is for the owner to effect the
redemption.
Article 1471. If the price is simulated, the
sale is void, but the act may be shown to
have been in reality a donation, or some
other act or contract.
EFFECT WHERE PRICE IS SIMULATED
1. SALE is VOID but CONTRACT is VALID
as donation - if price is simulated/false as
when the vendor intended to transfer the
thing gratuitously
2. If the contract is not shown to be a donation
or any other act or contract transferring
ownership because the parties do not intend
to be bound at all, the ownership of the
 thing is not transferred. The contract is
void and inexistent.
3. Simulation occurs when an apparent
contract is a declaration of a fictitious will
deliberately made by agreement of the
parties, in order to produce, for the purpose
of deception, the appearance of a juridical
act which does not exist or is different from
that which was really executed.
Its requisites are:
(a) an outward declaration of will different from the
will of the parties;
b) the false appearance must have been intended
by mutual agreement; and
(c) the purpose is to deceive third persons
Article 1472. The price of securities, grain,
liquids, and other things shall also be
considered certain, when the price fixed is
that which the thing sold would have on a
definite day, or in a particular exchange or
market, or when an amount is fixed above
or below the price on such day, or in such
exchange or market, provided said amount
be certain.
PRICE ON A GIVEN DAY AT PARTICULAR
MARKET
● a price is considered certain if it could be
determined with reference to another thing
certain
● This article is especially applicable to
fungible things like securities, grain, liquids,
etc. the price of which are subject to
fluctuations of the market.
Article 1473. The fixing of the price can
never be left to the discretion of one of the
contracting parties. However, if the price
fixed by one of the parties is accepted by
the other, the sale is perfected.
FIXING OF PRICE BY ONE OF THE
CONTRACTING PARTIES, NOT ALLOWED
1. If consent is essential to a contract of sale,
the determination of the price cannot be left
to the discretion of one of the contracting
parties; otherwise, it cannot be said that the
other consented to a price he did not and
could not previously know
2. The price must be determined impartially by
both parties (Art. 1458.) or left to the
judgment of a specified person or persons.
(Art. 14
Article 1474. Where the price cannot be
determined in accordance with the
preceding articles, or in any other manner,
the contract is inefficacious. However, if the
thing or any part thereof has been delivered
to and appropriated by the buyer he must
pay a reasonable price therefor. What is a
reasonable price is a question of fact
dependent on the circumstances of each
particular case.
Effect of failure to determine price.
(1) Where contract executory. — If the price
cannot be determined in accordance with Articles
1469 and 1472, or in any other manner, and the
bargain is still executory, the contract is without
effect. Price certain is an essential element of
the contract of sale. (Art. 1458.) Consequently,
there is no obligation on the part of the vendor to
deliver the thing and on the part of the vendee to
pay.
(2) Where delivery has been made. — If the thing
or any part thereof has already been delivered and
appropriated by the buyer, the latter must pay a
reasonable price therefore. This obligation of the
buyer is sometimes contractual (if the agreement
omits any reference to price), and sometimes,
quasi contractual (if the agreement provides that
the parties are thereafter to agree on the price).
(See Art. 2142.)
Concept of reasonable price.
The reasonable price or value of goods is
generally the market price at the time and place
fixed by the contract or by law for the delivery
of the goods. Under special circumstances of
unnatural conditions in the market, the market price
does not furnish the only test. In the leading case
upon this point, the court said: “A reasonable price
may or may not agree with the current price of the
commodity at the port of shipment when such
shipment is made. The current price of the day may
be highly unreasonable from accidental
circumstances, as on account of the commodity
having been purposely kept back by the vendor
himself, or with reference to the price at the other
ports in the immediate vicinity, or from various other
causes. This doctrine has been applied in cases
where the market has been monopolized.” (1
Williston,13 op. cit., p. 447.)
Determination of fair market value.
“In discussing the term ‘market value’, the author of
a well known treatise on the subject of damages
observes that to make a market there must be both
buying and selling; and the ‘market value’ is that
‘reasonable’ sum which property would bring
on a fair sale by a man willing but not obliged to
sell to a man willing but not obliged to buy.”
Article 1475. The contract of sale is
perfected at the moment there is a meeting
of minds upon the thing which is the object
of the contract and upon the price.
From that moment, the parties may
reciprocally demand performance, subject
to the provisions of the law governing the
form of contracts.
PERFECTION OF CONTRACT OF SALE
● Contracts are perfected by mere consent.
● The contract of sale being consensual, it is
perfected at the moment of consent
without the necessity of any other
circumstances
● The essence of consent is the conformity of
the parties on the term of the contract, the
acceptance by one of the offer made by the
other
1. Conduct of the parties - appropriate
conduct by the parties may be sufficient to
establish an agreement.
2. Transfer of ownership - the ownership is
not transferred until the delivery of the thing.
3. Form of Contract - binding regardless of its
form. However, in case the contract of sale
should fall within the provisions of the
Statute of Frauds (Art. 1403[2].) or of any
other applicable statute which requires a
certain form for its enforceability or validity
(Art. 1356.), then that form must be
complied with.
● A contract of sale may be in a private
instrument; the contract is valid and binding
between the parties upon its perfection and
a party may compel the other to execute a
public instrument embodying the contract.
4. Consent reluctantly given - no difference
in law where a person gives his consent
reluctantly and even against his good sense
and judgment as when he acts voluntarily
and freely.
5. Notarized deed of sale states receipt of
price - To overcome a public document
solemnly executed before a notary public,
the evidence to the contrary must be clear,
strong, and convincing.
- Parol evidence will not suffice to
negate the clear and positive recitals
of a public document not otherwise
tainted with fraud or falsification.
6. Applicant’s qualification to buy still
subject for investigation - the agreement
denominated as “contract of sale” was
considered by the court as a mere
application to buy the land in question, and
not a perfected contract of sale.
7. Chattel mortgage of car by mortgagor-
buyer prior to transfer of title to his name
- executed on a date earlier than the
transfer of the registration certificate thereof
in the name of the buyers does not render
the said mortgage made by the buyers
invalid, because the mortgagors were
already the owner of the car when the
mortgage was executed
8. Non-fulfillment by one party of his
obligation - the injured party may sue for
fulfillment or rescission with the payment of
damages in either case
WHEN DEFINITE AGREEMENT ON MANNER OF
PAYMENT ESSENTIAL
● As a consensual contract, a contract of sale
becomes a binding and valid contract upon
the meeting of the minds of the parties as to
the price, despite the manner of payment, or
even the breach of that manner of payment.
 It is not the act of payment of price that
determines the validity of a contract of sale.
EFFECT OF FAILURE TO PAY PRICE
FAILURE TO PAY = results in a right to demand
fulfillment or cancellation of the obligation
under existing valid contract
LACK OF CONSIDERATION = prevents the
existence of a valid contract
(1) The failure to pay the stipulated price after the
execution of the contract does not convert the
contract into one without cause or
consideration as to vitiate the validity of the
contract, it not being essential for the existence of
cause that payment or full payment be made at the
time of the contract.
(2) But a contract of sale is null and void where the
purchase price, which appears thereon as paid,
has, in fact, never been paid by the buyer to the
seller.
RIGHT OF OWNER TO FIX OWN PRICE
(1) The owner of a thing has the right to quote his
own price, reasonable or unreasonable. It is up to
the prospective buyer to accept or reject it. He may
even impose a condition hard to fulfill and name a
price quite out of proportion to the real value of the
thing offered for sale.
(2) He is also well within his right to quote a small
or nominal consideration (see Arts. 1470-1471.)
and such consideration is just as effectual and
valuable a consideration as a larger sum stipulated
or paid.
Article 1476. In the case of a sale by
auction:
(1) Where goods are put up for sale by
auction in lots, each lot is the subject of a
separate contract of sale.
(2) A sale by auction is perfected when the
auctioneer announces its perfection by the
fall of the hammer, or in other customary
manner. Until such announcement is made,
any bidder may retract his bid; and the
auctioneer may withdraw the goods from
the sale unless the auction has been
announced to be without reserve.
(3) A right to bid may be reserved expressly
by or on behalf of the seller, unless
otherwise provided by law or by stipulation.
(4) Where notice has not been given that a
sale by auction is subject to a right to bid on
behalf of the seller, it shall not be lawful for
the seller to bid himself or to employ or
induce any person to bid at such sale on his
behalf or for the auctioneer, to employ or
induce any person to bid at such sale on
behalf of the seller or knowingly to take any
bid from the seller or any person employed
by him. Any sale contravening this rule may
be treated as fraudulent by the buyer.
RULES GOVERNING AUCTION SALES
1. SALES OF SEPARATE LOTS BY
AUCTION ARE SEPARATE SALES - As
soon as the hammer falls on the first lot, the
purchaser of that lot has a complete and
separate bargain.
2. SALE PERFECTED BY THE FALL OF
THE HAMMER - It follows that the bidder
may retract his bid and the auctioneer may
withdraw the goods from sale any time
before the hammer falls. However, if the
sale has been announced to be without
reserve, the auctioneer cannot withdraw
the goods from sale once a bid has been
made and the highest bidder has a right
to enforce his bid.
3. RIGHT OF SELLER TO BID IN THE
AUCTION -
Requisites:
(a) such right was reserved;
(b) notice was given that the sale is subject
to a right to bid on behalf of the seller; and
(c) the right to bid by the seller is not
prohibited by law or by stipulation.
● Where no notice given of right to bid - it
shall be unlawful for the seller to bid either
directly or indirectly or for the auctioneer to
employ or induce any person to bid on
behalf of the seller
 ● Where notice of right to bid given - the
bidding in such a case would not operate as
a fraud
4. CONTRACT NOT TO BID - sale may be
fraudulent.
5. ADVERTISEMENTS FOR BIDDERS -
simply invitations to make proposals, and
the advertiser is not bound to accept the
highest or lowest bidder, unless the contrary
appears
RIGHT OF OWNER TO PRESCRIBE TERMS OF
PUBLIC AUCTION
● Owner has the right to prescribe the
manner, conditions, and terms of such sale
● Owner may provide that all of the purchase
price or any portion of it be paid at the time
of the sale, or that time will be given for that
payment, or that any or all bids may be
rejected.
● CONDITIONS MUST BE ANNOUNCED BY
AN AUCTIONEER OR BY THE OWNER
Article 1477. The ownership of the thing
sold shall be transferred to the vendee upon
the actual or constructive delivery thereof.
Article 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price
OWNERSHIP OF THING TRANSFERRED BY
DELIVERY
● Necessity of Delivery
○ Delivery of the thing sold is essential
in a contract of sale.
○ Delivery may be actual or
constructive
○ Contract is consummated by the
delivery of the thing sold and of the
purchase money
○ Only after the delivery of the thing
sold that the purchaser acquires a
real right or ownership over it.
● Purchase on Credit
○ In absence of stipulation, ownership
of the thing sold passes on to the
vendee upon delivery
● Non-Payment of Purchase Price
○ Payment of purchase price is not
essential to the transfer of
ownership, as long as the property
sold has been delivered
○ Non-payment only creates a right to
demand payment or to rescind the
contract, or to criminal prosecution
(bouncing checks)
● Presence of Intention to deliver
○ The act of delivery should be
coupled with the intention of
delivering the thing sold
EXCEPTIONS TO THE RULE
1. CONTRARY TO STIPULATION - the
ownership of things is transferred by
delivery, and not by mere payment.
However, the parties may stipulate that
despite the delivery, the ownership of the
thing shall remain with the seller until the
purchaser has fully paid the price.
- Pactum reservanti dominii or
contractual reservation of title
(a) In a contract of sale the seller agreed that
the ownership of the goods shall remain
with the seller until the purchase price shall
have been fully paid, merely to secure the
performance by the buyer of his obligation,
such stipulation cannot make the seller
liable in case of loss of the goods.
(b) If there is doubt by the wording of the
contract whether the parties intended a
suspensive condition (Art. 1478.) or a
suspensive period (Art. 1193, par. 1.) for the
payment of the stipulated price, the doubt
shall be resolved in favor of the greatest
reciprocity of interests.
(c) A stipulation that ownership in the thing sold
shall not pass to the purchaser until after he
has fully paid the price thereof could only be
binding upon the contracting parties, their
assigns, and heirs (Art. 1311, par. 1.) but
not upon third persons without notice.
2. CONTRACT TO SELL - where ownership is
retained by the seller and is not to pass until the full
payment of the price, such payment is a positive
suspensive condition, the failure of which is not a
breach, casual or serious, but simply an event that
prevents the obligation of the vendor to convey title
from acquiring binding force
3. CONTRACT OF INSURANCE - A perfected
contract of sale even without delivery vests in the
vendee an equitable title, an existing interest over
the goods sufficient to be the subject of insurance.
Article 1479. A promise to buy and sell a
determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to
sell a determinate thing for a price certain is
binding upon the promisor if the promise is
supported by a consideration distinct from
the price.
Kinds of promise treated in Art. 1479
● 3 kinds of promises
○ An act accepted unilateral promise
to sell in which the promisee
(acceptor) elects to buy;
○ An accepted unilateral promise to
buy in which the promisee (acceptor)
elects to sell
○ A bilateral promise to buy and sell
reciprocally accepted in which either
party chooses to exact fulfillment
Effect of unaccepted unilateral promise
● Unilateral promise to buy and sell which is
not accepted creates no juridical effect or
legal bond
● Policitacion
● A period may be given to the offeree within
which to accept the offer
Meaning of Option
● Contractual privilege existing in one person
for which he has paid a consideration which
gives him the right to buy/sell in compliance
with certain conditions
Nature of an Option Contract
● Preparatory Contract granting option to buy
or sell
○ It is a preparatory contract, searate,
and distinct form the main contract
itself which the parties may enter
into upon the consummation of the
option
○ Merely secures the privilege to
buy/sell
● Binding obligation of grantor of option
○ Gives the party granted the option
the right to decide whether or not to
enter into a principal contract
○ Binds the party who has given the
option not to enter into the principal
contract with any other person
during the agreed time and within
the period
● Perfection of the Contract of Sale
○ Imposes no binding obligation on the
person holding the option aside from
the consideration for the offer
○ It is is only when the option is
exercised may a sale be perfected
Consideration of an option contract
● Distinct from the sale price
○ An option must be supported by a
consideration distinct from the price
● Cash or anything with monetary value
○ Consideration need not be monetary
or actual cash
○ May consist of other things or
undertakings but must be
something of value
○ If consideration is not monetary then
it must be clearly specified as such
in the option contract
● Separate from sale price
○ A contract of option to buy/sell is
separate from the contract to
buy/sell, and both contracts need
separate and distinct considerations
for validity
● Absence of consideration
○ Does not invalidate the offer to buy
or to sell
○ An option unsupported by a
separate consideration stands as an
 unaccepted offer and when properly ○ When the offeror has allowed the
accepted ripens into a contract offeree a certain period within which
● Existence of consideration to accept the offer, the offer may be
○ Should be clearly specified in the withdrawn as a matter of right any
option contract or clause otherwise time before the acceptance
the promisee has the burden of ● Art. 1479
providing that a separate ○ For a promise to sell to be valid, it
consideration for the option contract must be supported by a
exists consideration distinct form the price
● RULE:
Effect of accepted unilateral promise ○ When an offer is supported by a
● 2nd paragraph of Art. 1479 refers to an separate consideration, a valid
“option” option contract exists
○ A unilateral promise to sell/buy a ○ When the offer is not supported by a
determinate thing for a price certain separate consideration, the offer
does not bind the promissor even if stands but, in the absence of a
accepted and may be withdrawn at binding contract, the offeror may
any time withdraw it anytime
○ Only after promise is supported by Effect of Bilateral Promise to sell
consideration distinct and separate ● Same effect as a perfected contract of sale
from the price that its acceptance since it is reciprocally demandable
will give rise to a perfected contract
○ The optionee (holder of the option), Option contract vs. Right of first refusal
after accepting the option and before
Option Right of
he exercises it, has the right, but not Contract First
the obligation, to buy/sell Refusal
○ Once the option is exercise, a
bilateral promise to sell/buy ensues Requisite (1) Option Absence of
and both parties are reciprocally s granted t o the the
offeree is for a requisites
bound to comply with their
fixed period
respective undertakings (2) At a
determined
price
Full payment of price unnecessary for exercise
of option to buy Object determinate determinate
● Party with an option may exercise his right Exercise Parties may Dependent
by merely notifying the owner of his decision of Right enter upon not only on
to buy and readiness to pay the stipulated confirmation the grantor’s
price of the option eventual
● Notice need not be coupled with actual and must be intention to
payment supported by enter into a
a binding
● Payment of the price is contingent upon the
consideration judicial
delivery of the deed of sae relation with
● An option to buy is not a contract of another but
purchase and sale also on
terms,
Art. 1479 vs. Art. 1324 including the
● Art. 1324 price are yet

to be firmed
up
Article 1480. Any injury to or benefit from
the thing sold, after the contract has been
perfected, from the moment of the
perfection of the contract to the time of
delivery, shall be governed by articles 1163
to 1165, and 1262.
This rule shall apply to the sale of fungible
things, made independently and for a single
price, or without consideration of their
weight, number, or measure.
Should fungible things be sold for a price
fixed according to weight, number, or
measure, the risk shall not be imputed to
the vendee until they have been weighed,
counted, or measured and delivered, unless
the latter has incurred in delay.
RISK OF LOSS OR DETERIORATION
(1) If the thing is lost before perfection, the seller
and not the one who intends to purchase it bears
the loss in accordance with the principle that the
thing perishes with the owner (res perit domino);
(2) If the thing is lost at the time of perfection, the
contract is void or inexistent. (Art. 1409[3].) The
legal effect is the same as when the object is lost
before the perfection of the contract of sale.
(3) If the thing is lost after perfection but before
its delivery, that is, even before the ownership is
transferred to the buyer, the risk of loss is shifted to
the buyer as an exception to the rule of res perit
domino
(4) If the thing is lost after delivery, the buyer
bears the risk of loss following the general rule of
res perit domino.
SCOPE OF ART. 1480
1. The first rule - where the thing is lost after
perfection but before its delivery (see Rule
No. 3, supra.) — applies to non-fungible
things (par. 1.) and fungible things sold
independently and for a single price or
for a price fixed without consideration of
their weight, number, or measure. (par.
2.)
Article 1480, paragraph 1 is applicable only where
the thing is determinate.
2. The second rule - relates to fungible things
sold for a price fixed in relation to weight,
number, or measure.
Paragraph 3 is an exception to the rule that the
vendee bears the loss after the perfection of the
contract and before delivery. However, the vendee
assumes the risk if he has incurred in delay in
receiving the goods sold.
Article 1481. In the contract of sale of
goods by description or by sample, the
contract may be rescinded if the bulk of the
goods delivered do not correspond with the
description or the sample, and if the
contract be by sample as well as
description, it is not sufficient that the bulk
of goods correspond with the sample if they
do not also correspond with the description.
The buyer shall have a reasonable
opportunity of comparing the bulk with the
description or the sample.
SALE OF GOODS BY DESCRIPTION AND/OR
SAMPLE
1. Sale by description - occurs where a seller
sells things as being part of a particular
kind, the buyer knowing whether the seller’s
representations are true or false, but relying
on them as true
- Purchaser has not seen the article
sold and relies on the description of
the vendor or has seen but the want
of identity is not apparent on
inspection
2. Sale by sample - bit must appear that the
parties contracted solely with reference to
the sample, with the understanding that the
bulk was like it.
- the vendor warrants that the thing
sold and to be delivered by him shall
conform with the sample in kind,
character, and quality.
- A sale by sample is really a
species of sale by description.
The sample is employed instead of
words to communicate to the buyer
the characteristics of the goods
 being sold. It is itself a tacit assertion EM - it is part of the purchase price
of the qualities of the bulk it OM - money is given as a distinct consideration for
represents an option contract
3. Sale by description and sample - When a 4. As to obligation of the buyer upon
sale is made both by sample and by payment of consideration
description, the goods must satisfy all the EM - when given, the buyer is bound to pay the
warranties appropriate to either kind of sale, balance
and it is not sufficient that the bulk of the OM - the would be buyer is not required to buy /
goods correspond with the sample if they do purchase
not also correspond with the description, 5. As to perfection of sale
and vice versa. EM - there is already a sale
OM - applies to a sale not yet perfected
MEANING OF BULK GOODS
Article 1483. Subject to the provisions of
- used to denote the goods as the Statute of Frauds and of any other
distinguished from the sample with applicable statute, a contract of sale may be
which they must correspond. made in writing, or by word of mouth, or
- “bulk of goods” mean the same as partly in writing and partly by word of mouth,
or may be inferred from the conduct of the
“goods” which, as a whole body, must
parties.
correspond substantially with the
sample and description
Form of contract of sale
Article 1482. Whenever earnest money is ● GR:
given in a contract of sale, it shall be
○ Form of contract refers to the
considered as part of the price and as proof
of the perfection of the contract. manner in which it is executed or
manifested.
MEANING OF EARNEST MONEY
○ Contract of Sale has no prescribed
● Earnest money is something of value given
form
by the buyer to the seller to show that the
○ Need not contain technical
buyer is really in earnest, and to bind the
description of the property
bargain. It is actually a partial payment of
(real/personal)
the purchase price and is considered as
● EXPNS:
proof of the perfection of the contract.
○ Certain instances where a particular
form may be required to be
enforceable under the SOF:
■ Form required for
enforceability
EARNEST MONEY AND OPTION MONEY
■ Form required in order that a
DISTINGUISHED
contract may be valid
1. As to transfer of ownership
■ Form required only for the
EM - title passes to the buyer upon delivery of the
convenience of the parties
thing sold
● Notarized deed of sale
OM - ownership is reserved to the seller and is not
○ Does not necessarily justify the
passed until full payment.
conclusion that the sale is a true
2. As to effect of non-payment
conveyance where in the parties are
EM - an action for specific performance or for
bound
rescission can be filed by the injured party
○ Not the function of the notary public
OM - there can be an action for specific
to validate and make binding an
performance
instrument never intended by the
3. As to consideration
 parties to have a binding and legal
effect
○ Intention of parties always the
primary consideration
Statute of Frauds (Art. 1403 (2) of the NCC)
● Descriptive statutes that require certain
classes of contracts to be in writing
● Merely regulates the formalities of the
contract necessary to render it enforceable
● To prevent fraud and perjury in the
enforcement of obligations
● Covers the following contracts which must
be in writing to be enforceable:
○ Sale of personal property at a price
not less than Php 500
○ Sale of a real property or an interest
therein regardless of the price
involved
○ Sale of property not to be performed
within a year from the date thereof
regardless of the nature of the
property and the price involved
● Non application of SOF:
○ Right of first refusal need not be
written to be enforceable and may
be proven by oral evidence
○ Does not apply to an agreement
creating an easement of right of way
● Presupposes the existence of a perfected
contract and requires only a note or
memorandum subscribe by the party
charged or by his agent be executed on
order to compel judicial enforcement
● No perfected contract = No basis for
application of the SOF
Ratification of Contracts Infringing Statute
● Contracts infringing the statue may be
ratified
○ Failure to object to oral evidence
■ Objection against the
admission of any evidence
must be made at the proper
time
○ Acceptance of benefits
Modes of Satisfaction of the SOF
● 3 ways:
○ Giving of a memorandum
■ Suitable for contract of sale
or to sell
○ Acceptance and receipt of part of the
goods (or things in action) sold and
actual receipt of the same
○ Payment or acceptance at the time
of some part of the purchase price
● SOF applies not only to goods but also
things in action e.g. assignment of credit at
a price not less than Php 500
SOF applicable only to executory contracts
● Only to executory contracts and to contracts
that are totally or partially performed
● Reason for rule:
○ Partial performance furnishes
reliable evidence of the intention of
the parties or the existence of a
contract
● Circumstances indicating partial
performance
○ Relinquishment of rights
○ Continued possession by a
purchaser who is already in
possession
○ Building of improvements
○ Tender of payment
○ Rendition of services
○ Payment of taxes
○ Surveying of the land at the
vendee’s expense
● Contracts not to be performed within 1 year
○ SOF applies only to agreements not
to be performs on either side within
a year from the making thereof
Sale of real property or an interest therein
● Sale of a piece of land made through an
agent is void unless agent’s authority is in
writing
● Sale of real property to affect 3rd persons =
registered in the RoD where the property is
located
● Purpose of registration of contract of sale is
to give notice to 3rd persons and protect the
 buyer against claims of 3rd persons arising
from subsequent alienations of the the
vendor
● Sale of land in a private instrument is valid
and binding upon the parties
● Even a verbal contract of sale of real estate
produces legal effects between the parties
● Need not be notarized it is enough it is in
writing
Legal recognition of electronic data messages
and electronic documents
● Validity and enforceability
○ Info shall not be denied validity or
enforceability solely on the ground
that it is in the form of an electronic
data message
○ Shall have the legal effect, validity or
enforceability as any other document
or legal writing
● Incorporation by reference
○ Information shall not be denied
validity or enforceability solely on the
ground that it is not contained in an
electronic data message but is
merely incorporated by reference
therein
● Writing
○ Electronic data message will be
sufficient to replace documents in
writing where:
■ It maintains it integrity and
reliability
■ Can be authenticated so as
to be usable for subsequent
reference in that:
● It has remained
complete and
unaltered
● Reliable in the light of
the purpose for which
it was generated and
in the light of all
relevant
circumstances
● Original
○ Where the law requires the form to
be in in its original form , the
requirement is met by an electronic
data message where:
■ Existence of a reliable
assurance as to the integrity
of the electronic document
from the time it was 1st
generated
■ The electronic data is
capable of being displayed to
the person to whom it was
presented
● Solemn Contracts
○ When The law requires that a
contract be in some form in order
that it may be valid or enforceable
that requirement is absolute and
indispensable
Legal recognition of electronic signatures
● Shall be equivalent to the signature of a
person if:
○ It is an electronic signature as
defined sin sec. 6 (g) of the rules
○ Provided by showing that a
prescribed procedure, not alterable
by the parties interested in the
electronic document or electronic
data message existed
Communication of electronic messages and
electronic documents
● Formation and validity of electronic
contracts
○ All elements requires under existing
laws for the formation and perfection
of contracts may be expressed in,
demonstrated and proved by means
of electronic data message
● Consummation of electronic transactions
with banks
○ Electronic transactions made
through networking among banks, or
linkages thereof with other entities or
networks, and vice versa shall be
deemed consummated under the
rules and regulations of the BSP
● Recognition by parties of electronic data
message
 ○ A declaration of will or other
statement shall not be denied legal
effect, validity and enforceability
solely on the ground that it is
contained in an electronic message
Article 1484. In a contract of sale of
personal property the price of which is
payable in installments, the vendor may
exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should
the vendee fail to pay;
(2) Cancel the sale, should the vendee's
failure to pay cover two or more
installments;
(3) Foreclose the chattel mortgage on the
thing sold, if one has been constituted,
should the vendee's failure to pay cover two
or more installments. In this case, he shall
have no further action against the purchaser
to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.
Remedies of vendor in sale of personal
property payable in installments
● Remedies:
○ Elect fulfillment upon the vendee’s
failure to pay
○ Cancel the sale, if the vendee shall
have failed to pay 2 or more
installments
○ Foreclose the chattel mortgage, if
one has been constituted, if the
vendee shall have failed to pay 2 or
more installments
Remedies alternative
● Remedies not cumulative
○ Alternative and are not to be
exercised cumulatively or
successively and the election of one
is a waiver of the right to resort to
the others
● Alternative remedies as distinguished from
alternative obligations
○
● Availment of all remedies
Applicability of Art. 1484
● Sale of personal property not payable in
installments
● Sale or mortgage of real estate
● Loan with chattel mortgage
Meaning of terms used in Art. 1484
● Exercise
● Action
● Any unpaid balance
● Foreclosure
Remedy of specific performance
● When available
● Recovery of purchase price
● Exercise of Remedy
Remedy of Cancellation
● When available
● Payment by vendee of the unpaid balance
of the purchase price to the vendor
● Recovery by vendee of the purchase price
from the vendor
● Exercise of Remedy
Remedy for foreclosure
● When Available
● Payment by mortgagor/vendee, of unpaid
balance of purchase price
● Payment by mortgagor/vendee of other than
unpaid balance of purchase price
● Purpose of prohibition against recovery of
unpaid balance
● Recovery by vendee of the purchase price
from vendor
● Prohibition not affected by assignment by
vendor of his rights
● Recourse against other security given to
secure purchase price
○ Recourse of mortgagee against
other securities after foreclosure
 ○ Recourse against other securities
when the lessor has deprived the lessee of
before foreclosure of the chattel the possession or enjoyment of the thing.
mortgage
○ Recourse of mortgagee against
Lease of personal property with option to buy
guarantor of vendee
● When right exercised
● Nature of transaction
○ Seller merely informed purchaser of
○ Leases of personalty with option to
intention to foreclose and did not
buy by the lessee who takes
actually foreclose
possession or enjoyment of the
○ Mere demand for surrender of thing
property leased are really sales of
sold but not foreclosure
personalty payable in installments
○ Action of replevin
● Purpose of provision
○ Action for specific performance
○ Prevent Vendors from restoring to
○ Vendor given possession by vendee
this form of contract that usually is in
did not foreclose
reality contract of sale of personalty
○ Seller filed petition for extrajudicial
payable in installments in
and obtained possession but did not
contravention of 1484
foreclose
● Repossession by lessor need not be
○ Thing not sold at public auction as
through court action
released it
○ The article does not require that the
○ Failure to exercise remedies
deprivation of the enjoyment of the
deemed a foreclosure under the
property be brought about through
circumstances
court action
Sale of financing or real estate on installment
payments Article 1486. In the case referred to in the
● Maceda act two preceding articles, a stipulation that the
installments or rents paid shall not be
● Real estate covered
returned to the vendee or lessee shall be
● Purpose of the law valid insofar as the same may not be
● Rights of buyer unconscionable under the circumstances.
● Cancellation of sale by seller STIPULATION AUTHORIZING THE FORFEITURE
○ Where the buyer had paid at least 2 OF INSTALLMENTS OR RENTS PAID
installments ● In sales of personal property by
○ Where the buyer had paid less than installments/leases of personal property
2 years installments with option to buy, parties may stipulate that
○ Cancellation, a two-step process installments or rents paid are not to be
● Requirement of notarial act returned.
○ Demand letters ● Stipulation = valid “insofar as the same may
○ Meaning of notarial act not be unconscionable under the
● Action for rescission circumstances”
● Grace period
● Calculation of installments
● Application of general principles of equity
● Remedies of the buyer absent a valid Article 1487. The expenses for the
execution and registration of the sale shall
cancellation of a contract to sell
be borne by the vendor, unless there is a
Article 1485. The preceding article shall be stipulation to the contrary.
applied to contracts purporting to be leases EXPENSES FOR EXECUTION AND
of personal property with option to buy,
REGISTRATION
 ● Vendor has the duty to pay not only the
expenses for the execution of the sale but
also for the registration of the same in the
absence of any agreement between the
parties
● Expenses incurred subsequent to the
transfer of title are to be borne by the buyer,
unless caused by the fault of the seller.
Article 1488. The expropriation of property
for public use is governed by special laws.
EXPROPRIATION OF PROPERTY FOR PUBLIC
USE
● Expropriation must be decreed by
competent authority and for public use and
always upon payment of just compensation.
● Rule 67, Rules of Court
Article 1489. All persons who are
authorized in this Code to obligate
themselves, may enter into a contract of
sale, saving the modifications contained in
the following articles.
Where necessaries are those sold and
delivered to a minor or other person without
capacity to act, he must pay a reasonable
price therefor. Necessaries are those
referred to in article 290.
PERSON WHO MAY ENTER INTO A CONTRACT
OF SALE
● GR: all persons, whether natural or juridical,
who can bind themselves have also legal
capacity to buy and sell.
● EXPNS: those cases when the law
determines that a party suffers from either
absolute or relative incapacity
KINDS OF INCAPACITY
● Absolute - persons who cannot bind
themselves
● Relative - exists only with reference to
certain persons or certain class of property.
There are no incapacities except those provided by
law and such incapacities cannot be extended to
other cases by implication for the reason that such
construction would be in conflict with the very
nature of Article 1489
LIABILITY FOR NECESSARIES OF MINOR OR
OTHER PERSON WITHOUT CAPACITY TO ACT
● Necessaries are those things which are
needed for sustenance, dwelling, clothing,
medical attendance, education and
transportation according to the financial
capacity of the family of the incapacitated
person.
● Contracts entered into by minors and other
incapacitated persons = voidable. However,
if necessaries are sold and delivered to
him, he must pay a reasonable price.
● The contract is valid but the minor has
the right to recover any excess above a
reasonable value paid by him.
SALE BY MINORS
● Real estate effected by minors who are
already adolescent, who pretended to have
reached the age of majority (but have not) is
valid, and they cannot be permitted
afterwards to excuse themselves from
compliance with the obligations
assumed by them or to seek their
annulment.
Article 1490. The husband and the wife
cannot sell property to each other, except:
(1) When a separation of property was
agreed upon in the marriage settlements; or
(2) When there has been a judicial
separation of property under article 191.
RELATIVE INCAPACITY OF HUSBAND AND
WIFE
1. A sale between husband and wife in
violation of Article 1490 is inexistent and
void from the beginning because such
contract is expressly prohibited by law.
2. They are also prohibited from making
donations to each other during the marriage
except moderate gifts on the occasion of
any family rejoicing. (Art. 87, Family Code.)
● if there has been a separation of property
agreed upon in the marriage settlements, or
when there has been a judicial separation of
 property decreed between them by the
court, the sales between husband and wife
are allowed.
● Marriage settlement - an agreement
entered into by persons who are about to be
united by marriage - for the purpose of fixing
the property relations that would be followed
by them for the duration of the marriage.
REASON FOR PROHIBITION UNDER ART. 1490
● for the protection of third persons who,
relying upon supposed property of either
spouse, enters into a contract with either of
them only to find out that the property relied
upon was transferred to the other spouse.
PERSONS PERMITTED TO QUESTION SALE
1. the heirs of either spouse, as well as
creditors at the time of the transfer, can
attack the validity of the sale but not
creditors who became such only after the
transaction.
2. The government is always an interested
party in all matters involving taxable
transactions.
● It is competent to question their validity or
legitimacy whenever necessary to block tax
evasion. It can impugn sales between
husband and wife.
Article 1491. The following persons cannot
acquire by purchase, even at a public or
judicial auction, either in person or through
the mediation of another:
(1) The guardian, the property of the person
or persons who may be under his
guardianship;
(2) Agents, the property whose
administration or sale may have been
intrusted to them, unless the consent of the
principal has been given;
(3) Executors and administrators, the
property of the estate under administration;
(4) Public officers and employees, the
property of the State or of any subdivision
thereof, or of any government-owned or
controlled corporation, or institution, the
administration of which has been intrusted
to them; this provision shall apply to judges
and government experts who, in any
manner whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys,
clerks of superior and inferior courts, and
other officers and employees connected
with the administration of justice, the
property and rights in litigation or levied
upon an execution before the court within
whose jurisdiction or territory they exercise
their respective functions; this prohibition
includes the act of acquiring by assignment
and shall apply to lawyers, with respect to
the property and rights which may be the
object of any litigation in which they may
take part by virtue of their profession;
(6) Any others specially disqualified by law.
INCAPACITY BY REASON OF RELATION TO
PROPERTY
● enumerates the persons who, by reason of
the relation of trust with the persons under
their charge or their peculiar control over the
property, are prohibited from acquiring said
property either directly or indirectly and
whether in private or public sale.
They are the:
(1) guardians;
(2) agents;
(3) executors and administrators;
(4) public officers and employees;
(5) judicial officers, employees and lawyers; and
(6) others especially disqualified by law.
- Persons disqualified to buy in Arts. 1490 to
91 are also DQ to become lessees of thing
mentioned thereon.
REASON FOR PROHIBITION UNDER ART. 1491
● grounded on public policy considerations
which disallow the transactions entered into
by them, whether directly or indirectly, in
view of the fiduciary relationship involved or
the peculiar control exercised by these
individuals over the properties or rights
covered.
● Seeks to prevent fraud on the part of such
persons and minimize temptations to the
 exertion of undue influence and improper
influence.
● The law does not trust human nature to
resist the temptations likely to arise out of
antagonism between the interest of the
seller and buyer.
PROHIBITION WITH RESPECT TO GUARDIANS
● Relationship is intimate, the dependence so
complete and the influence so great that
any transaction between two parties entered
are highly suspicious and presumptively
fraudulent.
PROHIBITION WITH RESPECT TO AGENTS
● Agent and the principal from one juridical
person.
● Ineffectual = sale made by agent to himself
● Consent of principal removes the
transaction out of prohibition in Art 1491
PROHIBITION WITH RESPECT TO EXECUTORS
AND ADMINISTRATORS
● only to properties under the
administration of the executor or
administrator at the time of the
acquisition and does not extend,
therefore, to property not falling within
this class.
● Executors do not administer the hereditary
rights of any heir.
PROHIBITION WITH RESPECT TO PUBLIC
OFFICIALS AND EMPLOYEES
● only to properties:
(1) belonging to the State, or of any subdivision
thereof, or of any government-owned or -controlled
corporation or institution,
(2) the administration of which has been entrusted
to the public officials or employees.
PROHIBITION WITH RESPECT TO JUDGES,
ETC., AND LAWYERS
● applies only to the sale or assignment of
property which is the subject of litigation
to the persons disqualified therein.
For prohibition to operate, sale or assignment must
take place during the pendency of the litigation
involving the property.
1. When property considered “in litigation”
- from the moment it became subject to
judicial action of the judge who afterwards
purchased it.
2. Where property acquired by lawyer is
foreclosure sale after termination of case
- will not remove it from the scope of the
prohibition for at the time the mortgage was
executed the relationship of lawyer and
client still existed.
3. Liability of lawyer for violation of
prohibition - a breach of professional
ethics and malpractice for which the lawyer
may be reprimanded, suspended or
disbarred from the practice of the legal
profession. Good faith is not a defense.
4. Where lawyer member of lawfirm
involved - by virtue of his profession is
covered by the prohibition
5. Cases not covered:
● Sale of the property of the client effected
before it became involved in the action
● Assignment of the amount of judgment
made by a person to his Atty. in payment of
professional fee
● sale of a parcel of land, acquired by a client
to satisfy a judgment in his favor, to his
attorney as long as the property was not the
subject of the litigation.
● Charging contingent fee based on a certain
percentage of the value of the property in
litigation
OTHER PERSONS ESPECIALLY DISQUALIFIED
(1) aliens who are disqualified to purchase
private agricultural lands
(2) an unpaid seller having a right of lien or
having estopped the goods in transitu, who is
prohibited from buying the goods either directly
or indirectly in the resale of the same at a public
or private sale which he may make
(3) The officer conducting the execution sale or
his deputies cannot become a purchaser, or be
interested directly or indirectly in any purchase
at an execution sale.
EFFECT OF SALE IN VIOLATION OF
PROHIBITION
(1) With respect to Nos. 1 to 3, the sale shall
only be voidable because in such cases only
private interests are affected.
- Defect can be cured by ratification of the
seller
(2) With respect to Nos. 4 to 6, the sale shall be
null and void, public interests being involved
therein.
NULLITY OF PROHIBITED CONTRACTS
DIFFERENTIATED
1. Public officers, etc., justices., etc and
lawyers - definite and permanent and
cannot be cured by ratification.
2. Guardian, agents, and administrators -
they may be “ratified” by means of and in
the form of a new contract, in which case its
validity shall be determined only by the
circumstances at the time of execution of
such new contract
- Causes of nullity which have ceased
to exist cannot impair the validity of
the new contract
- ratification /second contract could
then be valid from its execution;
however, it does not retroact to the
date of the first contract.
Article 1492. The prohibitions in the two
preceding articles are applicable to sales in
legal redemption, compromises and
renunciations.
PROHIBITION EXTENDS TO SALES IN LEGAL
REDEMPTION
(1) The relative incapacity provided in Articles 1490
and 1491 applies also to sales by virtue of legal
redemption, compromises, and renunciations.
(a) Compromise is a contract whereby the parties,
by reciprocal concessions, avoid a litigation or put
an end to one already commenced. (Art. 2028.)
● It is the amicable settlement of a
controversy.
(b) By renunciation, a creditor gratuitously
abandons his right against his creditor. The other
terms used by the law are condonation and
remission.
(2) The persons disqualified to buy referred to in
Articles 1490 and 1491 are also disqualified to
become lessees of the things mentioned therein.
Article 1493. If at the time the contract of
sale is perfected, the thing which is the
object of the contract has been entirely lost,
the contract shall be without any effect.
But if the thing should have been lost in part
only, the vendee may choose between
withdrawing from the contract and
demanding the remaining part, paying its
price in proportion to the total sum agreed
upon.
EFFECT OF LOSS OF THING AT THE TIME OF
SALE
● Before or at the time the contract of sale is
perfected.
1. Thing entirely lost - Where the thing is
entirely lost at the time of perfection, the
contract is inexistent and void (Art. 1409[3].)
because there is no object. (Art. 1318, par.
2.) There being no contract, there is no
necessity to bring an action for annulment.
2. Thing only partially lost - If the subject
matter is only partially lost, the vendee may
elect between withdrawing from the contract
and demanding the remaining part, paying
its proportionate price.
WHERE A THING CONSIDERED LOST
● The thing is lost when it perishes or goes
out of commerce or disappears in such a
way that its existence is unknown or it
cannot be recovered.
● Material deterioration or complete change in
the nature of the thing that it loses its former
utility taking into consideration the time the
contract was entered into.
Article 1494. Where the parties purport a
sale of specific goods, and the goods
without the knowledge of the seller have
perished in part or have wholly or in a
material part so deteriorated in quality as to
be substantially changed in character, the
buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in
so much thereof as have not deteriorated,

and as binding the buyer to pay the agreed
price for the goods in which the ownership
will pass, if the sale was divisible.
EFFECT OF LOSS IN CASE OF SPECIFIC
GOODS
● Art. 1493 applies to a sale of specific thing
● Art. 1494 applies to sales of goods, that is,
the object of the sale consists of a mass of
“specific goods” which means “goods
identified and agreed upon at the time a
contract of sale is made.”
● Both articles have actually the same
essence providing two alternative remedies
to the buyer in case of deterioration or
partial loss of the object prior to the sale,
namely: to rescind or withdraw from the
contract or to give it legal effect, paying
the proportionate price of the remaining
object.
1. Sale divisible — The second option is
available only if the sale is divisible. (Art.
1494, par. 2.)
● A contract is divisible when its consideration
is made up of several parts. (see Art. 1420.)
● When the consideration is entire and single,
the contract is indivisible.
2. Sale indivisible - If the sale is indivisible,
the object thereof may be considered as a
specific thing.
Art. 1504. Unless otherwise agreed, the
goods remain at the seller's risk until the
ownership therein is transferred to the
buyer, but when the ownership therein is
transferred to the buyer the goods are at
the buyer's risk whether actual delivery
has been made or not, except that:
(1) Where delivery of the goods has been
made to the buyer or to a bailee for the
buyer, in pursuance of the contract and
the ownership in the goods has been
retained by the seller merely to secure
performance by the buyer of his
obligations under the contract, the goods
are at the buyer's risk from the time of
such delivery;
(2) Where actual delivery has been
delayed through the fault of either the
buyer or seller the goods are at the risk of
the party in fault.
RISK OF LOSS GENERALLY ATTENDS TITLE
G.R. = if the thing is lost by fortuitous event, the
risk is borne by the owner of the thing at the
time of the loss under the principle of re perit
domino
EXPN:
1. seller reserves the ownership of the goods
merely to secure the performance by the
buyer of his obligations under the contract,
the ownership is considered transferred to
the buyer who, therefore, assumes the risk
from the time of delivery
2. Where actual delivery had been delayed
through the fault of either the buyer or
seller, the goods are at the risk of the party
at fault with respect to any loss which might
not have occurred but for such fault. In this
case, the law punishes the party at fault.
RISK OF LOSS BY FORTUITOUS EVENT AFTER
PERFECTION BUT BEFORE DELIVERY
(1) Conflict between Article 1480 and Article
1504.
- Under Article 1480, if the thing sold is lost
after perfection of the contract but before its
delivery, that is, even before the ownership
is transferred to the buyer, the risk of loss
by fortuitous event without the seller’s fault
is borne by the buyer as an exception to the
rule of res perit domino.
- The first paragraph of Article 1504 which
has been inserted in our Civil Code
presents a contrary rule.
(2) Solution suggested to avoid conflict. - Article
1480 the general rule on risk of loss and Article
1504, the exception.
(3) Article 1480 states the correct rule. — Article
1480 is the correct rule governing loss of thing sold
after the perfection of the contract
(a) the obligation of the buyer to pay the price is
not extinguished by the loss of the thing
before delivery is the settled construction of
Article 1452 (now Art. 1480.)
 (b) Article 1480 follows the Roman Law rule
“that risk of the thing sold passes to the
buyer even though the thing has not yet
been delivered to the buyer”
(c) Article 1480 is in consonance with Article
1189 (see Art. 1538.)
(d) Article 1504 cannot be reconciled with
Articles 1480 and 1189, unless Article 1504
is applied only to sale of “goods.”
(e) In case of improvement, the rule is that it
should pertain to the buyer. (Art. 1189[5].)
This is a counterpart of the risk which the
buyer assumes for the loss of the thing
(f) under Article 1537, the fruits pertain to the
vendee from the perfection of the contract.
The same right is given to the vendee under
Article 1164 which together with Articles
1165 and 1262, is referred to in Article 1480
as governing the question being discussed;
(g) Art. 1165, par. 3
(h) Art. 1262, par 1
Article 1495. The vendor is bound to
transfer the ownership of and deliver, as
well as warrant the thing which is the object
of the sale.
PRINCIPAL OBLIGATIONS OF THE VENDOR
(1) to transfer the ownership of the determinate
thing sold;
(2) to deliver the thing, with its accessions and
accessories, if any, in the condition in which
they were upon the perfection of the contract
(Art. 1537.);
(3) to warrant against eviction and against
hidden defects (Arts. 1495, 1547.);
(4) to take care of the thing, pending delivery,
with proper diligence (see Art. 1163.); and
(5) to pay for the expenses of the deed of sale,
unless there is a stipulation to the contrary.
(Art. 1487.
OBLIGATION TO TRANSFER OWNERSHIP AND
DELIVER
1) Ownership by vendor at time of perfection of
contract not essential. - The vendor need not be
the owner of the thing at the time of perfection of
the contract; it is sufficient that he has “a right to
transfer the ownership thereof at the time it is
delivered.”
- The obligation to transfer ownership and to
deliver is really implied in every contract of
sale.
(2) Transfer not essential to perfection of
contract. — The transfer of ownership and the
delivery of the thing sold are not essential to the
perfection of the contract. But if the seller does not
deliver at the time stipulated, the buyer may ask for
the rescission of the contract or fulfillment with the
right to damages in either case.
(3) No obligation to make delivery during period
of redemption. — The purchaser in execution
sales, however, is not entitled to immediate
possession of the property sold.
- The effective conveyance of the land is
accomplished by the deed which is issued
only after the period of redemption has
expired.
(4) Right of vendee to transfer of certificate of
title. — In a sale of registered land, the vendee has
a right to receive and the vendor the corresponding
obligation to transfer to him, not only the
possession and employment of the land but also
the certificate of title.
(5) Right of buyer to recover the price paid. —
the purchaser is entitled to recover the money paid
by him where the contract is set aside by reason of
the mutual material mistake of the parties as to the
identity or quantity of the land sold. And where the
purchaser recovers the purchase price from a
vendor who fails or refuses to deliver the title, he is
entitled, as a general rule, to interest on the money
paid from the time of payment.
Article 1496. 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
in any other manner signifying an
agreement that the possession is
transferred from the vendor to the vendee.
WAYS OF EFFECTING DELIVERY
1. By actual or real delivery
2. By constructive or legal delivery
3. By delivery in any other manner signifying
an agreement that the possession is
transferred to the vendee
 ● The critical factor which gives legal
effect to the act is the actual intention of
the vendor to deliver, and its acceptance
by the vendee.
● Delivery remains an indispensable
requisite - our law does not admit the
doctrine of transfer of ownership of
property by mere consent.
WAYS OF EFFECTING CONSTRUCTIVE
DELIVERY
1. Equivalent to actual delivery
Constructive delivery is a general term
comprehending all those acts which,
although not conferring physical
possession of the thing, have been held
by construction of law equivalent to acts
of real delivery.
● May be effected in any of the ff ways:
(a) By the execution of a public instrument
(b) By symbolical tradition or traditio symbolica
(c) By traditio longa manu
(d) By traditio brevi manu
(e) By traditio constitutum possessorium
(f) By quasi-delivery or quasi-traditio.
2. 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. 1478.) or fulfilled certain
conditions.
Article 1497. The thing sold shall be
understood as delivered, when it is placed
in the control and possession of the vendee.
CONCEPT OF TRADITION OR DELIVERY
● Tradition
○ 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
○ Original Acquisition
■ Applied to things never been
owned or abandoned
○ Derivative Acquisition
■ When a person entered into
the right of property which
had pre-existed in another
● Delivery may be constructive or actual but
contemplates “the absolute giving up of the
control and custody of the property on the
part of the vendor, and the assumption of
the same by the vendee
IMPORTANCE OF TRADITION
● Transfer of Ownership
- ○ Emphasizes the necessity of
tradition for the transfer of ownership
of the thing sold
○ SC: our law does not admit the
doctrine of transfer of ownership of
property by mere consent
○ Critical factor for effecting all modes
of delivery: actual intention of vendor
to deliver and acceptance by the
vendee
○ Contracts only constitute titles or
rights to the transfer or acquisition of
ownership, delivery or tradition is the
method to accomplish the same
○ It is during the delivery that the NCC
requires the seller to have the right
to transfer ownership of the thing
sold
● Enjoyment of a Thing Sold
○ Necessary to enable the vendee to
enjoy and make use of the property
purchased
● Liability in case of loss
○ When the thing subject of the sale is
placed in the control and possession
of the vendee the delivery is
complete and the vendee cannot
avoid liability in case the thing is lost
without the fault of the vendor
● Right of vendor to claim payment
○ Delivery produces natural effects in
law
 ○ Transfer of ownership without
prejudice to the right of the vendor to
claim the payment price
● Delivery and non-payment of price
○ Devoid of any stipulations,
ownership of the thing shall from the
vendor upon actual or constructive
delivery of the thing sold even if the
purchase price has not yet been fully
paid
● Consummation of contracts
○ Delivery of the thing together with
the payment of the price, marks the
consummation of the contract of sale
ACTUAL DELIVERY OF THE THING SOLD
● When deemed made
○ Actual delivery when the thing sold
is placed in the control and
possession of the vendee or his
agent
EXECUTION OF A PUBLIC INSTRUMENT OR
○ Physical delivery
DOCUMENT
○ Passing movable from hand to hand
○ Immovable: actual delivery may take
place when the buyer takes certain
material acts vis a vis the property in
the presence and with the blessing
of the seller
● Not always essential to passing of title
○ Actual or manual passing is not
always essential
○ Parties may agree when and on
what conditions the ownership in the
subject of the contract shall pass to
the buyer
PROOF OF DELIVERY
● Generally evidenced by a written
acknowledgement of a person that he/she
has received the goods e.g. delivery
receipts
● Bill of lading cannot substitute a DR
○ Does not evidence receipt of goods
by the consignee
○ Evidence of receipt by the carrier of
the goods from the shipper for
transportation and delivery
● Factory consignment invoice
○ Not evidence of actual delivery of
goods
○ Nothing more than a detailed
statement of the nature and quantity
and cost of the thing sold
○ Not proof of actual delivery to the
vendee or consignee
Article 1498. When the sale is made
through a public instrument, the execution
thereof shall be equivalent to the delivery of
the thing which is the object of the contract,
if from the deed the contrary does not
appear or cannot clearly be inferred.
With regard to movable property, its delivery
may also be made by the delivery of the
keys of the place or depository where it is
stored or kept.
1. Possession transferred to buyer by
notarized deed of conveyance. — the
execution of a public instrument as a
manner of delivery applies to movable as
well as immovable property since the law
does not make any distinction and it can be
clearly inferred by the use of the word “also”
in paragraph 2 of Article 1498. This manner
of delivery is symbolic.
a. The buyer may use the document as
proof of his ownership of the
property sold or for purposes, for
example of mortgaging the same.
b. Under Art.1498, possession along
with ownership, is transferred to the
vendee (or lessee) by virtue of the
notarized deed of conveyance, (or
lease) including the incorporeal
rights LIKE THE RIGHT TO EJECT
TENANTS OR SQUATTERS FROM
THE PROPERTY IN QUESTION.
c. Where an agreement analogous to a
deed of sale has been made through
a public instrument, its execution is
 equivalent to the delivery of the
property.
The vendor who resells it to
another does not transmit anything
to the second vendee.
d. Under Art 1498, the mere execution
of the deed of sale in a public
document is equivalent to the
delivery of the property “if from the
deed the contrary does not appear
or cannot clearly be inferred.”
Therefore, prior physical
delivery or possession is NOT
REQUIRED.
2. Delivery presumptive only. — mere
execution of the deed of sale in a public
document is equivalent to the delivery of the
property “if from the deed the contrary does
not appear or cannot clearly be inferred.” no
prior physical delivery or possession is
required. The execution of a public
instrument only gives rise to a prima facie
presumption of delivery.
a. Presumption that can be rebutted by
clear and convincing evidence.
b. The prima facie presumption of
delivery is deemed negated by the
failure of the vendee to take actual;
possession of the land sold.
c. DELIVERY as used in law on sales
refers to the concurrent transfer of
two things: 1. Possession and 2.
Ownership. This is the rationale
behind the jurisprudential doctrine
that PRESUMPTIVE DELIVERY VIA
EXECUTION OF A PUBLIC
INSTRUMENT IS NEGATED BY
THE REALITY THAT THE VENDEE
ACTUALLY FAILED TO OBTAIN
MATERIAL POSSESSION OF THE
LAND SUBJECT OF SALE.
3. Sale of thing not subject to control of
vendor. — Symbolic delivery by the
execution of a public instrument is
equivalent to actual delivery only where the
thing is subject to the control of the vendor
and there is no impediment that may
prevent the passing of the property from the
hands of the vendor into those of the
vendee.
4. Sale of registered land. — no act of the
parties can transfer the ownership of real
property under the torrens system. That is
done by the act of registration of the
conveyance which the parties have
made.
5. Possession of a part as constructive
possession of whole. — purchaser who
took actual possession of the land sold by
the exercise of possessory acts of clearing
the area of trees and of cultivating, such
possession and cultivation of a part is
logically and legally constructive possession
of the whole.
SYMBOLIC TRADITION
● Constructive delivery is symbolic when
to effect the delivery, the parties make
use of a token symbol to represent the
thing delivered.
Article 1499. The delivery of movable
property may likewise be made by the mere
consent or agreement of the contracting
parties, if the thing sold cannot be
transferred to the possession of the vendee
at the time of the sale, or if the latter already
had it in his possession for any other
reason.
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.
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.
 Article 1500. There may also be tradition
constitutum possessorium.
TRADITIO CONSTITUTUM POSSESSORIUM
● This mode of delivery is the opposite of
traditio brevi manu.
● It takes place when the vendor continues
in possession of the property sold not as
owner but in some other capacity, as for
example, when the vendor stays as a
tenant of the vendee.
Article 1501. With respect to incorporeal
property, the provisions of the first
paragraph of article 1498 shall govern. In
any other case wherein said provisions are
not applicable, the placing of the titles of
ownership in the possession of the vendee
or the use by the vendee of his rights, with
the vendor's consent, shall be understood
as a delivery.
QUASI-TRADITIO
● Tradition can only be made with respect to
corporeal things.
● Incase of incorporeal, the delivery is
effected by:
1. by the execution of a public instrument; or
2. when that mode of delivery is not
applicable, by the placing of the titles of
ownership in the possession of the vendee;
or
3. by allowing the vendee to use his rights as
new owner with the consent of the vendor.
INTENTION TO DELIVER AND TO ACCEPT A
TRANSFER OF POSSESSION
1. In all the forms of delivery, it is necessary
that the act be coupled with the intention of
delivering the thing.
2. Any act accompanied by the evident
intention of the vendor to deliver or of the
vendee to receive the thing sold, will be
considered as constituting tradition.
● in all the different modes of effecting
delivery, it is the real intention of the
parties, to deliver on the part of the
vendor, and to accept on the part of the
vendee, which gives legal effect to the
act. Without such intention, there is no
tradition.
Article 1502. When goods are delivered to
the buyer "on sale or return" to give the
buyer an option to return the goods instead
of paying the price, the ownership passes to
the buyer on delivery, but he may revest the
ownership in the seller by returning or
tendering the goods within the time fixed in
the contract, or, if no time has been fixed,
within a reasonable time. (n)
When goods are delivered to the buyer on
approval or on trial or on satisfaction, or
other similar terms, the ownership therein
passes to the buyer:
(1) When he signifies his approval or
acceptance to the seller or does any other
act adopting the transaction;
(2) If he does not signify his approval or
acceptance to the seller, but retains the
goods without giving notice of rejection,
then if a time has been fixed for the return
of the goods, on the expiration of such time,
and, if no time has been fixed, on the
expiration of a reasonable time. What is a
reasonable time is a question of fact.
CONTRACT OF SALE OR RETURN, AND OF
SALE ON TRIAL OR APPROVAL OR
SATISFACTION
● In general
○ Possible for parties to agree that
buyer shall temporarily take the
good into his possession to see
whether they are satisfactory to him
and if not, he ay refuse to become
the owner
○ If injured or damage the right to
return is lost and the sale becomes
absolute
● Sale or return
○ Contract of sale by which property is
sold but the buyer, who becomes the
owner of the property on delivery,
has the option to return the same to
the seller instead of paying the price
○ Option to purchase or return the
goods rest entirely on the buyer
 without reference to the quality of
ownership acceptance
the goods back in the to the seller
○ Loss or destruction of goods before seller
the exercise of the buyer’s option to
return falls upon him and renders Risk of Rests upon Remains
him responsible to the seller for the Loss the buyer with the
seller
purchase price or such part thereof
as remains unpaid
○ “Return” - previous transfer of title NOTE: 1502 uses “on sale or return. “For sale or
return” may intend to enter into a contract of
● Sale on trial or approval agency.
○ Contract in the nature of an option to
purchase if the goods prove NECESSITY OF EXPRESS WRITTEN
satisfactory, the approval of the AGREEMENT
buyer being the condition precedent ● When parol or extrinsic evidence not
○ Title shall continue in the seller until admissible
the sale has become absolute either ○ Uniform sales act and the Uniform
by buyer’s approval of the goods or Commercial Code from which 1502
failing to comply with the conditions was taken
of the contract or doing acts ■ Requires an express written
adopting the transaction such as agreement to make a sales
mortgaging the property to a 3rd contract either a “sale or
person return” or “sale on approval”
○ Devolves upon the buyer to give ■ Parol or extrinsic testimony
notice that he does not accept the could not be admitted
goods
○ Buyer cannot accept parts and reject ● When admissible
the rest of the goods ○ Above mentioned doctrine should
only apply when there is a written
“SALE OR RETURN” DISTINGUISHED FROM agreement between parties and the
SALE ON TRIAL sale is not a “sale or return” or a
“sale on approval”
○ Absence of a written contract, a
“Sale or Sale on
party may show, by parol or extrinsic
Return” Trial
testimony, that the sale is either a
Type of Resolutory Suspensive “sale or return” or a “sale on
Condition approval”

Contract Depends Depends on

entirely on the
the will of character or Article 1503. When there is a contract of
the buyer quality of sale of specific goods, the seller may, by
goods the terms of the contract, reserve the right
of possession or ownership in the goods
Ownership Passes to Remains in until certain conditions have been fulfilled.
the buyer on the seller The right of possession or ownership may
delivery and until the be thus reserved notwithstanding the
subsequent buyer delivery of the goods to the buyer or to a
carrier or other bailee for the purpose of
return of the signifies his
transmission to the buyer.
goods revert approval or

Where goods are shipped, and by the bill of
lading the goods are deliverable to the
seller or his agent, or to the order of the
seller or of his agent, the seller thereby
reserves the ownership in the goods. But, if
except for the form of the bill of lading, the
ownership would have passed to the buyer
on shipment of the goods, the seller's
property in the goods shall be deemed to be
only for the purpose of securing
performance by the buyer of his obligations
under the contract.
Where goods are shipped, and by the bill of
lading the goods are deliverable to order of
the buyer or of his agent, but possession of
the bill of lading is retained by the seller or
his agent, the seller thereby reserves a right
to the possession of the goods as against
the buyer.
Where the seller of goods draws on the
buyer for the price and transmits the bill of
exchange and bill of lading together to the
buyer to secure acceptance or payment of
the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor
the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no
added right thereby. If, however, the bill of
lading provides that the goods are
deliverable to the buyer or to the order of
the buyer, or is indorsed in blank, or to the
buyer by the consignee named therein, one
who purchases in good faith, for value, the
bill of lading, or goods from the buyer will
obtain the ownership in the goods, although
the bill of exchange has not been honored,
provided that such purchaser has received
delivery of the bill of lading indorsed by the
consignee named therein, or of the goods,
without notice of the facts making the
transfer wrongful.
PARAGRAPH 1
When ownership not transferred upon delivery. -
This article relates to a sale of specific goods.
As a general rule, the ownership in the goods sold
passes to the buyer upon their delivery to the
carrier.
Exceptions:
(1) if a contrary intention appears by the terms of
the contract (Arts. 1523, par. 1; 1503, par. 1)
(2) in the cases provided in the second and third
paragraphs of Article 1523
(3) in the cases provided in the first, second, and
third paragraphs of Article 1503.
Transfer of ownership where goods sold
delivered to carrier.
The general rule - is that delivery, be it only
constructive, passes title in the thing sold. The risk
of loss, therefore, as between the buyer and the
seller, falls upon the buyer.
On the other hand, if the seller directs the carrier to
redeliver the goods at their destination to the seller
himself, or to his order, it indicates an intention that
the carrier shall be the bailee for the seller and the
ownership will remain in the latter. The seller may,
by the terms of the contract, reserve the right of
possession or ownership in the goods until certain
conditions are fulfilled. (Art. 1505, par. 1.)
Where seller or his agent is consignee - Carrier
becomes bailee for seller. The seller thereby
reserves the ownership in the goods and the carrier
is a bailee for him and not the buyer. Par 2
Rights of seller
The seller may not only retain the goods until the
buyer performs his obligation under the contract,
but he may, even in violation of the contract,
dispose of them to third persons. If the seller does
this, of course, he is liable for damages to the buyer
but the second purchaser from the seller acquires a
better right.
PARAGRAPH 2
Significance where title held merely as
security. Par 2
1) Risk of loss on buyer - the beneficial
owner (buyer), not the one who holds for
security (seller), will be subject to the risk of
loss or deterioration
 2) Buyer’s right of action based on
ownership - As beneficial owner, he may, as
against any one except an innocent purchaser
for value of the bill of lading from the consignee,
bring an action based on ownership on making
tender of the price.
PARAGRAPH 3
Where goods are shipped and by the bill of lading
the goods are deliverable to the order of the buyer
or of his agent, but pos[1] session of the bill of
lading is retained by the seller or his agent, the
seller thereby retains a right to the possession of
the goods as against the buyer. (par. 3.)
Effect of retention - The effect of the retention of
the bill of lading closely analogous to the retention
of a lien (property na ibabalik sa buyer pag na fulfill
na obligation or payment) by the seller after the
property has passed to the buyer.
Instances where seller retains a hold of
goods by means of the bill of lading after he has
shipped them:
1. by consigning the goods to himself, either
by an order bill or a straight bill
2. by consigning the goods to the order of the
buyer and retaining possession of the bill of
lading.
3. to consign the goods to a third person
(usually a banker) requesting the latter to retain
the bill of lading or goods until payment of the
price.
Risk of loss on buyer. — The buyer as is true
where the seller consigns the goods to himself, or
his agent, or to a third person, bears the risk of
loss.
PARAGRAPH 4
“Where the seller draws on the buyer for the price
and transmits the bill of exchange and the bill of
lading together to the buyer to secure acceptance
or payment of the bill of exchange (par. 4.)”, the title
is regarded as retained in the seller until the bill of
exchange is paid. The fact that the bill of lading and
a bill of exchange are attached together indicates
that the seller intends to make the delivery of the
goods conditional upon the payment or acceptance
of the draft.
1. Duty of buyer if draft not paid.- The buyer
is bound to return the bill of lading if he does
not honor the bill of exchange. If he wrongfully
retains the bill of lading, he acquires no
additional right thereby. In carrying out the
device in question, it is customary to send the
bill of lading with the draft attached thereto to
some person other than the buyer, for if the bill
of lading and the draft are sent directly to the
buyer, the latter may obtain the goods without
paying the draft and the seller, even if he has a
good right of action against the buyer on this
account, is compelled to enter upon litigation in
order to enforce his rights, whereas if the bill of
lading and draft are sent through the third
person, ordinarily a bank, the buyer is unable to
obtain the goods without paying the price
2. Effect of buyer obtaining possession of
bill of lading without honoring draft. — As
regard third persons, however, if the bill of
lading provides that the goods are deliverable
to the buyer or to the order of the buyer (Art.
1507.), or is indorsed in blank (Art.1508[2].), or
is indorsed to the buyer by the consignee
named therein (Art. 1509.), a purchaser in good
faith for value of the bill of lading or goods from
the buyer will obtain the ownership in the goods
although the bill of exchange has not been
honored.
Distinctions in regard to the form of the bill of
lading.
They must here be observed:
(1) If the seller has named the buyer as consignee,
the property has passed to the consignee or at
least it seems to have been so to one who inspects
the document;
(2) If the bill of lading, though naming the seller as
consignee, is indorsed by him to the buyer or in
blank, the possession of the document by the buyer
gives him, if not the actual title, at least an apparent
ownership; and
(3) If the bill of lading names the seller or a third
person as consignee and no indorsement of the
document had been made, possession by the
buyer would not indicate that the buyer had title.
Article 1504. Unless otherwise agreed, the
goods remain at the seller's risk until the
ownership therein is transferred to the
buyer, but when the ownership therein is
transferred to the buyer the goods are at the
buyer's risk whether actual delivery has
been made or not, except that:
(1) Where delivery of the goods has been
made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the
ownership in the goods has been retained
by the seller merely to secure performance
by the buyer of his obligations under the
contract, the goods are at the buyer's risk
from the time of such delivery;
(2) Where actual delivery has been delayed
through the fault of either the buyer or seller
the goods are at the risk of the party in fault.
As a general rule, if the thing is lost by fortuitous
event, the risk is borne by the owner of the thing at
the time of the loss under the principle of res perit
domino.
Article 1504 states the exceptions:
(1) Where the seller reserves the ownership of the
goods merely to secure the performance by the
buyer of his obligations under the contract, the
ownership is considered transferred to the
buyer who, therefore, assumes the risk from the
time of delivery.
(2) Where actual delivery had been delayed
through the fault of either the buyer or seller, the
goods are at the risk of the party at fault with
respect to any loss which might not have occurred
but for such fault. In this case, the law punishes the
party at fault.
Risk of loss by fortuitous event after perfection but
before delivery.
Conflict between Article 1480 and Article 1504
Under Article 1480, if the thing sold is lost after
perfection of the contract but before its delivery,
that is, even before the ownership is transferred to
the buyer, the risk of loss by fortuitous event
without the seller’s fault is borne by the buyer as an
exception to the rule of res perit domino.
Consequently, the buyer’s obligation to pay the
price subsists if he has not yet paid the same or if
he had, he cannot recover it from the seller
although the latter’s obligation to deliver the thing is
extinguished by its loss.
However, the first paragraph of Article 1504 which
has been inserted in our Civil Code presents a
contrary rule. Taken from the American law on
sales it provides that: “Unless otherwise agreed,
the goods remain at the seller’s risk until the
ownership therein is transferred to the buyer.” By
Article 1480, as already pointed out, the risk of loss
of the thing after perfection is shifted from the seller
to the buyer even though the buyer has not yet
acquired ownership thereof.
Article 1505. Subject to the provisions of
this Title, where goods are sold by a person
who is not the owner thereof, and who does
not sell them under authority or with the
consent of the owner, the buyer acquires no
better title to the goods than the seller had,
unless the owner of the goods is by his
conduct precluded from denying the seller's
authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act,
recording laws, or any other provision of law
enabling the apparent owner of goods to
dispose of them as if he were the true
owner thereof;
(2) The validity of any contract of sale under
statutory power of sale or under the order of
a court of competent jurisdiction;
(3) Purchases made in a merchant's store,
or in fairs, or markets, in accordance with

the Code of Commerce and special laws.
SALE BY A PERSON NOT THE OWNER
● fundamental doctrine of law that no one can
give what he has not or transfer a greater
right to another than he himself has.
● Sale is a derivative mode of acquiring
ownership and the buyer gets only such
rights as the seller had.
1. Where the owner of the goods is, by his
conduct, precluded from denying the
seller’s authority to sell. — where a parcel
of land is sold by one not the owner or the
agent of the owner, but the real owner
thereof upon being questioned in a criminal
case instituted against the vendor states
that he authorized such sales so that the
vendor was acquitted of the charge against
him, a purchaser in good faith acquires a
valid title to the property as it is not lawful
nor permissible for said owner to deny or
retract his former sworn statement that he
had consented to said sale.
2. Where the law enables the apparent
owner to dispose of the goods as if he
were the true owner thereof. — The law
referred to here, therefore, must be found in
the provisions of our Civil Code on agency.
(a) Factor Acts are designed to protect third
persons who under specified conditions
deal with an agent believing him to be the
owner of goods
(b) Example of recording laws: P.D. No. 1529
(Property Registration Decree), R.A. No.
4136 (Land Transportation and Traffic
Code), and the Revised Administrative
Code with regards to the sale of large cattle
(Sec. 529.) and sale of vessels. (Sec.
1171.)
(c) Examples of “any provision of law”: No. (1)
are Act No. 2031 (Negotiable Instruments
Law) and Act No. 2137. (Warehouse
Receipts Law)
(d) the acquirer or the purchaser in good
faith of a chattel or movable property is
entitled to be respected and protected in
his possession as if he were the true
owner thereof until a competent court rules
otherwise.
(e) Sale in real property - Every person
dealing in good faith and for valuable
consideration with registered land may
safely rely upon what appears in the
certificate of title and does not have to
inquire further.
3. Where the sale is sanctioned by statutory or
judicial authority. — According to Article 559 of
the Civil Code, “the possession of movable
property acquired in good faith is equivalent to
title. Nevertheless, one who has lost any movable,
or has been unlawfully deprived therefor, may
recover it from the person in possession of the
same. If the possessor of a movable lost or of
which the owner has unlawfully been deprived has
acquired it in good faith at a public sale, the owner
cannot obtain its return without reimbursing the
price paid therefor.”
4. Where the sale is made at merchant’s stores,
fairs or markets. - The sale is necessary not only
to facilitate commercial sales on movables but also
to give stability to business transactions especially
in a country like the Philippines, where free
enterprise prevails, for a buyer cannot be
reasonably expected to look behind the title of
every article when he buys at a store.
5 Where the seller has a voidable title which has
not been avoided at the time of the sale. — See
Article 1506.
6. Where seller subsequently acquires title. —
When a person conveys property to another of
which at the time he is not the owner, his
subsequent acquisition of title validates his
previous conveyance.
Article 1506. Where the seller of goods has
a voidable title thereto, but his title has not
been avoided at the time of the sale, the
buyer acquires a good title to the goods,
provided he buys them in good faith, for
value, and without notice of the seller's
defect of title
SALE BY ONE HAVING A VOIDABLE TITLE
1. Requisites for acquisition of good title
by buyer. — If the seller has only a
voidable title to the goods, the buyer
acquires a good title to the goods provided
he buys them:
 (a) before the title of the seller has been
avoided;
(b) in good faith for value; and
(c) without notice of the seller’s defect of
title.
2. Basis of rule. — Article 1506 seems to be
predicated on the principle that where loss
has happened which must fall on one of two
innocent persons, it should be borne by him
who is the occasion of the loss.
Article 1521. 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,
express or implied, between the parties.
Apart from any such contract, express or
implied, or usage of trade to the contrary,
the place of delivery is the seller's place of
business if he has one, and if not his
residence; but in case of a contract of sale
of specific goods, which to the knowledge of
the parties when the contract or the sale
was made were in some other place, then
that place is the place of delivery.
Where by a contract of sale the seller is
bound to send the goods to the buyer, but
no time for sending them is fixed, the seller
is bound to send them within a reasonable
time.
Where the goods at the time of sale are in
the possession of a third person, 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.
Demand or tender of delivery may be
treated as ineffectual unless made at a
reasonable hour. What is a reasonable hour
is a question of fact.
Unless otherwise agreed, the expenses of
and incidental to putting the goods into a
deliverable state must be borne by the
seller.
Place of delivery of goods sold.
1. Where there is an agreement, express or
implied, the place of delivery is that agreed
upon;
2. Where there is no agreement, the place of
delivery is that determined by usage of trade;
3. Where there is no agreement and there is
also no prevalent usage, the place of delivery is
the seller’s place of business;
4. In any other case, the place of delivery is
the seller’s residence; and
5. In case of specific goods, which to the
knowledge of the parties at the time the
contract was made were in some other place,
that place is the place of delivery, in the
absence of any agreement or usage of trade to
the contrary.
From the above, it can be seen that the
presumption is that the buyer must take the
goods from the seller’s place of business or
residence rather than the seller to deliver them
to the buyer.
Time of delivery of goods sold. - determined by
the agreement of the parties or, in the absence
thereof, by the usage of trade.
Par 2. - If no time is fixed by the contract, then the
seller is bound to send the goods to the buyer
within a reasonable time. (to determine reasonable
time - question of fact; dependent upon the
circumstances attending the particular transaction)
Delivery of goods in possession of a third
person - 3rd par
delivery which is necessary to protect the buyer
against third persons. - To affect third persons,
the person holding the goods must acknowledge
being the bailee for the buyer.
Hour of delivery of goods sold - 4th par
What is a reasonable hour is a question of fact
largely dependent upon the circumstances.
Duty of seller to put goods in deliverable
condition. – last par
Unless otherwise agreed, the seller bears the
expenses to place the thing in a deliverable state.
that is, in such a state that the buyer would, under
the contract, be bound to take delivery of them.
Article 1522. Where the seller delivers to
the buyer a quantity of goods less than he
contracted to sell, the buyer may reject
them, but if the buyer accepts or retains the
goods so delivered, knowing that the seller
is not going to perform the contract in full,
he must pay for them at the contract rate. If,
however, 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, the buyer shall not be liable
for more than the fair value to him of the
goods so received.
Where the seller delivers to the buyer a
quantity of goods larger than he contracted
to sell, the buyer may accept the goods
included in the contract and reject the rest.
If the buyer accepts the whole of the goods
so delivered he must pay for them at the
contract rate.
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, the buyer may accept the
goods which are in accordance with the
contract and reject the rest.
In the preceding two paragraphs, if the
subject matter is indivisible, the buyer may
reject the whole of the goods.
The provisions of this article are subject to
any usage of trade, special agreement, or
course of dealing between the parties.
Delivery of goods less than quantity contracted.
Where the seller is under a contract to deliver a
specific quantity of goods and he delivers a smaller
quantity as full performance of his obligation, the
buyer may reject the goods so delivered.
The buyer may, however, accept the goods in
which case he must pay for their
1. price at the contract rate if he knew that no
more were to be delivered or
2. the fair value to him of the goods, if he did
not know that the seller is going to be guilty of a
breach of contract. (par. 1.)
Delivery of goods more than quantity
contracted - The buyer may accept the quantity
contracted for and reject the excess. However, if he
accepts all the goods delivered, he makes himself
liable for the price of all of them.
Delivery of goods mixed with others - the buyer
may accept those which are in accordance with the
contract and reject the rest.
Effect of indivisibility of subject matter - If the
subject matter of the sale is indivisible, in case of
delivery of a larger quantity of goods (par. 2.) or of
mixed goods (par.3.), the buyer may reject the
whole of the goods. (par. 4.)
Application of usage of trade, special agreement, or
course of dealing.
Usage of trade - any practice or method of dealing
having such regularity of observance in a place,
vocation or trade as to justify an expectation that it
will be observed with respect to the transaction in
question.
Course of dealing - is a sequence of previous
conduct between the parties to a particular
transaction which is fairly to be regarded as
establishing a common basis of understanding for
interpreting their expressions and other conduct.
Article 1523. Where, in pursuance of a
contract of sale, the seller is authorized or
required to send the goods to the buyer,
delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose
of transmission to the buyer is deemed to
be a delivery of the goods to the buyer,
except in the cases provided for in article

1503, first, second and third paragraphs, or
unless a contrary intent appears.
Unless otherwise authorized by the buyer,
the seller must make such contract with the
carrier on behalf of the buyer as may be
reasonable, having regard to the nature of
the goods and the other circumstances of
the case. If the seller omit so to do, and the
goods are lost or damaged in course of
transit, the buyer may decline to treat the
delivery to the carrier as a delivery to
himself, or may hold the seller responsible
in damages.
Unless otherwise agreed, where goods are
sent by the seller to the buyer under
circumstances in which the seller knows or
ought to know that it is usual to insure, the
seller must give such notice to the buyer as
may enable him to insure them during their
transit, and, if the seller fails to do so, the
goods shall be deemed to be at his risk
during such transit.
Delivery to carrier on behalf of buyer - General
rule. — Where the seller is authorized or required
to send the goods to the buyer, the general rule is
that delivery of such goods to the carrier constitutes
delivery to the buyer, whether the carrier is named
by the buyer or not.
Exceptions - They are those provided for in
paragraphs 1, 2, and 3 of Article 1503 and when a
contrary intent appears, that is, the parties did not
intend the delivery of the goods to the buyer
through the carrier. The seller is not responsible for
misdelivery by the carrier where the carrier was
chosen and authorized by the buyer to make the
delivery.
Seller’s duty after delivery to carrier - The fact
that the ownership in the goods may have passed
to the buyer does not mean that the seller has
already fulfilled his duty to the buyer.
1. To enter on behalf of buyer into such
contract reasonable under the circumstances.
2. To give notice to buyer regarding
necessity to insure goods.
Definition of shipping terms.
C.O.D. - “collect on delivery”
F.O.B. - free on board
C.I.F - cost, insurance and freight
Article 1524. The vendor shall not be
bound to deliver the thing sold, if the
vendee has not paid him the price, or if no
period for the payment has been fixed in the
contract.
DELIVERY, SIMULTANEOUS WITH PAYMENT
OF PRICE
G.R. = the obligation to deliver the thing subject
matter of a contract arises from the moment of its
perfection and from that time the obligation may be
enforced.
- contract of purchase and sale is bilateral
and from it arises not only the obligation to
deliver the thing but also that of paying the
price. The obligations are reciprocal.
WHEN DELIVERY MUST BE MADE BEFORE
PAYMENT OF PRICE
● the rule is that the thing shall not be
delivered unless the price be paid
● the exception is that the thing must be
delivered though the price be not first
paid, if time for such payment has been
fixed in the contract.
Article 1525. The seller of goods is deemed
to be an unpaid seller within the meaning of
this Title:
(1) When the whole of the price has not
been paid or tendered;
(2) When a bill of exchange or other
negotiable instrument has been received as
conditional payment, and the condition on
which it was received has been broken by
reason of the dishonor of the instrument,
the insolvency of the buyer, or otherwise.
In articles 1525 to 1535 the term "seller"
includes an agent of the seller to whom the
 bill of lading has been indorsed, or a
consignor or agent who has himself paid, or
is directly responsible for the price, or any
other person who is in the position of a
seller.
MEANING OF UNPAID SELLER
An unpaid seller is one who has not been paid
or tendered the whole price or who has
received a bill of exchange or other negotiable
instrument as conditional payment and the
condition on which it was received has been
broken by reason of the dishonor of the
instrument.
1. Agent of the seller
2. A consignor or agent who has himself paid
or is directly responsible for the price
3. Any other person in the position of the seller
WHERE WHOLE PRICE HAS NOT BEEN PAID
1. Tender of payment by buyer. — Although
tender of payment is not the same as
performance, and a seller to whom the price
of goods has been tendered is strictly
unpaid, and can, therefore, bring an action
subsequently for the price, which he has
refused, yet tender destroys the seller’s lien.
2. Payment of part of price. — Payment of a
part only of the price does not destroy a
seller’s lien. The seller remains an unpaid
seller even if title has passed to the buyer.
3. Payment by negotiable instrument. —
According to paragraph 2 of Article 1249
(Civil Code), “the delivery of promissory
notes payable to order, or bills of exchange
or other mercantile documents shall
produce the effect of payment only when
they have been cashed or when through the
fault of the creditor they have been
impaired.”
Article 1526. Subject to the provisions of this
Title, notwithstanding that the ownership in
the goods may have passed to the buyer, the
unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them
for the price while he is in possession of
them;
(2) In case of the insolvency of the buyer, a
right of stopping the goods in transitu after he
has parted with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise
limited by this Title.
Where the ownership in the goods has not
passed to the buyer, the unpaid seller has, in
addition to his other remedies a right of
withholding delivery similar to and
coextensive with his rights of lien and
stoppage in transitu where the ownership
has passed to the buyer.
SPECIAL REMEDIES OF AN UNPAID
SELLER OF GOODS
● 1526 - gives unpaid seller of goods
certain remedies but does not cover an
action for the purchase price
● Even if the ownership of the goods has
already passed to the buyer, the unpaid
seller may exercise these rights:
○ Lien on the goods or right to
retain them for the price while in
his possession
○ Right of stopping the goods in
transitu in case of insolvency of
the buyer
○ Right of resale
○ Right to rescind the sale
● If unpaid seller still retains ownership
then he cannot be said to have a lien on
the goods but has the right to withhold
delivery
NATURE OF UNPAID SELLER’S
POSSESSORY LIEN ON THE GOODS
● Lien - charge upon property for the
payment or discharge of a debt or duty
● GR: existence of a seller’s lien
presupposes that the title to the goods
has passed to the buyer since it would
be incongruous that a person will have a
lien on his own goods
● Art. 1526 is denominated as a lien but is
actually greater
● The seller’s position is almost that of a
pledgee with a power to sell at private
sale in case of default, and the power
survives til payment of the price
UNPAID SELLER’S LIEN ON THE PRICE
● Possessory lien - entitles the seller to
retain possession of the goods as
security for the purchase price
BASIS OF RIGHTS OF UNPAID SELLER
● Inherent justice of depriving the him of
goods with which e has not finally parted
where it is evident that he has not been
or will not be paid the price for them
when it is due
● Measure of damage = estimated loss
directly and naturally resulting in the
ordinary course of events from the
buyer’s breach of contract for refusing to
pay the purchase price
Article 1527. Subject to the provisions of
this Title, the unpaid seller of goods who is
in possession of them is entitled to retain
possession of them until payment or tender
of the price in the following cases, namely:
(1) Where the goods have been sold
without any stipulation as to credit;
(2) Where the goods have been sold on
credit, but the term of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien
notwithstanding that he is in possession of
the goods as agent or bailee for the buyer.
WHEN UNPAID SELLER’S POSSESSORY
LIEN MAY BE EXERCISED
Sale without stipulation as to credit
● seller is entitled to the payment of the
prices the same time that he transfers
the possession of the goods
● “Stipulation as to credit” - a period for
payment of the price has been fixed in
the contract
Expiration of term of credit
● Even where the parties agree upon a
sale on credit, the seller’s right of lien
may be exercised
● Buyer is entitled to possession without
paying the price but if he fails to pay
until the term of the credit has expired
and the price becomes due, he loses
the right which he had
Insolvency of the buyer
● Lien of the seller in possession is
revived even though the time for
payment of the price has not yet arrived
● When one party to a bilateral contract is
incapacitated from performing his part of
the agreement, the other party is also
excused from performing
 ● Does not dissolve the bargain it merely
revives the seller’s lien
UNPAID SELLER AS BAILEE FOR THE
BUYER
● Immaterial that the seller holds the
goods as bailee for the buyer
● Though the seller has charged the buyer
storage for the goods, the lien may still
be asserted
Article 1528. Where an unpaid seller has
made part delivery of the goods, he may
exercise his right of lien on the remainder,
unless such part delivery has been made
under such circumstances as to show an
intent to waive the lien or right of retention.
LIEN GENERALLY NOT LOST BY PART
DELIVERY
● When part of the goods are delivered, the
unpaid seller has a lien upon the remainder
for the proportion of the price which is due
on account of the goods so retained.
● if the delivery of the part is intended as
symbolical delivery of the whole, and,
therefore, a waiver of any right of retention
as to the remainder, the lien is lost.
Article 1529. The unpaid seller of goods
loses his lien thereon:
(1) When he delivers the goods to a carrier
or other bailee for the purpose of
transmission to the buyer without reserving
the ownership in the goods or the right to
the possession thereof;
(2) When the buyer or his agent lawfully
obtains possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien
thereon, does not lose his lien by reason
only that he has obtained judgment or
decree for the price of the goods.
WHEN UNPAID SELLER LOSES
POSSESSORY LIEN
Delivery to agent or bailee of buyer
● An unconditional delivery to an agent or
bailee for the buyer is the same as
delivery to the buyer himself
Possession by buyer or his agent
● When the ownership is transferred, the
seller has no lien simply because he has
no possession necessary for a lien
● Wrongful taking of the goods (without
buyer’s consent) does not destroy the
lien
● If goods are put into possession of the
buyer merely to allow to examine the
object, this would not amount to an
assent to a surrender of the lien
Waiver of lien
● Seller may lose his lien either by
express agreement to surrender it or by
such conduct as estops him from
asserting it
● Extension of credit waives the lien of the
seller only on the condition that the
buyer keep his credit good by avoiding
bankruptcy or insolvency
● Mere judgement by a court obtained by
the unpaid seller for the price of the
goods is not a ground for the loss of his
lien
REVIVAL OF LIEN AFTER DELIVERY
● If a buyer refuses to receive the goods
after they have been delivered to a
 carrier or other bailee on his behalf =
seller may reclaim the goods and revest
himself with his lien
● If the buyer returns the goods in
wrongful repudiation of the sale = lien on
the unpaid price is revived = seller
makes it clear in accepting the goods
from the buyer that he is not assenting
to the rescission of the sale
● Return of the goods by the buyer to the
seller for some special reason (e.g.
repairs & alterations) = does not revive
the lien of the seller
AGREEMENT OF CONTINUANCE OF LIEN
● Parties may agree that the seller shall
retain a lien even though the goods
have been delivered to the buyer
Article 1530. Subject to the provisions of
this Title, when the buyer of goods is or
becomes insolvent, the unpaid seller who
has parted with the possession of the goods
has the right of stopping them in transitu,
that is to say, he may resume possession of
the goods at any time while they are in
transit, and he will then become entitled to
the same rights in regard to the goods as he
would have had if he had never parted with
the possession.
RIGHT OF SELLER TO STOP GOODS IN
TRANSITU
● Right which a seller of goods on credit
has to recall them or retake them while
in the possession of a carrier who
received them for delivery to the buyer
● Exercises the right b obtaining actual
possession of the goods or by giving
notice of his claim to the carrier or other
bailee in possession
● Exercising right of stoppage in transitu =
entitled to the same rights as if not
parted with the possession of the goods
● Continues while goods are in the hands
of the carrier ; terminates when
consignee / bona fide transferee obtains
lawful possession
● Delivery of the goods to the middleman
for carriage to the buyer is the beginning
of the transit
● Continues during the possession of the
successive connecting carriers
● Buyer’s insolvency need not be judicially
declared
EXERCISE OF RIGHT OF STOPPAGE IN
TRANSITU
Requisites
1. Seller must be UNPAID
2. Buyer must be INSOLVENT
3. Goods must be IN TRANSIT
4. Seller must either actually take
possession of the goods sold or give
notice of his claim to the carrier or other
person in possession
5. Seller must surrender the negotiable
document of title, if any, issued by the
carrier or bailee
6. Seller must bear the expense of the
delivery of the goods after the exercise
of the right
Sale or credit
● No right of stoppage in transitu exists in
a cash sale
● Sale must be on credit
Title to goods in buyer
● Not defeated by the fact that title to the
goods has passed to the buyer
● Right applies where the title of the
goods in transit has vested in an
 insolvent buyer who has not paid the
entire purchase price
BASIS AND NATURE OF RIGHT OF
STOPPAGE IN TRANSITU
● The right is founded on the equitable
principle that one man’s property should
not be applied in payment of another
man’s debts
● right does not proceed from any
agreement of the parties but is
independently conferred by law
INSOLVENCY OF THE BUYER
Requirement of insolvency
● Buyer’s insolvency is essential to the
seller’s right of stoppage in transitu
● These circumstances do not justify the
exercise of the right of stoppage in
transitu:
○ Buyer was in default in the
performance of his obligations
○ Death of buyer (unless estate is
insolvent)
○ Goods have been levied on by
attaching creditors of the buyer
● Does not to be absolutely bankrupt or
formally adjudged a bankrupt
● Sufficient that the buyer be generally
unable to pay his debts in the ordinary
course of business
Time of insolvency
● Sufficient that the buyer became
insolvent before he has taken
possession of the goods
● If at the time of the sale, the seller knew
of buyer’s insolvency, the seller cannot
claim the right of stoppage
EFFECT OF EXERCISE OF RIGHT BY
SELLER
Right to same position as before sale
● Effect of such exercise of the right is to
restore the seller to the same position
as if the property never left his
possession
Right to recover possession
● Carrier makes delivery to buyer
notwithstanding proper notice from the
seller, it is ineffectual to defeat the
seller’s rights and the seller may
generally recover possession from the
buyer or from a third person claiming
under him
● Carrier may incur liability
Right to recover agreed price
● Does not operate to rescind the sale
and revest the title to the seller
● Seller may, after exercising the right, se
and recover the agreed price, provided
he is ready and willing to deliver the
goods on payment
Article 1531. Goods are in transit within
the meaning of the preceding article:
(1) From the time when they are
delivered to a carrier by land, water, or
air, or other bailee for the purpose of
transmission to the buyer, until the
buyer, or his agent in that behalf, takes
delivery of them from such carrier or
other bailee;
(2) If the goods are rejected by the
buyer, and the carrier or other bailee
continues in possession of them, even if
the seller has refused to receive them
back.
Goods are no longer in transit within the
meaning of the preceding article:

(1) If the buyer, or his agent in that
behalf, obtains delivery of the goods
before their arrival at the appointed
destination;
(2) If, after the arrival of the goods at the
appointed destination, the carrier or
other bailee acknowledges to the buyer
or his agent that he holds the goods on
his behalf and continues in possession
of them as bailee for the buyer or his
agent; and it is immaterial that further
destination for the goods may have
been indicated by the buyer;
(3) If the carrier or other bailee
wrongfully refuses to deliver the goods
to the buyer or his agent in that behalf.
If the goods are delivered to a ship,
freight train, truck, or airplane chartered
by the buyer, it is a question depending
on the circumstances of the particular
case, whether they are in the
possession of the carrier as such or as
agent of the buyer.
If part delivery of the goods has been
made to the buyer, or his agent in that
behalf, the remainder of the goods may
be stopped in transitu, unless such part
delivery has been under such
circumstances as to show an agreement
with the buyer to give up possession of
the whole of the goods.
WHEN GOODS ARE IN TRANSIT
● The goods are not yet in transit until they
are delivered to a carrier or other bailee for
the purpose of transmission to the buyer.
● The goods are in transit —
(1) after delivery to a carrier or other
bailee and before the buyer or his agent
takes delivery of them; and
(2) if the goods are rejected by the buyer,
and the carrier or other bailee continues
in possession of them.
WHEN GOODS ARE CONSIDERED NO LONGER
IN TRANSIT
● The right of stoppage in transitu arises
solely when an unpaid seller has shipped
goods to an insolvent buyer. The right to
retake continues only while the goods are in
transit.
● The goods areno longer in transit in the
following cases:
(1) After delivery to the buyer or his agent in that
behalf;
(2) If the buyer or his agent obtains possession of
the goods at a point before the destination originally
fixed;
(3) If the carrier or bailee acknowledges to hold the
goods on behalf of the buyer; and
(4) If the carrier or bailee wrongfully refuses to
deliver the goods to the buyer.
ATTORNMENT BY THE BAILEE
● The right to stop the goods may be
terminated not simply by delivery to the
buyer, but by attornment of the bailee to the
buyer.
● In order to terminate the seller’s right to
stop, the carrier must enter into a new
relation, distinct from the original contract of
carriage, to hold the goods for the buyer as
his agent not for the purpose of expediting
them to the place of original destination,
pursuant to that contract, but in a new
character for the purpose of custody on the
buyer’s account.
EFFECT OF PARTIAL DELIVERY
● The mere fact that part of the goods has
been delivered does not deprive the seller
of the right to stop with respect to the
remainder just as the seller may still
 exercise his right of lien on the remainder
after part of the goods had been delivered.
● However, it may be shown that the seller
has an agreement with the buyer to give up
possession of the whole of the goods.
Article 1532. The unpaid seller may
exercise his right of stoppage in transitu
either by obtaining actual possession of the
goods or by giving notice of his claim to the
carrier or other bailee in whose possession
the goods are. Such notice may be given
either to the person in actual possession of
the goods or to his principal. In the latter
case the notice, to be effectual, must be
given at such time and under such
circumstances that the principal, by the
exercise of reasonable diligence, may
prevent a delivery to the buyer.
When notice of stoppage in transitu is given
by the seller to the carrier, or other bailee in
possession of the goods, he must redeliver
the goods to, or according to the directions
of, the seller. The expenses of such delivery
must be borne by the seller. If, however, a
negotiable document of title representing
the goods has been issued by the carrier or
other bailee, he shall not be obliged to
deliver or justified in delivering the goods to
the seller unless such document is first
surrendered for cancellation.
WAYS OF EXERCISING THE RIGHT TO STOP
1. By taking actual possession of the
goods - The seller’s power to stop in
transitu includes not only the power to
counter delivery to the buyer but to order
redelivery to himself.
- Duty imposed is qualified by the
existence of a lien of the carrier on
the goods for charges due for their
carriage.
2. By giving notice of his claim to the
carrier or bailee - To make a notice
effective as a stoppage in transitu, it must
be given at such time, and under such
circumstances that the principal, by the
exercise of reasonable diligence, may
communicate it to his agent to prevent the
delivery to the buyer. There is no form of
notice which is essential; it is only
necessary that the goods be sufficiently
described for identification
EFFECT OF OUTSTANDING BILL OF LADING
● If the goods are covered by a negotiable
document of title, the carrier or bailee has
no obligation to deliver the goods to the
seller unless such document is first
surrendered for cancellation.
Article 1533. Where the goods are of
perishable nature, or where the seller
expressly reserves the right of resale in
case the buyer should make default, or
where the buyer has been in default in the
payment of the price for an unreasonable
time, an unpaid seller having a right of lien
or having stopped the goods in transitu may
resell the goods. He shall not thereafter be
liable to the original buyer upon the contract
of sale or for any profit made by such
resale, but may recover from the buyer
damages for any loss occasioned by the
breach of the contract of sale.
Where a resale is made, as authorized in
this article, the buyer acquires a good title
as against the original buyer.
It is not essential to the validity of resale
that notice of an intention to resell the
goods be given by the seller to the original
buyer. But where the right to resell is not
based on the perishable nature of the goods
or upon an express provision of the contract
of sale, the giving or failure to give such
notice shall be relevant in any issue
involving the question whether the buyer
had been in default for an unreasonable
time before the resale was made.
It is not essential to the validity of a resale
that notice of the time and place of such
 resale should be given by the seller to the
original buyer.
The seller is bound to exercise reasonable
care and judgment in making a resale, and
subject to this requirement may make a
resale either by public or private sale. He
cannot, however, directly or indirectly buy
the goods.
UNPAID SELLER’S RIGHT OF RESALE
1. When resale allowable - An unpaid seller
can exercise the right to resell only when he
has either a right of lien or a right to stop the
goods in transitu and under any of the three
following cases:
(a) where the goods are perishable in nature;
(b) where the right to resell is expressly reserved in
case the buyer should make a default; and
(c) where the buyer delays in the payment of the
price for an unreasonable time.
2. Effect of resale - the seller is not liable for
any profit made by such resale; but if he
sells for less than the price, he has a right to
sue for the balance.
- As against the original buyer, the
new buyer acquires a good title to
the goods.
3. Notice of resale not essential - except in
the case of perishable goods, which it is
obvious may require an expeditious sale,
and where the right to resell is reserved, the
failure to give notice shall be relevant upon
the question whether the buyer has been in
default for an unreasonable time.
4. Manner of resale - The seller is only
required to exercise reasonable care and
judgment in making a resale. He cannot,
however, directly or indirectly, buy the
goods.
Article 1534. An unpaid seller having the
right of lien or having stopped the goods in
transitu, may rescind the transfer of title and
resume the ownership in the goods, where
he expressly reserved the right to do so in
case the buyer should make default, or
where the buyer has been in default in the
payment of the price for an unreasonable
time. The seller shall not thereafter be liable
to the buyer upon the contract of sale, but
may recover from the buyer damages for
any loss occasioned by the breach of the
contract.
The transfer of title shall not be held to have
been rescinded by an unpaid seller until he
has manifested by notice to the buyer or by
some other overt act an intention to rescind.
It is not necessary that such overt act
should be communicated to the buyer, but
the giving or failure to give notice to the
buyer of the intention to rescind shall be
relevant in any issue involving the question
whether the buyer had been in default for
an unreasonable time before the right of
rescission was asserted.
UNPAID SELLER’S RIGHT OF RESCISSION
1. When seller may rescind - An unpaid
seller has a right to rescind only if he has
either a right of lien or a right to stop the
goods in transitu and under either of two
situations:
(a) Where the right to rescind is expressly
reserved in case the buyer should make
a default; or
(b) Where the buyer delays in the payment of
the price for an unreasonable time.
2. Effect of rescission - In the case of rescission,
the seller resumes ownership in the goods. While
the seller shall not be liable to the buyer upon the
contract of sale, the latter, however, may be made
liable to the seller for damages for any loss
occasioned by the breach of contract.
3. Manner of rescission - An election by the seller
to rescind may be manifested by notice to the buyer
or by some other overt act showing an intention to
rescind.
- Communication of such election to the
buyer is not necessary. But, as in regard
to resale, the giving or failure to give
notice is relevant in determining the
reasonableness of the time given the
buyer to make good his obligations
under the contract.
Article 1535. Subject to the provisions of
this Title, 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.
If, however, a negotiable document of
title has been issued for goods, 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, whether such negotiation be
prior or subsequent to the notification to
the carrier, or other bailee who issued
such document, of the seller's claim to a
lien or right of stoppage in transitu.
EFFECT OF SALE OF GOODS SUBJECT TO
LIEN OR STOPPAGE IN TRANSITU
1. Where goods not covered by negotiable
document of title - a seller can give no
larger right than he has. When, therefore,
goods are subject to a legal lien, as they are
when an unpaid seller is in possession of
them, a purchaser from the original buyer
can acquire only such right as the buyer
then had.
2. Where goods covered by negotiable
document of title - goods are covered by a
negotiable document of title, the seller’s lien
cannot prevail against the rights of a
purchaser for value in good faith to whom
the document has been indorsed.
- REASON: rests upon the nature of a
negotiable document of title which in
legal fiction operates as a delivery of
the goods described therein when
indorsed.
- The rule protects a purchaser
without notice after the seller had
stopped the goods either by virtue of
his right of lien or stoppage in
transitu.
Article 1536. 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.
RIGHT OF VENDOR TO WITHHOLD DELIVERY
IN SALE ON CREDIT
● In a contract of sale, the obligation to pay
the price is correlative to the obligation to
deliver the thing sold. Accordingly, the
vendor is not bound to make delivery if the
vendee has not paid him the price.
● If, however, a period has been fixed for
payment, the vendor must deliver the thing
sold though the price be not first paid.
Article 1537. The vendor is bound to
deliver the thing sold and its accessions and
accessories in the condition in which they
were upon the perfection of the contract.
All the fruits shall pertain to the vendee from
the day on which the contract was
perfected.
CONDITION OF THING TO BE DELIVERED
● parties take into consideration not only the
particular thing which is the subject matter
 of the contract, but also its condition at the
time such contract was perfected.
● Therefore, vendor is obliged to preserve the
thing pending delivery because the thing
sold and its accessions and accessories
must be in the condition in which they were
upon the perfection of the contract.
● It is the seller’s duty to deliver the thing sold
in a condition suitable for its enjoyment by
the buyer for the purposes contemplated.
Thus, a subdivision lot seller should not shift
to the buyer the burden of providing access
to and from the subdivision. It is seller’s duty
to construct the necessary roads in the
subdivision that could serve as outlets.
Proper access to the residence is essential
to its enjoyment.
● While a sale of a determinate thing (e.g.,
land) includes all its accessions (e.g.,
house) and accessories even though they
may not have been mentioned, a sale of the
latter is not sufficient to convey title or right
to the former.
Note: Accessions are the fruits of a thing; or
additions to, or improvements upon, a thing
such as the young of animals, house or trees
on a land, etc. Accessories are anything
attached to a principal thing for its completion,
ornament, or better use such as picture frame,
key of a house, etc.
RIGHT OF VENDEE TO THE FRUITS
1. When vendee entitled - The vendee has a
right to the fruits of the thing sold from the
time the obligation to deliver it arises. (Art.
1164.) The obligation to deliver arises upon
the perfection of the contract of sale.
2. When vendee not entitled
(a) When the rule provided in Article 1537 (par.
2) is modified by agreement of the parties, their
agreement shall, of course, govern;
(b) If the vendee rescinds the contract of sale
instead of exacting the fulfillment thereof, he is
entitled only to damages like interest, attorney’s
fees and costs but he may not also claim the
fruits of the thing sold; and
(c) In a contract of promise to sell, the vendee is
not entitled to the fruits. The only right of the
contracting parties is to reciprocally demand
the fulfillment of the contract. Prior to the sale
and conveyance of the subject matter of the
contract, the promisee or would-be vendee
acquires no right to the fruits thereof.
Article 1538. In case of loss, deterioration
or improvement of the thing before its
delivery, the rules in article 1189 shall be
observed, the vendor being considered
the debtor.
RULES IN CASE OF LOSS, DETERIORATION,
OR IMPROVEMENT OF THING BEFORE
DELIVERY
● Consistent with Art. 1480 pars. 1 and 2 -
the loss shall be at the risk of the vendee
pending delivery
Article 1539. The obligation to deliver the
thing sold includes that of placing in the
control of the vendee all that is mentioned
in the contract, in conformity with the
following rules:
If the sale of real estate should be made
with a statement of its area, at the rate of
a certain price for a unit of measure or
number, the vendor shall be obliged to
deliver to the vendee, if the latter should
demand it, all that may have been stated
in the contract; but, should this be not
possible, the vendee may choose
between a proportional reduction of the
price and the rescission of the contract,
provided that, in the latter case, the lack
in the area be not less than one-tenth of
that stated.
The same shall be done, even when the
area is the same, if any part of the
immovable is not of the quality specified
in the contract.
The rescission, in this case, shall only

take place at the will of the vendee, when
the inferior value of the thing sold
exceeds one-tenth of the price agreed
upon.
Nevertheless, if the vendee would not
have bought the immovable had he
known of its smaller area of inferior
quality, he may rescind the sale.
2 TYPES OF PRICING AGREEMENT
● Sales involving real estate, the parties may
choose between 2 types of pricing
agreement:
○ Unit Price Contract
■ Purchase price is determined
by way of reference to a
stated rate per unit
○ Lump sum contract
■ A full purchase price for an
immovable the area of which
may be declared based on
an estimate or where both
area and boundaries are
stated
SALE OF REAL PROPERTY BY UNIT OF
MEASURE OR NUMBER
Entire area stated in contract must be delivered
● The cause of he contract with respect to the
vendee is the number of such units or the
thing purchased as determined by the
stipulated no. of units
● Vendor must deliver the entire property
agreed upon
Where area greater than that stated in the
contract
● The buyer may either:
○ Accept the area included in the
contract and reject the rest
○ Accept the whole area and pay for
the same at the contract rate
Where are lesser than that stated in the
contract
● The buyer may either:
○ Proportionate reduction in the
purchase price
○ Rescission under certain conditions
WHEN VENDEE ENTITLED TO RESCIND THE
SALE OF REAL PROPERTY
● Lack in area is at least 1/10th than that
stated or stipulated
● Deficiency in the quality specified in the
contract exceeds 1/10th of the price agreed
upon
● The vendee wouldn’t have brought the
immovable had he known of its smaller area
or inferior quality irrespective of the extent
of the lack in area or quality
NOTE:
● Fulfillment = vendee is entitled only to a
proportionate reduction of the price where
there is a deficiency in area or number
● Different rule where there is a violation of
warranty against hidden defects
● Vendor is liable for damages
Article 1540. If, in the case of the
preceding article, there is a greater area
or number in the immovable than that
stated in the contract, the vendee may
accept the area included in the contract
and reject the rest. If he accepts the
whole area, he must pay for the same at
the contract rate.
WHERE IMMOVABLE OF A GREATER AREA OR
NUMBER
● If the area or number in the immovable is
greater than that stipulated in the contract,
the vendee may accept the area included in
the contract and reject the rest. If he
accepts the whole, he makes himself liable
for the price of the same at the contract
rate.
 ● The vendee may not withdraw from the
contract.
SALE OF REAL ESTATE MADE FOR A LUMP
SUM
Article 1541. The provisions of the two
preceding articles shall apply to judicial
1. Mistake in area stated in contract
sales.
immaterial - If the sale is made for a lump
sum, and not so much per unit of measure
APPLICATION OF ARTICLES 1539 AND 1540 TO or number, the cause of the contract is the
JUDICIAL SALES thing sold independent and irrespective of
its number or measure.
● The provisions of Articles 1539 and 1540 - Law presumes that the purchaser
are applicable to both private (voluntary) had in mind a determinate price for
and judicial sales when the immovable the real estate and that he
sold is lacking in area or is of inferior ascertained its area and quality
quality or is greater in area than stated in before the contract was perfected.
the contract. 2. Where area or number stated together
with boundaries - If the vendor cannot
REASON: rules they contain are derived from the
deliver to the vendee all that is included
very nature of the contract of sale
within the boundaries mentioned in the
contract, the latter has the option to reduce
Article 1542. In the sale of real estate, the price in proportion to the deficiency or to
made for a lump sum and not at the rate set aside the contract.
of a certain sum for a unit of measure or 3. Where there is conflict between area
number, there shall be no increase or stipulated and title to property - the
decrease of the price, although there be a former shall prevail when the boundaries
greater or less area or number than that are certain and no alteration thereof has
stated in the contract. been proven.
4. Where identity of erroneously
The same rule shall be applied when two
designated property clearly established -
or more immovables as sold for a single
the mistake in designating the property in
price; but if, besides mentioning the
the deed of sale “does not vitiate consent of
boundaries, which is indispensable in
the parties or affect the validity and binding
every conveyance of real estate, its area
effect of the contract.
or number should be designated in the
5. Where words “about,” “more or less,”
contract, the vendor shall be bound to
etc. are used - The words when used in
deliver all that is included within said
connection with quantity or distance, are
boundaries, even when it exceeds the
words of safety and caution, intended to
area or number specified in the contract;
cover some slight or unimportant
and, should he not be able to do so, he
inaccuracy, and, while enabling an
shall suffer a reduction in the price, in
adjustment to the imperative demands of
proportion to what is lacking in the area or
fixed monuments, they do not weaken or
number, unless the contract is rescinded
destroy the statements of distance and
because the vendee does not accede to
quantity when no other guides are
the failure to deliver what has been
furnished.
stipulated.
CONFLICT BETWEEN AREA STATED AND
BOUNDARIES
 1. Where boundaries given are sufficiently
certain - may be disregarded because what
really defines a piece of ground is not the
area mentioned in its description but the
boundaries therein laid down as enclosing
the land and indicating its limits.
2. Where boundaries do not identify land or
overlapping of boundaries exists - The
above rule is not applicable where the
boundaries relied upon do not identify the
land beyond doubt.
- In such case, the area stated in the
document should be followed.
- An area delimited by boundaries
properly identifies a parcel of land.
However, in controversial cases,
where there appeared to be an
overlapping of boundaries, the
actual size of the property gains
importance. It is well-settled that
anyone who claims that he has a
better right to a property must prove
both ownership and identity of the
said property.
3. Where discrepancy in measurement is
so great - “when the land sought to be
registered is almost seven times as much
as that described in the deed, the evidence
as to natural boundaries must be very clear
and convincing before that rule (that natural
boundaries will prevail over area) can be
applied.”
Article 1543. The actions arising from
articles 1539 and 1542 shall prescribe in
six months, counted from the day of
delivery.
PRESCRIPTION OF ACTIONS
● Actions based on Arts. 1539 - 1542 for
either rescission of the contract or
proportionate reduction of the price must be
brought WITHIN 6 MONTHS counted from
the day of delivery
● 1543 = actual delivery
● No execution of deed of sale but buyer
already in possession = no delivery =
ownership not transferred = not delivery
under this article
Article 1544. If the same thing should
have been sold to different vendees, the
ownership shall be transferred to the
person who may have first taken
possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the
ownership shall belong to the person
acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the
ownership shall pertain to the person who
in good faith was first in the possession;
and, in the absence thereof, to the person
who presents the oldest title, provided
there is good faith.
Rules as to preference of ownership in case of
a double sale.
If the property sold is movable, the ownership shall
be
1. acquired by the vendee who first takes
possession in good faith.
2. If the property sold is immovable, the
ownership shall belong, in the order hereunder
stated, to:
a. The vendee who first registers the
sale in good faith in the Registry of
Property (Registry of Deeds) has a
preferred right over another vendee
who has not registered his title even
if the latter is in actual possession of
the immovable property. More credit
is given to registration than to actual
possession. The requirement of the
law then is two-fold: acquisition in
good faith and registration in good
faith.
 b. In the absence of registration, the
vendee who first takes possession in
good faith.
c. In the absence of both registration
and possession, the vendee who
presents the oldest title (who first
bought the property) in good faith.
Note: Article 1544 has no application to lands not
registered with the Torrens system. If the sale is not
registered, it is binding only as between the seller
and the buyer.
Mere presentation to the office of the register of
deeds of a document on which acknowledgment of
receipts is written is not equivalent to registration.
Registration in its juridical aspect must be
understood as the entry made in a book or public
registry of deeds.
One who buys from a person who is not the
registered owner of property is not a purchaser in
good faith.
The fundamental premise of the preferential rights
established by Article 1544 is good faith And it is
not only required that the purchaser of real property
who has registered the same should have done so
in good faith, but also for a valuable consideration.
Article 1545. Where the obligation of either
party to a contract of sale is subject to any
condition which is not performed, such party
may refuse to proceed with the contract or
he may waive performance of the condition.
If the other party has promised that the
condition should happen or be performed,
such first mentioned party may also treat
the nonperformance of the condition as a
breach of warranty.
Where the ownership in the thing has not
passed, the buyer may treat the fulfillment
by the seller of his obligation to deliver the
same as described and as warranted
expressly or by implication in the contract of
sale as a condition of the obligation of the
buyer to perform his promise to accept and
pay for the thing.
MEANING OF CONDITION
● an uncertain event or contingency on the
happening of which the obligation (or
right) of the contract depends.
(1) The term, in the context of a perfected
contract of sale, pertains, in reality, to the
compliance by one party of an undertaking, the
fulfillment of which would beckon, in turn, the
demandability of the reciprocal prestation of the
other party.
(2) The term is not used in the sense of a
“promise” with the possible exception of the
buyer’s promise to accept and pay for the thing sold
which is conditioned on the seller’s performance of
his promise to deliver the thing as described and
warranted.
EFFECT OF NON-FULFILLMENT OF CONDITION
● A contract of sale may be absolute or
conditional
(1) If the obligation of either party is subject to any
condition and such condition is not fulfilled, such
party may either:
(a) refuse to proceed with the contract; or
(b) proceed with the contract, waiving the
performance of the condition.
(2) If the condition is in the nature of a promise
that it should happen, the non-performance of
such condition may be treated by the other
party as a breach of warranty.
Article 1546. Any affirmation of fact or any
promise by the seller relating to the thing is
an express warranty if the natural tendency
of such affirmation or promise is to induce
the buyer to purchase the same, and if the
buyer purchases the thing relying thereon.
No affirmation of the value of the thing, nor
any statement purporting to be a statement
of the seller's opinion only, shall be
construed as a warranty, unless the seller
made such affirmation or statement as an
expert and it was relied upon by the buyer.
MEANING OF WARRANTY
● Warranty - statement or representation
made by the seller of goods,
contemporaneously and as a part of the
contract of sale, having reference to the
character, quality, or title of the goods,
and by which he promises or undertakes
to insure that certain facts are or shall be
as he then represents them.
KINDS OF WARRANTY
- Express or Implied warranty
● Express warranty - is any affirmation of
fact or any promise by the seller relating
to the thing, the natural tendency of
which is to induce the buyer to purchase
the thing and the buyer thus induced,
does purchase the same.
- EFFECT: it is immaterial whether
the seller did not know that it was
true or false. No intent is necessary
to make the seller liable for his
warranty. It is the natural
consequences of what the seller
says and the reliance thereon by the
buyer that alone are important.
EFFECT OF EXPRESSION OF OPINION
● A mere expression of opinion, no matter
how positively asserted, does not import a
warranty unless the seller is an expert and
his opinion was relied upon by the buyer.
Article 1547. In a contract of sale, unless a
contrary intention appears, there is:
(1) An implied warranty on the part of the
seller that he has a right to sell the thing at
the time when the ownership is to pass, and
that the buyer shall from that time have and
enjoy the legal and peaceful possession of
the thing;
(2) An implied warranty that the thing shall
be free from any hidden faults or defects, or
any charge or encumbrance not declared or
known to the buyer.
This article shall not, however, be held to
render liable a sheriff, auctioneer,
mortgagee, pledgee, or other person
professing to sell by virtue of authority in
fact or law, for the sale of a thing in which a
third person has a legal or equitable
interest.
MEANING OF IMPLIED WARRANTY
● implied warranty is that which the law
derives by implication or inference from
the nature of the transaction or the
relative situation or circumstances of the
parties, irrespective of any intention of
the seller to create it.
NATURE: a natural, not an essential, element of a
contract, because it is presumed to exist even
though nothing has been said in the contract on the
subject.
- Incorporated in the contract of sale, may be
waived or modified by express stipulation.
IMPLIED WARRANTIES IN SALE
● implied warranty is reserved for cases
where the law attaches an obligation to
the seller which is not expressed in any
words.
1. Implied warranty as to seller’s title. —
that the seller guarantees that he has a right
to sell the thing sold and to transfer
ownership to the buyer who shall not be
disturbed in his legal and peaceful
possession thereof.
2. Implied warranty against hidden defects
or unknown encumbrance. — that the
seller guarantees that the thing sold is free
from any hidden faults or defects or any
charge or encumbrance not declared or
known to the buyer.
3. Implied warranty as to fitness or
merchantability. — that the seller
guarantees that the thing sold is reasonably
fit for the known particular purpose for which
it was acquired by the buyer or, where it
 was bought by description, that it is of
merchantable quality.
Article 1548. Eviction shall take place
whenever by a final judgment based on a
right prior to the sale or an act imputable to
the vendor, the vendee is deprived of the
whole or of a part of the thing purchased.
The vendor shall answer for the eviction
even though nothing has been said in the
contract on the subject.
The contracting parties, however, may
increase, diminish, or suppress this legal
obligation of the vendor.
MEANING OF EVICTION
● Eviction may be defined as the judicial
process, whereby the vendee is deprived
of the whole or part of the thing
purchased by virtue of a final judgment
based on a right prior to the sale or an
act imputable to the vendor.
ESSENTIAL ELEMENTS OF WARRANTY
AGAINST EVICTION
(1) The vendee is deprived in whole or in part of the
thing purchased;
(2) He is so deprived by virtue of a final judgment
(Art. 1557.);
(3) The judgment is based on a right prior to the
sale or an act imputable to the vendor;
(4) The vendor was summoned in the suit for
eviction at the instance of the vendee (Art. 1558.);
and
(5) There is no waiver on the part of the vendee.
TRESPASS CONTEMPLATED BY WARRANTY
AGAINST EVICTION
● Mere trespass in fact does not give rise
to the application of the doctrine of
eviction.
● It is the disturbance in law which
requires that a person go to the courts of
justice claiming the thing sold, or part
thereof, and invoking reasons.
VENDOR’S LIABILITY IS WAIVABLE
● Warranty is not an essential element of a
contract of sale and may, therefore, be
increased, diminished, or suppressed by
agreement of the parties.
Article 1549. The vendee need not appeal
from the decision in order that the vendor
may become liable for eviction.
VENDEE HAS NO DUTY TO APPEAL FROM
JUDGMENT
● vendee’s right against the vendor is not
lost because he, the vendee, did not
appeal.
● If he did not follow up the case and made
use of all possible remedies he should
suffer for his omission.
Article 1550. When adverse possession
had been commenced before the sale but
the prescriptive period is completed after
the transfer, the vendor shall not be liable
for eviction.
EFFECT OF PRESCRIPTION
● By prescription, one acquires ownership
and other real rights through the lapse of
time in the manner and under the
conditions prescribed by law. In the
same way, rights and actions are lost by
prescription.
1. Completed before sale. — The vendee
may lose the thing purchased to a third
person who has acquired title thereto by
prescription.
● When prescription has commenced
to run against the vendor and was
completed before the sale, vendee
can enforce warranty against
eviction.
2. Completed after sale. — Even if
prescription has started before the sale but
has reached the limit prescribed by law after
the sale, the vendor is not liable for eviction.
Article 1551. If the property is sold for
nonpayment of taxes due and not made
known to the vendee before the sale, the
vendor is liable for eviction.
DEPRIVATION FOR NONPAYMENT OF TAXES
 ● If the vendee is deprived of the ownership of
the property because it is sold at public for
nonpayment of taxes due from the vendor,
the latter is liable for eviction for an act
imputable to him.
Article 1552. The judgment debtor is also
responsible for eviction in judicial sales,
unless it is otherwise decreed in the
judgment.
LIABILITY OF JUDGMENT DEBTOR
● rule on implied warranty does not apply to a
sheriff who sells by virtue of authority in law,
the judgment debtor is responsible for
eviction and hidden defects even in judicial
sales, unless otherwise decreed in the
judgment
● Based on the general principal that a person
may not enrich himself at the expense of
another.
Article 1553. Any stipulation exempting the
vendor from the obligation to answer for
eviction shall be void, if he acted in bad
faith.
STIPULATION WAIVING WARRANTY
1. Effect of vendor’s bad faith. — The
vendor’s bad faith under Article 1553
consists in his knowing beforehand at the
time of the sale, of the presence of the fact
giving rise to eviction, and its possible
consequence.
2. Effect of vendee’s bad faith. — If he
knew the defect of title at the time of sale, or
had knowledge of the facts which should
have put him upon inquiry and investigation
as might be necessary to acquaint him with
the defects of the title of the vendor, he
cannot claim that the vendor has warranted
his legal and peaceful possession of the
property sold on the theory that he
proceeded with the sale with the
assumption of the danger of eviction.
Article 1554. If the vendee has renounced
the right to warranty in case of eviction, and
eviction should take place, the vendor shall
only pay the value which the thing sold had
at the time of the eviction. Should the
vendee have made the waiver with
knowledge of the risks of eviction and
assumed its consequences, the vendor
shall not be liable.
KINDS OF WAIVER OF EVICTION
1. Consciente - the waiver is voluntarily made
by the vendee without the knowledge and
assumption of the risks of eviction
2. Intencionada - the waiver is made by the
vendee with knowledge of the risks of
eviction and assumption of its
consequences.
EFFECT OF WAIVER BY VENDEE
● If the waiver was only conscious, the vendor
shall pay only the value which the thing sold
had at the time of eviction. This is a case of
solutio indebiti.
- sole effect of a waiver
unaccompanied by the knowledge
and assumption of the danger of
eviction is to deprive the purchaser
of the benefits mentioned in Nos. 2,
3, 4, and 5 of Article 1555.
● In the second kind of waiver, the vendor is
exempted from the obligation to answer for
eviction, provided he did not act in bad faith.
PRESUMPTION AS TO KIND OF WAIVER
- every waiver is presumed to be
consciente while the contrary is not proven,
but to consider it intencionada, it is
necessary besides the act of waiver that it
be accompanied by some circumstance
which reveals the vendee’s knowledge of
the risks of eviction and his intention to
submit to its consequences.
Article 1555. When the warranty has been
agreed upon or nothing has been stipulated
on this point, in case eviction occurs, the
vendee shall have the right to demand of
the vendor:
(1) The return of the value which the thing
sold had at the time of the eviction, be it
greater or less than the price of the sale;
(2) The income or fruits, if he has been
ordered to deliver them to the party who
 won the suit against him;
(3) The costs of the suit which caused the
eviction, and, in a proper case, those of the
suit brought against the vendor for the
warranty;
(4) The expenses of the contract, if the
vendee has paid them;
(5) The damages and interests, and
ornamental expenses, if the sale was made
in bad faith.
Article 1555 specify in detail the rights and liabilities
of the vendor and the vendee in the event eviction
takes place “when the warranty has been agreed
upon or nothing has been stipulated on this point,”
that is, in the absence of waiver of eviction by the
vendee. (art 1554)
RIGHTS AND LIABILITIES IN CASE EVICTION
OCCURS.
1. Return of value of thing
2. Income and fruits, if ordered to deliver to
party who won the suit
3. Cost of the suit
4. Expenses of the contract
5. Damages and interest
(1) Return of value of thing. — If at the time of the
eviction the value of the property is really more or
less than its value at the time of the sale, by reason
of improvements or deterioration, it is but just that
the vendor should pay the excess or not suffer the
damage.
- All kinds of improvements whether useful or
necessary or even recreational expenses
voluntarily incurred by the vendee or caused
by nature or time insofar as they may affect
the value of property, are taken into account
in determining the increase in value.
(2) Income or fruits of thing. — The vendee is
liable to the party who won the suit against him for
the income or fruits received only if so decreed by
the court. The obvious inference from this provision
is that to the vendee belongs the use, free of any
liability, of the subject matter of the sale. And this
benefit is not by any means gratuitous. It is offset
by the use without interest of the money of the
vendee by the vendor.
(3) Costs of the suit. — The vendee is also
entitled to recover the expense of litigation resulting
in eviction, including the costs of the action brought
against the vendor to enforce his warranty. “Costs
of the suit” mentioned in No. (3) does not include
travelling expenses incurred by the vendee in
defending himself in the action. He is not entitled to
recover damages unless the sale was made by
the vendor in bad faith.
(4) Expenses of the contract. — In the absence of
any stipulation to the contrary, the expenses in the
execution and registration of the sale are borne by
the vendor. However, if the vendee should have
paid for such expenses, he shall have the right to
demand the same from the vendor.
(5) Damages and interests. — The right of the
vendee to demand “damages and interests and
ornamental expenses” is qualified by the condition
that the sale was made in bad faith. If good faith
is presumed, the vendee is not entitled to recover
damages unless bad faith on the part of the vendor
is shown in making the sale.
The word “interests” does not cover interest on the
purchase price as in lieu thereof the vendee is
entitled to the fruits of the thing, and in cases he
has been ordered by a court to deliver the fruits to
the successful party, the vendor must indemnify
him.
Ornamental expenses referred are those expenses
that did not increase the value of the thing.
Right of second purchaser to whom warranty
assigned.
Where a warranty against eviction was expressly
agreed upon in a contract of sale and the vendee
sold the same land to another expressly assigning
to him the right to warranty, the second purchaser
has a right of action against the first vendor to
make good the warranty against eviction.
● The rule that a contract binds only the
parties, their assigns and heirs (see Art.
1311, par. 2.) is not applicable to this case.
The basis of the second purchaser’s action is the
first vendee’s transfer to him of the right to the
warranty, a right which the latter had against the
seller and which the former exercises by virtue of
the transfer.

Article 1556. Should the vendee lose, by
reason of the eviction, a part of the thing
sold of such importance, in relation to the
whole, that he would not have bought it
without said part, he may demand the
rescission of the contract; but with the
obligation to return the thing without other
encumbrances that those which it had when
he acquired it.
He may exercise this right of action, instead
of enforcing the vendor's liability for eviction.
The same rule shall be observed when two or
more things have been jointly sold for a lump
sum, or for a separate price for each of them,
if it should clearly appear that the vendee
would not have purchased one without the
other.
ALTERNATIVE RIGHTS OF VENDEE IN CASE
OF PARTIAL EVICTION
● Contemplates of partial eviction
● Art. 1554 - total eviction
● 1556 is applicable:
(1) When the vendee is deprived of a part of the
thing sold if such part is of such importance to the
whole that he would not have bought the thing
without said part; or
(2) When two or more things are jointly sold
whether for a lump sum or for a separate price for
each, and the vendee would not have purchased
one without the other.
REMEDY OF RESCISSION NOT AVAILABLE IN
CASE OF TOTAL EVICTION
● In case the vendee is totally evicted from
the thing sold, he cannot avail of the remedy
of rescission, because this remedy
contemplates that the one demanding it is
able to return whatever he has received
under the contract.
Article 1557. The warranty cannot be
enforced until a final judgment has been
rendered, whereby the vendee loses the
thing acquired or a part thereof.
FINAL JUDGMENT OF EVICTION IS ESSENTIAL
● Two essential elements for enforcement of
warranty in case of eviction:
(1) deprivation of the whole or of a part of the thing
sold; and
(2) existence of a final judgment.
● Eviction may take place by virtue of a final
judgment of an administrative office or
board, and it is not indispensable that it be
rendered by a court, provided it was
rendered by competent authority and in
conformity with the procedure prescribed by
law.
Article 1558. The vendor shall not be
obliged to make good the proper warranty,
unless he is summoned in the suit for
eviction at the instance of the vendee.
Formal summons to vendor essential. Another
essential requisite before a vendor may be legally
liable for eviction is that he should be summoned in
the suit for eviction at the instance of the vendee.
(1) Vendor to be made party in suit for eviction.
— The phrase “unless he is summoned in the suit
for eviction” means that the vendor should be made
a party to the suit either by way of asking that the
former be made a co-defendant (Art. 1559.) or by
the filing of a third-party complaint against said
vendor.
(2) Object of the law. — The object is to give the
vendor an opportunity to intervene and defend the
title that he has transferred, for, after all, he alone
would know the circumstances or reasons behind
the claim of the plaintiff and be in a position to
defend the validity of his title.
In the absence of such opportunity, the vendor is
not bound to his warranty.
Article 1559. The defendant vendee shall
ask, within the time fixed in the Rules of
Court for answering the complaint, that the
vendor be made a co-defendant.
VENDOR TO BE MADE CO-DEFENDANT
● the notification required by Article 1559
refers to a case where the vendee is the
defendant in a suit instituted to deprive him
of the thing purchased.
Article 1560. If the immovable sold should
be encumbered with any non-apparent
burden or servitude, not mentioned in the
agreement, of such a nature that it must be
presumed that the vendee would not have
acquired it had he been aware thereof, he
may ask for the rescission of the contract,
unless he should prefer the appropriate
indemnity. Neither right can be exercised if
the non-apparent burden or servitude is

recorded in the Registry of Property, unless
there is an express warranty that the thing
is free from all burdens and encumbrances.
Within one year, to be computed from the
execution of the deed, the vendee may
bring the action for rescission, or sue for
damages.
One year having elapsed, he may only bring
an action for damages within an equal
period, to be counted from the date on
which he discovered the burden or
servitude.
Where immovable sold encumbered with non-
apparent burden.
(1) Right of vendee. — Although the vendee is not
deprived of the thing sold, totally or partially, the
vendee may still rescind the contract or ask for
indemnity, if the thing sold should be encumbered
with any non-apparent burden or servitude, not
mentioned in the agreement of such a nature that
the vendee would not have acquired it had he been
aware thereof.
(2) When right cannot be exercised. — The
alternative rights granted by Article 1560 cannot be
exercised in the following cases:
(a) If the burden or servitude is apparent, that is,
“made known and is continually kept in view by
external signs that reveal the use and enjoyment of
the same’’ (Art. 615, par.4.);
(b) If the non-apparent burden or servitude is
registered; and
(c) If the vendee had knowledge of the
encumbrance, whether it is registered or not
(3) When action must be brought. — The action
for rescission or damages must be brought within
one year from the execution of the deed of sale. If
the period has already elapsed, the vendee may
only bring an action for damages within one year
from the date of the discovery of the non-apparent
burden or servitude.
SUBSECTION 2. — Warranty Against Hidden
Defects of, or Encumbrances Upon, the Thing
Sold
Article 1561. The vendor shall be
responsible for warranty against the hidden
defects which the thing sold may have,
should they render it unfit for the use for
which it is intended, or should they diminish
its fitness for such use to such an extent
that, had the vendee been aware thereof,
he would not have acquired it or would have
given a lower price for it; but said vendor
shall not be answerable for patent defects
or those which may be visible, or for those
which are not visible if the vendee is an
expert who, by reason of his trade or
profession, should have known them.
(1) Redhibition is the avoidance of a sale on
account of some vice or defect in the thing sold,
which renders its use impossible, or so
inconvenient and imperfect that it must be
supposed that the buyer would not have purchased
it had he known of the vice.
(2) Redhibitory action is an action instituted to
avoid a sale on account of some vice or defect in
the thing sold which renders its use impossible, or
so inconvenient and imperfect that it must be
supposed that the buyer would not have purchased
it had he known of the vice.
● Object is the rescission of contracts.
● If the object is to procure the return of a part
of the purchase price paid by the vendee,
the remedy is known as accion quanti
minoris or estimatoris.
(3) Redhibitory vice or defect is a defect in the
article sold against which defect the seller is bound
to warrant.
● The vice or defect must constitute an
imperfection, a defect in its nature, of
certain importance; and a minor defect does
not give rise to redhibition.
● The mere absence of a certain quality in the
thing sold which the vendee thought it to
contain is not necessarily a redhibitory
defect. One thing is that the thing lacks
certain qualities and another thing is that it
positively suffers from certain defects.
Requisites for warranty against hidden
defects.
The following requisites must concur for the
existence of the warranty against hidden defects:
(1) The defect must be important or serious;
(2) It must be hidden;
(3) It must exist at the time of the sale;
(4) The vendee must give notice of the defect to
the vendor within a reasonable time (Art. 1586.);
(5) The action for rescission or reduction of the
price must be brought within the proper period
— 6 months from the delivery of the thing sold
(Art. 1571.) or within 40 days from the date of the
delivery in case of animals (Art. 1577, par. 1.); and
(6) There must be no waiver of warranty on the
part of the vendee.
When defect important. The defect is important if:
(1) it renders the thing sold unfit for the use for
which it is intended; or
(2) if it diminishes its fitness for such use to such an
extent that the vendee would not have acquired it
had he been aware thereof or would have given a
lower price for it.
When defects are hidden. The defect is hidden (or
latent) if it was not known and could not have been
known to the vendee.
● It is one which is hidden to the eyes and
cannot be discovered by ordinarily careful
inspection or examination.
● Hence, there is no warranty if the defect is
patent or visible. For the same reason, the
vendor’s liability for warranty cannot be
enforced although the defect is hidden if the
vendee is an expert who, by reason of his
trade or profession, should have known it.
The same defect, therefore, may be hidden
with respect to one person, but not hidden
with respect to another.
Where a defect patent or made known.
1. A warranty does not cover defects that the
buyer must have noticed. So, if the seller of
a horse (which is obviously blind) says it is
sound except for its eyes, the seller must be
correct.
2. Either the seller informs or the buyer knows
or should have known about a hidden
defect. A well-known limitation on any
doctrine exempting the seller from liability
for statements or promises regarding
obvious defects is that the seller is liable if
the seller uses art to conceal the defects.
3. In general, there is no implied warranty
against hidden defects in used goods sales.
Except in cases of misrepresentation or bad
faith, the seller is liable.
4. If the seller intends to bind himself against
patent or obvious defects, he may do so. In
such a case, the seller cannot claim that the
buyer failed to inspect the item or relied on
his own judgment.
Article 1562. In a sale of goods, there is an
implied warranty or condition as to the
quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by
implication, makes known to the seller the
particular purpose for which the goods are
acquired, and it appears that the buyer
relies on the seller's skill or judgment
(whether he be the grower or manufacturer
or not), there is an implied warranty that the
goods shall be reasonably fit for such
purpose;
(2) Where the goods are brought by
description from a seller who deals in goods
of that description (whether he be the
grower or manufacturer or not), there is an
implied warranty that the goods shall be of
merchantable quality.
Implied warranties of quality.
Quality of goods includes their state or condition.
(Art. 1636.) The purpose of holding the seller on his
implied warranties is to promote high standard in
business and to discourage sharp dealings. They
are based on the principle that “honesty is the best
policy.”
(1) Implied warranty of fitness. — There is no
implied warranty as to the quality or fitness for any
particular purpose of goods under a contract of
sale,
except as follows: where:
(a) the buyer, expressly or by implication,
manifests to the seller the particular purpose for
which the goods are required, and
(b) the buyer relies upon the seller’s skill or
judgment. Then, whether he be the grower or
manufacturer or not — there is an implied warranty
that the goods are reasonably fit for such purpose.
2) Implied warranty of merchantability. — Where
goods are bought by description, the seller
impliedly warrants that the goods are of
merchantable quality.

a. Merchantability- It is not a quality
guarantee in the sense of requiring a
specific grade, but it does require identity
between the contract and the tender in the
sense that the latter is of sufficient quality to
be worth something. Courts have used
terms like ‘saleable' (or ‘sellable') and
‘standard' (or ‘average quality') to describe
goods sold under a particular description.
b. Causes of unmerchantability.- The
inability to sell goods is not always due to
physical defects, but to other factors, such
as trademark infringement. It's not
uncommon for non-food items to be
unmerchantable because their use is
hazardous. Face powders, for example, are
not marketable if an ingredient causes skin
irritation. For example, when goods are not
harmful to most people, there may be no
cause for action.
c. Saleability in a particular market. The
requirement of merchantable quality does
not imply saleability in a specific market.
d. Applicability to goods in that
description- The warranty of merchantable
quality applies to all goods purchased from
a seller who deals in goods of that
description, whether sold under a patent or
trade name or not.
Warranty of merchantability distinguished from
warranty of fitness.
A warranty of merchantability is a
warranty that goods are reasonably fit for the
general purpose for which they are sold. On the
other hand,
a warranty of fitness is a warranty that the
goods are suitable for the special purpose of the
buyer which will not be satisfied by mere fitness for
general purposes
Fitness for a particular purpose and
merchantability.
It should be noted that merchantability is not always
synonymous with fitness for purpose. A reaping
machine is designed for one purpose only: reaping.
It cannot be sold unless it meets this requirement.
But the purpose may be more specific. So, a
machine may be desired for use on rough terrain,
but it may be impossible to make it work
satisfactorily in the buyer's desired location.
Article 1563. In the case of contract of sale
of a specified article under its patent or
other trade name, there is no warranty as to
its fitness for any particular purpose, unless
there is a stipulation to the contrary.
Sale under a patent or trade name.
Under Article 1562(1), the buyer makes known to
the seller the particular purpose for which the
goods are desired. Article 1563 is naturally a
provision limiting the application of Article 1562.
● The buyer has used his own judgment
instead of relying on the seller's. In other
words, it's a brand name. To avoid a
warranty of fitness, the buyer must choose
the description or the goods must be known.
● Article 1563 makes an exception for “a
contrary stipulation.” So, even if the buyer
relied on the seller's judgment rather than
the patent or trade name, an implied
warranty of fitness for purpose exists.
Article 1563 defines “particular purpose”
as a usage distinct from the article's
intended use.
● However, an implied warranty of
merchantability or fitness for a particular
purpose is not excluded. There is an implied
warranty that an item sold is fit for human
consumption if it is sold by a food dealer
and the buyer relies on the seller's skill or
judgment.
Article 1564. An implied warranty or
condition as to the quality or fitness for a
particular purpose may be annexed by the
usage of trade.
EFFECT OF USAGE OF TRADE
● A warranty may be attached by usage to a
contract containing no express provision in
regard to warranty
● Absence of usage = no warranty
● Usage is relied on for the purpose of
showing the intention of the parties
● Usage = known to both parties = binding but
not in all cases
 ● If unknown to 1 the other must be justified in
assuming knowledge on the part of the
person he is dealing
Article 1565. In the case of a contract of
sale by sample, if the seller is a dealer in
goods of that kind, there is an implied
warranty that the goods shall be free from
any defect rendering them unmerchantable
which would not be apparent on reasonable
examination of the sample.
ABSENCE OF DEFECT RENDERING GOODS
UNMERCHANTABLE
● 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
● Contract of sale by sample
○ Not enough that goods are
substantially like the samples as to
kind, quality and value to be
merchantable; the goods must also
be free from defects
MERCHANTABILITY OF GOODS SOLD
SAMPLE
Where sample not merchantable
● Contract to sell by sample
○ All the buyer is entitled to is that the
goods be like the sample
○ Buyer has no right to have the goods
merchantable if the sample which he
has inspected is not
Where sample subject to latent defect
● Sale by sample
○ Defect in the goods is of such
character that inspection will not
reveal it
○ Sample subject ot latent defect and
buyer relies on sellers judgement,
buyer is entitled not simply to goods
like the sample but to gooda like
those which the sample seems to
present
● Art. 1481 - contract may be rescinded
where the bulk of the goods delivered do
not correspond with the sample
Article 1566. The vendor is responsible to
the vendee for any hidden faults or defects
in the thing sold, even though he was not
aware thereof.
This provision shall not apply if the contrary
has been stipulated, and the vendor was
not aware of the hidden faults or defects in
the thing sold.
RESPONSIBILITY OF VENDOR FOR HIDDEN
DEFECTS
Effect of ignorance of vendor
● Does not relieve him of liability
● Good faith cannot be availed of as a
defense by the vendor
Exception
● Parties may stipulate otherwise in their
contract provided the vendor acted in good
faith (unaware of the existence of the
hidden defect)
● Vendor not relieved from liability for making
false or misleading claims about the thing
BY
Where vendee aware of the defect
● Cannot complain later
● Deemed to have willfully and voluntarily
assumed the risk attendant to the sale
Proof of defect
● A manufacturer or seller cannot be held
liable for any damage allegedly caused by
the product in the absence of any proof that
the product in question was defective
● The defect must be present upon delivery
on manufacture of the product
● Tracing the defect to the seller or
manufacturer requires some evidence that
there was no tampering with, or changing of
the product
DOCTRINES OF “CAVEAT VENDITOR” AND
“CAVEAT EMPTOR”
● Caveat emptor (let the buyer beware)
○ Belongs to the bygone age
○ Implied warranty of quality was not
recognized
○ Applicable in sherrif’s sales, sales of
animals, and tax sales
○ Applies in double sale of property
where the issue is who between 2
 vendees has a better right to the
property
● Caveat Venditor
○ Let the seller beware
○ The vendor is liable to the vendee
for any hidden faults or defects in
the thing sold, even though he was
not aware thereof
Article 1567. In the cases of articles 1561,
1562, 1564, 1565 and 1566, the vendee
may elect between withdrawing from the
contract and demanding a proportionate
reduction of the price, with damages in
either case
ALTERNATIVE REMEDIES OF THE BUYER TO
ENFORCE WARRANTY
● Withdraw from the contract (accion
redhibitoria)
● Demand a proportionate reduction of the
price with the right to damages (accion
quanti minoris)
● Applicable when implied warranty is
breached
● The same right is given to the vendee in the
sale of animals with redhibitory effects
WITHDRAWAL BY VENDEE FROM CONTRACT
Obligations of vendor and vendee
● Seller must return the purchase price and
buyer must return the thing with the fruits
received before withdrawal or demand
● Unless the seller is compensated by
payment of interest on the purchase price
Restoration of things to the situation before
sale
● Requires that things should be restored to
the same situation as if the sale had not
intervened
● If thing no longer exists it is sufficient for the
buyer to return what remains of the thing
together with the accessories
● No part remains = buyer may bring a
redhibitory action without the need to return
the thing
Option to withdraw, not to rescind
● Withdrawal from the contract contemplated
under art. 1567, the buyer need not return
the thing sold if no part of the thing remains
● 1567 gives the vendee the right not to
rescind but to withdraw from the contract
Right to claim damages
● Vendee is entitled to claim damages from
the vendor
● Vendee must present proof that he suffered
damage as a result of the vendor’s breach
of warranty
ACCION QUANTI MINORIS
● Redhibitory not only gives rise to a
redhibitory action but als accion quanti
minoris
● Demanding seller to make a proportionate
reduction to the purchase price
● Vendee is also entitled to claim damages
Article 1568. If the thing sold should be lost
in consequence of the hidden faults, and
the vendor was aware of them, he shall
bear the loss, and shall be obliged to return
the price and refund the expenses of the
contract, with damages. If he was not aware
of them, he shall only return the price and
interest thereon, and reimburse the
expenses of the contract which the vendee
might have paid.
EFFECT OF LOSS OF THING SOLD ON
ACCOUNT OF HIDDEN DEFECTS
Vendor aware of hidden defects
● Vendor shall bear the loss because he
acted in bad faith
● Vendee has the right to recover:
○ The price paid
○ Expenses of the contract
○ Damages
Vendor not aware of hidden defects
● Vendor obliged to return:
○ The price paid
○ Interest thereon
○ Expenses of the contract if paid by
the vendee. He is not made liable for
damages because he is not guilty of
bad faith
Article 1569. If the thing sold had any
hidden fault at the time of the sale, and
should thereafter be lost by a fortuitous
event or through the fault of the vendee, the
latter may demand of the vendor the price

which he paid, less the value which the
thing had when it was lost.
If the vendor acted in bad faith, he shall pay
damages to the vendee.
EFFECT OF LOSS OF DEFECTIVE THING SOLD
● Thing sold had no hidden defect BUT lost
though a fortuitous event or through the
fault of the vendee is to be borne by the
vendee
● Vendor is obliged to return the price paid
less the value of the thing at the time of the
loss in case where hidden defects existed
EFFECT OF DETERIORATION OF THE THING
SOLD
● Thing sold had hidden faults at the time of
the sale, and the thing is subsequently lost
through the fault of the vendee, the vendor
is not relieved for liability
● Thing deteriorates by fault of the vendee,
the buyer is not prevented from bringing a
redhibitory action
Article 1570. The preceding articles of this
Subsection shall be applicable to judicial
sales, except that the judgment debtor shall
not be liable for damages.
WARRANTY IN JUDICIAL SALES
As to judgement debtor
● In a judicial sale, the seller is the judgement
debtor
● Buyer can avail either of the alternative
remedies to enforce the warranty and the
provisions of Art. 1568 and 1569
● Judgement debtor is forced to sell thus
there can be no liability for damages
● Seller does not take an active part in the
sale and in determining the price precludes
the existence of bad faith on his part
As to government
● In judicial sales, the principle of caveat
emptor applies
● Purchaser acquires by his purchase no
higher or better title or right than that of the
judgment debtor
RIGHT OF PURCHASER IN JUDICIAL SALES
Right as assignee only
● Purchaser of property on sale under
execution and levy takes assignee only
● What is sold by the sheriff is not the
property advertised but simply the interest
of the debtor in the property
Right to reimbursement when judicial sale set
aside
● Where a judicial sale is voided or set aside
without fault of the purchaser, the latter is
entitled to reimbursement of the purchase
money paid by him subject to setoff for
benefits enjoyed while he has possession of
the property
● Judicial sale can only be set aside upon the
return to the buyer of the purchase price
with simple interest and other expenses
incurred by him
Article 1571. Actions arising from the
provisions of the preceding ten articles shall
be barred after six months, from the delivery
of the thing sold.
PRESCRIPTION OF ACTIONS IN CASES OF
IMPLIED/EXPRESS WARRANTY
● The redhibitory action or the action for
reduction of the purchase price prescribes 6
months from the date of delivery to the
vendee of the thing sold or when it was
placed in his control or possession
● If the action is not for breach of warranty but
quasi-delict or negligence, the prescriptive
period is 4 years
● Express warranty - apply general rule on
rescission of contract thus prescription
period is 4 years
Article 1572. If two or more animals are
sold together, whether for a lump sum or for
a separate price for each of them, the
redhibitory defect of one shall only give rise
to its redhibition, and not that of the others;
unless it should appear that the vendee
would not have purchased the sound animal
or animals without the defective one.
The latter case shall be presumed when a
team, yoke pair, or set is bought, even if a
 separate price has been fixed for each one
of the animals composing the same.
SALE OF 2 OR MORE ANIMALS TOGETHER
● If redhibitory defect is in 1 or in some but
not all = redhibition will not affect the other
without it
● Immaterial whether the price has been fixed
for a lump sum for all the animals or for a
separate price of each
● EXP’N:
○ When it can be shown by the
vendee that he would not have
purchased the sound ones without
those which are defective
○ Such intention need not be
established by vendee but may be
presumed when a team, yoke, pair
or set is bought unless vendor
proves the contrary
Article 1573. The provisions of the
preceding article with respect to the sale of
animals shall in like manner be applicable to
the sale of other things
SALE OF 2 OR MORE THINGS TOGETHER
● Points considered in the prev. article must
also apply
Article 1574. There is no warranty against
hidden defects of animals sold at fairs or at
public auctions, or of live stock sold as
condemned.
Sale of animals at fairs or at public auctions or as
condemned.
This article is a limitation to the provisions of Article
1570. It is based on the assumption that the
defects must have been clearly known to the buyer.
Since the law does not make any distinction, the
public auctions referred to may be judicial or
extrajudicial. Sale of animals as condemned
precludes all idea of warranty against hidden
defects. (Art.1561.) Such animals are bought not
because of their quality or capacity for work.
Article 1575. The sale of animals suffering
from contagious diseases shall be void.
A contract of sale of animals shall also be
void if the use or service for which they are
acquired has been stated in the contract,
and they are found to be unfit therefor.
The article declares the class of animals which
cannot be the object of commerce — animals
suffering from contagious diseases and those found
unfit for the use or service stated. The sale of such
animals is void as against public interest and not
merely subject to rescission or reduction of the
price. (Art. 1567.) It is to be governed by the rules
relating to nullity of contracts. (see Art. 1409.)
This article contemplates a sale that has been
perfected and consummated.
Article 1576. If the hidden defect of
animals, even in case a professional
inspection has been made, should be of
such a nature that expert knowledge is not
sufficient to discover it, the defect shall be
considered as redhibitory.
But if the veterinarian, through ignorance or
bad faith should fail to discover or disclose
it, he shall be liable for damages.
What constitutes redhibitory defect of animals?
To be considered redhibitory, the defect must not
only be hidden. It must be of such a nature that
expert knowledge is not sufficient to discover it.
Article 1577. The redhibitory action, based
on the faults or defects of animals, must be
brought within forty days from the date of
their delivery to the vendee.
This action can only be exercised with
respect to faults and defects which are
determined by law or by local customs.
What should be considered redhibitory defects in
the sale of animals are only those determined by
law or by local customs. If the defects are patent,
there is no warranty against such defects although
there exists a redhibitory vice.
Article 1578. If the animal should die within
three days after its purchase, the vendor
shall be liable if the disease which cause
the death existed at the time of the contract.
Responsibility of vendor where animal dies.
If the animal sold is suffering from any disease at
the time of the sale, the vendor is liable should it
die of said disease within three days from the date
of the sale (not date of delivery). This claim of the
vendee must be based on a finding of an expert
that the disease causing the death existed at the
time of the contract. If the death occurs after three
days or the defect is patent or visible, he is not
liable. If the loss is caused by a fortuitous event or
by the fault of the vendee, and the animal has
vices, Article 1569 should be applied.
Article 1579. If the sale be rescinded, the
animal shall be returned in the condition in
which it was sold and delivered, the vendee
being answerable for any injury due to his
negligence, and not arising from the
redhibitory fault or defect.
Liability of buyer in case sale of animal is
rescinded.
If the vendee avails himself of the remedies granted
by Article 1567 (see Art. 1580.), the vendee must
return the animal in the condition in which it was
sold and delivered. In case of injury due
to his negligence, the vendee shall be responsible
but this would be no obstacle to the rescission of
the contract due to the redhibitory defect or fault of
the animal. (see Art. 1569.)
Under Article 1556, the buyer may not ask for
rescission where he has created new
encumbrances upon the thing sold.
Article 1580. In the sale of animals with
redhibitory defects, the vendee shall also
enjoy the right mentioned in article 1567;
but he must make use thereof within the
same period which has been fixed for the
exercise of the redhibitory action.
The vendee has the same right to bring at his option,
either a redhibitory action or an action quanti
minoris. The action must be brought within forty
days from the date of the delivery of the animals to
the vendee. (Art. 1577.)
Article 1581. The form of sale of large
cattle shall be governed by special laws.
The special law governing the sale of large
cattle is Act No. 4117, now found in Sections
511 to 536 of the Revised Administrative Code,
as amended, providing for the registration,
branding, conveyance, and slaughter of large
cattle. The sale must appear in a public document.
(see Art. 1358.)
Article 1507. A document of title in which it
is stated that the goods referred to therein
will be delivered to the bearer, or to the
order of any person named in such
document is a negotiable document of title.
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.
(2) Goods. — Included all chattels personal but not
things in action or money of legal tender in the
Philippines. The term includes growing fruits or crops.
(3) Order. — Relating to documents of title means an
order by indorsement on the documents.
NATURE AND FUNCTION OF DOCUMENTS OF
TITLE
 1. Receipts of, or orders upon, a bailee of
goods represented. — Documents of title
refer to goods and not to money
2. Evidence of transfer of title and
possession of the goods and contract
between the parties. — A document of title is
symbol of the goods covered by it, serving as
evidence of (a) transfer of title and (b) transfer
of possession. It also serves as an evidence
of the (c) contract between the parties who
are bound by its terms.
MOST COMMON FORMS OF DOCUMENTS OF
TITLE
1. Bills of lading - It is a contract and a
receipt for the transport of goods and their
delivery to the person named therein, to
order, or to bearer.
● three persons — the carrier, the
shipper, and the consignee. The
shipper and the consignee may be
one and the same person.
● Its acceptance generally constitutes
the contract of carriage even though
not signed.
2. Dock warrant - It is an instrument given by
dock owners to an importer of goods
warehoused on the dock as a recognition
of the importer’s title to the said goods,
upon production of the bill of lading
3. Warehouse receipt - a contract or receipt
for goods deposited with a warehouseman
containing the latter’s undertaking to hold
and deliver the said goods to a specified
person, to order, or to bearer.
● Quedan is a warehouse receipt usually for
sugar received by a warehouseman
LAWS GOVERNING DOCUMENTS OF TITLE
1. The Civil Code (in Arts. 1507 to 1520, 1532
[2nd par.], 1535 [2nd par.], and 1749.)
primarily governs documents of title other
than warehouse receipts;
2. The Warehouse Receipts Law (Act No.
2137.) primarily governs warehouse
receipts; and
3. The Code of Commerce subsidiarily
governs bills of lading issued by common
carriers (in Arts. 350 to 354 for land
carriers and in Arts. 706 to 718 for
maritime carriers).
CLASSES OF DOCUMENTS OF TITLES
Documents of title may be either:
(1) Negotiable documents of title or those by the
terms of which the bailee undertakes to deliver the
goods to the bearer and those by the terms of which
the bailee undertakes to deliver the goods to the
order of a specified person; or
(2) Non-negotiable documents of title or those by
the terms of which the goods covered are deliverable
to a specified person.
Article 1508. A negotiable document of title
may be negotiated by delivery:
(1) Where by the terms of the document the
carrier, warehouseman or other bailee
issuing the same undertakes to deliver the
goods to the bearer; or
(2) Where by the terms of the document the
carrier, warehouseman or other bailee
issuing the same undertakes to deliver the
goods to the order of a specified person,
and such person or a subsequent indorsee
of the document has indorsed it in blank or
to the bearer.
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, any holder may indorse the same to
himself or to any specified person, and in
such case the document shall thereafter be
negotiated only by the indorsement of such
indorsee.
NEGOTIATION OF NEGOTIABLE DOCUMENT BY
DELIVERY
● If the goods are deliverable to the bearer,
or when it is indorsed in blank or to the
bearer by the person to whose order the
goods are deliverable or by a subsequent
indorsee.
● If the document is specially indorsed, it
becomes an order document of title and
 negotiation can only be effected by the
indorsement of the indorsee.
An indorsement is A special
indorsement
in blank when the
specifies the person
holder merely signs
to whom or to whose
his name at the back
order the goods are
of the receipt without to be delivered.
specifying to whom
the goods are to be
delivered.
Article 1509. A negotiable document of title
may be negotiated by the indorsement of
the person to whose order the goods are by
the terms of the document deliverable. Such
indorsement may be in blank, to bearer or
to a specified person. If indorsed to a
specified person, it may be again negotiated
by the indorsement of such person in blank,
to bearer or to another specified person.
Subsequent negotiations may be made in
like manner.
NEGOTIATION OF NEGOTIABLE DOCUMENT BY
INDORSEMENT
● A negotiable document of title by the terms
of which the goods are deliverable to a
person specified therein may be
negotiated only by the indorsement of
such person.
1. If indorsed in blank or to bearer, the document
becomes negotiable by delivery. (Art. 1508.)
2. If indorsed to a specified person, it may be
again negotiated by the indorsement of such
person in blank, to bearer, or to another
specified person. Delivery alone is not
sufficient.
● A party is liable only as guarantor and not
as indorser if his indorsement is made for
the purpose of identification only.
Article 1510. If a document of title which
contains an undertaking by a carrier,
warehouseman or other bailee to deliver the
goods to bearer, to a specified person or
order of a specified person or which
contains words of like import, has placed
upon it the words "not negotiable," "non-
negotiable" or the like, such document may
nevertheless be negotiated by the holder
and is a negotiable document of title within
the meaning of this Title. But nothing in this
Title contained shall be construed as
limiting or defining the effect upon the
obligations of the carrier, warehouseman, or
other bailee issuing a document of title or
placing thereon the words "not negotiable,"
"non-negotiable," or the like.
NEGOTIABLE DOCUMENTS OF TITLE MARKED
“NON-NEGOTIABLE”
● Under Article 1510, the words “not
negotiable,” “non-negotiable” and the like
when placed upon a document of title in
which the goods are to be delivered to
“order” or to “bearer” have no effect and
the document continues to be negotiable.
Article 1511. 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. A non-
negotiable document cannot be negotiated
and the indorsement of such a document
gives the transferee no additional right.
TRANSFER OF NON-NEGOTIABLE DOCUMENTS
● A non-negotiable document of title cannot
be negotiated.
● It can be transferred or assigned by
delivery
● In such a case, the transferee or assignee
acquires only the rights stated in Article
1514. Even if the document is indorsed, the
transferee acquires no additional right.
Article 1512. A negotiable document of title
may be negotiated:
(1) By the owner thereof; or
(2) By any person to whom the possession
or custody of the document has been
entrusted by the owner, if, by the terms of
the document the 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, or if at the time of such
entrusting the document is in such form that

it may be negotiated by delivery.
PERSONS WHO MAY NEGOTIATE
● if the owner of the goods permits another to
have the possession or custody of negotiable
receipts running to the order of the latter or to
bearer, it is a representation of title upon
which bona fide purchasers for virtue are
entitled to rely despite breaches of trust or
violations of agreement on the part of the
apparent owner.
● As between two innocent persons, the loss
must fall upon him whose misplaced
confidence made the loss possible.
Article 1513. 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; 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.
RIGHTS OF PERSON TO WHOM DOCUMENT HAS
BEEN NEGOTIATED
● If it has been duly negotiated, either by
delivery, in the case of a document of title to
bearer, or by indorsement and delivery, in the
case of a document of title to order.
● PERSON ACQUIRES:
(1) The title of the person negotiating the
document, over the goods covered by the
document; (2) The title of the person
(depositor or owner) to whose order by the
terms of the document the goods were to
be delivered, over such goods; and
(3) The direct obligation of the bailee
(warehouseman or carrier) to hold
possession of the goods for him, as if the
bailee had contracted directly with him.
● One who purchases, therefore, a negotiable
document of title issued to a thief acquires no
right over the goods as the thief has no right
to transfer, notwithstanding that such
purchaser is innocent. But the purchaser
acquires a good title where the owner, by his
conduct, is estopped from asserting his title.
Article 1514. A person to whom a
document of title has been transferred, but
not negotiated, acquires thereby, as against
the transferor, the title to the goods, subject
to the terms of any agreement with the
transferor.
If the document is non-negotiable, such
person also acquires the right to notify the
bailee who issued the document of the
transfer thereof, 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.
Prior to the notification to such bailee by the
transferor or transferee of a non-negotiable
document of title, 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, or by a notification to such bailee
by the transferor or a subsequent purchaser
from the transferor of a subsequent sale of
the goods by the transferor.
RIGHTS OF PERSON TO WHOM DOCUMENT HAS
BEEN TRANSFERRED
● This article refers to the rights of a person to
whom a negotiable document of title (not duly
negotiated) has been transferred (par. 1.) or of
the transferee of a non-negotiable document.
(pars. 2 and 3.)
● PERSON ACQUIRES:
1. The title to the goods as against the
transferor;
2. The right to notify the bailee of the
transfer thereof;
3. The right, thereafter, to acquire the
obligation of the bailee to hold the
goods for him.
● The right of the transferee is not absolute
as it is subject to the terms of any
agreement with the transferor. He merely
steps into the shoes of the transferor.
ATTACHMENT OF GOODS COVERED BY
DOCUMENT TRANSFERRED
 ● The transfer of a non-negotiable document
of title does not effect the delivery of the who assigns for value a claim secured by a
goods covered by it. Accordingly, before document of title unless a contrary intention
notification, the bailee is not bound to the appears, warrants:
transferee whose right may be defeated by a
levy of an attachment or execution upon the (1) That the document is genuine;
goods by the creditor of the transferor or by a
notification to such bailee of the subsequent (2) That he has a legal right to negotiate or
sale of the goods. transfer it;
● If the document is negotiable, the goods
cannot be attached or be levied under an (3) That he has knowledge of no fact which
execution unless the document be first would impair the validity or worth of the
surrendered to the bailee or its negotiation document; and
enjoined.
(4) That he has a right to transfer the title to
Article 1515. Where a negotiable document
the goods and that the goods are
of title is transferred for value by delivery,
merchantable or fit for a particular purpose,
and the indorsement of the transferor is
whenever such warranties would have been
essential for negotiation, the transferee
implied if the contract of the parties had
acquires a right against the transferor to
been to transfer without a document of title
compel him to indorse the document unless
the goods represented thereby.
a contrary intention appears. The
negotiation shall take effect as of the time
when the indorsement is actually made. WARRANTIES ON SALE OF DOCUMENTS
● The person negotiating or transferring a
TRANSFER OF ORDER DOCUMENT WITHOUT
document could be held liable as when, for
INDORSEMENT
example, the document was a forgery, or
● the rights of a person to whom an order
he had stolen it, or he had knowledge that
document of title, which may not properly
the document was invalid for want of
be negotiated by mere delivery, has been
consideration, or that the goods had been
delivered, without indorsement.
damaged.
1. The right to the goods as against
● It is the duty of every indorsee to know that all
the transferor
previous indorsements are genuine;
2. The right to compel the transferor
otherwise, he will not acquire a valid title to
to indorse the indorsement.
the instrument.
● If the intention of the parties is that the
● Under the Negotiable Instruments Law, the
document should be merely transferred, the
last indorser warrants that all previous
transferee has no right to require the
indorsements are genuine.
transferor to indorse the document.
Article 1517. The indorsement of a
RULE WHERE DOCUMENT SUBSEQUENTLY document of title shall not make the
INDORSED indorser liable for any failure on the part of
● The negotiation shall take effect as of the the bailee who issued the document or
time when the indorsement is actually previous indorsers thereof to fulfill their
made, not at the time the document is respective obligations.
delivered.
INDORSER AS GUARANTOR
● The negotiation becomes complete only at
● The indorsement of a negotiable
the time of indorsement.
instrument has a double effect. It is at the
● If by that time the purchaser already had
same time a conveyance of the instrument
notice that the title of the seller was defective,
and a contract of the indorser with the
he cannot be considered a purchaser in good
indorsee that on certain conditions the
faith though he had no such notice when he
indorser will pay the instrument if the party
bought the document.
primarily liable fails to do so.
● The indorsement of a document of title
amounts merely to a conveyance by the
Article 1516. A person who for value indorser, not a contract of guaranty.
negotiates or transfers a document of title - an indorser of a document of title shall
by indorsement or delivery, including one not be liable to the holder if, for
 example, the bailee fails to deliver the the document be first surrendered, or
goods because they were lost due to its negotiation prohibited by the court.
his fault or negligence. - The bailee cannot be compelled to
deliver up the possession of the
Article 1518. The validity of the negotiation
goods until the document is
of a negotiable document of title is not
surrendered to him or impounded
impaired by the fact that the negotiation was
by the court.
a breach of duty on the part of the person
WHERE DEPOSITOR NOT OWNER
making the negotiation, or by the fact that
● Do not apply if the person depositing is
the owner of the document was deprived of
not the owner of the goods (like a thief) or
the possession of the same by loss, theft,
one who has no right to convey title to the
fraud, accident, mistake, duress, or
goods binding upon the owner.
conversion, if the person to whom the
● Neither does it apply to actions for recovery or
document was negotiated or a person to
manual delivery of goods by the real owner
whom the document was subsequently
nor to cases where the attachment is made
negotiated paid value therefor in good faith
before the issuance of the negotiable
without notice of the breach of duty, or loss,
document of title.
theft, fraud, accident, mistake, duress or
conversion. Article 1520. A creditor whose debtor is the
owner of a negotiable document of title shall
WHEN NEGOTIATION NOT IMPAIRED BY FRAUD,
be entitled to such aid from courts of
MISTAKE, DURES, ETC.
appropriate jurisdiction by injunction and
● it may be negotiated even by a thief or
otherwise in attaching such document or in
finder and the holder thereof would
satisfying the claim by means thereof as is
acquire a good title thereto if he paid value
allowed at law or in equity in regard to
therefor in good faith without notice of the
property which cannot readily be attached
seller’s defect of title.
or levied upon by ordinary legal process.
● It should be noted that Article 1518 speaks of
theft of the document and not of the goods CREDITOR’S REMEDIES TO REACH
covered by such document. In the latter case, NEGOTIABLE DOCUMENTS
it needs no argument to show that even a ● the court full has power to aid by injunction
bona fide holder of a document issued over and otherwise a creditor seeking to get a
such stolen goods cannot acquire title. negotiable document covering such goods.
Article 1519. If goods are delivered to a However, if an injunction is issued but the
bailee by the owner or by a person whose negotiable document of title is negotiated to
act in conveying the title to them to a an innocent person, the transfer is
purchaser in good faith for value would bind nevertheless effectual.
the owner and a negotiable document of
title is issued for them they cannot
thereafter, while in possession of such
bailee, 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. 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.
ATTACHMENT OR LEVY UPON GOODS
COVERED BY A NEGOTIABLE DOCUMENT
● The bailee has the direct obligation to hold
possession of the goods for the original
owner or to the person to whom the
negotiable document of title has been duly
negotiated.
- While in the possession of such
bailee, the goods cannot be attached
or levied under an execution unless