SALES AND LEASE

SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
reverts ownership in the seller seller until the buyer signifies his
SALES -the risk of loss or injury rests
upon the buyer
approval or acceptance to the
seller
-the risk still remains with the
I. OBLIGATIONS OF THE VENDOR seller
Principal obligations of the vendor:
Distinctions in regard to the form of the bill of lading:
1. to transfer the ownership of the determinate thing sold;
1. If the seller has named the buyer as consignee, the property has passed
2. to deliver the thing, with its accessions and accessories, if any, in the
to the consignee or at least it seems to have been so to one who
condition in which they were upon the perfection of the contract;
inspects the document;
3. to warrant against eviction and against hidden defects;
2. If the bill of lading, though naming the seller as consignee, is indorsed
4. to take care of the thing, pending delivery, with proper diligence; and
by him to the buyer or in blank, the possession of the document by the
5. to pay for the expenses of the deed of sale, unless there is a stipulation
buyer gives him, if not the actual title, at least an apparent ownership;
to the contrary.
and
3. If the bill of lading names the seller or a third person as consignee and
Ways of effecting delivery:
no indorsement of the document had been made, possession by the
1. by actual or real delivery;
buyer would not indicate that the buyer had title.
2. by constructive or legal delivery; or
3. by delivery in any other manner signifying an agreement that the
Most common forms of documents of title:
possession is transferred to the vendee.
1. Bill of Lading
2. Dock Warrant
Ways of effecting constructive delivery:
3. Warehouse Receipt
1. by the execution of a public instrument;
2. by symbolical tradition or traditio symbolica;
Classes of documents of title:
3. by traditio longa manu;
1. Negotiable documents of title
4. by traditio brevi manu;
2. Non-negotiable documents of title
5. by traditio constitutum possessorium; or
6. by quasi-delivery or quasi-traditio.
Rights of person to whom document has been transferred:
1. The title to the goods as against the transferor;
SALE ON RETURN VS. SALE ON TRIAL
2. The right to notify the bailee of the transfer thereof; and
SALE ON RETURN SALE ON TRIAL 3. The right, thereafter, to acquire the obligation of the bailee to hold the
-subject to a resolutory condition -subject to a suspensive condition goods for him.
-depends entirely on the will of the -depends on the character or
buyer quality of the goods Rights of a person to whom an order document of title has been
-subsequent return of the goods -the ownership remains in the delivered without indorsement:
FINALS REVIEWER: Definitions, Enumerations, Provisions, Case Rulings Page |1 Barataman-Abdulcadir
 SALES AND LEASE
SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
1. The right to the goods as against the transferor; and
2. The right to compel the transferor to indorse the indorsement.
Rules of place of delivery:
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.
Special remedies of an unpaid seller of goods:
1. A lien on the goods or right to retain them for the price while in his
possession;
2. A right of stopping the goods in transitu in case of insolvency of the
buyer;
3. A right of resale; and
4. A right to rescind the sale.
Requisites for the exercise of right of stoppage in transitu:
1. The seller must be unpaid:
2. The buyer must be insolvent;
3. The goods must be in transit:
4. The 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. The seller must surrender the negotiable document of title, if any,
issued by the carrier or bailee; and
6. The seller must bear the expenses of delivery of the goods after the
exercise of the right.
FINALS REVIEWER: Definitions, Enumerations, Provisions, Case Rulings
Ways of exercising the right to stop:
1. by taking actual possession of the goods; or
2. by giving notice of his claim to the carrier or bailee
Rules as to preference of ownership in case of a double sale:
1. If the property sold is movable, the ownership shall be 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);
b. In the absence of registration, the vendee who first takes
possession in good faith; and
c. In the absence of both registration and possession, the vendee who
presents the oldest title (who first bought the property) in good
faith.
Kinds of Warranty:
1. Express warranty; and
2. Implied warranty
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;
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; and
5. There is no waiver on the part of the vendee.
Kinds of waiver of eviction:
1. Consciente, that is, the waiver is voluntarily made by the vendee
without the knowledge and assumption of the risks of eviction; and
Page |2 Barataman-Abdulcadir
 SALES AND LEASE
SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
2. Intencionada, that is, the waiver is made by the vendee with
knowledge of the risks of eviction and assumption of its consequences.

Requisites for warranty against hidden defects: II. OBLIGATIONS OF THE VENDEE
1. The defect must be important or serious;
2. It must be hidden; Principal obligations of the vendee:
3. It must exist at the time of the sale; 1. to accept delivery; of the thing sold;
4. The vendee must give notice of the defect to the vendor within a 2. to pay the price1 of the thing sold at the time and place stipulated in
reasonable time; the contract; and
5. The action for rescission or reduction of the price must be brought 3. to bear the expenses for the execution and registration of the sale and
within the proper period; and putting the goods in a deliverable state, if such is the stipulation.
6. There must be no waiver of warranty on the part of the vendee.
Modes of manifesting acceptance:
CAVEAT EMPTOR VS. CAVEAT VENDITOR 1. Express acceptance; and
CAVEAT EMPTOR CAVEAT VENDITOR 2. Implied acceptance
The vendor is liable to the vendee It requires the purchaser to be
for any hidden faults or defects in aware of the supposed title of the III. ACTIONS FOR BREACH OF CONTRACT OF SALE OF
the thing sold, even though he was vendor and one who buys without GOODS
not aware thereof. checking the vendor’s title takes
all the risks and losses consequent Actions available:
to such failure. 1. action by the seller for payment of the price;
2. action by the seller for damages for non-acceptance of the goods;
Alternative remedies of the buyer to enforce warranty: 3. action by the seller for rescission of the contract for breach thereof;
1. Accion redhibitoria; or 4. action by the buyer for specific performance; and
2. Accion quanti minoris 5. action by the buyer for rescission or damages for breach of warranty.

Rights and obligations of buyer in case of rescission:

1. In case of rescission, the buyer shall cease to be liable for the price, his
only obligation being to return the goods;
2. If he has paid the price or any part thereof, he may recover it from the
seller;
FINALS REVIEWER: Definitions, Enumerations, Provisions, Case Rulings Page |3 Barataman-Abdulcadir
 SALES AND LEASE
SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
3. He has the right to hold the goods as bailee for the seller should the ownership within a certain period obligation;
latter refuse the return of the goods; and of time; -mortgagor does not lose his
4. He has the right to have a lien on the goods for any portion of the price -the seller loses all interest if he interest in the property if he fails
already paid which lien he may enforce as if he were an unpaid seller. does not repurchase the property to pay the debt at its maturity.
upon the very day named in the
contract.

IV. EXTINGUISHMENT OF SALE

Classifications of causes for extinguishment of sale:

1. Common or those causes which are also the means of extinguishing all Rights acquired by vendee a retro:
other contracts like payment, loss of the thing, condonation, etc.; 1. Vendee subrogated to vendor’s rights; and
2. Special or those causes which are recognized by the law on sales; and 2. Right to eject vendor
3. Extra-special or those causes which are given special discussion by the
Civil Code and these are conventional redemption and legal Right of legal redemption of co-owner:
redemption. 1. There must be co-ownership of a thing;
2. There must be alienation of all or of any of the shares of the other co-
Nature of conventional redemption: owners;
1. Purely contractual; 3. The sale must be to a third person or stranger; and
2. Accidental stipulation; 4. The sale must be before partition.
3. Real right when registered;
4. Potestative; Right of legal redemption of adjacent owners of rural lands,
5. Resolutory condition; requisites:
6. Power or privilege; 1. Both the land of the one exercising the right of redemption and the
7. Reserved at the moment of the perfection of the contract; land sought to be redeemed must be rural;
8. It can make the person exercising it the owner of the property; 2. The lands must be adjacent;
9. It gives rise to reciprocal obligation 3. There must be an alienation;
4. The piece of rural land alienated must not exceed one (1) hectare;
PACTO DE RETRO VS. MORTGAGE 5. The grantee or vendee must already own any other rural land; and
PACTO DE RETRO MORTGAGE 6. The rural land sold must not be separated by brooks, drains, ravines,
-ownership is transferred but the -ownership is not transferred but roads and other apparent servitudes from the adjoining lands.
ownership is subject to the the property is merely subject to
condition that the seller might a charge or lien as security for the V. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL
recover the compliance of a principal RIGHTS
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 SALES AND LEASE
SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
lessee; -compensation is presumed;
Nature of assignment of credit: -must be for price or -will of one is sufficient;
1. Consensual, bilateral, onerous, commutative or aleatory; compensation; -three persons are involved
2. Effects the transfer of rights; and -will of both parties is necessary (principal, agent, third person)
3. Gratuitous for extinguishment of the -risk of loss is borne by the
relationship; principal;
-only two persons are involved -agent is not liable unless
(lessor and lessee) expressly binds himself
-risk of loss before delivery is
borne by the independent
contractor; and
LEASE -the independent contractor is
personally liable to third persons.
I. GENERAL PROVISIONS

Kinds of Lease according to subject matter:

LEASE OF WORK OR SERVICE VS. PARTNERSHIP
1. Lease of things;
LEASE OF WORK OR PARTNERSHIP
2. Lease of work; and
SERVICE
3. Lease of service.
-there is no principle of -every partner is an agent of the
representation; partnership;
LEASE OF THING VS. SALE
-the lessor performs a material act -the partners enter into
LEASE SALE
for the benefit of the employer; commercial or business
-only the use or enjoyment is -ownership is transferred;
-only two persons are involved; transactions for the realization of
transferred; -the transfer is permanent, unless
-the work or service is dependent profits;
-the transfer is temporary; and subject to resolutory condition;
upon the ends or purposes of the -a juridical personality
-the lessor need not be the owner. and
lessee; (partnership) separate and distinct
-the seller must be the owner or at
-the work or service must be for a from that of each of the partner is
least authorized to sell.
price or compensation; formed;
-the will of both parties is -the partners perform acts
LEASE OF WORK VS. AGENCY necessary for the extinguishment conducive to their own business
LEASE OF WORK AGENCY of the relationship; purposes;
-the basis is employment; -the basis is representation; -the independent contractor is -the partners share in the profits or
-lessor performs material act -agent performs judicial act on personally liable for his contracts losses
without representation of the behalf of his principal;
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 SALES AND LEASE
SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
with third persons; and -the will of any partner is 3. To pay the expenses for the deed of lease.
- the lessor (like a servant) sufficient;
ordinarily performs only -a partner is generally not; and Requisites for an implied renewal of lease:
ministerial duties. -every partner as an agent of the 1. The term of the original contract of lease are:
partnership, exercises discretionary 2. The lessee continues enjoying the thing leased for at least 15 days;
powers. 3. The continuation of the occupation by the lessee is with the
acquiescence of the lessor; and
Persons disqualified to become lessees: 4. The lessor or lessee has not previously given a notice to vacate.
1. husband and wife;
2. guardian; Causes or modes by which the agricultural leasehold relation may be
3. agents; extinguished:
4. executors and administrators; 1. Abandonment of the landholding without the knowledge of the lessor;
5. public officers and employees; 2. Voluntary surrender of the landholding by the lessee, written notice of
6. justices, judges, prosecuting attorneys, clerks of superior and inferior which shall be served three (3) months in advance;
courts, and other officers and employees. 3. Absence of a successor or heir in the event of death or permanent
incapacity of the lessee;
4. Termination of the leasehold by the lessee;
5. Acquisition of the land in question by the lessee;
6. Mutual consent of the parties; and 7. Judicial ejectment of the lessee.

Obligations of the Lessor:

1. To deliver the thing which is the object of the contract in such a
conditions as to render it fit for the use intended;
2. To make on the same during the lease all the necessary repairs in order
to keep it suitable for the use to which it has been devoted, unless
there is a stipulation to the contrary; and
3. To maintain the lessee in the peaceful and adequate enjoyment of the
lease for the entire duration of the contract.
Obligations of the Lessee:
1. To pay the price of the lease according to the terms stipulated;
2. To use the thing leased as a diligent father of a family, devoting it to
the use stipulated; and in the absence of stipulation, to that which may
be inferred from the nature of the thing leased, according to the
custom of the place; and
FINALS REVIEWER: Definitions, Enumerations, Provisions, Case Rulings
Supreme Court Rulings
The DAS and the redemption agreement constitute an equitable mortgage.
A contract purporting to be a sale with right to repurchase shall be construed as
an equitable mortgage.
The purported deed of sale was actually intended to merely secure the payment
of the shortage incurred by a party.
The contract shall be presumed to be an equitable mortgage when it may be
fairly inferred that the real intention of the parties is simply to secure the
payment of a debt or the performance of any other obligation.
An equitable mortgage arises from a transaction, regardless of its form, which
results into a security, or an offer or attempt to pledge land as security for a debt
or liability.
The presumption of equitable mortgage equally applies to a contract purporting
Page |6 Barataman-Abdulcadir
 SALES AND LEASE
SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
to be an absolute sale.
A co-owner can still enforce her right of legal redemption.
A deed of repurchase executed independently of the deed of sale where the two
stipulations are found in two instruments instead of one document, the right of
repurchase would amount only to one option granted by the buyer to the seller.
Since the contract cannot be upheld as a contract of sale with the right to
repurchase, art. 1602, ncc on equitable mortgage will not apply
The promise to sell would only amount to a mere offer and, therefore, it is not
enforceable unless it was sought to be exercised before a withdrawal or denial
thereof.
A buyer can exercise his right of repurchase within four (4) years from the date
of the contract.
An action for consolidation of title and obtain a judicial order of consolidation
which must be recorded in the Registry of Property.
Generally, if the lessor or the lessee should not comply with their obligations,
the aggrieved party may ask for either the rescission of the contract and
indemnification for damages, or only the latter, allowing the contract to remain
in force. Since the parties have already provided for the penalty clause that
should be paid by the lessee in case of non-compliance, the penalty clause shall
be the measure of the indemnity to be paid to the lessor in case the lessee
commits a breach of the terms of the lease.
In order that there may be tacita reconduccion there must be expiration of the
contract; there must be continuation of possession for 15 days or more; and
there must be no prior demand to vacate.
Ernie can file a crossclaim against Joel for damages on account of the rescission
of the contract of assignment. Conrad can file a counterclaim against Victor for
damages for lack of cause of action at the time of the filing of the suit.
FINALS REVIEWER: Definitions, Enumerations, Provisions, Case Rulings
The delay in the payment of the rentals is minimal and cannot be made the basis
of an ejectment suit.
The lessor cannot have the lease cancelled for alleged violation of the provision
against assignment. The lessee did not assign the lease, or any portion thereof, to
the subsidiaries. It merely subleased some floors to its subsidiaries.
The lessee has the right to remove the building and other improvements unless
the landowner decides to retain the building at the time of the termination of the
lease and pay the lessee one-half of the value of the improvements at that time.
The landowner/lessor may refuse to reimburse one-half (1/2) of the value of the
improvements and require the lessee to remove the improvements.
All partners including industrial ones, shall be liable pro rata with all their
property only after all the partnership assets have been exhausted, for the
contracts which may be entered into in the name and for the account of the
partnership.
The lessor is under obligation to make all the necessary repairs on the property
leased in order to keep it suitable for the use to which it has been devoted,
unless there is a stipulation to the contrary. If the lessor fails to comply with this
obligation, the lessee may ask for rescission of the contract with damages or he
may opt to continue with the lease and ask only for damages from the lessor.
In the contract of lease of things, if there is no express prohibition, the lessee
may sublet the thing leased.
The act of a lessee in subleasing the thing without notifying the lessor leased is
not one of the causes for which the lessor may terminate the lease and judicially
eject the lessee.
The acceptance by the lessor of the payment by the lessee of the rentals in
arrears even during the pendency of the ejectment case does not constitute a
waiver or abandonment of the ejectment case.
The implied renewal of the lease on a month-to-month basis did not have the
effect of extending the life of the option to purchase which expired at the end of
Page |7 Barataman-Abdulcadir
 SALES AND LEASE
SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
the original lease period.
The sublessee is bound to the lessor for all acts which refer to the use and
preservation of the thing leased in the manner stipulated between the lessor and
the lessee.
Provisions
Article 1226. In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interests in case of noncompliance, if
there is no stipulation to the contrary. Nevertheless, damages shall be paid if the
obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the
obligation.
The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code.
Article 1603. In case of doubt, a contract purporting to be a sale with right to
repurchase shall be construed as an equitable mortgage.
Article 1605. In the cases referred to in articles 1602 and 1604, the apparent
vendor may ask for the reformation of the instrument.
Article 1606. The right referred to in article 1601, in the absence of an express
agreement, shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days
from the time final judgment was rendered in a civil action on the basis that the
contract was a true sale with right to repurchase.
Article 1607. In case of real property, the consolidation of ownership in the vendee
by virtue of the failure of the vendor to comply with the provisions of article 1616
shall not be recorded in the Registry of Property without a judicial order, after the
vendor has been duly heard.
Article 1623. The right of legal pre-emption or redemption shall not be exercised
except within thirty days from the notice in writing by the prospective vendor, or
FINALS REVIEWER: Definitions, Enumerations, Provisions, Case Rulings
by the vendor, as the case may be. The deed of sale shall not be recorded in the
Registry of Property, unless accompanied by an affidavit of the vendor that he has
given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
Article 1649. The lessee cannot assign the lease without the consent of the lessor,
unless there is a stipulation to the contrary.
Article 1650. When in the contract of lease of things there is no express
prohibition, the lessee may sublet the thing leased, in whole or in part, without
prejudice to his responsibility for the performance of the contract toward the
lessor.
Article 1651. Without prejudice to his obligation toward the sublessor, the
sublessee is bound to the lessor for all acts which refer to the use and preservation
of the thing leased in the manner stipulated between the lessor and the lessee.
Article 1652. The sublessee is subsidiarily liable to the lessor for any rent due
from the lessee. However, the sublessee shall not be responsible beyond the
amount of rent due from him, in accordance with the terms of the sublease, at the
time of the extra-judicial demand by the lessor.
Payments of rent in advance by the sublessee shall be deemed not to have been
made, so far as the lessor's claim is concerned, unless said payments were effected
in virtue of the custom of the place.
Article 1659. If the lessor or the lessee should not comply with the obligations set
forth in articles 1654 and 1657, the aggrieved party may ask for the rescission of
the contract and indemnification for damages, or only the latter, allowing the
contract to remain in force.
Article 1670. If at the end of the contract the lessee should continue enjoying the
thing leased for fifteen days with the acquiescence of the lessor, and unless a
notice to the contrary by either party has previously been given, it is understood
that there is an implied new lease, not for the period of the original contract, but
for the time established in articles 1682 and 1687. The other terms of the original
contract shall be revived.
Article 1673. The lessor may judicially eject the lessee for any of the following
causes:
(1) When the period agreed upon, or that which is fixed for the duration of leases
under articles 1682 and 1687, has expired;
(2) Lack of payment of the price stipulated;
Page |8 Barataman-Abdulcadir
 SALES AND LEASE
SALES: Obligations of the Vendor, Obligations of the Vendee, Actions for Breach of Contract of Sale of Goods, Extinguishment of Sale, Assignment of Credits;
LEASE: General Provisions, Lease of Rural and Urban Lands, Work and Labor
(3) Violation of any of the conditions agreed upon in the contract;
(4) When the lessee devotes the thing leased to any use or service not stipulated
which causes the deterioration thereof; or if he does not observe the requirement in
No. 2 of article 1657, as regards the use thereof.
The ejectment of tenants of agricultural lands is governed by special laws.
Article 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or
substance of the property leased, the lessor upon the termination of the lease shall
pay the lessee one-half of the value of the improvements at that time. Should the
lessor refuse to reimburse said amount, the lessee may remove the improvements,
even though the principal thing may suffer damage thereby. He shall not, however,
cause any more impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no damage is
caused to the principal thing, and the lessor does not choose to retain them by
paying their value at the time the lease is extinguished.
Article 1816. All partners, including industrial ones, shall be liable pro rata with
all their property and after all the partnership assets have been exhausted, for the
contracts which may be entered into in the name and for the account of the
partnership, under its signature and by a person authorized to act for the
partnership. However, any partner may enter into a separate obligation to perform
a partnership contract.

FINALS REVIEWER: Definitions, Enumerations, Provisions, Case Rulings Page |9 Barataman-Abdulcadir