UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
LAW ON SALES
(TITLE VI, CIVIL CODE)
COVERAGE
1.4.1 Nature, forms and requisites
1.4.2 Earnest money as distinguished
from option money
1.4.3 Rights/obligations of vendor and
vendee
1.4.4 Warranties
1.4.4.1 Express Warranties (in
relation to consumer laws)
1.4.4.2 Implied Warranties
1.4.5 Installment sales
1.4.5.1 Personal property – Recto
Law
1.4.5.2 Real Property – Maceda
Law
1.4.5.3 PD 957 / Condominium
Act
1.4.6 Extinguishment of a contract of
sale
1.4.6.1 Conventional Redemption
1.4.7 Legal Redemption
NATURE, FORMS AND
REQUISITES
DEFINITION
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. [Art. 1458, CC]
NOTE:
SALE IS TITLE AND NOT MODE. When a
contract of sale is perfected, the seller is
merely obligated to transfer ownership and to
deliver the property. Transfer of ownership is
effected only upon delivery.
KINDS OF CONTRACT OF SALE
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(1) Absolute – when sale is not subject to any
condition and the title immediately passes to
the purchaser upon delivery
(2) Conditional – ownership of the object
remains with the vendor until fulfilment of the
condition/s.
ESSENTIAL REQUISITES
1. Consent or meeting of the minds to
transfer ownership in exchange for the
price;
2. Determinate subject matter;
3. Price certain in money or its equivalent.
CONSENT
The meeting of the offer and the acceptance
upon the thing and the cause which are to
constitute the agreement.
REQUISITE:
1. Legal capacity
2. Offer and acceptance; and
3. No vitiation of consent.
Exceptions to consent being a requisite:
(1) Expropriation,
(2) Ordinary Execution Sale,
(3) Judicial Foreclosure Sale, and
(4) Extra-Judicial Foreclosure Sale
LEGAL CAPACITY
All persons who have capacity to enter into
obligations may enter into a contract of sale
[Art 1489, CC]
KINDS OF INCAPACITY
(1) Absolute incapacity – when persons cannot
bind themselves at all
(2) Relative incapacity – only with regard to
certain persons and certain class of property
(3) Specific incapacity/Special disqualifications
1.ABSOLUTE INCAPACITY
[ARTS. 1327, 1397, 139]
(MIND-CI) [ART. 1327, CC]
(1) Minors
(2) Insane or Demented
(3) Deaf-mutes who do not know how to write
(4) Civil Interdiction
(5) Judicially-declared Incompetents (Art. 39)
(a) Prodigal
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
(b) Imbeciles
(c) Absence & presumption of death
(d) Persons not of unsound mind but
by reason of age, disease, weak mind,
and other similar causes, cannot take
care of themselves and manage their
property without outside aid (Easy
prey for deceit and exploitation)
Exception:
If necessaries are sold and delivered to an
incapacitated person: pay a reasonable price
therefor. [Art 1489]
“Necessaries” – those which are indispensable
for sustenance, dwelling, clothing, medical
attendance, education and transportation. [Art
194, Family Code]
EFFECTS OF INCAPACITY:
(1) If both parties are incapacitated:
UNENFORCEABLE [Art. 1403 (3)]
(2) If only 1 party is incapacitated: VOIDABLE
2. RELATIVE INCAPACITY: MARRIED PERSONS
(1) Husband and wife [Art. 1490]
General Rule: Cannot sell property to each
other, Sale between spouses is VOID.
Exceptions:
(a) Separation of property in marriage
settlement, OR
(b) Judicial separation of property.
Note: Such prohibition shall likewise apply to
common law spouses. [Calimlim-Canulas v
Fortun, 1984]
(2) Alienage[Art. 39]
General Rule: Aliens are disqualified from
purchasing or acquiring real property.
Exception: If acquisition is through hereditary
succession
3. SPECIAL DISQUALIFICATIONS [ARTS. 1491-
1492] (AGE-PLJ)
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(1) Agents - Cannot purchase or acquire
property whose administration or sale was
entrusted to them
Exception: Principal gives consent.
(2) Guardian - Cannot purchase property of
person under his guardianship
(3) Executors and Administrators - Cannot
acquire or purchase property of estate under
their administration.
Exception:
The prohibition on executors and
administrators does not apply if the principal
consents to the sale.[Distajo v. CA, 2000]
(4) Public Officers and Employees - Cannot
acquire or purchase property of State/any of
its subdivisions, GOCC or administration, the
administration of which was entrusted to
them.
Includes judges and government experts who,
in any manner whatsoever take part in the
sale.
(5) Lawyers - Cannot acquire or purchase
property or rights in litigation in which they
take part by virtue of their profession
(6) Justices, Judges, prosecuting attorneys,
clerks and other officers and employees
connected with the administration of justice -
Cannot acquire or purchase property or rights
in litigation or levied upon on execution before
the court within whose jurisdiction or territory
they exercise their respective functions.
(7) Others specially disqualified by law
(a) Unpaid sellers with goods in transit from
buying the goods
(b) Officer conducting the execution sale of
deputies
Effect of incapacity:
 Contracts expressly prohibited by law are
void and cannot be ratified. Neither can
the right to set-up the defense of illegality
be waived. [Art. 1409 (7)]
 Sales entered into by guardians,
administrators, and agents (specific
incapacities) in violation of Art. 1491 may
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
be ratified by means of and in the form of
a new contract when the cause of nullity
has ceased to exist. Ratification is valid
only from date of execution of the new
contract and does not retroact.
 Those entered into by public
officers/employees, justices and judges,
and lawyers in violation of Art. 1491 are
inexistent and void from the beginning.
[Rubias v Batiller, 1973]
SUBJECT MATTER/OBJECT
REQUISITES OF A VALID SUBJECT MATTER
[ARTS. 1459-1465]
For Rights:
(1) Transmisible or personal
(2) Licit
For Things:
(1) Licit
(2) Existing, Future, Contingent
(3) Determinate or determinable
1. MUST BE LICIT [Art. 1459]
The thing is licit when—
(1) Within the commerce of man [Art 1347, CC]
(2) Example of properties that are not within
the commerce of man:
(a) Those belonging to the State or its
political subdivisions intended for
public use or public service. (Art 420)
(b) Church
(c) Narcotics or dangerous drugs
except upon prescription (RA 6425, the
dangerous drugs act of 1972)
(3) When right is not intransmissible [Art 1347]
(4) It does not contemplate a future
inheritance, unless expressly authorized by law
Examples of illicit sale
(1) Sale of future inheritance is void[Art. 1347]
The rights to succession are transmitted from
the moment of the death of the decedent [Art.
777, CC]. Thus, one cannot sell or promise to
sell what he expects to inherit from a living
person. [Rivero v. Serrano, 1950]
(2) Sale of animals suffering from contagious
diseases [Art 1575]
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(3) Sale of animals if the use or service for
which they are acquired has been stated in the
contract, and they are found to be unfit
therefor [Art 1575]
(4) Sale of land in violation of Constitutional
prohibition against the transfer of lands to
aliens. [Art XII of Constitution]
 When the subject matter is illicit, the
contract of sale is void [Art. 1409 (7)]
2. EXISTING, FUTURE, CONTINGENT
The goods which form the subject of a contract
of sale may either be—
(1) Existing goods owned or possessed by the
seller;
(2) Goods to be manufactured, raised, OR
acquired by the seller – “FUTURE GOODS”; [Art
1462, CC]
1. It is valid only as an executory
contract to be fulfilled by acquisition
and delivery of goods specified.
(3) Things having POTENTIAL existence may be
the object of a contract of sale. [Art 1461, CC]
1. The thing sold must be specific and
identified, and owned by the vendor at
that time.
Sale of MERE hope or expectancy
 Valid, BUT subject to condition that the
thing will come into existence
Example: “Next catch” of a fisherman.
Sale of VAIN hope or expectancy
 Void
Example: Sale of a falsified raffle ticket which
will never win.
EMPTIO REI SPERATAE
 Sale of a thing with potential existence.
 Sale is subject to the condition that the
thing will exist; if it doesn’t, there is no
contract.
 The object is a future thing.
EMPTIO SPEI
 Sale of mere hope or expectancy that the
thing will come to existence. Sale of the
hope itself.
 Sale is effective even if the thing does not
come into existence unless it is a vain
hope.
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
 The object is a present thing which is the
hope or expectancy.
(4) Sale of SPECIFIC THINGS
(a) Sale of things in litigation [Art
1381(4)]
(b) Sale of an undivided interest in a
thing [Art 1463]
LEGAL EFFECT: Make the buyer a co-owner in
the thing sold:
(i) acquire full ownership of his part
(ii) may sell his part even without consent of
other co-owners
(c) Sale of undivided share of a specific
mass [Art 1464]
 The sale of an undivided share in a specific
mass of fungible goods makes the buyer a
co-owner of the entire mass in proportion
to the amount he bought.
 If later on it was discovered that the mass
of fungible goods contain less than what
was agreed upon, the buyer becomes
owner of whole mass and seller must make
up for the difference.[De Leon]
 A Co-owner cannot sell more than his
share [Yturralde v CA, 1972]
(d) Sale of things subject to resolutory
condition [Art 1465]
Examples: Things acquired under legal or
conventional right of redemption; or subject to
reserva troncal; pacto de retro sale
PRICE
MEANING OF PRICE (Arts. 1469-1474)
Price signifies the sum stipulated as the
equivalent of the thing sold and also every
incident taken into consideration for the fixing
of the price put to the debit of the buyer and
agreed to by him [Inchausti v. Cromwell, 1911]
REQUISITES FOR A VALID PRICE
(Ce-MoRe)
(1) Certain or ascertainable at the time of
perfection
(2) In Money or its equivalent
(a) Example of “equivalent”: Letters of
credit
(b) If price is partly in money and partly
in another thing: Determine manifest
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intention of the parties to see whether
it was barter or sale. [Art 1468]
(c) If intention does not clearly appear,
it shall be considered a barter if the
value of the thing exceed the amount
of money or its equivalent. [Art 1468]
(3) Real
When buyer has an intention to pay and the
seller has an expectation to receive the price
(a) If simulated: Sale is VOID; BUT act
may be shown to have been a
donation or some other act or
contract. [Art 1471]
(b) An admission of non-payment of
any centavo in exchange of a property
in a contract of sale renders the sale
VOID. [Labagala vs. Santiago, 2001]
(c) If Price is false – when the real
consideration is not the price stated in
the contract:
(i) Sale is void
(ii) UNLESS proved to be founded on
another true and lawful price [Art
1353]
HOW PRICE IS DETERMINED/ CERTAIN
(1) Fixed by agreement of the parties
(a) Fixing of price cannot be left to the
discretion of one of the parties
(b) BUT if such is accepted by the
other, sale is perfected. [Art 1473]
(2) Determination is left to the judgment of a
specified person
General Rule: Price fixed by 3rd persons
designated by the parties is binding upon them
Exceptions:
(a) If unable or unwilling: Sale is
inefficacious UNLESS parties
subsequently agree about the price.
(b) If in bad faith/by mistake: Courts
may fix price (but mere error in
judgment cannot serve as basis for
impugning price fixed)
(c) If 3rd person is prevented from
fixing price by fault of seller or buyer:
Innocent party may avail of remedies
(rescission or fulfillment of obligation,
with damages)
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
(d) If 3rd person disregards specific
instructions/data/procedure, thereby
fixing an arbitrary price
(3) The price is made in reference to another
thing, or when the price fixed is the price of the
commodity on a definite day, or in a particular
exchange or market, OR when the amount
fixed is above or below the price on such day,
exchange or market. [Art 1472]
 When the price is not certain, the
contract is without effect and no
obligation arises from it. Exception:
When the thing is already delivered,
the buyer must pay a reasonable price
therefor. This exception only arises
when the means contemplated by the
parties for fixing the price have
become ineffectual.
INADEQUACY OF PRICE (ARTS. 1355, 1470)
General Rule: Does not affect a contract of
sale’s validity. [Art. 1470]
The stipulation in a contract of sale which
states that the consideration is “Php1 and
other valuable considerations” does not make
the contract void. Gross inadequacy of price
does not affect the contract of sale except that
it may indicate a defect in consent. [Bagnas v.
C.A., 1989]
Exceptions:
(1) In Voluntary sales
(a) Where low price indicates a vice of
consent, sale may be annulled.
(b) Where price is so low to be
shocking to the conscience (fraud,
mistake, undue influence), then sale
may be set aside.
(c) Where price is simulated such as
when the real intention was a
donation or some other contract.
(d) Where the parties did not intend to
be bound at all, sale is void.
(2) In Involuntary sales
A judicial or execution sale is one made by a
court with respect to the property of a debtor
for the satisfaction of his indebtedness.
(a) Where price is so low to be
shocking to the conscience, such that a
Page 5 of 16
reasonable mind would not be likely to
consent to it, then judicial sale will be
set aside.
(b) If in event of a resale, a better price
can be obtained.
(3) Rescissible contracts of sale
Inadequacy of price is a ground for rescission
of conventional sale under Art 1381 (a-b)
WHEN NO PRICE AGREED (ART. 1474)
(1) Sale is inefficacious [Art. 1474]
(2) But if the thing or part thereof has been
delivered and appropriated by the buyer, he
must pay a reasonable price therefor.
(a) What is a reasonable price is a
question of fact dependent on the
circumstances of each particular case.
[Art 1474]
(b) The reasonableness of a price may
be determined on the basis of a
company’s balance sheet showing the
book value or fair market value of its
shares. [Philippine Free Press vs. CA,
2005]
Generally, the reasonable price is the
market price at the time and place
fixed by the contract or by law for
delivery of goods.
FALSE PRICE VS SIMULATED PRICE
(1) False Price – there is a true price but it was
not written down in the contract. Parties
intended to be bound.
(2) Simulated Price
(a) Absolute - When the parties never
intended to be bound at all. Thus, void!
Parties may recover from each other
what they may have given under the
contract.
(b) Relative - When parties conceal
their true agreement. When it does
not prejudice 3rd persons and is not
intended for any purpose contrary to
law, morals, public policy, etc., it binds
the parties to their real agreement.
Effect of simulated price:
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
(1) If price is simulated when vendor intended SALE DACION EN PAGO
to transfer thing gratuitously, the sale is void, No pre-existing debt Pre-existing debt
but the contract shall be valid as a donation. Creates an Extinguishes the
(2) If contract is not a donation or any other act obligation obligation (mode of
transferring ownership because parties did not payment)
intend to be bound, it is void. Price is more freely Price is value of the
Disagreement on the manner of payment is agreed upon, fixed thing given
tantamount to a failure to agree on the price. by the parties
[Toyota Shaw vs. CA, 1995] Buyer has to pay the Payment is received
price by the debtor before
SALE DISTINGUISHED FROM OTHER contract is perfected
CONTRACTS
SALE CONTRACT TO SELL
SALE DONATION Ownership is Ownership is only
Onerous Gratuitous transferred upon transferred upon full
Perfected by mere Must comply with delivery payment of price
consent the formalities Non-payment is a Full payment is a
required by law. [Art resolutory condition positive suspensive
745, CC] condition, hence
non-payment would
SALE BARTER not give rise to the
Consideration is Consideration is obligation to
price in money or its another thing transfer ownership
equivalent
 Barter is a contract where one of the FORMATION OF CONTRACT OF SALE
parties binds himself to give one thing in
consideration of the other’s promise to Valid in any form
give another thing [Art.1638, CC]  Contracts shall be obligatory, in whatever
 If consideration consists partly in money form they may have entered into, provided
and partly in another thing, the intention all the essential requisites for their validity
of the parties determines whether the are present. However, when the law
contract is one of sale or barter. requires that a contract be in some form in
 If manifest intention is not clear: Barter order that it may be valid or enforceable,
when the value of thing is more than the or that a contract be proved in a certain
amount of money or its equivalent; way, that requirement is absolute and
otherwise, sale. [Art.1468] indispensable. (Art. 1356, CC)
 The contract of sale is perfected at the
SALE CONTRACT FOR A moment there is a meeting of minds upon
PIECE OF WORK the thing which is the object of the
Goods are Goods are contract and upon the price. From that
manufactured or manufactured for moment, the parties may reciprocally
procured in the customer upon his demand performance, subject to the
ordinary course of special orde provisions of the law governing the form of
business contracts. (Art. 1475, CC)
For the general For a specific  The necessity of a public document for
market, whether on customer contracts which transmit or extinguish real
hand or not rights over immovable property, as
Governed by Statute Not within Statute mandated by Article 1358 of the Civil Code,
of Frauds of Frauds is only for convenience; it is not essential
for validity or enforceability . The only

Page 6 of 16
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
effect of noncompliance with the
provisions of Article 1358 of the Civil Code
is that a party to such a contract embodied
in a private document may be compelled
to execute a public document. (Teoco vs.
Metrobank, G.R. No. 162333, December
23, 2008 )
EARNEST MONEY AS
DISTINGUISHED FROM OPTION
MONEY
EARNEST MONEY
 Part of purchase price [Art 1482]
 Given only when there is already a sale
 When given, the buyer is bound to pay the
balance
 Buyer manifests his earnest desire to buy
the property
OPTION MONEY
 Separate and distinct consideration from
the purchase price
 Given when sale is not yet perfected
 When given, the would-be-buyer is not
required to buy, but may even forfeit it
depending on the terms of the option
 Grantee of option is still undecided
whether or not to buy or sell the property
[Baviera]
RIGHTS/OBLIGATIONS OF
VENDOR AND VENDEE
OBLIGATIONS OF THE VENDOR
a) To transfer the ownership of the thing (Art.
1495, CC);
b) To deliver the thing sold with all its
accessions and accessories in the condition in
which they were upon the perfection of the
contract (Art. 1537, CC);
c) To warrant against eviction and against
hidden defects (Art. 1547, CC);
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d) To take care of the thing, pending delivery,
with proper diligence (Art. 1163, CC); and
e) To pay for the expenses for the execution
and registration of the sale, unless there is a
stipulation to the contrary (Art. 1487, CC).
DELIVERY
a) Transferred upon delivery
 Ownership and other real rights over
property are acquired and transmitted by
law, by donation, by testate and intestate
succession, and in consequence of certain
contracts, by tradition. (Art. 712, second
par., CC)
 The ownership of the thing sold shall be
transferred to the vendee upon the actual
or constructive delivery thereof. (Art.
1477, CC)
 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. (Art. 1496, CC)
Modes of Delivery
a) Actual
b) Constructive or legal
c) Any other manner (Art. 1496, CC)
Constructive Delivery of Different Types of
Property
(a) Tradition Longa Manu (Long Hand)
Delivery of thing by mere agreement.
Example: Seller points to the property without
actually transferring physical possession
thereof.
When an employer assigned all its rights and
title to all surplus property salvaged by the
contractor, tradition longa manu takes place.
Delivery is upon the moment a thing is
salvaged. [Board of Liquidators v. Floro, 1960]
(b) Tradition Brevi Manu (Short Hand)
MOVABLE is delivered when the buyer had the
thing already in his possession before the sale
took place, not as owner but as lessee,
borrower, or depositary.
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
(c) Tradition Constitutum Possessorium
Seller continues to be in possession of the
property sold, by virtue of a lease contract
agreement with the vendee.
a) Real property
1. Execution of public instrument
2. Traditio constitutum possessorium
b) Personal property
1. Execution of public instrument
2. Symbolic delivery
3. Traditio longa manu
4. Traditio brevi manu
5. Traditio constitutum possessorium
c) Incorporeal property
1. Execution of public instrument
2. Placing of titles of ownership in the
possession of the vendee
3. Exercise by the vendee of his rights with the
vendor’s consent.
4. Constructive delivery is merely presumptive
 The execution of a public instrument gives
rise only to a prima facie presumption of
delivery. Such presumption is destroyed
when the delivery is not effected because
of a legal impediment. Such constructive
or symbolic delivery, being merely
presumptive, is deemed negated by the
failure of the vendee to take actual
possession of the land sold. (T en Forty
Realty vs. Cruz,G.R. No. 151212,
September 10, 2003 )
5. By agreement, delivery may not result in the
transfer of ownership
 The parties may stipulate that ownership
in the thing shall not pass to the purchaser
until he has fully paid the price. (Art. 1478,
CC)
DOUBLE SALES [ART. 1544]
General Rule: Prior tempore, potior jure (“he
who is first in time is preferred in right”)
applies.
Requisites [Cheng v Genato, 1998]:
(1) 2 or more valid sales;
(2) Same subject matter;
Page 8 of 16
(3) 2 or more buyers with conflicting interests
over the rightful ownership of the thing sold;
(4) Same seller
RULES GOVERNING SALE OF MOVABLES,
IMMOVABLES AND UNREGISTERED LANDS
(1) Sale of Movables
Ownership shall be transferred to the person
who may have first taken possession in good
faith.
(2) Sale of Immovables
(a) Ownership belongs to the person who:
(i) In good faith first recorded the sale
in the Registry of Property; OR
(ii) If there is no inscription of sale on
the title, ownership passes to the
person who in good faith was first in
possession; OR
(iii) In the absence thereof, to the
person who presents the oldest title,
PROVIDED there is good faith.
Possession - refers to any of the modes
of possession in Articles 1497-1501
Oldest Title – any public document
showing acquisition of the land in good
faith. To constitute “title,” the
transmission of ownership must
appear in a public document [Art. 1358
(1)]
Examples: Deed of Sale, Deed of
Donation, Deed of Trust
(b) Registration includes any entry made in the
Primary Entry Book of the registry, including
both registration in its ordinary and strict sense
and cancellation, annotation, and even
marginal notes. [Cheng v. Genato, 1998]
Pencilled entries on the title are not
considered registration. [AFPMBAI v. Court of
Appeals, 1999]
OBLIGATIONS OF THE VENDEE
a) To accept delivery; and
b) To pay the price.
1. Buyer’s Right of Examination before
Acceptance (Art. 1584, CC)
a) The buyer has a right to a reasonable
opportunity to examine the goods to
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
ascertain whether they are in
conformity with the contract.
b) Unless a specific period is agreed
upon, the buyer should examine the
goods within a reasonable time.
2. Signs of Acceptance by the Buyer (Art. 1585,
CC)
a) When he communicates with the
seller expressly manifesting his
acceptance thereof;
b) When he performs an act in relation
to the goods inconsistent with the
ownership of the seller ; and
c) When, after the lapse of a
reasonable time following the
delivery, he retains the goods without
complaining to the seller or without
intimating that he has rejected them.
3. Buyer’s Right to Suspend Payment of the
Price (Art. 1590, CC)
a) If he is disturbed in the possession
or ownership of the thing bought;
b) If he has a well-grounded fear that
his possession or ownership would be
disturbed by a vindicatory action or
foreclosure of mortgage.
4. Rescission
a) In sale of real property
1. Absolute Sale – Apply Art. 1191 and
1592 of the Civil Code
2. Sale on Installment / Contract to Sell
– Apply Republic Act 6552
b) In sale of personal property (Art. 1593, CC)
a) The vendee, upon the expiration of
the period fixed for the delivery of the
thing purchased, refused to receive it
without justifiable cause; or
b) He failed to pay the price, unless
granted a longer period within which
to pay.
WARRANTIES
1. Express Warranty
 Express warranty is any affirmation of fact
or any promise by the seller relating to the
thing if the natural tendency of such
Page 9 of 16
affirmation or promise is to induce the
buyer to purchase the same, and if the
buyer purchases the thing relying thereon.
(Art. 1546, CC)
2. Implied Warranty
 Implied warranty is inherent in a contract
of sale. It is presumed to exist although
nothing has been mentioned about it.
(Pineda)
 Implied warranty may be modified or
suppressed by agreement of the parties.
(Art. 1548, 1566, CC)
3. Implied Warranties in Sale (Art. 1547, CC)
a) 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
(implied warranty against eviction);
b) 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.
4. Elements of Warranty against Eviction
a) The vendee is deprived in whole or
in part of the thing purchased (Art.
1557, CC);
b) He is so deprived by virtue of a final
judgment (Art. 1557, CC);
c) The vendor was summoned in the
suit for eviction at the instance of the
vendee (Art. 1558, CC);
● The vendor/s should be made
parties to the suit at the instance of
vendees, either by way of asking that
the former be made a co-defendant or
by the filing of a third party complaint
against said vendors. (Escaler vs. Court
of Appeals, L42636, August 1, 1985 )
d) There is no waiver on the part of the
vendee (Art. 1554, CC);
e) The vendee is in good faith (J .M.
Tuason vs. Court of Appeals, L41233,
November 21, 1979 )
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
5. Obligation of the Vendor in case of Eviction
(Art. 1555, CC)
a) 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;
b) The income or fruits, if he has not
been ordered to deliver them to the
party who won the suit against him;
c) The costs of suit which caused the
eviction and, in proper case, those of
the suit brought against the vendor for
the warranty;
d) The damages and interests and
ornamental expenses, if the sale was
made in bad faith.
6. Elements of Warranty Against Hidden
Defects
a) The defect must be such that it r
enders the thing unfit for the use for
which it is intended, or it diminishes 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
(Art. 1561, CC);
b) The defect must be hidden or
cannot be discovered by ordinary
inspection or examination (Art. 1561,
CC);
c) The defect must be present at the
time of the execution of the sale ;
d) The vendee has not waived the
warranty (Art. 1566, CC).
7. Obligation of the Vendor in case the Thing
is Lost due to Hidden Defects (Art. 1568, CC)
a) If the vendor was aware thereof:
● Return the price and refund the
expenses of the contract, with
damages
b) If the vendor was not aware thereof:
● Return the price and interest
thereon, and reimburse the expenses
of the contract which the vendee
might have paid.
8. Prescriptive Period for Rescission or
Reduction of the Price (Warranty Against
Hidden Defects)
Page 10 of 16
a) 6 months from delivery
b) 40 days (in case of animals) from
delivery
WHEN SELLER IS NOT THE OWNER
General Rule: Ownership is not acquired by the
buyer. One cannot give what one does not
have. [Art 1505]
Exceptions:
(1) Seller has a right to transfer ownership
Seller need not be the owner of the thing at the
time of perfection of the contract. It is
sufficient that seller has a right to transfer
ownership thereof at the time it is delivered.
[Art. 1459]
One who sells something he does not own yet
is bound by the sale when he acquires the thing
later. [Bucton vs Gabar, 1974]
(2) Estoppel: Owner is, by his conduct,
precluded from denying the seller’s authority
to sell. [Art. 1434]
(3) Registered land bought in good faith
General rule: Buyer need not go beyond the
Torrens Title
Exception: When he has actual knowledge of
facts and circumstances that would impel a
reasonably cautious man to make further
inquiry
(4) Order of courts; Statutory Sale
In execution sale, the buyer merely steps into
the shoes of the judgment debtor [Rule 39, sec.
33, ROC]
(5) When goods are purchased in Merchant’s
store, Fair, or Market [Art 1505]
The policy of the law has always been that
where the rights and interest of the vendor
clash with that of an innocent buyer for value,
the latter must be protected. [Sun Brothers
and Co. vs. Velasco, 1958]
SALE BY PERSON HAVING A VOIDABLE TITLE
(1) True owner may recover the thing when the
ff. requisites concur:
(a) Subject matter is movable
(b) Owner has either lost the thing or has been
unlawfully deprived. [Art 559]
(2) Reimbursement is necessary before owner
can recover when:
(a) Buyer acted in good faith
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
(b) Acquired at a public auction [Art 559] BUT the buyer may only avail of the
(3) Recovery no longer possible when: grace period once every 5 years
(a) Buyer in good faith (b) Refund of Cash Surrender Value
(b)Acquired it at a merchant’s store, fair or (CSV): 50% of total amount paid + 5%
market. [Art 1506] for every year after the first 5 years of
installments
INSTALLMENT SALES BUT total CSV should not be greater
than 90% of total amount paid
(c) Notice of cancellation of demand
RECTO LAW: SALE OF MOVABLES ON
for rescission by notarial act effective
INSTALLMENT – ARTS. 1484-1486
30 days from the buyer’s receipt
thereof and upon full payment of CSV
WHEN APPLICABLE
(1) Sale of movables in installment
(2) If buyer has paid less than 2 years of
 The rule is intended to apply to sales of
installments: (GN)
movables, the price of which is payable in
(a) Grace period of at least 60 days
2 or more installments, but not to straight-
(b) Notice of cancellation or demand
term sales where the price is payable in
for rescission by notarial act, effective
full, after making a down payment because
30 days upon receipt thereof
the law aims to protect improvident
buyers who may betempted to buy beyond
(3) During the grace period, the buyer shall also
their means. [Levy Hermanos vs. Gervacio,
have the right:
1939]
(a) To sell or assign his rights,
evidenced in a notarial instrument
(2) Lease of personal property with option to
(b) To update his account
buy
(c) To pay in advance any installment,
(a) When lessor has deprived the
or the full unpaid balance of the price,
lessee of the possession or enjoyment
without any interest
of the thing (i.e. lessor files a complaint
for replevin against lessee)
Down payments, deposits, or options on the
(b) Also applies when seller assigns his
contract shall be included in the total number
credit to someone else
of installments made.
MACEDA LAW (RA 6552): SALE OF
The seller may go to court for judicial rescission
IMMOVABLES ON INSTALLMENT
in lieu of a notarial act of rescission.
RA 6552 does NOT apply to:
(1) Industrial lots
Cancellation pertains to extrajudicial
(2) Commercial buildings
cancellation. Absence of notice does not bar
(3) Sale to tenants under Agricultural Reform
the filing of an action to cancel the contract.
Code [RA 3844]
(4) Sale of lands payable in straight terms [RA
A decision in an ejectment case can operate as
6552, Sec 3]
notice of cancellation as required by RA6552.
However, mere filing of an unlawful detainer
Rights of the Buyer:
suit by the seller does not operate as such
The law imposes additional requirements on
notice. [De Leon]
the part of the seller for a valid rescission
(1) If buyer has paid at least 2 years of
installments: (GRN) The Condominium Act (RA 4726)
(a) Grace period of 1 month per year of 1. Definition (Sec. 2)
installment payment made A condominium is an interest in real property
consisting of:

Page 11 of 16
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
a) separate interest in a unit in a residential,
industrial or commercial building; and
b) an undivided interest in common, directly or
indirectly, in the l and on which it is located and
in other common areas of the building .
Title to the common areas, including the l and,
or the appurtenant interests in such areas, may
be held by a corporation specially formed for
the purpose (hereinafter known as the
"condominium corporation" ) in which the
holders of separate interest shall automatically
be members or shareholders, to the exclusion
of others, in proportion to the appurtenant
interest of their respective units in the
common areas.
2. Transfer or Conveyance of Unit and
Undivided Interest in the Common Areas;
Nationality requirement
 Any transfer or conveyance of a unit or an
apartment, office or store or other space
therein, shall include the transfer or
conveyance of the undivided interests in
the common areas or, in a proper case, the
membership or shareholdings in the
condominium corporation: Provided ,
however , That where the common areas
in the condominium project are owned by
the owners of separate units as co-owners
thereof, no condominium unit therein shall
be conveyed or transferred to persons
other than Filipino citizens, or corporations
at least sixty percent of the capital stock of
which belong to Filipino citizens, except in
cases of hereditary succession. Where the
common areas in a condominium project
are held by a corporation, no transfer or
conveyance of a unit shall be valid if the
concomitant transfer of the appurtenant
membership or stockholding in the
corporation will cause the alien interest in
such corporation to exceed the limits
imposed by existing laws. (Sec. 5)
 The law provides that no condominium
unit can be sold without at the same time
selling the corresponding amount of rights,
shares or other interests in the
condominium management body, the
Condominium Corporation; and no one
can buy shares in a Condominium
Corporation without at the same time
Page 12 of 16
buying a condominium unit. It expressly
allows foreigners to acquire condominium
units and shares in condominium
corporations up to not more than 40% of
the total and outstanding capital stock of a
Filipino owned or controlled corporation.
Under this set up, the ownership of the
land is legally separated from the unit
itself. The land is owned by a
Condominium Corporation and the unit
owner is simply a member in this
Condominium Corporation. As long as 60%
of the members of this Condominium
Corporation are Filipino, the remaining
members can be foreigners. (Hulst vs. P.R.
Builders, G.R. No. 156364, September 25,
2008 [Resolution on the Motion for Partial
Reconsideration] )
3. Incidents of Ownership
a) Ownership of a Unit
1. interior surfaces of the perimeter
walls, floors, ceilings, windows and
doors thereof;
2. the exclusive right to paint, repaint,
tile, wax, paper or otherwise refinish
and decorate the inner surfaces of the
walls, ceilings, floors, windows and
doors bounding his own unit;
3. the exclusive right to mortgage,
pledge or encumber his condominium
and to have the same appraised
independently of the other
condominiums but any obligation
incurred by such condominium owner
is personal to him; and
4. the absolute right to sell or dispose
of his condominium unless the master
deed contains a requirement that the
property be first offered to the
condominium owners within a
reasonable period of time before the
same is offered to outside parties.
b) Interest in the Common Areas
1. lobbies, stairways, hallways, and
other areas of common use, elevator
equipment and shafts, central heating,
central refrigeration and central air-
conditioning equipment, reservoirs,
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
tanks, pumps and other central
services and facilities, pipes, ducts,
flues, chutes, conduits, wires and
other utility installations, wherever
located, except the outlets thereof
when located within the unit;
2. an exclusive easement for the use of
the air space encompassed by the
boundaries of the unit as it exists at
any particular time and as the unit may
lawfully be altered or reconstructed
from time to time;
3. unless otherwise provided, the
common areas are held in common by
the holders of units, in equal shares,
one for each unit;
4. A nonexclusive easement for
ingress, egress and support through
the common areas is appurtenant to
each unit and the common areas are
subject to such easements .
4. Grounds for Partition of the Condominium
Project (Sec. 8):
a) That three years after damage or
destruction to the project which renders
material part thereof unfit for its use prior
thereto, the project has not been rebuilt or
repaired substantially to its state prior to its
damage or destruction, or
b) That damage or destruction to the project
has rendered one-half or more of the units
therein untenantable and that condominium
owners holding in aggregate more than thirty
percent interest in the common areas are
opposed to repair or restoration of the project;
or
c) That the project has been in existence in
excess of fifty years, that it is obsolete and
uneconomic, and that condominium owners
holding in aggregate more than fifty percent
interest in the common areas are opposed to
repair or restoration or remodeling or
modernizing of the project; or
d) That the project or a material part thereof
has been condemned or expropriated and that
the project is no longer viable, or that the
condominium owners holding in aggregate
more than seventy percent interest in the
common areas are opposed to continuation of
the condominium regime after expropriation
Page 13 of 16
or condemnation of a material portion thereof;
or
e) That the conditions for such partition by sale
set forth in the declaration of restrictions, duly
registered in accordance with the terms of this
Act, have been met .
5. The Condominium Corporation
a) The corporate purposes of such a
corporation shall be limited to the holding of
the common areas, either in ownership or any
other interest in real property recognized by
law, to the management of the project, and to
such other purposes as may be necessary,
incidental or convenient to the
accomplishment of said purposes. (Sec. 10)
b) Membership in a condominium corporation,
regardless of whether it is a stock or nonstock
corporation, shall not be transferable
separately from the condominium unit of
which it is an appurtenance. When a member
or stockholder ceases to own a unit in the
project in which the condominium corporation
owns or holds the common areas, he shall
automatically cease to be a member or
stockholder of the condominium corporation.
(Ibid)
c) The term of a condominium corporation
shall be coterminous with the duration of the
condominium project, the provisions of the
Corporation Law to the contrary
notwithstanding. (Sec. 11)
d) In case of involuntary dissolution of a
condominium corporation for any of the
causes provided by law, the common areas
owned or held by the corporation shall, by way
of liquidation, be transferred pro indiviso and
in proportion to their interest in the
corporation to the members or stockholders
thereof, subject to the superior rights of the
corporation creditors. Such transfer or
conveyance shall be deemed to be a full
liquidation of the interest of such members or
stockholders in the corporation. After such
transfer or conveyance, the provisions of this
Act governing undivided co-ownership of, or
undivided interest in, the common areas in
condominium projects shall fully apply. (Sec.
12)
e) Until the enabling or the master deed of the
project in which the condominium corporation
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
owns or holds the common area is revoked, the
corporation shall not be voluntarily dissolved
through an action for dissolution under Rule
104 of the Rules of Court, except for the
following:
1. That three years after damage or
destruction to the project in which the
corporation owns or holds the
common areas, which damage or
destruction renders a material part
thereof unfit for its use prior thereto,
the project has not been rebuilt or
repaired substantially to its state prior
to its damage or destruction; or
2. That damage or destruction to the
project has rendered one-half or more
of the units therein untenantable and
that more than thirty percent of the
members of the corporation, if
nonstock, or the shareholders
representing more than thirty percent
of the capital stock entitled to vote, if
a stock corporation, are opposed to
the repair or reconstruction of the
project, or
3. That the project has been in
existence in excess of fifty years, that it
is obsolete and uneconomical, and
that more than fifty percent of the
members of the corporation, if
nonstock, or the stockholders
representing more than fifty percent
of the capital stock entitled to vote, if
a stock corporation, are opposed to
the repair or restoration or remodeling
or modernizing of the project; or
4. That the project or a material part
thereof has been condemned or
expropriated and that the project is no
longer viable, or that the members
holding in aggregate more than
seventy percent interest in the
corporation, if nonstock, or the
stockholders representing more than
seventy percent of the capital stock
entitled to vote, if a stock corporation,
are opposed to the continuation of the
condominium regime after
expropriation or condemnation of a
material portion thereof; or
Page 14 of 16
5. That the conditions for such a
dissolution set forth in the declaration
of restrictions of the project in which
the corporation owns or holds the
common areas, have been met . (Sec.
13)
f) The condominium corporation may also be
dissolved by the affirmative vote of all the
stockholders or members thereof at a general
or special meeting duly called for the purpose:
Provided , That all the requirements of Section
sixty-two of the Corporation Law are complied
with. (Sec. 14)
6. The Condominium Certificate of Title (Sec.
18)
a) Issued upon registration of an instrument
conveying a condominium, the payment of the
proper fees, and after entering and annotating
the conveyance on the certificate of title
covering the land included within the project;
b) Contains a copy of the description of the
land, a brief description of the condominium
conveyed, name and personal circumstances
of the condominium owner ;
c) No conveyance of condominiums or part
thereof, subsequent to the original
conveyance thereof from the owner of the
project, shall be registered unless
accompanied by a certificate of the
management body of the project that such
conveyance is in accordance with the
provisions of the declaration of restrictions of
such project.
7. Assessments and Condominium Dues (Sec.
20)
a) It is imposed in accordance with a duly
registered declaration of restrictions.
b) It shall be an obligation of the owner thereof
(of the condominium) at the time the
assessment is made.
c) The a mount of any such assessment plus
any other charges thereon, such as interest,
costs (including attorney's fees) and penalties,
as such may be provided for in the declaration
of restrictions, shall be and become a lien upon
the condominium assessed when the
management body causes a notice of
assessment to be registered with the Register
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
of Deeds of the city or province where such
condominium project is located.
d) Upon payment of said assessment and
charges or other satisfaction thereof, the
management body shall cause to be registered
a release of the lien .
e) Such lien shall be superior to all other liens
registered subsequent to the registration of
said notice of assessment except real property
tax liens and except that the declaration of
restrictions may provide for the subordination
thereof to any other liens and encumbrances.
f) Such liens may be enforced in the same
manner provide
EXTINGUISHMENT OF A
CONTRACT OF SALE
CAUSES [ARTS. 1600, 1231]
Generally, extinguished by the same causes as
all other obligations [Arts.1600, 1231]
(P-PLAN-C3-R3)
(1) Payment/performance
(2) Prescription
(3) Loss of thing due
(4) Annulment
(5) Novation
(6) Condonation/remission
(7) Confusion/merger
(8) Compensation
(9) Rescission
(10) Resolutory condition fulfilled
(11) Redemption (Conventional or Legal)
1. Conventional Redemption – It takes place
when the vendor reserves the right to
repurchase the thing sold, with the obligation
to comply with the provisions of Article 1616
and other stipulations which may have been
agreed upon. (Art. 1601, CC)
2. Characteristics of the Right to Repurchase:
a) It is purely contractual.
b) It is an accidental stipulation.
c) It is a real right when it is registered.
d) It is potestative, as it depends upon the will
of the vendor.
e) It is a resolutory condition.
Page 15 of 16
f) It is not an obligation but a power or privilege
of the vendor.
g) It is reserved at the moment of the
perfection of the contract.
h) The person entitled to exercise the right is
the owner of the property sold and not any
third party.
i) It gives rise to reciprocal obligations.
3. What the Vendor A Retro must return to the
Vendee (Art. 1616, CC):
a) Price of the sale;
b) Expenses of the contract;
c) Any other legitimate payments made by
reason of the sale; and
d) The necessary and useful expenses made on
the thing sold.
4. Equitable mortgage – It is one which,
although lacking in some formality, or form or
words, or other requisites demanded by a
statute, nevertheless reveals the intention of
the parties to charge real property as security
for a debt, there being no impossibility nor
anything contrary to law in this intent.
(Rockville vs. Spouses Miranda, G.R. No.
155716, October 2, 2009 )
5. When a Sale with Right of Repurchase
presumed to be an Equitable Mortgage (Art.
1602, CC):
a) When the price of a sale with right to
repurchase is unusually inadequate ;
b) When the vendor remains in possession as
lessee or otherwise;
c) When upon or after the expiration of the
right to repurchase another instrument
extending the period of redemption or
granting a new period is executed;
d) When the purchaser retains for himself a
part of the purchase price ;
e) When the vendor binds himself to pay the
taxes on the thing sold;
f) In any other case where it may be fairly
inferred that the real intention of the parties is
that the transaction shall secure the payment
of a debt or the performance of any other
obligation.
6. The presence of even one of the
circumstances in Article 1602 is sufficient basis
 UNIVERSIDAD DE DAGUPAN
NOTES ON THE LAW ON SALES
to declare a contract as one of equitable
mortgage. The explicit provision of Article 1602
that any of those circumstances would suffice
to construe a contract of sale to be one of
equitable mortgage is in consonance with the
rule that the law favors the least transmission
of property rights.
(Banga vs. Bello, G.R. No. 156705, September
30, 2005, citing Aguirre vs. Court of Appeals,
323 SCRA 771, 775 [2000] )
7. Legal Redemption the right to be
subrogated, upon the same terms and
conditions stipulated in the contract, in the
place of one who acquires a thing by purchase
or dation in payment, or by any other
transaction whereby ownership is transmitted
by onerous title. (Art. 1619, CC)
8. Legal Redemption by a Co-Owner:
a) There must be co-ownership of a thing;
b) There must be alienation of all or of any of
the shares of the other co-owners;
c) The sale must be to a third person or
stranger, i.e., not a co-owner; and
d) The sale must be before partition.
● If the price of the alienation is grossly
excessive, the redemptioner shall pay only a
reasonable one.
● Should two or more co-owners desire to
exercise the right of redemption, they may
only do so in proportion to the share they may
respectively have in the thing owned in
common.
9. Legal Redemption by Adjacent Owners of
Rural Lands:
a) Both the l and of the one exercising the right
of redemption and the land sought to be
redeemed must be rural ;
b) The lands must be adjacent ;
c) There must be an alienation ;
d) The piece of rural land alienated must not
exceed one (1) hectare ;
e) The grantee or vendee must already own
another rural land ; and
f) The rural land sold must not be separated by
brooks, drains, ravines, roads and other
apparent servitudes from the adjoining lands.
● The right cannot be exercised against a
vendee if he is also an adjacent owner.
Page 16 of 16
● In case two or more adjacent owners desire
to exercise the right of redemption, the law
gives preference to the owner of the adjoining
land of smaller area but if both lands have the
same area, to the one who first requested the
redemption.
● The reason for the law in question is to foster
the development of agricultural areas by
adjacent owners who may desire the increase
for the improvement of their own land." The
intention of the law in giving this right of
redemption is to protect agriculture, by the
union of small agricultural lands and those
adjoining thereto under one single owner for
their better exploitation. ( Fabia vs.
Intermediate Appellate Court,
L66101,November 21, 1984 )
10. Pre-Emption and Legal Redemption by
Adjacent Owners of Urban Lands:
a) The one exercising the right must be an
adjacent owner ;
b) The piece of l and s old must be so small and
so situated that a major portion thereof cannot
be used for any practical purpose within a
reasonable time; and
c) Such urban land was bought merely for
speculation.
11. Statute of Limitation
a) The right of legal pre-emption or
redemption shall not be exercised except
within thirty days from the notice in writing by
the prospective vendor, or by the vendor, as
the case may be. (Art. 1623, CC)
END