SUMMARY OF TOPICS

TOPICS
I. LAW ON SALES
II. LAW ON AGENCY
III. CREDIT TRANSACTIONS
IV. OMNIBUS INVESTMENT CODE
V. FOREIGN INVESTMENTS ACT
VI. RETAIL TRADE LIBERALIZATION ACT
 PART I.

LAW ON SALES
Articles 1458-1637 of the
Civil Code of the Philippines
 WEEKS 1 & 2
I. ELEMENTS

II. REQUISITES

III. PERFECTION
 CONTRACT OF SALE
“Art. 1458. By the contract of sale, one of the
contracting parties obligates himself to
transfer ownership of and to deliver a
determinate thing, and the other to pay
therefor a price in money or its equivalent.”
 PARTIES TO A SALE
SELLER/VENDOR – the contracting party who has the obligation to:
a. Transfer ownership &
b. Deliver a determinate thing

BUYER/VENDEE – the other contracting party who has the obligation

to:
a. Pay a price certain in money or its equivalent
KINDS OF SALE (LAST SENTENCE, ART. 1458)
ABSOLUTE SALE CONDITIONAL SALE
The seller does not reserve his title Conditions are imposed by the
over the thing sold seller in order that ownership will
pass
Ownership passes upon delivery Ownership automatically passes
whether the buyer has actually from the moment the condition
paid a single centavo or not happens
 SALE AS DISTINGUISHED
FROM OTHER CONTRACTS
SALE PIECE OF WORK
Thing has been Goods manufactured
manufactured for the specifically for the customer
general market in the and upon his special order
ordinary course of business
 SALE AS DISTINGUISHED
FROM OTHER CONTRACTS
SALE BARTER
Thing is given in exchange Thing is given in exchange
of money of another thing
• If the consideration is partly in money and partly in another thing:
a. Determine manifest intention of parties
b. If not manifest: Barter if value of the thing exceeds amount of
money. Otherwise, it is a sale
 SALE AS DISTINGUISHED
FROM OTHER CONTRACTS
SALE DATION IN PAYMENT
No pre-existing credit Pre-existing credit
Buyer has the obligation to Property is alienated to the
pay the price creditor in satisfaction of a
debt in money
 CHARACTERISTICS OF SALE
1. CONSENSUAL – perfected by the mere consent of the parties
2. BILATERAL – both contracting parties are bound to fulfill obligations
toward each other
3. RECIPROCAL – the obligation of one is dependent upon the obligation of
the other.
4. ONEROUS – the thing sold is conveyed in consideration of the price and
vice versa
5. COMMUTATIVE – the thing sold is equivalent to the price paid
6. NOMINATE – has a special name or designation under the law
7. PRINCIPAL – does not depend for its existence and validity on some
other contract
Since sale is a form
of a contract, the
essential elements
of a contract of
sale is the same as
the essential
elements of a
contract.
 I. ELEMENTS OF A
CONTRACT OF SALE
1. CONSENT
– Meeting of the minds between the seller and the buyer as to the offer and acceptance upon the
thing and the price
* Note: legal capacity to give consent
2. OBJECT OR SUBJECT MATTER
– Refers to the determinate thing or a thing capable of being made determinate
- May be real or personal properties, rights
3. CAUSE OR CONSIDERATION
– Price certain in money or its equivalent (as to the seller)
- Delivery of the thing (as to the buyer)
 1st ELEMENT:
CONSENT
- Express or implied
- Legal capacity to give consent
- If consent is not given by one or both parties, the contract is void

IN RELATION TO CAPACITY TO BUY OR SELL

“Art. 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.”
 1st ELEMENT: CONSENT
KINDS OF CAPACITY
1. JURIDICAL CAPACITY
- The fitness to be the subject of legal relations
2. CAPACITY TO ACT
- Power to do acts with legal effects
 1st ELEMENT: CONSENT
KINDS OF INCAPACITY
1. ABSOLUTE INCAPACITY – Those who cannot validly give consent to any contract
ex. Minors, insane or demented persons, deaf-mutes who do not know how to write
2. RELATIVE INCAPACITY – Those prohibited to enter into specific contracts under certain circs.
a. Sale between spouses, in general (Art. 1490)
b. Sale by persons mentioned under Art. 1491, either in person or through an intermediary,
namely:
- Guardians, agents, executors and administrators
- Public officers and employees
- Justices, judges , prosecuting attorneys, clerks of superior and inferior courts,
and other officers and employees connected with the administration of justice (includes
the act of acquiring by assignment and shall likewise apply to lawyers)
- Any others specially disqualified by law.
 2nd ELEMENT:
OBJECT
THING must be:
1. LICIT and vendor must have the RIGHT TO TRANSFER OWNERSHIP thereof at
the time it is delivered (Art. 1459)
- Lawful, not contrary to law, morals, good customs, public policy
- Within the commerce of men
2. DETERMINATE (Art. 1460)
- Particularly designated;
- Physically segregated from all others of the same class; or
- Capable of being made determinate without necessity of a new or further
agreement
 Suppose A agreed to sell to B a car for Php
200,000, and B agreed to buy a car from A for
Php 200,000.
What is the object or subject matter of the
contract?
CAR

Is this a valid contract of sale?

Is this a valid contract of sale?

This is not a valid contract of sale,

because the object or subject
matter is not determinate.
Re-state the example to make the
contract of sale valid.
A agreed to sell to B a Toyota Corolla car with
plate number ABC123 for Php 200,000, and B
agreed to buy said Toyota Corolla car with plate
number ABC123 from A for Php 200,000.
 2nd ELEMENT:
OBJECT
THING must:
3. HAVE POTENTIAL EXISTENCE (Art. 1461)
- Emptio Rae Speretae
- Future things may be the object of a sale (potential existence and title
vests in the buyer the moment the thing comes into existence)
* SALE OF A MERE HOPE OR EXPECTANCY or Emptio Spei is
VALID
* SALE OF VAIN HOPE OR EXPECTANCY is VOID
4. POSSIBLE
Suppose A who bought a Toyota Corolla car with plate number ABC123
for Php 200,000 from C, on installment, and A will fully pay the car and
have ownership of it on May 20, 2019. On April 20, 2019, A agreed to sell
and deliver to B on May 30, 2019, the Toyota Corolla car with plate
number ABC123 for Php 220,000, and B agreed to buy the same.

Is there a perfected contract of sale between A

and B on April 20, 2019?

Yes, there is a perfected contract of sale, even

though A is not yet the owner of the Toyota Corolla
car with plate number ABC123 on April 20, 2019.
Art. 1459 does not require that the seller has the right
to transfer ownership at the time of the perfection of
the contract of sale, as long as the seller has the
right to transfer ownership at the time it is to be
delivered.
Supposing A accidentally found a Acer Laptop owned
by B. A then sells the Acer Laptop owned by B to C
for PhP 5,000. Is there a valid contract of sale?

NO. Because, A does not have a right to transfer

ownership of the Acer Laptop
Suppose A intends to build a two (2) storey house
on the lot he owns located at Lot 123 in Subd. X.
May this house, which does not exist yet, be the
object or subject matter of a contract of sale?

Yes. Art. 1461 states that:

“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.”

 •1st par. of Art. 1461 provides that future things may be subject
of a contract of sale.

Ex. A binds himself to sell to B, 100 kilos of mango fruits that A will
harvest in his farm (thing having a potential existence)

“a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come
into existence as the natural increment or usual incident of something already in existence, and then belonging
to the vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs.
European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature
are said to have a potential existence. A man may sell property of which he is potentially and not actually
possess. He may make a valid sale of the wine that a vineyard is expected to produce; or the grain a field may
grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow
upon sheep; or what may be taken at the next case of a fisherman's net; or fruits to grow; or young animals not
yet in existence; or the goodwill of a trade and the like. The thing sold, however, must be specific and Identified.
They must be also owned at the time by the vendor.” (Luis Pichel, petitioner vs. Prudencio Alonzo, respondent
G.R. No. L-36902 January 30, 1982)
 The 3rd paragraph of Art. 1461 mentioned that if the subject of a contract
of sale is a vain hope and expectancy, the same is void

What is a vain hope or vain expectancy?

A vain hope or a vain expectancy is something that is

impossible to happen.

When the object or subject matter of a contract of

sale is impossible to happen, the contract of sale
is void.
 Give an example of sale of hope or expectancy

B buys a lottery ticket from A, for P100, in the hope of winning the prize

the object is the hope or expectancy of winning the prize

Give an example of sale of a vain hope or

expectancy

B buys a fake lottery ticket from A, for P100, in the hope of winning the prize

the object is a vain hope or expectancy, because B has no chance of winning,

it is impossible to happen
May future goods be the object of a contract of sale?

What are future goods?

Future goods - are goods to be manufactured,

raised, or acquired by the seller after the
perfection of the contract of sale
Art. 1462 provides:

“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.”
Examples of future goods:
Shoes to be produced by a factory
Crops to be grown / harvested
Airplanes to be manufactured
May O, owner of a 1,000 sqm. Land, sell an undivided
portion of the land, equivalent to 200 sqm to B? YES

Art. 1463 states:

“The sole owner of a thing may sell an undivided

interest therein.”
The owner of the thing may sell the whole or an
undivided interest in the thing. In such a case a co-
ownership will be created between the buyer and
seller of the thing.
 Art. 1464 provides:

“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 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.”
 What are fungible goods?

Fungible goods 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.
Art. 1464 pertains to sale of fungible goods that are in
mass, and their weight, number or measure is
undetermined, and the seller and buyer agreed to sell
and buy a definite weight, number or measure. In such
a case the buyer and the seller become co-owners of the
fungible things in mass.

In case the mass contains less that the agreed

weight, number or measure sold, the buyer becomes
the sole owner of the mass. The seller is also
obliged to supply the deficiency.
 Give an example where the mass contains less that the agreed weight,
number or measure sold, thus the buyer becomes the sole owner of the
mass, and the seller is also obliged to supply the deficiency.

A sold to B 250 cavans of rice stored in the warehouse of A, which

purportedly contained 1000 cavans. In such a case, A and B will be co-
owners of the rice stored in the warehouse, wherein A owns ¾, and B owns
¼ of the rice stored in the warehouse.

However, if it was discovered that only 200 cavans of rice were stored in the
warehouse. B will now be the sole owner of the 200 cavans of rice, and A is
obligated to deliver to B the deficient 50 cavans of rice.
 Art. 1465 states:

“Things subject to a resolutory condition may be the object of the contract of

sale.”
What is a Resolutory condition?

A resolutory condition is an uncertain event upon the happening of

which, the obligation (or right) subject of it is extinguished.

Give an example of a sale of a thing subject of a

resolutory condition.
S sells his land to B, but S was given a right to buy-back (repurchase) the land within
2 years. Just 6 months after buying the land, B sells the land to C.

Before expiration of 2 years, S buys-back (repurchased) the land.

What is the thing subject of a resolutory condition in this example?

In this case, the land, is subject to a resolutory condition, which is the
right to repurchase the land within two (2) years. The sale of the land
from B to C is valid, even though S still has the right to repurchase the
land.

In such a case, C will be bound to sell the land to S, within the two (2)
year repurchase period, should S desire to exercise his right to
repurchase the land.
Art. 1466 states:

“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.”

What is a contract of agency?

A contract of agency is defined as a contract wherein

a person binds himself to render some service or to do
something in representation or on behalf of another,
with the consent and authority of the latter
 SALE OF:
 EXISTING GOODS or FUTURE GOODS (Art. 1462)
- Future goods – to be manufactured, raised or acquired by the seller
after the perfection of the contract of sale

 UNDIVIDED INTEREST (Art. 1463)

- By sole owner – sells undivided share or interest or specific portion
- By a co-owner – may dispose share without the consent of the other
co-owners
 SALE OF:
 UNDIVIDED SHARE OF A SPECIFIC MASS (Art. 1464)
- Fungible goods – goods of which any unit is treated as the equivalent of any
other unit (e.g. grain, oil or wine)
- Undivided share – buyer becomes co-owner in proportion to the definite
share bought (e.g. 250 unsegregated cavans)

 THING SUBJECT TO A RESOLUTORY CONDITION (Art. 1465)

- Resolutory condition - uncertain event the happening of which shall
extinguish the obligation (e.g. Pacto de Retro Sale)
 SALE OF:
 GOODS BY DESCRIPTION AND/OR SAMPLE (Art. 1481)
- may be rescinded IF bulk of goods delivered do not correspond with
the description or sample

Sale by description – sells things as being of a particular kind; relies

on description given
Sale by sample – a small quantity is exhibited as fair specimen of the
bulk; implied warranty that the goods shall be free from any defect not
apparent
 3rd ELEMENT:
CAUSE or CONSIDERATION
PRICE must be:
1. CERTAIN (Art. 1469)
- Capable of being ascertained in money or its equivalent
- IF left to the judgment of a third person – valid except if third person is in
bad faith

2. ADEQUATE
- Gross inadequacy of price (Art. 1470) – shall not invalidate sale; may indicate
defect in consent or that parties intended a donation or other contract
 3rd ELEMENT:
CAUSE or CONSIDERATION
PRICE must:
3. NOT BE SIMULATED (Art. 1471)
- If simulated (i.e. fictitious price), the sale is void
- But the act may be a donation or some other contract

4. BE FIXED BY BOTH PARTIES (Art. 1473)

- Cannot be left to the discretion of one of the contracting parties
- However, if price fixed is accepted, the sale is perfected
- If price cannot be determined, the sale is void. But where delivery was made, the buyer
must pay a reasonable price therefor (Art. 1474)
 PERFECTION OF SALE
“Art. 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.”

- Meeting of the minds upon the thing and the price

- In case of failure to pay the price, the seller may demand specific
performance or rescission of the contract, with payment of damages in both
cases (in relation to Art. 1592)
 GENERAL RULE:
DELIVERY TRANSFERS OWNERSHIP
“Art. 1477. The ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.”

- Title passes upon actual or constructive delivery EXCEPT when

there is a stipulation that ownership shall not pass until full
payment of the price (in relation to Art. 1478)
 OPTION CONTRACT
(Par. 2, Art. 1479)
- Property owner agrees with another person that the latter shall have
the right to buy the former’s property at a fixed price within an
agreed period
- Right or privilege to buy the owner’s property and pays a
consideration therefor
- OPTION MONEY – a consideration separate and distinct from the
purchase price for the exercise of the above right or privilege
 OPTION CONTRACT vs.
RIGHT OF FIRST REFUSAL
OPTION CONTRACT RIGHT OF FIRST REFUSAL
Principal contract Accessory contract
- Option to buy is granted for a - Gives a party the right to have
fixed period and at a determined the first opportunity to either
price purchase or lease a property, or to
enjoy a right
 EARNEST MONEY
(Art. 1482)
- Considered as part of the purchase price
- Proof of the perfection of the contract of sale
- i.e. down payment, partial payment deductible from the
purchase price
DISTINCTION BETWEEN OPTION MONEY AND EARNEST
MONEY
Item of Distinction OPTION MONEY EARNEST MONEY

Whether it is part of the Not part of the price Part of the price
Price or not

As to perfection of the Not proof of perfection of Proof od perfetction of a

Contract of Sale a contract of sale contract of sale

Obligation to pay the The prospective buyer The buyer has the obligation
balance of the has no obligation to pay to pay the balance of the
purchase price the balance of the purchase price
purchase price
 III. FORM OF SALE
“Art. 1483. Subject to the provisions of the Statute of Frauds and of any other
applicable statute, a contract of sale may be made in writing, or by word of
mouth, or partly in writing and partly by word of mouth, or may be inferred
from the conduct of the parties.”

GENERAL RULE: any form (i.e. in writing, word of mouth, partly in writing
and word of mouth, or may be inferred from parties’ conduct

EXCEPTIONS: those under the Statute of Frauds (in writing, otherwise

unenforceable)
 STATUTE OF FRAUDS
- in writing, otherwise unenforceable

a. Sale of personal property with a value of not less than P500.00;

b. Sale of real property or interest therein (must appear in a public
instrument and registered with the property registry of deeds to
bind third persons)
c. Sale of property not to be performed within a year from the date
thereof
 WEEKS 3 & 4
I. SELLER/VENDOR: RIGHTS &
OBLIGATIONS

II. BUYER/VENDEE: RIGHTS & OBLIGATIONS

III. UNPAID SELLER

 I. OBLIGATIONS OF
THE SELLER OR VENDOR
 As imposed by LAW
1. To transfer ownership of the thing sold;
2. To deliver the thing, including its fruits;
3. To warrant the object sold against eviction and hidden defects;
4. To take care of the thing sold with the diligence of a good father
of the family;
5. To pay for execution and registration, unless there’s a contrary stip.
 As imposed by the parties through STIPULATIONS
 1st & 2nd OBLIGATIONS:
TO TRANSFER & TO DELIVER
(Art. 1495)
- Ownership of the thing is transferred by delivery (Art. 1496)
- DELIVERY - Concurrent transfer of ownership/control &
possession
- Actual or constructive delivery (Arts. 1497-1501)
* Payment is not essential to transfer ownership when there has been
delivery of the thing
 KINDS OF DELIVERY
1. REAL OR ACTUAL
“Art. 1497. The thing sold shall be understood as delivered, when it is
placed in the control and possession of the vendee.”
2. LEGAL OR CONSTRUCTIVE
- Delivery by operation of law
3. QUASI-TRADITIO
- Delivery of rights, credits or incorporeal property
 KINDS OF LEGAL OR
CONSTRUCTIVE DELIVERY
1. EXECUTION OF A PUBLIC INSTRUMENT (Art. 1498)
2. TRADITIO SIMBOLICA – use of symbol to represent the thing delivered (Par. 2,
Art. 1498)
3. TRADITION LONGA MANU – pointing out of the object without actual delivery
(Art. 1499)
4. TRADITIO BREVI MANU – possession of the thing is with the would be buyer
prior to the sale (conversion to possession in the concept of an owner) (Art. 1499)
5. TRADITIO CONSTITUTUM POSSESSORIUM – opposite of brevi manu (Art.
1500)
 QUASI-TRADITIO
- Delivery of rights, credits or incorporeal property (Art. 1501)

1. Execution of a public instrument (from delivery of

certificates, ownership passes)
2. Placing of titles of ownership in the possession of the vendee
3. Use by the vendee of his rights with the vendor’s
consent
 DELIVERY OF MOVABLES
1. Delivery of the thing plus accessories and accessions, including
fruits;
2. If goods delivered are less than under the contract = Buyer has the
option to accept or reject it
3. If goods delivered are more than under the contract = Buyer has
the option to:
• a. Accept as per contract and reject the rest
• b. Accept the whole and pay the price
• c. Reject the whole if the subject matter is indivisible
DELIVERY OF IMMOVABLES
1. IF SOLD PER UNIT OR NUMBER
- statement of its area, rate at certain price = deliver all that may have been stated under
the contract
a. If delivered is lesser = rescission or proportional reduction of price (lack in
the area is not less than 1/10 of area agreed upon)
b. If delivered is greater = accept as per contract and reject the rest or accept the
whole area and pay at contract rate

2. IF SOLD FOR LUMP SUM

- price per unit is not indicated
- If area delivered is lesser or greater = price will not be adjusted
 DELIVERY OF FRUITS and
ACCESSIONS and ACCESSORIES
- Accrue from the time the sale is perfected but no real right over it
until it is delivered

 DELIVERY THROUGH CARRIER

GENERAL RULE: delivery to the carrier is delivery to the buyer
EXCEPTION: a contrary intention appears or there is implied
reservation of ownership under Pars. 1, 2 & 3 of Art. 1503
 PLACE OF DELIVERY
WHERE should the thing or goods be delivered? (Art. 1521)
Consider: 
1. The stipulation of the parties;
2. The place fixed by usage or trade;
3. The place of business of the seller;
4. The seller’s place of residence;
5. If the thing is not in the place of business of the seller, place of delivery
shall be where the thing is located at the time of perfection of the contract.
 Also applicable to time of delivery
 EFFECT OF DELIVERY
GENERAL RULE:
Ownership of thing shall be transferred to the buyer upon actual or
constructive delivery

EXCEPTIONS:
1. In a contract to sell
2. Sale on acceptance or approval
3. Sale or return
 SALE ON RETURN or
SALE ON APPROVAL
 SALE ON RETURN – Ownership passes to buyer upon delivery; buyer
has the option to return the same to the seller instead of paying the price
(Art. 1502)
 SALE ON APPROVAL – Title shall continue in the seller until:
a. Buyer approves the goods or accepts it
b. Buyer retains goods without giving notice of rejection (fixed time,
upon its expiration; no time, upon expiration of reasonable time)
- Also called sale on acceptance, sale on trial or sale on satisfaction (1502)
 DOUBLE SALES
(Art. 1544)

REQUISITES:
1. Two or more sales transactions constituting valid sales;
2. Two or more sales transactions pertaining to the same thing;
3. Two or more buyers at odds over the rightful ownership; and
4. Two or more buyers bought from the same seller
 DOUBLE SALES
If the thing sold is a MOVABLE:
- The first person who took possession in good faith has a better right.

If the thing sold is an IMMOVABLE:

- The buyer who first registers in good faith has a better right.
- If there was no registration, then the person who first took possession.
- If neither is in possession, the buyer with the oldest title in good faith.
(Good faith means having no knowledge of the defect on the title of the seller)
 3rd OBLIGATION:
TO WARRANT AGAINST EVICTION
and HIDDEN DEFECTS
WARRANTY
- A statement or representation made by the seller
contemporaneously and as part of a contract of sale
- Having reference to the character, quality or title of the goods
- And by which seller promises or undertakes to insure that certain
facts are or shall be as he then represents
 EXPRESS WARRANTY
(Art. 1546)

1. Any affirmation of fact or any promise by the seller relating to the thing;
2. The natural tendency of such affirmation or promise is to induce the buyer to
purchase the same
3. Buyer purchases the thing relying thereon.

• In case of breach = Seller is liable for damages

 Effect of expression of opinion – not a warranty unless the seller is an expert and the
opinion is relied upon by the buyer
 IMPLIED WARRANTY
(Art. 1547)

- Deemed included in all contracts of sale whether parties are actually aware or not or
whether they were intended or not
- Warranty by operation of law

KINDS:
A. Warranty against Eviction
B. Warranty against Hidden Defects
C. Warranty against Redhibitory Defects
 A. WARRANTY
AGAINST EVICTION
• INCLUSIONS:
1. That the seller has the right to sell at the time ownership
is to pass;
2. That the buyer shall enjoy the legal and peaceful
possession of the same
 B. WARRANTY
AGAINST HIDDEN DEFECTS
1. Subject matter may be a movable or immovable;
2. Nature of hidden defect is such that it should render the thing unfit for the use for
which it was intended or should diminish its fitness;
3. Had the buyer been aware, he would not have acquired it or would have given a
lower price

• There is breach when:

a. The defect is hidden and not patent
b. The defect must have already existed at the time of the sale
 SPECIFIC IMPLIED WARRANTY
IN SALE OF GOODS
WARRANTY AS TO THE FITNESS AND QUALITY
• REQUISITES:
1. Buyer makes known to seller the particular purpose for which
goods are acquired and it appears that the buyer relied on the
seller’s skill or judgment;
2. Goods are bought by description from seller who deals in goods
of that description
 SPECIFIC IMPLIED WARRANTY
IN SALE OF GOODS
1. SALE OF ANIMALS IN FAIRS
- no warranty against hidden defects
- with warranty against eviction or title
2. PUBLIC AUCTIONS
- no warranty against hidden defects
- with warranty against eviction or title
3. “AS IS WHERE IS” sales
- no warranty as to the fitness of the thing
- with warranty against eviction
4. SALE OF SECOND HAND ITEMS
 4th & 5th OBLIGATIONS:
TO PRESERVE AND TO PAY EXPENSES
4. OBLIGATION TO PRESERVE THE THING
- With the diligence of a good father of a family
- In the condition in which they were upon the perfection of the contract

5. OBLIGATION TO PAY FOR THE EXECUTION AND REGISTRATION

- General Rule: Seller bears obligation to pay
- Except: Contrary stipulation
 II. OBLIGATIONS OF
THE BUYER OR VENDEE
1. To pay the price
2. To accept delivery of the thing sold
 1st OBLIGATION:
TO PAY THE PRICE
- According to the terms agreed upon regarding time,
place and amount
- If payment of interest is stipulated – pay the same
- In case of default in the payment of the price = breach of
contract where specific performance or rescission may be
resorted to plus payment of damages and interests
 2nd OBLIGATION:
TO ACCEPT DELIVERY
There is ACCEPTANCE when:
1. Buyer intimates to seller that he has accepted;
2. Buyer does any act inconsistent with ownership of
seller; or
3. Buyer retains thing without intimating to seller that he
has rejected
 III. UNPAID SELLER
(Art. 1525)

1. One who has not been paid or tendered the whole price;
or
2. One who has received a bill of exchange or negotiable
instrument as conditional payment and the same was
dishonored
REMEDIES OF UNPAID SELLER
(Art. 1526)

Notwithstanding that the ownership in the goods may have passed to

the buyer, the unpaid seller of goods, as such, has:
1. Lien on the goods or the right to retain them (possessory lien)
2. Stoppage in transitu
3. Right of resale
4. Rescission
 1. POSSESSORY LIEN
(Art. 1527)

The unpaid seller of goods who is in possession of them is entitled to

retain possession until payment or tender of the price in the
following cases, namely:
1. Goods have been sold without any stipulation as to credit;
2. Goods have been sold on credit but the term of credit has expired;
3. Where the buyer becomes insolvent
 WHEN UNPAID SELLER
(Art. 1529) LOSES LIEN
The unpaid seller of goods loses his lien thereon:

(1) When he delivers the goods to a carrier for 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.
 2. STOPPAGE IN TRANSITU
(Art. 1530)
• 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
transit
• Unpaid seller 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.
- either by obtaining actual possession or by giving notice of his claim to the
carrier
 2. STOPPAGE IN TRANSITU
(Art. 1530)
• 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
transit
• Unpaid seller 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.
- either by obtaining actual possession or by giving notice of his claim to the
carrier
 GOODS IN TRANSIT
(Art. 1531)

The GOODS ARE IN TRANSIT when:

a. After delivery to a carrier and before the buyer or his
agent takes delivery of them;
b. If the goods are rejected by the buyer and the carrier
continues in possession of them
 3. RIGHT OF RESALE
(Art. 1533)

• Can be exercised when he has either a right of lien or a right to stop

the goods in transitu
• And under any of the 3 following cases:
1. Goods are perishable in nature
2. Right to resell is stipulated in case of default
3. Buyer delays in the payment of the price for an unreasonable time
 4. RIGHT OF RESCISSION
(Art. 1533)

REQUISITES:
1. Right to rescind is stipulated in case of default
2. Buyer delays in the payment of the price for an
unreasonable time
> Notice must be given by the unpaid seller
 WEEK 5
I. EXTINGUISHMENT OF SALE

II. INSTALLMENT SALES: RECTO LAW

III. INSTALLMENT SALES: MACEDA

LAW
I. EXTINGUISHMENT OF SALE
CAUSES
Payment or Performance Novation
Loss of thing due Annulment
Condonation or Remission Rescission
Confusion or Merger of Rights Fulfillment of Resolutory Condition
Compensation Prescription
Redemption (Legal or Convetional)
 REDEMPTION:
1. CONVENTIONAL REDEMPTION
When the seller reserves the right to repurchase the thing sold in the
same instrument of sale as one of the stipulations of the contract

PERIOD OF REDEMPTION:
- No period stipulated = 4 years from date of the contract
- Period stipulated = not to exceed 10 years
 CONVENTIONAL REDEMPTION
1. Seller a retro must return:
a. Price of the sale
b. Expenses of the contract and other legitimate payments
made by reason of the sale;
c. Necessary and useful expenses made on the thing sold
2. Complying with any other stipulation agreed upon, if any
 CONVENTIONAL REDEMPTION
AVAILABLE TO:
1. SELLER (or his agent/heirs/assigns)
2. CREDITORS of seller, AFTER they have exhausted the seller’s property

• If co-owners, jointly and in the same contract, sell an undivided immovable, each may
redeem only his respective share
• If a sole owner sells an immovable and leaves several heirs, each heir may redeem
only his share

In these 2 cases, the buyer a retro may demand all the sellers a retro or heirs to buy
redeem the whole thing and he cannot be compelled to agree to a partial redemption.
 EQUITABLE MORTGAGE
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, and contains nothing
impossible or contrary to law.
 PRESUMPTION OF
EQUITABLE MORTGAGE
1. Price unusually inadequate;
2. Possession retained by the seller as lessee or otherwise;
3. Period of redemption extended (or granted anew) upon or after the
expiration of the right to repurchase;
4. Part of the purchase price retained by the seller;
5. Payment of taxes on the thing sold borne by the seller;
6. Any other case where it may be fairly inferred that the real intention of
the parties is for the transaction to secure a debt or other obligation (1602)
 REQUISITES
OF PRESUMPTION
a. that the parties entered into a contract denominated as a contract
of sale, and
b. that their intention was to secure an existing debt by way of a
mortgage.

 In case of doubt, a contract purporting to be a sale with right to

repurchase shall be construed as an equitable mortgage
 REDEMPTION:
2. LEGAL REDEMPTION
(Arts. 1619-1623)

- 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 onerous title (such as sale or
dation)
 REDEMPTION:
2. LEGAL REDEMPTION
• To whom available?
– Co-owner in case of disposition in favor of 3rd person
– Co-heirs in case of disposition in favor of 3rd person
– Owners of adjoining lands
• Rural
• Urban
– Pre-emption
– Redemption
 REDEMPTION:
2. LEGAL REDEMPTION

PERIOD OF REDEMPTION:
- Within 30 days from the notice in writing
by the prospective vendor or the vendor,
as the case may be.
 II. INSTALLMENT SALES
RECTO LAW
- Sale of movable in installments

Seller may exercise any of the following:

1. Exact fulfillment if there is failure to pay (specific performance);
2. Cancel sale if there is failure to pay 2 or more installments; or
3. Foreclose chattel mortgage on the thing sold if there is failure to pay 2 or more installments;
cannot recover any unpaid balance

The above alternative remedies are likewise applicable to contracts purporting to be leases of personal
property with option to buy (Art. 1485)
 Forfeiture of installments - Valid EXCEPT if unconscionable under circumstances (Art. 1486)
 III. INSTALLMENT SALES
MACEDA LAW
- Sale of immovable in installments (Republic Act No. 6552 or The
Realty Installment Buyer Act)
- Intended to protect ordinary buyers of residential realty under
contracts of sale, contracts to sell and financing
- Provides for remedies of buyer who paid for less than 2 years or
more than 2 years
 MACEDA LAW
FOR BUYERS WHO PAID AT LEAST 2 YEARS OF INSTALLMENTS:

1. Pay balance without interest within 1 month grace period for every year
of installment payment (grace period exercised once every 5 years)
2. No payment made during grace period = the contract is cancelled and
buyer is entitled to 50% of what he has paid + if more than 5 years, 5% for
every year but not to exceed 90% of total payments made (cancellation
shall be effected 30 days from notice and upon payment of cash surrender
value)
 MACEDA LAW
FOR BUYERS WHO PAID LESS THAN 2 YEARS OF INSTALLMENTS:

1. 1st grace period of 60 days from date the installment became due
2. 2nd grace period of 30 days from notice of the cancellation or demand for
rescission

OTHER RIGHTS:
a. Sell interests under the contract
b. Assign rights under the contract