Rights and Remedies of the Seller and

Buyer

ATTY. ADRIAN B. CAMPILLA

 Remedies of an Unpaid Seller
Any man may not take law in his own hands, must
seek remedy through courts
 Requisites:
1. Subject matter- goods

2. Seller is unpaid
 –not completely paid or received negotiable
instrument under a condition and condition has been
breached by reason of dishonor

3. Physical possession is with seller
2021 Slide Number 2
Four Main Rights of an Unpaid Seller

1. Possessory lien

2. Stoppage in transit

3. Special right of re-sale 

4. Special right to rescind 

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 Possessory Lien
Seller not bound to deliver if buyer has not paid him
the purchase price
 RIGHT TO RETAIN GOODS
This cannot be availed when seller does not have custody

The right can only be exercised in following circumstances:

a. goods sold without stipulation as to credit
b. goods sold on credit but term of credit has expired
c. buyer becomes insolvent

NOTE: When part of goods delivered, may still exercise

right on goods undelivered

2021 Slide Number 4

 Instances when Possessory Lien is Lost
a. seller delivers goods to carrier for transmission to
buyer without reserving ownership in goods or right to
possess them

b. buyer or agent lawfully obtains possession of goods

c. Waiver

NOTE: Seller also loses lien when he voluntarily

 parts with goods (still has stoppage in transitu
 
2021 Slide Number 5
 Stoppage in Transitu
Requisites:
1. Goods are in transit
•  When goods are in transit
•  From the time goods are delivered to carrier for purpose
of transmission to buyer
2.  Goods rejected by buyer & carrier continues to possess
them

 When goods no longer in transit
 Reached point of destination
 Before reaching destination, buyer met seller along the way
 Goods are supposed to have been delivered to buyer
but carrier refused
2021 Slide Number 6
 How do you exercise Stoppage in Transitu
when Buyer is Insolvent?

When the buyer is no longer able to pay when the

obligation to do so became due, the SELLER may

a. Obtain actual possession of goods

b. Give notice of claim to carrier/

bailee in possession thereto

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 Special Right to Resell Goods
Requisites:
1. goods are perishable
2. stipulated the right of resale in case buyer defaults
in payment
3. buyer in default for unreasonable time

Why is the right to resell special?

 There are things which seller cannot do in ordinary sale:

a) ownership is with buyer but seller can sell goods

b) title accorded to buyer is destroyed even without
court intervention
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 Special Right to Rescind
Why is the right to rescind special?
Mainly because ownership of goods is already with
buyer but seller may still rescind;
Also ownership is destroyed even without court
intervention but in ordinary sale, need to go to court
to destroy transfer of ownership

Requisites:
1. Expressly stipulated
2. Buyer is in default for unreasonable time
3. Notice needed to be given by seller to buyer
2021 Slide Number 9
 GENERAL RULE
REMEDIES OF BUYER

When Seller fails to deliver, buyer may

seek SPECIFIC PERFORMANCE WITHOUT
GIVING SELLER OPTION TO RETAIN
GOODS ON PAYMENT OF DAMAGES

2021 Slide Number 10

 SALE OF MOVABLES ON
INSTALLMENT- RECTO LAW

The statute was called Act No. 4122, otherwise

known as the Installment Sales Law. Its main
purpose is to prevent potential abuses by the seller
in the event that the buyer is unable to make further
installments for a property.

These are now enunciated under Articles 1484 to

1486 of the New Civil Code. These are the
provisions that currently contain the precepts of the
Recto Law.
2021 Slide Number 11
 REMEDIES OF UNPAID SELLER UNDER
RECTO LAW
(1) Exact fulfillment of the obligation, should the vendee fail to
pay;

(2) Cancel the sale, should the vendee's failure to pay cover
two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one

has been constituted, should the vendee's failure to pay
cover two or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be
void;
2021 Slide Number 12
 Chattel Mortgage under the Recto Law

Foreclosure is a legal process that allows

lenders to recover the amount owed on a
defaulted loan by taking ownership of and
selling the mortgaged property. 

Under the Recto Law, as to the remedy,

If Seller chooses foreclosure, no further action 
against buyer to recover any unpaid balance of
the price.

2021 Slide Number 13

 Recto Law applicable to Lease with Option to
Purchase

The Court took judicial notice of the practice of

vendors of personal property of denominating a
contract of sale on installment as one of lease
to prevent the ownership of the object of the
sale

2021 Slide Number 14

 Remedies in the Sale of Immovables

REMEDIES OF SELLER
1. Anticipatory breach
 Seller has reasonable grounds to fear
loss of immovable sold and its price
- sue for RESCISSION

2. Non –payment of price

- RESCISSION
2021 Slide Number 15
 Remedies in the Sale of Immovables
REMEDIES OF BUYER
1. Disturbed in possession or with reasonable grounds to fear
disturbance
- SUSPEND PAYMENT
2. In case of subdivision or condoMINIUM projects of real
estate developer fails to comply with obligation according
to approved plan:

a) RESCIND

b) SUSPEND PAYMENT UNTIL SELLER COMPLIES

2021 Slide Number 16

 Subdivision and Condominium Buyers Protection
Decree – P.D. 957
Covers Subdivisions and Condominiums

P.D.957 “was issued in the wake of numerous reports that

many real estate subdivision owners, developers, operators
and/or sellers have reneged on their representations and
obligations to provide and maintain properly subdivision
roads, drainage, sewerage, water systems, lighting systems
and other basic requirements or the health and safety of
home and lot buyers. It was designed to stem the tide of
fraudulent manipulations perpetrated by unscrupulous
subdivision and condominium sellers free from liens and
encumbrances

2021 Slide Number 17

 Related Rights under P.D. 957
Section 20 of P.D. 957 directs every owner and developer of real property
to provide the necessary facilities, improvements, infrastructure and other
forms of development, failure to carry out which is sufficient cause for the
buyer to suspend payment, and any sums of money already paid shall not
be forfeited.

In case the developer of a subdivision or condominium fails in its

obligation under Section 20, Section 23 gives the buyer:
• the option to demand reimbursement of the total amount paid, or to
wait for further development of the subdivision, and when the buyer
opts for the latter alternative, he may suspend payment of the
installments until such time that the owner or developer has fulfilled its
obligations.

• buyer required only to give due notice to the owner or developer of the
project. Signify buyer’s s intention to suspend payment.

2021 Slide Number 18

 Sale of Real Property on Installment –
Maceda Law

Known as Republic Act No. 6552 applies to

purchasers of real property on an installment
basis. This also known as the Realty
Installment Buyer Act and contemplates
residential properties in particular

2021 Slide Number 19

 Coverage of the Maceda Law
Coverage: REAL ESTATE (Residential)
1. contract of sale
2. contract to sell
3. financing transactions
 
Excluded:
1. Industrial
2. commercial
3. sale to tenants under agrarian laws
2021 Slide Number 20
 Remedies of the Buyer under the Maceda
Law
1. Buyer paid at least two(2) years of installment
a. Pay without interest the balance within grace period of
one (1) month for every year of installment payment
-Grace to be exercised once every five (5) years

b. When no payment but contract is cancelled;

- Buyer entitled to 50% of what he has paid +5% for every

year but not exceeding 90% of total payments Seller
makes cancellation to be effected thirty (30) days
from notice and upon payment of cash surrender value

2021 Slide Number 21

 Remedies of the Buyer under the Maceda
Law
2. Buyer paid less than  two (2) years of
 installment

a. Grace period is  sixty (60) days. This is

counted from the date the installment became
due.

2021 Slide Number 22

 Remedies of the Seller under the Maceda
Law
If the buyer fails to pay the payments due at
the end of the grace period, the seller is
entitled to cancel the contract. Nonetheless,
the seller must first inform the buyer of the
cancellation or the rescission order.

A notification or request must be made by a

notarial act and the cancellation or rescission
shall only take effect 30 days after such notice
or request has been made.
2021 Slide Number 23
 Other Rights under the Maceda Law
a. Sell rights to another

b. Reinstate contract by updating within 30 days

before cancellation

c. Deed of Sale to be done by notarial act

d. To pay full installment in advance as to the balance

of price anytime without interest

e. Have full payment annotated in certificate of title

2021 Slide Number 24
 Remedy of Rescission in Sales Contracts

RESCISSION UNDER ARTICLE RESCISSION UNDER ARTICLE

1191 1385

LEGAL BASIS IS SUBSTANTIAL LEGAL BASIS IS LESION

BREACH

Principal Remedy subsidiary remedy

- Retaliatory in Nature  –cannot be instituted except when
other remedies exhausted

Mutual Restitution Mutual Restitution

2021 Slide Number 25

 Contract of Sale v. Contract to Sell
CONTRACT OF SALE
OWNERSHIP TRANSFERRED BY
DELIVERY
Non-payment is resolutory condition
which may be basis of breach
Perfection gives rise to reciprocal
demandable obligation
Rescission is APPLICABLE
2021
CONTRACT TO SELL
OWNERSHIP IS RESERVED UNTIL
FULL PAYMENT OF THE PURCHASE
PRICE
Non-payment prevents the happening
of the suspensive condition which may
cancel the Contract to Sell
Perfection gives rise to reciprocal
conditional obligation
Rescission not APPLICABLE
Slide Number 26
Questions and Comments

2021 Slide Number 27