A. Sales: 1. General Provisions
A. Sales: 1. General Provisions
A. Sales: 1. General Provisions
The stipulation in a contract of sale which 3. Generally, the reasonable price is the
states that the consideration is “PhP1 and market price at the time and place fixed by
other valuable considerations” does not make the contract or by law for delivery of goods.
the contract void. Gross inadequacy of price
does not affect the contract of sale except that e. False price vs. simulated price
it may indicate a defect in consent. [Bagnas v. False Price Simulated Price
CA, G.R. No. L-38498 (1989)] Price stated in the
Price stated in the
contract is not
contract is not the
General Rule: Does not affect a contract of intended to be paid.
true price. Parties
sale’s validity. [Art. 1470, CC] Parties never
intended to be
intended to be
bound.
Exceptions: bound.
a. In Voluntary sales Effect: Void for lack
• Where low price indicates a vice of Effect: Binds the of
consent, sale may be annulled. parties to their real cause/consideration,
• Where price is so low to be shocking to the agreement when it but can be shown as
conscience (fraud, mistake, undue does not prejudice a donation or some
influence), then sale may be set aside 3rd persons and is other contract.
• Where price is simulated such as when the not intended for any Parties may recover
real intention was a donation or some other purpose contrary to from each other
contract. law, morals, public what they may have
• Where the parties did not intend to be policy, etc. given under the
bound at all, sale is void. contract.
Unless it appears otherwise, business While the object might be made determinate,
advertisements of things for sale are not the exercise of the right, however, would be
definite offers, but mere invitations to make an dependent not only on the grantor's eventual
offer. [Art. 1325, CC] intention to enter into a binding juridical relation
with another but also on terms, including the
2. Option contracts price, that obviously are yet to be later firmed
up.
Option
An accepted unilateral promise to buy or to sell Even on the premise that such right of first
a determinate thing for a price certain is binding refusal has been decreed under a final
upon the promissor if the promise is supported judgment, like here, its breach cannot justify
by a consideration distinct from the price. [Art. correspondingly an issuance of a writ of
1479(2), CC; De Leon] execution under a judgment that merely
recognizes its existence, nor would it sanction
Separate Consideration an action for specific performance without
A consideration for an optional contract is just thereby negating the indispensable element of
as important as the consideration for any other consensuality in the perfection of contracts.
kind of contract. If there was no consideration [Ang Yu v. CA, G.R. No. 109125 (1994)]
for the contract of option, then it cannot be
enforced any more than any other contract 4. Mutual promise to buy and sell
where no consideration exists. [Enriquez dela
Cavada v. Diaz, G.R. No. 11668 (1918)] The obligation is not to enter into a sale, but
rather to negotiate in good faith for the
The option is not the contract of sale itself. The possibility of entering into a sale. When the
optionee has the right, but not the obligation, to promissor has in fact negotiated in good faith,
buy. Once the option is exercised timely, i.e., but the parties’ minds could not meet on the
the offer is accepted before a breach of the price and the terms of payment, then promissor
option, a bilateral promise to sell and to buy has complied with his obligation [Villanueva].
Sale by husband in favor of a concubine after was entrusted to them. Prohibition includes
he had abandoned his family and left conjugal judges and government experts who, in
home where his wife and children lived and any manner, take part in the sale.
from whence they derived their support, is void.
[Ching v. Goyanko, Jr., G.R. No. 165879 5. Lawyers - Cannot acquire or purchase
(2006)] property or rights in litigation in which they
take part by virtue of their profession
Reason for this rule: Such prohibition is for
the protection of third persons who, relying For the prohibition to operate, the sale or
upon supposed property of either spouse, assignment must take place during the
enters into a contract with either of them only pendency of the litigation involving the
to find out that the property relied upon was property. [Laig v. Court of Appeals (1991)]
transferred to the other spouse. [De Leon]
Exceptions: An assignment to a lawyer by
2. Alienage [Art. 39, CC] his client of an interest in the property does
General Rule: Aliens are disqualified from not violate Art 1491, where:
purchasing or acquiring real property. a. A judgment has been rendered and
has become final; and
Exception: If acquisition is through hereditary b. In case of contingency fee
succession arrangements: the interest of the
lawyer may be annotated as an
3. Trusteeship [Art. 39, CC] adverse claim on the property
awarded to his client [Director of
3. Special disqualifications Lands v. Ababa, G.R. No. L-26096
(1979)]
Such is grounded on public policy
considerations which disallow the transactions 6. Justices, Judges, prosecuting
entered into by them (directly or indirectly) in attorneys, clerks and other officers and
view of the fiduciary relationship involved or employees connected with the
the peculiar control exercised by these administration of justice - Cannot
individuals over the properties or rights acquire or purchase property or rights in
covered. [Mananquil v. Villegas (1990)] litigation or levied upon on execution
1. Agents – Cannot purchase or acquire before the court within whose jurisdiction or
property whose administration or sale was territory they exercise their respective
entrusted to them, except if principal gives functions.
consent
2. Guardian – Cannot purchase property of 7. Others specially disqualified by law
person under his guardianship i. Unpaid sellers with goods in transit
3. Executors and administrators –Cannot from buying the goods
acquire or purchase property of estate ii. Officer conducting the execution
under their administration. sale of deputies
iii. Aliens who are disqualified to
The prohibition on executors and purchase private agricultural lands
administrators does not apply if the
principal consents to the sale. [Distajo v. b. Effects of incapacity
CA, G.R. No. 112954 (2000)]
1. Absolute incapacity
4. Public officers and employees - Cannot
acquire or purchase property of State/any If both parties are incapacitated:
of its subdivisions, GOCC or unenforceable [Art. 1403 (3), CC].
administration, the administration of which
Those entered into by public Seller need not be the owner of the thing at
officers/employees, justices and judges, and the time of perfection of the contract. It is
lawyers in violation of Art. 1491 are inexistent sufficient that the seller has a right to
and VOID from the beginning. [Rubias v. transfer ownership thereof at the time it is
Batiller, supra]. It is NOT subject to delivered. [Art. 1459, CC]
RATIFICATION.
One who sells something he does not own
Exception: Sales entered into by guardians, yet is bound by the sale when he acquires
administrators, and agents (specific the thing later. [Bucton v. Gabar, G.R. No.
incapacities) in violation of Art. 1491 may be L-36359 (1974)]
General rule: Buyer need not go beyond Obligation to transfer ownership and to deliver
the Torrens Title is implied in every contract of sale [Arts. 1458-
1459, CC]
Exception: When he has actual
knowledge of facts and circumstances that Transfer of ownership requires delivery [Art.
would impel a reasonably cautious man to 1495, CC]
make further inquiry
General Concepts
d. Order of courts; Statutory Sale - In Under Article 1495, the seller has twin
execution sale, the buyer merely steps into obligations to (a) transfer the ownership and (b)
the shoes of the judgment debtor [Sec. 33, deliver the thing, which is the object of sale to
Rule 39, ROC] the buyer. In Article 1164, this includes the
obligation to deliver the fruits and accessories
e. When goods are purchased in Merchant’s from the time the obligation to deliver it arises;
store, Fair, or Market [Art. 1505, CC] however he shall acquire no real right over
them until the same has been delivered to him.
ii. Sale by Person having a Voidable Title
Transfer of ownership is effected even if the
a. True owner may recover the thing when the purchase has been made on credit. Payment
ff. requisites concur: of the purchase price is not essential to transfer
• Subject matter is movable of ownership as long as the property sold was
Determine first if • Owner has either lost the thing or delivered.
there’s a lawful
deprivation has been unlawfully deprived. [Art.
559, CC] Intention to transfer ownership
if there is, it can be • All forms of delivery shall be coupled
recovered
b. Reimbursement is necessary before owner with intention of delivering the thing
XPN: if acquired in can recover when: sold.
public sale (cannot ● Buyer acted in good faith • Seller must be the owner or authorized
recover without
reimbursing) ● Acquired at a public auction [Art. by owner of the thing sold
559, CC]
When right to transfer ownership must
c. Recovery no longer possible when: exist: At the time of delivery and not at the time
● Buyer in good faith of perfection of contract of sale.
● Acquired it at a merchant’s store,
fair or market. [Art. 1506, CC] iv. Concept of Delivery
When Sale Not Valid “Control” over thing sold must be such that
When the thing sold is a public property the seller is capable of physically
transferring it to buyer.
Sale by Person Having a Voidable Title
a. True owner may recover the thing when the Although parties may stipulate that the
ff. requisites concur: execution of a public instrument is
● Subject matter is movable equivalent to delivery, this legal fiction
● Owner has either lost the thing or has holds true only when there is no
been unlawfully deprived. [Art. 559, impediment that may prevent the passing
CC] of the property from the vendor to the
b. Reimbursement is necessary before owner vendee. [Vda. de Sarmiento v. Lesaca,
can recover when: G.R. No. L-15385 (1960)]
● Buyer acted in good faith
● Acquired at a public auction [Art. 559, If, notwithstanding execution of the
CC] instrument, the buyer cannot enjoy material
c. Recovery no longer possible when: tenancy and make use of the object himself
● Buyer in good faith or through another in his name, there is no
● Acquired it at a merchant’s store, fair or delivery. [Power Commercial v. CA, G.R.
market. [Art. 1506, CC] No. 119745 (1997)]
transferred to the possession of the buyer at For example, a seller remains in possession of
the time of sale. [Art. 1499, CC] the property sold, by virtue of a lease
agreement with the vendee, at the time of the
Example: Seller points to the property without perfection of the contract of sale.
actually transferring physical possession
thereof. Vendee became, as lessor, the legal
possessor while the vendor is in material
Delivery by mere agreement; seller points out possession of the property in the name and
to the buyer the property without need of representation of the vendee.
actually delivering (as when the thing sold
cannot be transferred to the possession of the Seller continues to be in possession of the
vendee at the time of sale). Delivery takes property sold
place when the thing is placed in the sight of
the purchaser so that he can take possession f. Quasi-traditio
of it at pleasure. With regard to movable
property, its delivery may also be made by the Mode of delivery of incorporeal things or rights.
delivery of the keys of the place or depository
where it is stored or kept. Delivery is effected:
● By execution of public instrument
When an employer assigned all its rights and ● When such is not applicable, by placing
title to all surplus property salvaged by the the titles of ownership in the
contractor, traditio longa manu takes place. possession of the buyer
Delivery is upon the moment a thing is ● By allowing the buyer to use his rights
salvaged. [Board of Liquidators v. Floro, G.R. as new owner with the consent of the
No. L-15155 (1960)] seller
Example: If Delivery of movable property by mere consent General Rule: Delivery to the courier or carrier
you are renting or agreement, if the buyer already had it in his is tantamount to delivery to buyer, whether
a house then
you bought it.
possession for any other reason. [Art. 1499, carrier is named by buyer or not. The buyer
CC] assumes the risk of loss.
6. F.A.S. (Free Alongside) – Seller bears the Rules Governing Sale of Movables,
expenses of transportation until he delivers Immovables and Unregistered Lands
the goods alongside a vessel at a named
port. a. Sale of Movable: Ownership shall be
transferred to the person who may have
vii. Double Sales [Art. 1544, CC] first taken possession in good faith.
General Rule: Prior tempore, prior jure (“First b. Sale of Immovables: Registered Land –
in time, priority in right”) applies. Ownership belongs to the person who:
● In good faith first recorded the sale in
Requisites: the Registry of Property; or
a. 2 or more valid sales; ● If there is no inscription of sale on the
b. Same subject matter; title, ownership passes to the person
c. 2 or more buyers with conflicting interests who in good faith was first in
over the rightful ownership of the thing possession; or
sold; ● In the absence thereof, to the person
d. Same seller. [Cheng v. Genato, G.R. No. who presents the oldest title,
129760 (1998)] provided there is good faith.
merely acquires the latter’s interest in the When buyer is presumed to be in bad faith
property sold as of the time the property ● Annotation of adverse claim: Places any
was levied upon. [Carumba v. CA, G.R. No. subsequent buyer of the registered land in
L-27587 (1970)] bad faith. [Balatbat v. CA, G.R. No. 109410
(1996)]
d. Sale of Immovables: Unregistered Land ● Annotation of Lis Pendens: Buyer cannot
be considered an innocent purchaser for
Instrument or deeds establishing, value where it ignored the lis pendens on
transmitting, acknowledging, modifying or the title.
extinguishing rights with respect to lands ● A purchaser of a parcel of land cannot
not registered under the Land Registration close his eyes to facts which should put a
Act or the Spanish Mortgage Law, are reasonable man upon his guard, such as
required to be registered in the Registry of when the property subject of the purchase
Property to prejudice 3rd persons, although is in the possession of persons other than
such registration is understood to be the seller. A buyer who could not have
“without prejudice to a third party with a failed to know or discover that the land sold
better right”. [PD 1528 Sec 113] to him was in the adverse possession of
another is a buyer in bad faith. [Heirs of
Art. 1544 applies to unregistered land Ramon Durano v. Uy, G.R. No. 136456
subject to a conventional sale (because of (2000)]
Art. 1358) but NOT to unregistered land
subject to judicial sale. Annotation of
Lis Pendens
Adverse Claim
Unregistered by both buyers, the first buyer May be cancelled
May be cancelled
is preferred. only in one
even before the action
instance, i.e., after
If first buyer did not register but second buyer is finally terminated
the claim is
registered property, second buyer is preferred. for causes which may
adjudged invalid or
not be attributable to
unmeritorious by
viii. Property Registration Decree [P.D. the claimant
the Court
1529]
The two are not contradictory or repugnant to
REQUISITES FOR REGISTRATION OF one another; nor does the existence of one
DEED OF SALE IN GOOD FAITH automatically nullify the other, and if any of the
registrations should be considered
a. Purchaser in Good Faith - One who buys unnecessary or superfluous, it would be the
the property of another, without notice that notice of lis pendens [A. Doronila Resources
some other person has a right to or interest Development Inc v. CA, G.R. Nos. L-42956-
in such property, and who pays a full and 571988]
fair price for the sale, at the time of the
purchase or before he has notice of the b. Accompanied by vendors duplicate
claim/interest of some other person in the certificate of title, payment of capital
property. [Agricultural and Home Extension gains tax, and documentary tax
Development Group v. CA, G.R. No. 92310 registration fees
(1992)]
Must be accompanied by:
General Rule: As a rule, he who asserts the ● Vendor’s duplicate certificate of title
status of a purchaser in good faith and for value ● Payment of capital gains tax – 6% of the
has the burden of proving such assertion. selling price or zonal value, whichever is
[Mathay v. CA, G.R. No. 115788 (1998)] higher
(Note: This is discussed under Section H of this He has no obligation to return them UNLESS
Sales Reviewer, on Warranties.) otherwise agreed BUT he has to take
reasonable care of the goods
4. Obligations of the Vendee
He is not a depositary thereof UNLESS he
voluntarily agrees to be one
Inspection and acceptance
i. Inspection/buyer’s right to examine
The buyer is deemed to have accepted the
[Art. 1584]
goods when:
1. He intimates to the seller that he has
General rule: The buyer is not deemed to have
accepted them
accepted the goods delivered which he has not
2. The goods have been delivered to him and
previously examined unless and until he has
he does any act in relation to them which is
had a reasonable opportunity to examine them
inconsistent with the ownership of the
for the purpose of ascertaining whether they
seller
are in conformity with the contract.
3. After the lapse of a reasonable time, he
retains the goods without intimating to the
Exception: If there is a stipulation to the
seller that he has rejected them. [Art. 1585,
contrary [par. 1, Art. 1584, CC]
CC]
General rule: The seller is bound, when he
General rule: Exercise of acts of ownership
tenders delivery to the buyer, on request, to
over the goods is a manifestation of
afford the buyer a reasonable opportunity to
acceptance, such as making use of them as
examine the goods for the purpose of
owner, making alterations in the goods, or
ascertaining whether they are in conformity
subjecting it to the process of manufacture.
with the contract.
Exception: Buyer’s right to make a test of
Exception: Unless otherwise agreed upon
goods, but only if necessary, to enable him to
[par. 2, Art. 1584, CC]
determine whether to accept or reject the
goods.
Exception to the right to examine: C.O.D.
Sales
Modes of acceptance
Where goods are delivered to a carrier by the
2. Express acceptance - Buyer intimates to
seller, in accordance with an order from or
the seller that the has accepted them
agreement with the buyer, upon the terms that
3. Implied acceptance
the goods shall not be delivered by the carrier
b. When the vendee, after delivery of
to the buyer until he has paid the price, whether
goods, does any act inconsistent
such terms are indicated by marking the goods
with the vendor’s ownership or
with the words "collect on delivery," or
General rule: The vendee is not bound to The three instances when the vendee shall pay
accept delivery of goods in installment interest for the period between delivery and
payment of the price:
Exception: Unless otherwise agreed upon 1. If there was a stipulation;
[par. 1, Art. 1583, CC] 2. If the thing sold and delivered produces
fruits or income;
Where separate price has been fixed for 3. If the vendee is in default, from the time of
each installment [par. 2, Art. 1583, CC] judicial or extrajudicial demand for
Where there is a contract of sale of goods payment [Art. 1589, CC].
1. To be delivered by stated installments,
2. To be separately paid for, and ii. Right of vendee to suspend payment
3. The seller makes defective deliveries in of price
respect of one or more installments, or the
buyer neglects or refuses without just The vendee has the right to suspend in two
cause to take delivery of or pay for one or instances:
more installments. 1. If he is disturbed in the possession or
ownership of the thing bought; or
It depends in each case on the terms of the 2. If he has reasonable grounds to fear such
contract and the circumstances of the case: disturbance, by a vindicatory action or a
1. Whether the breach of contract is so foreclosure of mortgage [Art. 1590, CC]
material as to justify the injured party in
refusing to proceed further and suing for Except
damages for breach of the entire contract, 1. If the vendor gives security for the return of
or the price in a proper case
2. Whether the breach is severable, giving 2. If it has been stipulated
rise to a claim for compensation but not to 3. If the vendor caused disturbance or danger
a right to treat the whole contract as to cease
broken. 4. If the disturbance is a mere act of trespass
5. If the vendee has already fully paid the
Obligation to pay the price price [De Leon]
Article 1582, CC: The vendee is bound to Should the vendee be disturbed in the
accept delivery and to pay the price of the possession or ownership of the thing delivered,
thing sold at the time and place stipulated in or should he have reasonable grounds to fear
the contract. such disturbance by a vindicatory action, or a
foreclosure of mortgage, he may suspend
If the time and place should not have been payment until the vendor has caused the
stipulated, the payment must be made at the disturbance or danger to cease, unless there is
time and place of the delivery of the thing a stipulation to the contrary [Baviera]
sold.
Note: The contract of sale constitutes only a 1. True owner may recover the thing when
right to the transfer or acquisition of ownership, the ff. requisites concur:
while delivery is the method of accomplishing • Subject matter is movable
the same. • Owner has either lost the thing or has
been unlawfully deprived. [Art. 559,
When the seller is not the owner CC]
(1) As avoided; or
Res Perit domino [Arts. 1263, (2) As valid in all of the existing goods or in
and 1189 CC] so much thereof as have not deteriorated,
and as binding the buyer to pay the agreed
Owner bears risk of loss and deterioration. The price for the goods in which the ownership
ownership is transferred only upon delivery. will pass, if the sale was divisible.
Pursuant to Art. 1262, CC if the thing is Exceptions: [Art. 1504 (1) and (2), CC]
destroyed without the fault of the a. Where delivery has been made either to
debtor/seller, the obligation to pay shall the buyer or to the bailee for the buyer, but
subsist. ownership in the goods has been retained
2. Res perit domino or the seller bears the risk by the seller merely to secure performance
of loss. by the buyer of his obligations under the
Basis: The rule on loss is different from the contract; and
rule on deterioration for the loss would be b. Where actual delivery has been delayed
for the account of the seller, while the through the fault of either the buyer or
deterioration would be for the account of seller, the goods are at the risk of the party
the buyer. in fault.
General Rule: Buyer bears risk of loss and Bill of Lading – A document issued by the
deterioration. common carrier acknowledging receipt of
goods described therein for transportation to a divested of his rights merely upon loss of the
designated place and delivery to a named documents.
consignee
• It is a symbol of possession and control Rights Acquired by Negotiation
of the goods if it is negotiable in form A document of title represents the right of the
• This authorizes the consignee to consignee in the goods so that:
transfer the goods to another • A person to whom a negotiable document
• If properly negotiated, this shall of title had been duly negotiated acquires
operate as a transfer of possession of not merely the rights of his vendor but
the goods in transit as effectively as a also whatever rights the original
physical delivery thereof consignee had over the goods.
• The buyer of the document of title may
Kinds of Documents of Title acquire a better title than his vendor,
constituting an exception to Art. 1505, CC.
Negotiable – the goods described therein are
deliverable to bearer or to the order of the Note: The validity of the negotiation of a
consignee document of title to an innocent purchaser for
value is not affected by the fact that there was
Non-Negotiable – deliverable only to a a breach of duty on the part of the person to
specified person whom such document was entrusted by the
owner, or by the fact that the owner of the
NEGOTIABLE DOCUMENTS OF TITLE document was deprived of it by loss, theft,
fraud, accident, mistake, duress or conversion.
How Negotiated [Baviera]
A negotiable bill of lading may be negotiated by
delivery of the document to another if by the Example: If a negotiable instrument was
terms thereof, the goods are deliverable to indorsed in blank by the consignee and was
bearer stolen by the one who sold and delivered the
document to an innocent purchaser for value =
When the bill of lading was endorsed in blank the latter acquires the title of the consignee
by the person to whose order the goods
were deliverable. Implied Warranties
A person who transfers or negotiates a
If by its terms the goods are deliverable to the document of title for value:
order of a specified person, it can only be • Warrants not only the genuineness and
negotiated by indorsement of such person. validity of the document and his right to
transfer it
Who May Negotiate It • BUT ALSO assumed all the warranties
Only the owner of the document or one to of a vendor of goods.
whom possession or custody of the document
has been entrusted by the owner, may However, he does NOT warrant that the
negotiate it. [Art. 1512, CC] common carrier will fulfill its obligations to
deliver the goods or that the previous indorsers
Or the one to whom possession or custody of will fulfill their obligation.
document has been entrusted by the owner. • The indorser of a negotiable document of
This was in accordance with common law title does not assume the same warranties
denying the full effects of negotiability of bills of like that of a general indorser of a
lading inasmuch as they do not represent negotiable bill of exchange/promissory
money but merely evidence of performance of note
certain contractual duties. Owner should not be
opinion, judgment, probability, or expectation. If seller has promised that the condition should
When the buyer undertakes his own happen or be performed, the buyer may treat
investigation, and the seller does nothing to the nonperformance of the condition as a
prevent it from being as full as the buyer breach of warranty. [Art. 1545, CC]
chooses, the buyer cannot afterwards allege
misrepresentations. [Songco v. Sellner, G.R. Express Implied
No. L-11513 (1917)] Nature is
Contractual; Freely Constituted by Law
Economic Loss Doctrine: Where the defect Represented
makes the goods less valuable Only seller is bound,
Stipulated by parties,
whether or not
Condition v. Warranty thereby binding both
intended or known
the seller and buyer
Article 1545, CC: Where the obligation of by the parties.
either party to a contract of sale is subject to
any condition which is not performed, such Express Warranties
party may refuse to proceed with the
contract or he may waive performance of the For there to be express warranty, the following
condition. If the other party has promised requisites must concur:
that the condition should happen or be a. An affirmation of fact or any promise
performed, such first mentioned party may relating to the thing sold;
also treat the nonperformance of the b. The natural tendency of such
condition as a breach of warranty. affirmation or promise is to induce the
buyer to buy;
Where the ownership in the thing has not c. The buyer buys the thing relying
passed, the buyer may treat the fulfillment by thereon. [Art. 1546, CC]
the seller of his obligation to deliver the same d. Made before the sale, not upon
as de- scribed and as warranted expressly delivery or any other point
or by implication in the contract of sale as a
condition of the obligation of the buyer to An express warranty can be made by and also
perform his promise to accept and pay for be binding on the seller even in the sale of a
the thing. second hand article. [Moles v. IAC, G.R. No.
73913 (1989)]
Condition Warranty
Goes into the Express Warranty v. Dealer’s/Trader’s Talk
Pertains to and performance of an Article 1545, CC: Any affirmation of fact or
affects the existence obligation and may, any promise by the seller relating to the thing
of the obligation in itself, be an is an express warranty if the natural
obligation tendency of such affirmation or promise is to
Non-happening does Non-fulfillment induce the buyer to purchase the same, and
not amount to breach constitutes breach if the buyer purchase the thing relying
of contract of contract thereon. No affirmation of the value of the
Stipulation or thing, nor any statement purporting to be a
Must be stipulated statement of the seller's opinion only, shall
operation of law
Always relates to the be construed as a warranty, unless the seller
May attach either to made such affirmation or statement as an
subject matter or the
the seller’s duty to expert and it was relied upon by the buyer.
seller’s obligations
deliver thing or some
as to the subject
other circumstance Article 1340, CC: The usual exaggerations
matter
in trade, when the other party had an
opportunity to know the facts, are not in Implied Warranties [Art. 1547,
themselves fraudulent. CC]
Article 1341, CC: A mere expression of an An implied warranty is derived by law, by
opinion does not signify fraud, unless made implication, or inference from the nature of the
by an expert and the other party has relied transaction or relativation, or circumstances of
on the former's special knowledge. the parties, irrespective of any intention of the
seller to create it. [De Leon]
Express
Dealer’s or Trader’s Talk
Warranty Implied Warranty of Title
What is a. Implied Warranty against
Affirmation of the value of the
specifically Encumbrance/Non-Apparent Servitudes
thing or statement of only the
represented b. Implied Warranty against Hidden Defects
seller’s opinion is not a
as true in [Art. 1547, CC]
warranty unless:
said
● The seller made it as an • Implied Warranty as to Merchantable
document Quality and Fitness of Goods
expert;
cannot be
● It was relied upon by the • Implied Warranty against Redhibitory
considered Defect in the Sale of Animals [Art.
buyer. [Art.1546, CC]
as mere 1572, CC]
● Ordinarily, what does not
dealer's • Quality and Fitness of Goods in Sale by
appear on the face of the
talk. [Moles Sample or Description
written instrument [Moles
v. IAC, c. Other Warranties
v. IAC, supra]
supra]
IMPLIED WARRANTY OF TITLE
Express Warranty v. False Representation
Article 1342, CC: Misrepresentation by a Implied warranty arises by operation of law and
third person does not vitiate consent, unless need not be stipulated in the contract of sale.
such misrepresentation has created
substantial mistake and the same is mutual. Warranty of Seller’s Right to Sell: Seller
warrants his right to sell at the time the
Express ownership is to pass.
False Representation
Warranty
When concealment of facts Inapplicable to a sheriff, auctioneer,
comes with an active mortgagee, pledgee, or other person
misstatement of fact or a professing to sell by virtue of authority in fact or
partial statement of fact, such law. [Art. 1547, CC]
that withholding of that unsaid
portion makes that which is Warranty against Eviction: Seller warrants
stated absolutely false.
Concealment that buyer, from the time ownership passes,
of facts does shall have and enjoy legal and peaceful
However, a buyer who fails to
not possession of the thing. Its requisites are:
inspect the condition of
necessarily
property despite ample a. Buyer is deprived of the whole or a part of
amount to the thing sold;
opportunity to do so when
false b. Eviction is by final judgment;
there is no opposition on the
representation c. Final judgment based on a right prior to the
part of seller to inspect cannot
later on allege false sale or an act imputable to the vendor;
representation. [Philippine d. Seller is summoned and made co-
Manufacturing Co. v. Go defendant in the suit for eviction at the
Jocco, G.R. No. L-24256 instance of the buyer. [Power Commercial
(1926)] and Industrial Corp. v. CA, G.R. No.
119745 (1997)]
If ownership has not yet passed to the buyer, perform his obligations, or has committed a
the seller cannot maintain an action for the breach of the contract of sale.
price, unless it involves (1) or (3). Under this rule, rescission would bar an action
Title to goods passes from the moment the on the contract because it means cancellation
goods are placed at the buyer’s disposal when of the contractual obligations between the
refusal to accept is without just cause. [de Leon parties. [Baviera]
citing Art. 1588, CC]
The unpaid seller’s right to rescind for non-
ACTION FOR DAMAGES [Art. 1596, CC] performance is not absolute. Not allowed to
When ownership has not yet passed and the rescind when:
buyer, without lawful cause, neglects or a. There are 3rd persons possessing the
refuses to ACCEPT and PAY for the goods objects of the contract to whom no bad faith
is imputable [de Leon; Ocejo Perez & Co.
General rule: Measure of damages is the v. International Bank, G.R. No. L-10658
ESTIMATED LOSS directly and naturally (1918)]
resulting in the ordinary course of events from b. Breach is on slight or casual [de Leon;
the buyer’s breach. Song Fo & Co. v. Hawaiian-Phil. Co.,
supra]
Exceptions:
a. Where there is available market for goods: The seller cannot unilaterally and
Difference between the contract price and extrajudicially rescind a contract absent
the market price. The market price is fixed express stipulation to do so, except as
at the time the goods ought to have been provided in Art. 1597. [De Leon]
accepted, or if no time was fixed, at the
time of refusal to accept. 2. Special Remedies of the Unpaid
Seller [Arts. 1525-1535, CC]
Note: When there are special
circumstances showing proximate a. Possessory lien;
damages of a greater amount than the b. Stoppage in transitu;
difference between the contract price and c. Special right of resale; and
market price, seller is entitled to such d. Special right to rescind
higher amount of damages when such
damages may be reasonably attributed to Note: These special remedies have a
the non-performance of the obligation. [de hierarchical application. The special rights to
Leon; par. 3, Art. 1596 read with par. 2, Art. resell and to rescind can be availed of by the
2201, CC] unpaid seller only when either of the two prior
rights of possessory lien or stoppage in transitu
b. Where labor or expense of material amount have been exercised by the unpaid seller.
is necessary on the part of the seller to [Villanueva]
perform the contract: Cost of labor
performed or expenses made before Definition of an Unpaid Seller
receiving notice of buyer’s repudiation, and
unrealized profit. Art. 1525. Seller is deemed to be unpaid seller:
1. When the whole of the price has not
RESCISSION BY GIVING THE BUYER been paid or tendered;
NOTICE OF THE ELECTION TO RESCIND 2. When a bill of exchange or other
[Art. 1597, CC] negotiable instrument has been
When the goods have not yet been delivered to received as conditional payment, and
the buyer, and the buyer repudiated the the condition on which it was received
contract of sale, or manifested his inability to has been broken by reason of the
e. The seller must surrender the negotiable b. By giving notice of his claim to the
instrument or title, if any, issued by the carrier/other bailee who has possession of
carrier/bailee the goods
f. The seller must bear the expenses of the • Carrier must redeliver goods to seller,
delivery of the goods after exercise of such or according to his instructions
right. • Carrier not obliged to redeliver until the
negotiable document of title, if any, has
When Goods Are In Transit [par. 1, Art 1531, been surrendered for cancellation
CC]
a. From the time of delivery to the carrier or Effect When Buyer Has Sold the Goods [Art.
other bailee by the seller, for the purpose 1535, CC]
of transmission to the buyer, until the buyer General Rule: Seller’s right to stoppage in
or his agent takes such delivery from the transitu is not affected even if buyer has sold or
carrier. disposed of the goods unless the seller has
b. Even when goods have reached their given his assent thereto.
ultimate destination, if buyer rejects them Exceptions:
and carrier retains possession a. When seller has given consent thereto
b. When a negotiable document of title has
To terminate transit by delivery to a been issued for the goods to a purchaser
middleman, delivery must be to keep, not to for value in good faith
transport.
SPECIAL RIGHT OF RESALE
In case of misdelivery, the goods are still Available to unpaid seller who has a right of lien
considered in transit, hence, the seller may still or who has stopped the goods in transitu [Art.
exercise his right pursuant to Article 1523. 1533, CC].
made BUT the buyer may only avail of However, mere filing of an unlawful detainer
the grace period once every 5 years suit by the seller does not operate as such
• Buyer has right to the refund of Cash notice. [de Leon]
Surrender Value (CSV): 50% of total
amount paid + 5% for every year after b. Remedies of the Buyer
the first 5 years of installments BUT
total CSV should not be greater than General rule: Courts will refuse to decree
90% of total amount paid specific performance with respect to chattels
• After the lapse of the grace period, because damages are a sufficient remedy.
buyer is given a notice of cancellation
or demand for rescission by notarial Exception: Buyer is entitled to the specific
act, effective 30 days from the buyer’s thing which to him has special value and which
receipt thereof AND only upon full he cannot readily obtain in the market OR
payment of CSV where damages would not furnish a complete
and adequate remedy. [Baviera]
b. If buyer has paid less than 2 years of
installments: QUICK SUMMARY OF REMEDIES OF
• Grace period of at least 60 days BUYER
• After the lapse of the grace period, REMEDY
buyer is given a notice of cancellation Damages, Rescission, Price
or demand for rescission by notarial Movables through Specific
act, effective 30 days upon receipt Performance.
thereof Return or Offer to Return
(with recovery of price or may
c. During the grace period, the buyer shall become the seller’s bailee)
also have the right: Breach of
Acceptance, for recoupment
• To sell or assign his rights, evidenced Warranty
or with damages
in a notarial instrument Refuse to Accept with
• To update his account Damages
• To pay in advance any installment, or Rescission, Suspension of
the full unpaid balance of the price, Payment, PD 957
without any interest, and to have such (Reimbursement of the total
full payment of the purchase price Immovables
amount paid/ compel the
annotated in the certificate of title developer to complete
covering the property. facilities)
Contract of Sale: Article
Down payments, deposits, or options on the Immovables
1592, CC
contract shall be included in the total number of on
Contract to Sell: Maceda Law
installments made. Installment
(RA 6552)
separately paid for, whether prompt payment there shall be no increase or decrease of the
or delivery is of the essence of the contract price, although there be a greater or less
such that a delay or breach of the obligation area or number than that stated in the
would entitle the aggrieved party to treat the contract.
entire contract as broken or to regard each
breach as severable would depend on the
terms of the contract and the circumstances of If the sale of property is for a lump sum, there
the case. [Baviera] shall be no increase or decrease in the price,
whether the actual area delivered turned out to
Severability: is whether the breach is so be greater or less than that stated in the
material as to justify the aggrieved party in contract. [Baviera]
refusing to proceed further with the entire
contract or so immaterial that the breach is Inspection and Acceptance
severable, giving rise merely to a claim for
damages.
Note: This is discussed in Section D of this
sales reviewer, on the Obligations of the
Sale of Immovables Vendee.
Available when the seller reserves the right to 3. Subsequent purchaser of property, even if
repurchase the thing sold in the same the right to redeem was not mentioned in
instrument of sale as one of the stipulations of the subsequent contract; except if
the contract [Villarica v. CA, G.R. No. L-19196 registered land, where the right to redeem
(1968)] must be annotated on the title
4. If several heirs, then the right of redemption
2. Period can be exercised against each heir for his
share of the property [Art. 1615, CC]
General Rule: Follow period stipulated in
contract, but should not exceed 10 years. 5. How exercised
The right of repurchase is not a right granted to When there is agreement: Period not to
the seller by the buyer in a subsequent exceed 10 years [Art. 1606, CC]
instrument, but one reserved by the seller in the
same instrument as the sale contract. Any right General Rule: Period starts to run from the
granted after the execution of the sale date of the execution of the contract
instrument is not a right to repurchase, but
some other right like an option to buy. [Roberts Exception: When the efficacy of the sale is
v. Papio, G.R. No. 166714 (2007)] subject to a suspensive condition, period
should be counted not from the date appearing
2. Requisites for presumption of on the instrument, but from the date when the
an equitable mortgage condition is fulfilled, marking the
consummation of the sale [Tolentino citing
a. That the parties entered into a contract Manresa].
denominated as a contract of sale, and
b. That their intention was to secure an Additional 30 days for Repurchase
existing debt by way of a mortgage. The last paragraph of Art. 1606 giving the
[Molina v. CA, supra] vendor the right to repurchase within 30 days
from the time of the rendition of final judgment seller a retro to file a suit for consignation
applies only where the nature and the with the courts of the redemption price
character of the transaction, whether as a [Catangcatang v. Legayada, G.R. L-26295
pacto de retro or an equitable mortgage, was (1978)].
put in issue before the court [Gonzales v. de 4. If the offer or tender of payment for
Leon, G.R. No. L-14532 (1965)] repurchase is refused, it is not necessary
for the vendor a retro to consign in court or
When an unrecorded pacto de retro sale was make judicial deposit of the repurchase
construed as an equitable mortgage, the price [Rosales v. Reyes, G.R. No. 8162
plaintiff had the right to enforce his lien in a (1913)].
separate proceeding notwithstanding the fact
that he had failed to obtain judgment declaring The seller a retro is given no option to require
him the sole and absolute owner of the land. the buyer a retro to remove the useful
[Heirs of Arches v. Diaz, G.R. No. L-27136 improvements on the land subject of the sale a
(1973)] retro, unlike that granted the owner of a land
under Arts. 546 and 547. Under Art. 1616, the
Where the petition of the buyer in a pacto de seller a retro must pay for useful improvements
retro sale is for a judicial orders pursuant Art. introduced by the buyer a retro; otherwise, the
1607, so that there may be consolidation of latter may retain possession of the land until
ownership since there was failure to redeem reimbursement is made. [Gargollo v. Duero,
during the redemption period, the right of action G.R. No. L-15973 (1961)]
to foreclose or to collect the indebtedness
arises from the court judgment declaring the Legal Redemption [Art. 1619,
contract an equitable mortgage. CC]
6. Exercise of the right to redeem Rationale for the law: Public policy (to minimize
[Art. 1616, CC] co-ownership) and benefit of the redemptioner
The right is available not only to original co- b. Adjacent lands are separated by
owners, but to those who had later acquired the brooks, drains, roads and other
share of the co-owner. apparent servitudes for the benefit of
other estates
But the right of redemption may be exercised
by a co-owner only when part of the community Order of preference if two or more wishes to
property is sold to a stranger. When the portion exercise the right:
is sold to another co-owner, the right does not • Owner with smaller land area
arise because a new participant is not added to • If same land area, then the one who
the co-ownership [Fernandez v. Sps. Tarun, first requested the redemption
G.R. No. 143868 (2002)].
c. Redemption by adjoining land-owners
If the price of the alienation is grossly of urban land (applies only to small
excessive, the redemptioner shall pay only a portions of urban land) [Art. 1621, CC]
reasonable one.
Right of Pre- Right of
Should two or more co-owners desire to emption Redemption
exercise the right, they may also do so in Owner of any
proportion to the share they may respectively adjoining land has a
have in the thing owned in common. right of pre-emption
If the resale has
at a reasonable price
The ff. requisites must concur: been perfected, the
when:
a. Co-ownership of a thing owner of the
a. Urban land is
b. Alienation of shares of co-owners or all adjoining land shall
so small and
of the other co-owners have a right of
so situated
c. Sale must be to a third person or redemption, also at a
that a major
stranger reasonable price
portion of it
d. Sale must be before partition cannot be
e. Right must be exercised within the Priority if 2 or more
used for any
period specified in Article 1623 adjoining owners
practical
f. Buyer must be reimbursed the price of want to redeem:
purpose w/in
the sale owner whose
a reasonable
intended use of the
time;
Rationale: Public Policy, since co-ownership is land appears to be
b. Was bought
a hindrance to the development and best justified
merely for
administration of the property. [Baviera] speculation;
c. Was resold
b. Redemption by adjoining landowners of Arises before sale Arises after sale
rural land [Art. 1621, CC] No rescission There can be
because no sale rescission of the
The ff. requisites must concur: exists yet original sale
a. All lands must be rural lands The action is
b. Lands must be adjacent to each other Action is directed
directed against
c. A piece of rural land is alienated against buyer
prospective seller
d. Area does not exceed one hectare
e. Buyer must already own other rural d. Redemption of Credit
lands
Available when it is sold while in litigation (From
When not applicable the time the complaint is answered)
a. The grantee does not own any rural
land