Sales Rev

SALES AND LEASE REVIEWER
(by Diory Rabajante)
SALES
* CONTRACT OF SALE, defined (Art. 1458, CC)

By the contract of sale, one of the contracting parties obligates himself
to transfer the ownership of and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its equivalent.
* SOURCES OF RIGHTS / OBLIGATIONS (Art. 1156)

1. Law
2. Contracts
3. Quasi – Contracts
4. Acts or omissions punished by law; and
5. Quasi – delicts
Sale is a contract and is, therefore, a source of obligations. It has the force
of law between the contracting parties, which should be complied with in
good faith. (Art. 1159)
* CHARACTERISTICS OF A CONTRACT OF SALE
1. Nominate - law gave it a name, i.e . ―SALE‖
2. Principal - can stand on its own, unlike an accessory contract
3. Bilateral - imposes obligation on both parties

a. obligation of seller – transfer ownership & deliver
b. obligation of buyer – pay price
Consequence of being bilateral: power to rescind is implied in bilateral

contracts (Art. 1191)
4. Onerous – imposes valuable consideration

Consequence: all doubts in construing contract to be resolved in greater
reciprocity of interest
5. Commutative – a thing of value is exchanged for equal value

Subjective Test: as long as parties believe in all honesty that he is
receiving equal value then it complies with the test & would not be
deemed a donation.
SALES AND LEASE REVIEWER by Diory Rabajante
o Inadequacy of price or aleatory character not sufficient

ground to cancel contract of sale; o sale may be annulled
based on vice of consent regarding inadequacy but not on
inadequacy per se
6. Consensual – a contract of sale is perfected by mere consent.
7. Title & not a mode – title gives rise to an obligation to transfer; it is not
a mode w/c actually transfers ownership.
On its own, sale is not a mode which transfers ownership. It creates an

obligation to transfer ownership. It is the delivery that transfers
ownership.
* CONTRACT OF ABSOLUTE SALE VS. CONTRACT OF CONDITIONAL SALE

A contract of sale may be absolute or conditional. (Art. 1458)
True Test:
A contract of sale gives rise to two obligations: for the seller, to transfer
the ownership of and deliver a determinate thing; for the buyer, the
payment of the price.
If the condition is imposed upon the seller’s obligation to transfer the
ownership of and deliver the thing, there is a conditional sale. Note that the
essence of sale is the acquisition of ownership.
However, if the condition is imposed upon the buyer’s obligation to pay
the price, the sale is still absolute. Payment of the purchase price is part of
the consummation stage (not perfection stage) of the contract of sale.
Perfection of the contract of sale is not affected by the fact that payment is
subject to conditions, it being the case that a contract of sale is perfected by
mere consent.
HYPOTHETICAL QUESTIONS:
1. A and B entered into a contract of sale whereby A obliges himself to

transfer the ownership of and deliver a certain piano to B for P5,000. A
and B further agreed that the piano will be delivered to B immediately
after the execution of the contract, and that B is given ten days to pay
the price. The ownership is, however, reserved to A until the full
payment of the purchase price. Was the contract of sale entered into
by A and B absolute?
No. The contract of sale between A and B was conditional because
there was a condition imposed upon A’s obligation to transfer the
ownership of the piano. B’s ownership of piano is automatically
transferred to the buyer by operation of law upon fulfillment of a
suspensive condition which is the payment of the purchase price.
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2. A and B entered into a contract of sale whereby A obliges himself to

transfer the ownership of and deliver a certain piano to B for P5,000.
They further agreed that payment of the price by B is subject to the
condition that B will receive money from C. Is the contract of sale
entered into by A and B absolute?
Yes. The condition is imposed only upon the payment of the price.
Jurisprudential Doctrines:
People's There was no perfected sale of a lot when it was

Homesite conditionally or contingently awarded subject to the
& approval by the city council of the proposed
Housing consolidation subdivision plan and the approval of the
Corp. vs award by the valuation committee and higher
CA authorities. When the plan was approved, the
Mendozas should have manifested in writing their
acceptance of the award for the purchase of the lot just
to show that they were still interested in its purchase,
although the area was reduced. Yet, they did not do so.
Article 1475 of the
NCC provides that ―the contract of sale is perfected at
the moment there is a meeting of the minds..." Under
the facts of this case, there was no meeting of minds on
the purchase of Lot 4 with an area of 2,608.7 square
meters at P21 a square meter.
As to the conditional nature of the sale, Article 1181 of
the NCC states that ―in conditional obligations, the
acquisition of rights, as well as the extinguishment or
loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition.
Dignos A deed of sale is absolute in nature although
vs CA denominated as a "Deed of Conditional Sale" where
nowhere in the contract in question is a proviso or
stipulation to the effect that title to the property sold is
reserved in the vendor until full payment of the
purchase price, nor is there a stipulation giving the
vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period. In
this case, there is no such stipulation reserving the title
of the property on the vendors nor does it give them the
right to unilaterally rescind the contract upon non-
payment of the balance thereof within a fixed period.
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Furthermore, all the elements of a valid contract of sale

under Article 1458 of the Civil Code, are present.
* CONTRACT OF SALE VS. CONTRACT TO SELL
With the passage of the Maceda Law, which has lumped together both
remedies of rescission and cancellation into a uniform procedural and
substantial straight-jacket, even the Supreme Court has, in its fairly recent
cases, began to blur what used to be different remedies, and in the process
has almost made indistinguishable the substantive differences between a
contract of sale and a contract to sell involving residential real estate and
condominium units. – Villanueva, C., Law on Sales, 2004 ed.
Art. 1478: The parties may stipulate that ownership in the thing shall not
pass to the purchaser until he has fully paid the price.
CONTRACT OF SALE CONTRACT TO SELL

Title passes to buyer upon Ownership is retained and will
delivery be transferred upon payment
Failure to pay is a resolutory Failure to pay is a positive
condition which puts an end to suspensive condition, failure of
the transaction; Remedies: which is not a breach but
(1) Specific performance prevents the obligation of the
(2) Rescission (1191) vendor to convey title to arise
Seller loses ownership upon Title remains in the vendor
delivery even after delivery
CONTRACT OF CONTRACT TO SELL

CONDITIONAL SALE
Both: Reservation of ownership until full payment
First element (consent) is Ownership is not automatically
present albeit conditioned transferred to the buyer (even if
upon the happening of there has been previous delivery
contingent event which may to him) upon fulfillment of
or may not occur, in effect, suspensive condition (i.e. full
contract of sale is payment of purchase price).
automatically perfected Seller still has to convey title to
without further act having to prospective buyer by entering
be performed by the seller into a contract of absolute sale.
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With respect to sale to third With respect to sale to third

person: person:
- Upon fulfillment of - No double sale (because no
suspensive condition, sale previous sale of property
becomes absolute which despite fulfillment of
affects seller’s title suspensive condition)
- 3P becomes buyer in bad - 3P not a buyer in bad faith
faith if possesses - Prospective buyer cannot
constructive or actual seek relief of reconveyance of
knowledge of defect in property, but only sue under
seller’s title Art 19 (unjustified disregard
- Second buyer cannot of right)
defeat the first buyer’s title
Art. 1544 (Double Sale) is Art. 1544 (Double Sale) is not
applicable applicable
* CONTRACT OF SALE VS. CONTRACT FOR A PIECE OF WORK
Article 1713: By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in consideration
of a certain price or compensation. The contractor may either employ
only his labor or skill or also furnish the material.
Article 1467:
CONTRACT OF SALE: A contract for the delivery at a certain price of
an article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same
is on hand at the time or not
CONTRACT FOR A PIECE OF WORK: if the goods are to be
manufactured specially for the customer AND upon his special order,
and not for the general market. Here, service is the Subject Matter
BUT:
THERE CAN BE NO CONTRACT FOR PIECE OF WORK FOR PAST
SERVICE RESULTING IN THE CREATION OF THE OBJECT
(ALWAYS A SALE)
JURISPRUDENTIAL DOCTRINES:
Celestino Co. vs When a factory accepts a job that requires
Collector the use of extraordinary or additional
equipment, or involves services not
generally performed by it, it thereby
contracts for a piece of work.
- In the case at bar, the orders exhibited
were not shown to be special. They were
merely orders for work — nothing is shown
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to call them special requiring extraordinary

service of the factory. The factory sold
materials ordinarily manufactured by it —
sash, panels, mouldings — to Teodoro &
Co., although in such form or combination
as suited the fancy of the purchaser. Such
new form does not divest the factory of its
character as manufacturer. Neither does it
take the transaction out of the category of
sales under Article 1467 above quoted,
because although the Factory does not, in
the ordinary course of its business,
manufacture and keep on stock doors of the
kind sold to Teodoro, it could stock and/or
probably had in stock the sash, mouldings
and panels it used therefor (some of them
at least).
Commissioner vs The distinction between a contract of sale
Engineering and and one for work, labor and materials is
Supply Company tested by the inquiry whether the thing
transferred is one not in existence and
which never would have existed but for the
order of the party desiring to acquire it, or
a thing which would have existed and has
been the subject of sale to some other
persons even if the order had not been
given.
If the article ordered by the purchaser is
exactly such as the plaintiff makes and
keeps on hand for sale to anyone, and no
change or modification of it is made at
defendant's request, it is a contract of sale,
even though it may be entirely made after,
and in consequence of, the defendants
order for it.
The word "contractor" has come to be used
with special reference to a person who, in
the pursuit of the independent business,
undertakes to do a specific job or piece of
work for other persons, using his own
means and methods without submitting
himself to control as to the petty details.
IMPORTANCE OF DISTINCTION
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• Difference in the rules governing both contracts (e.g. tax rates and
other charges are lower for contractors) and application of SoF
• Inchausti v Cromwell - SC adopted Massachusetts rule that the test
whether the thing transferred is one not in existence and which never
would have existed but for the order of the party desiring to acquire
it, or a thing which would have existed and been subject of sale to
some other person, even if the order had not been given.
• True test of a Contractor – he renders service in the course of an
independent occupation, representing the will of his employer only as
to the result of his work, and not as to the means by which it is
accomplished (Luzon Stevedoring Co v Trinidad and La Carlota Sugar
Central v Trinidad).
• More examples of CONTRACT OF SALE: o future sale of articles
which he is habitually making although at the time not made or
finished
article ordered is exactly such as plaintiff makes and keeps on hand for
sale to anyone and no change or modification of it is made at defendant’s
request although made after and in consequence of, defendant’s order for it
CONTRACT OF SALE CONTRACT FOR A PIECE OF

WORK
Contract for delivery of an article,
which the vendor in the ordinary Goods are to be manufactured
course of business manufactures specially for a customer and
or procures for upon special order and not for
general market (whether on the general market
hand or not)
Essence is object Essence is service
Jurisprudence:
* Timing Test under Art.
1467: whether the thing
transferred would have never
existed but for the order
* Habituality Test: if
manufacturer engages in activity
with need to employ
extraordinary skills and
equipment (Celestino vs. CIR)
* Nature of the Object Test:
each product’s nature of
execution differs from the others;
products are not ordinary
products of
manufacturer (EEI vs CIR)
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* CONTRACT OF SALE VS. CONTRACT OF AGENCY TO SELL
Article 1868: By a contract of agency, a person binds himself to render

some service or to do something in representation or on behalf of another,
with the consent or authority of the latter.
Articles 1868 to 1932: (provisions on Agency)
Article 1466: In construing a contract containing provisions characteristic
of both the contract of sale and of the contract of agency to sell, essential
clauses of the whole instrument shall be considered.
Article 1322: An offer made through an agent is accepted from the time
acceptance is communicated to him
SALE CONTRACT OF AGENCY TO SELL

Buyer pays the price Agent does not pay
Buyer acquires ownership Agent does not acquire ownership
over the object of the
contract
Seller warrants Agent does not warrant, unless he
agrees
Essence of sale: transfer of Essence of agency: delivery to the
title or agreement to agent of the goods not as the agent’s
transfer it for the price paid property but of the principal who
or promised remains the owner and has the right
to control the sales by the agent, fix
the price and terms, demand and
receive the proceeds of the sales less
the agent’s commission
Quiroga vs Where the price of the objects is paid within the terms
Parsons fixed without any other consideration and regardless as
Hardware Co. to whether the objects are sold, the contract is one of
sale.
(In order to classify a contract, due regard must be
given to its essential clauses. A contract is what the law
defines it to be, and not what it is called by the
contracting parties.)
- In the case at bar, it shows that the cause and
subject matter which are to furnish the defendant with
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beds and in turn, pay for the stipulated price, are

precisely the essential features of contract of purchase
and sale. There was an obligation on the part of the
plaintiff to supply beds and on defendant’s part, to pay
the price which in turn, excludes the legal conception
of an agency.
- In an agency, there is an order to sell whereby the
agent receives a thing to sell it and he is not required to
pay its price but is required to turn over to the
principal the price he obtains for the sale. If he does not
succeed in selling it, he will have to return the thing.
This is not the case of the matter in the case at bar. By
virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was
necessarily obliged to pay their price within the term
fixed, without any other consideration and regardless
as to whether he had or had not sold the beds. Hence,
the contract by and between the parties is one of
purchase and sale.
Kerr vs Lingad The transfer of title or agreement to transfer it for a
price paid is the essence of sale. If such transfer puts
the transferee in the position of an owner and makes
him liable for the agreed price, the transaction is a sale.
On the other hand, the essence of an agency to sell is
the delivery to an agent, not as his property, but as the
property of his principal, who remains the owner and
has the right to control sales, fix the price and terms,
demand and receive the proceeds less the agent's
commission upon sales made.
- In the case at bar, the relationship between the
petitioner and US Rubber International is one of
brokerage or agency because of the following
contractual stipulations:
*that petitioner can dispose of the products of the
Company only to certain persons or entities and within
stipulated limits, unless excepted by the contract or by
the Rubber Company (Par. 2);
*that it merely receives, accepts and/or holds upon
consignment the products, which remain properties of
the latter company (Par. 8);
*that every effort shall be made by petitioner to
promote in every way the sale of the products (Par. 3);
*that sales made by petitioner are subject to approval
by the company (Par. 12);
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*that on dates determined by the rubber company,

petitioner shall render a detailed report showing sales
during the month (Par. 14);
*that the rubber company shall invoice the sales as of
the dates of inventory and sales report (Par. 14);
*that the rubber company agrees to keep the
consigned goods fully insured under insurance policies
payable to it in case of loss (Par. 15);
*that upon request of the rubber company at any time,
petitioner shall render an inventory of the existing
stock which may be checked by an authorized
representative of the former (Par. 15); and
*that upon termination or cancellation of the
Agreement, all goods held on consignment shall be held
by petitioner for the account of the rubber company
until their disposition is provided for by the latter (Par.
19).
* CONTRACT OF SALE VS. DACION EN PAGO
Article 1245: Dation in payment, whereby property is alienated to the

creditor in satisfaction of a debt in money, shall be governed by the
law on sales.
• There is a novation of the contract of loan into a contract of sale
when creditor agrees to accept a thing in payment of the debt.
• If thing given in payment turns out to belong to another, creditor’s
remedy is governed by law on sales, not on loan.
SALE DACION EN PAGO

No pre-existing credit Pre-existing credit
Gives rise to obligations Extinguishes obligations
Cause or consideration is the Cause or consideration from the
price from the viewpoint of viewpoint of the person offering the
the seller; or the obtaining of dation in payment is the
the object, from the viewpoint extinguishment of his debt; from
of the buyer the viewpoint of the creditor, the
cause is the acquisition of the object
offered in lieu of the original credit
Greater freedom in the Less freedom in determining the
determination of the price price
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Giving of the price may Giving of the object in lieu of the

generally end the obligation credit may extinguish completely or
of the buyer partially the credit (depending on
the agreement)
* CONTRACT OF SALE VS. BARTER
Article 1638: By a contract of barter or exchange, one of the parties

binds himself to give one thing in consideration of the other’s promise
to give another thing.
Article 1468: if the consideration of the contract consists partly in
money and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such
intention does not clearly appear, it shall be considered a:
BARTER: if value of the thing given as part of the consideration

> amount of the money or its equivalent
▪ Because the true cause of the contract for the
other party is the thing transferred and not
the money.
SALE: if
▪ value of thing < amount of money or its
equivalent value of thing = value of
money
―Manifest intention‖ – judged by the parties’ contemporaneous and

subsequent acts
* CONTRACT OF SALE VS. LEASE
Article 1643: In the lease of things, one of the parties binds himself to
give to another, the enjoyment or use of a thing for a price certain,
and for a period which may be definite or indefinite. However, no lease
for more than 99 years shall be valid.
Article 1484: Vendor’s alternative remedies in a contract of sale of
personal property price of which is payable in installments:
1. Exact fulfillment of obligation in case of failure to pay (specific
performance)
2. Cancel sale in case of failure to pay two or more installments
3. Foreclose the chattel mortgage
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Article 1485: Art 1484 is also applicable to contracts purporting to be

leases of personal property with option to buy, when lessor has
deprived lessee of the possession or enjoyment of thing.
• So-called rents must be regarded as payment of price in
installments since due payment of the agreed amount results in
the transfer of title to the lessee
Jose v. Barrueco, 67 The total rents being equal to the value of the
Phil 747 (1939) thing leased, the SC considered the
transaction as one of sale.
*PARTIES TO A CONTRACT OF SALE

(DISQUALIFICATIONS)
Article 1489: All persons authorized in this Code to obligate

themselves, may enter into contract of sale, saving the modifications
contained in the following articles.
Where necessaries are 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 Art 290 (now Art 194 of FC)
▪ Art. 194, Family Code: Necessaries = everything indispensable
for sustenance, dwelling, clothing, medical attendance,
education, and transportation
▪ Art 1399,Civil Code: obligation of incapacitated person who

entered into contract to restitute that which he has benefited
from
Article 234, Family Code: Emancipation takes place by the attainment

of majority. Unless otherwise provided, majority commences at the
age of 18 years (as amended by R.A. 6809).
Article 44: The following are juridical persons:
(1) The State and its political subdivision
(2) Other corporations, institutions and entities for public
interest or purpose, created by law; their personality

begins as soon as they have been constituted according
to law
(3) Corporations, partnerships and associations for private
interest or purpose to which the law grants a juridical

personality, separate and distinct from that of each
shareholder, partner or member.
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Article 46: Juridical persons may acquire and possess property of all
kinds, as well as incur obligations and bring civil or criminal actions,
in conformity with the laws and regulations of their organization.
Article 36(6), Corporation Code: Every corporation incorporated under this
Code has the power and capacity:
6. In case of stock corporations, to issue or sell stocks to
subscribers and to sell stocks to subscribers and to sell treasury
stocks in accordance with the provisions of this Code; and to
admit members to the corporation if it be a non-stock
corporation;
a. Absolute Incapacity
Article 1327: The following cannot give consent to a contract:

(1) Unemancipated minors
(2) Insane or demented persons and
(3) Deaf-mutes who do not know how to write
Article 1328: Contracts entered into during a lucid interval are valid.
Contracts agreed to in a state of drunkenness or during a hypnotic
spell are voidable.
Article 1390: The following contracts are voidable or annullable, even

though there may have been no damage to the contracting parties:
(1) One of the parties is incapable of giving consent (want of
capacity)
(2) Consent is vitiated by mistake, violence, intimidation,
undue influence or fraud (vitiated consent) These contracts are binding,

unless they are annulled by a proper court action. They are susceptible
of ratification.
Article 1393: Ratification may be effected expressly or tacitly. It is

understood that there is a tacit ratification if with knowledge of the
reason which renders the contract voidable and such reason having
ceased, the person who has a right to invoke it should execute an act
which necessarily implies an intention to waive his right.
Article 1397: The action for annulment of the contracts may be

instituted by all who are thereby obliged principally or subsidiarily.
However, persons who are capable cannot allege the incapacity of
those with whom they contracted; nor can those who exerted
intimidation, violence or undue influence or employed fraud or caused
mistake base their action upon these flaws of the contract.
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Article 1399: When the defect of the contract consists in the

incapacity of one of the parties, the incapacitated person is not
obliged to make any restitution except insofar as he has been
benefited by the price or thing received by him.
Article 1489: (refer above)
Article 194, Family Code: Support comprises everything indispensable

for sustenance, dwelling, clothing, medical attendance, education and
transportation in keeping with the financial capacity of the family.
The education of the person to be supported referred to in the
preceding paragraph shall include his schooling or training for some
profession, trade or vocation, even beyond the age of majority.
Transportation shall include expenses in going to and from school, or
to and from place of work.
b. Relative Incapacity
Articles 1490: Husband and wife cannot sell property to each other,
except
1. When separation of property was agreed upon in marriage
settlements
2. When there has been judicial separation of property under
Art 191
REASON FOR THE RULE

• To prevent commission of fraud or prejudice to third
persons
• To prevent one from unduly influencing the other
• To avoid indirect donations
Article 1492: The prohibitions in the two preceding articles are

applicable to sales in:
1. Legal redemption [Article 1619: Legal redemption is the
right to be subrogated, upon the same terms and

conditions stipulated in the contract, in the place of one
who acquires a thing by purchase or dation in payment, or
by any other transaction whereby ownership is transmitted
by onerous title.]
2. Compromises [Article 2028: a compromise is a contract
whereby the parties, by making reciprocal concessions,

avoid a litigation or put an end to one already commenced.]
– amicable settlement of a controversy
3. Renunciations [Article 1270: Condonation or remission is
essentially gratuitous, and requires the acceptance of the

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obligor…] – exists when creditor gratuitously abandons his

right against debtor as in condonation or remission
Article 73, Family Code: Either spouse may exercise any legitimate
profession, occupation, business or activity without the consent of the
other. The latter may object only on a valid, serious and moral
grounds.
In case of disagreement, the court shall decide whether or not:
1. The objection is proper; and
2. Benefit has accrued to the family prior to the
objection (resulting obligation shall be enforced against the
separate property of the spouse who has not obtained consent) or
thereafter. Foregoing provisions shall not prejudice the rights of
creditors who acted in good faith.
Article 96, Family Code: The administration and enjoyment of the

community property shall belong to both spouses jointly. In case of
disagreement, the husband's decision shall prevail, subject to recourse
to the court by the wife for proper remedy, which must be availed of
within five years from the date of the contract implementing such
decision. In the event that one spouse is incapacitated or otherwise
unable to participate in the administration of the common properties,
the other spouse may assume sole powers of administration. These
powers do not include disposition or encumbrance without authority of
the court or the written consent of the other spouse. In the absence of
such authority or consent, the disposition or encumbrance shall be
void. However, the transaction shall be construed as a continuing offer
on the part of the consenting spouse and the third person, and may be
perfected as a binding contract upon the acceptance by the other
spouse or authorization by the court before the offer is withdrawn by
either or both offerors.
Prohibition can be taken advantage of only by persons who bear such a
relationship to the spouses making the transfer or to the property itself
that such transfer interferes with their rights or interest.
c. Specific Incapacity
Article 1491: The following persons cannot acquire by purchase, even

at a public or judicial auction, either in person or through the
mediation of another: [GAEP-JS]
(1) The guardian, the property of the person or persons who may be under
his guardianship; o Actual collusion is hard to prove between
purchaser and guardian, but such fact can be deduced from the very
short time between the two sales and the relationship between them.
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(2) Agents, the property whose administration or sale may have been
entrusted to them, unless the consent of the principal has been given;
o Incapacity to buy rests on the fact that greed might get the better of
the sentiments of loyalty and disinterestedness which should animate
an administrator or agent.
o A broker does not come within the prohibition because he is a
mere go-between or middleman between the seller and the
buyer, bringing them together to make the contract
themselves.
(3) Executors and administrators, the property of the estate under
administration; o But an executor can buy the hereditary rights of an
heir to the estate under his administration (Naval v Enriquez)
(4) Public officers and employees, the property of the State or of any
subdivision thereof, or of any government-owned or controlled
corporation, or institution, the administration of which has been
entrusted to them; this provision shall apply to judges and government
experts who, in any manner whatsoever, take part in the sale; o
Intended not only to remove any occasion for fraud but also to
surround them with the prestige necessary to carry out their functions
by freeing them from all suspicion which although unfounded, tends to
discredit the institution by putting into question the honor of said
functionaries.
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with
the administration of justice, the property and rights in litigation or
levied upon an execution before the court within whose jurisdiction or
territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers,
with respect to the property and rights which may be the object of any
litigation in which they may take part by virtue of their profession. o
Law intends to avoid improper interference by a judge in a thing
levied upon or sold by his order (Gan Tingco v Pabinquit).
o Incapacity of SC or CA Justice extends to properties or rights
in litigation in their territorial jurisdiction. o CFI Judge
can buy properties in litigation pending outside his territorial
jurisdiction.
o Prohibition likewise extends to properties levied upon an
execution before the court within whose territorial jurisdiction
they exercise their respective functions.
o As to lawyers: curtail any undue influence of the lawyer on
his client on account of their confidential association.
o Violation of this prohibition also constitutes a breach of
professional ethics.
o No prohibition if client assigns to the lawyer after the
judgment has been rendered and became final.
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Contingent fee of lawyer maybe annotated as an adverse claim

on property awarded to client.
(6) Any others specially disqualified by law.
• Such contracts made in violation of this provision are void for
public policy. They cannot be ratified neither can the right to set up
the defense of illegality be waived.
• REASON FOR THE RULE:
1. The persons occupy fiduciary relationship with the owner of
properties mentioned
2. Prevent them from being tempted to take advantage of their
position
Mercado and The courts have laid down the rule that the sale of real
Mercado vs property made by minors who have already passed the
Espiritu ages of puberty and adolescence and are near the adult
age when they pretend to have already reached their
majority, while in fact they have not, is valid, and they
cannot be permitted afterwards to excuse themselves
from compliance with the obligation assumed by them
or to seek their annulment. This doctrine is entirely in
accord with the provisions of the Rules of Court (Rule
131, Sec. 1) and the principle of estoppel.
Sia Suan vs The ruling in Mercado case is affirmed.
Alcantara To bind a minor who represents himself to be of legal
age, it is not necessary for his vendee to actually part
with cash, as long as the contract is supported by a valid
consideration. Since appellee's conveyance to the
appellants was admittedly for and in virtue of a pre-
existing indebtedness (unquestionably a valid
consideration), it should produce its full force and effect
in the absence of any other vice that may legally
invalidate the same. It is not here claimed that the deed
of sale is null and void on any ground other than the
appellee's minority. Appellee's contract has become fully
efficacious as a contract executed by parties with full
legal capacity.
The circumstance that, about one month after the date
of the conveyance, the appellee informed the appellants
of his minority, is of no moment, because appellee's
previous misrepresentation had already estopped him
from disavowing the contract. Said belated information
merely leads to the inference that the appellants in fact
did not know that the appellee was a minor on the date
of the contract, and somewhat emphasizes appellee's
17
bad faith, when it is borne in mind that no sooner had

he given said information than he ratified his deed of sale
upon receiving from the appellants the sum of P500.
Uy Sui Pin vs The sale from Uy Sui Pin to his wife Chua Hue is null
Cantollas and void not only because the former had no right to
dispose of the land in controversy in view of the
existence of the contract but because such sale comes
within the prohibition of article 1458 of the Civil Code.
Maharlika Pub. It is a policy of the law that public officers who hold
Co. vs Tagle positions of trust may not bid directly or indirectly to
acquire prop properties foreclosed by their offices and
sold at public auction. Article XIII, Section 1 of our
Constitution states that: Public office is a public trust.
Public officers and employees shall serve with the
highest degree of responsibility, integrity, loyalty and
efficiency, and shall remain accountable to the people.
A Division Chief of the GSIS is not an ordinary
employee without influence or authority. The mere fact
that he exercises ample authority with respect to a
particular activity, i.e., retirement, shows that his
influence cannot be lightly regarded.
The point is that he is a public officer and his wife acts
for and in his name in any transaction with the GSIS. If
he is allowed to participate in the public bidding of
properties foreclosed or confiscated by the GSIS, there
will always be the suspicion among other bidders and
the general public that the insider official had access to
information and connections with his fellow GSIS
officials as to allow him to eventually acquire the
property. It is precisely the need to forestall such
suspicions and to restore confidence in the public
service that the Civil Code now declares such
transactions to be void from the beginning and not
merely voidable. The reasons are grounded on public
order and public policy. Assuming the transaction to be
fair and not tainted with irregularity, it is still looked
upon with disfavor because it places the officer in a
position which might become antagonistic to his public
duty.
18
Bautista vs
Montilla
Rubias vs The purchase by a lawyer of the property in litigation
Batiller from his client is categorically prohibited by Article
1491, paragraph (5) of the Philippine Civil Code, and
that consequently, plaintiff's purchase of the property
in litigation from his client (assuming that his client
could sell the same since his client's claim to the
property was defeated and rejected) was void and could
produce no legal effect, by virtue of Article 1409,
paragraph (7) of our Civil Code which provides that
contracts "expressly prohibited or declared void by law
are inexistent‖ and that "these contracts cannot be
ratified. Neither can the right to set up the defense of
illegality be waived."
Fornilda vs The fact that the property in question was first
RTC mortgaged by the client to his lawyer and only
subsequently acquired by the latter in a foreclosure
sale long after the termination of the case will not
remove it from the scope of the prohibition for at the
time the mortgage was executed the relationship of
lawyer and client still existed, the very relation of trust
and confidence sought to be protected by the
prohibition, when a lawyer occupies a vantage position
to press upon or dictate terms to a harassed client. To
rule otherwise would be to countenance indirectly what
cannot be done directly.
Director of Article 1491 prohibits only the sale or assignment
Lands vs Abada between the lawyer and his client of property which is
the subject of litigation. In other words, for the
prohibition to operate, the sale of the property must
take place during the pendency of the litigation
involving the property.
A contract for a contingent fee is not covered by Article
1491 because the tranfer or assignment of the property
in litigation takes effect only after the finality of a
favorable judgment. In the instant case, the attorney's
fees of Atty. Fernandez, consisting of one-half (1/2) of
whatever Maximo Abarquez might recover from his
share in the lots in question, is contingent upon the
success of the appeal. Hence, the payment of the
attorney's fees, that is, the transfer or assignment of
one-half (1/2) of the property in litigation will take
place only if the appeal prospers. Therefore, the tranfer
actually takes effect after the finality of a favorable
19
judgment rendered on appeal and not during the

pendency of the litigation involving the property in
question. Consequently, the contract for a contingent
fee is not covered by Article 1491.
Krivenko vs Aliens are disqualified to purchase agricultural lands

Register of (1987 Consitution, Art. XII, Secs. 3 and 7). Our lands
Deeds form part of our heritage thus we should preserve
them. We need to nationalize them otherwise foreigners
might end up owning them which would make a
mockery out of our independence. They can lease lands
if they wish or if they really want to own land, they can
always acquire Filipino citizenship.
Sarsosa vda. Where a land is sold to an alien who later sold it to a
de Barsobia vs naturalized Filipino, the sale to the latter cannot be
Cuenco impugned. In such case, there would be no more public
policy to be served in allowing the Filipino seller or his
heirs to recover the land as the same is already owned
by a qualified person.
Herrera vs Luy Where a land is sold to an alien who later sold it to a
Kim Guan Filipino, the sale to the latter cannot be impugned. In
such case, there would be no more public policy to be
served in allowing the Filipino seller or his heirs to
recover the land as the same is already owned by a
qualified person.
Vicente Prescription may never be invoked to defend that
Godinez vs Fong which the Constitution prohibits. However, where a
Pak Luen land is sold to an alien who later sold it to a Filipino,
the sale to the latter cannot be impugned. In such case,
there would be no more public policy to be served in
allowing the Filipino seller of his heirs to recover the
land as the same is already owned by a qualified person
Jacobus Under Republic Act (R.A.) No. 4726, otherwise known
Bernard Hulst as the Condominium Act, foreign nationals can own
vs PR Builders, Philippine real estate through the purchase of
Inc. condominium units or townhouses constituted under
the Condominium principle with Condominium
Certificates of Title. It expressly allows foreigners to
acquire condominium units and shares in
condominium corporations up to not more than 40% of
the total and outstanding capital stock of a Filipino-
owned or controlled corporation. Under this set up, the
ownership of the land is legally separated from the unit
20
itself. The land is owned by a Condominium

Corporation and the unit owner is simply a member in
this Condominium Corporation. As long as 60% of the
members of this Condominium Corporation are
Filipino, the remaining members can be foreigners.
* ELEMENTS OF A CONTRACT OF SALE
* CONSENT
-See Perfection Stage
A contract of sale is perfected by mere consent. (Art. 1475)
Consent = meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. (Art. 1319)
ELEMENTS OF CONSENT:
1. Subjects / Contracting parties
2. Concurrence of offer and acceptance (Arts. 1319 - 1326)
3. Legal Capacity of the Contracting parties (Arts. 1327 – 1329)
4. The consent must be intelligent, free and spontaneous (Arts. 1330 –
1336)
* SUBJECT MATTER
ELEMENTS OF SUBJECT MATTER

1. It must be existing, future, or subject to resolutory condition. (It must
be at least a ―possible‖ subject matter)

2. It must be licit.
3. It must be determinate or determinable.
POSSIBLE THING -
Art. 1461: Things having a potential existence (Emptio rei speratae)
may be the object of the contract of sale. The efficacy of the sale of a
mere hope or expectancy (Emptio Spei) is ―deemed subject to the
condition that the thing will come into existence‖ (this phrase should
apply to emptio rei speratae and not to emptio spei)). The sale of a vain
hope or expectancy is void.
Art. 1462: 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
21
a contract of sale of goods, whose acquisition by the seller depends

upon a contingency which may or may not happen.
Art. 1463: The sole owner of a thing may sell an undivided interest
therein.
Art. 1464: 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.
Art. 1465: Things subject to a resolutory condition (pacto de retro
sale) may be the object of the contract of sale.
*EMPTIO SPEI – sale of a mere hope or expectancy (e.g. sale of a

sweepstake ticket for P100 where the buyer purchases the ticket with
the hope that upon the draw the ticket would win him a million pesos.
The object of sale here is not the prize, but rather the ticket or the
chance to win)
*EMPTIO REI SPERATAE – sale of a thing with potential existence,

subject to a suspensive condition that the thing will come into
existence. If the subject matter does not come into existence, the
contract is deemed extinguished as soon as the time expires or if it
has become indubitable that the event will not take place. (e.g. sale of
pending crops)
LICIT –
Art. 1459: The thing must be licit and the vendor must have a right to
transfer the ownership thereof at the time it is delivered.
Art. 1347: All things which are not outside the commerce of men,
including future things, may be the object of a contract. All rights which
are not intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance except in cases
expressly authorized by law.
22
Art. 1409: The following contracts are inexistent and void from the
beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy;

(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the
transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object
of the contract cannot be ascertained;

(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
Art. 1416: When the agreement is not illegal per se but is merely
prohibited, and the prohibition by the law is designated for the
protection of the plaintiff, he may, if public policy is thereby enhanced,
recover what he has paid or delivered.
Examples of void sale due to being illicit:

- Sale of animals suffering from contagious diseases (Art. 1575)
- Sale of animals if the use or service for which they are acquired has
been stated in the contract, and they are found to be unfit therefor
(Art. 1575)
- Sale of future inheritance. (Art. 1347)
DETERMINATE OR AT LEAST DETERMINABLE

(Art. 1460) A thing is determinate when it is particularly designated or
physically segregated from all others of the same class. A thing is
determinable (and this satisfies the requirement that the thing be
determinate as per Art. 1458) when the following concur:
(a) If at the time the contract is entered into, the thing is
capable of being made determinate; and (b) Without the
necessity of a new or further agreement between the parties.
Martin vs Property or goods which at the time of the sale

Reyes are not owned by the seller but which
thereafter are to be acquired by him, cannot be
the subject of an executed sale but may be
the subject of a contract for the future sale and
delivery thereof, even though the acquisition of
the goods depends upon a contingency which
may or may not happen. In such case, the
23
vendor assumes the risk of acquiring the title

and making the conveyance, or responding in
damages for the vendee's loss of his bargain.
Melizza vs The requirement of the law that a sale must
City of have for its object a determinate thing, is fulfilled
Iloilo as long as, at the time the contract is entered
into, the object of the sale is capable of being
made determinate without the necessity of a new
or further agreement between the parties (Art.
1273, old Civil Code; Art. 1460, New Civil Code).
The specific mention of some of the lots plus the
statement that the lots object of the sale are the
ones needed for city hall site; avenues and
parks, according to the Arellano plan,
sufficiently provides a basis, as of the time of the
execution of the contract, for rendering
determinate said lots without the need of a new
and further agreement of the parties.
Appellant however fails to consider that the
area needed under that plan for city hall site
was then already known; it could be
determined which, and how much of the
portions of land contiguous to those specifically
named, were needed for the construction of the
city hall site.
National The object of the contract, being the palay
Grains grains produced in Soriano's farmland and the
Authority NFA was to pay the same depending upon its
vs IAC quality. The fact that the exact number of
cavans of palay to be delivered has not been
determined does not affect the perfection of the
contract. Article 1349 of the New Civil Code
provides: "... The fact that the quantity is not
determinate shall not be an obstacle to the
existence of the contract, provided it is possible
to determine the same, without the need of a
new contract between the parties." In this case,
there was no need for NFA and Soriano to enter
into a new contract to determine the exact
number of cavans of palay to be sold. Soriano
can deliver so much of his produce as long as it
does not exceed 2,640 cavans.
Pichel vs A valid sale may be made of "the wine a vine is
Alonzo expected to produce; or the grain a field may
grow in a given time; or the milk a cow may
24
yield during the coming year; or the wool that

shall thereafter grow upon a sheep; or what
may be taken at the next cast of a fisherman's
net; or the goodwill of a trade, or the like. The
thing sold, however, must be specific and
identified. They must be also owned by the
vendor at the time.
Domingo The object of a contract, in order to be
Realty vsconsidered as "certain," need not specify such
CA object with absolute certainty. It is enough that
the object is determinable in order for it to be
considered as "certain."
-In the instant case, the title over the subject
property contains a technical description that
provides the metes and bounds of the property
of petitioners. Such technical description is the
final determinant of the extent of the property
of petitioners. Thus, the area of petitioners’
property is determinable based on the technical
descriptions contained in the TCTs.
*Art. 1459 provides that the seller must have the right to transfer the
ownership at the time the thing is delivered. Hence, it is not required
that the seller is the owner of the thing at the moment of the perfection
of the contract of sale.
GEN. RULE: The owner need not be the owner of the
thing at the time of perfection. EXCEPTION: Conchita
Nool vs CA and Cavite Development Bank vs Lim
25
Cavite In the case at bar, a contract of LEASE
SALES AND saleREVIEWER
was by Diory Rabajante
Developmentperfected. The sum of P30,000.00, although
Bank, et al denominated in the offer to purchase as
vs Cyrus "option money," is actually in the nature of
Lim, et al. earnest money or down payment when
considered with the other terms of the offer.
Contracts are not defined by the parties
thereto but by principles of law. In
determining the nature of a contract, the
courts are not bound by the name or title
given to it by the contracting parties.
- However, a legal obstacle has rendered it
impossible in the case at bar, to perform its
obligation. The sale to Lim of the property
mortgaged by Rodolfo is deemed a nullity for
CDB never acquired a valid title to the
property because the foreclosure sale, in
which CDB has been awarded the property
is also a nullity since the mortgagor is not
the real owner of the said property.
Conchita Article 1505 of the Civil Code provides that
Nool vs CA "where goods are sold by a person who is
not the owner thereof, and who does not sell
them under authority or with consent of the
owner, the buyer acquires no better title to
the goods than the seller had, unless the
owner of the goods is by his conduct
precluded from denying the seller's
authority to sell." Here, there is no
allegation at all that petitioners were
authorized by DBP to sell the property to the
private respondents. Jurisprudence, on the
other hand, teaches us that "a person can
sell only what he owns or is authorized to
sell; the buyer can as a consequence
acquire no more than what the seller can
legally transfer." As petitioners "sold"
nothing, it follows that they can also
"repurchase" nothing. In this light, the
contract of repurchase is also inoperative —
and by the same analogy, void.
1. A brought B to the place where A’s property is located. A told B that

the size of his land is as big as far as B’s eyes can see. A offered to sell
26
this land to B for P500k. B accepted the offer. Is there a perfected

contract?
Yes. The subject matter is determinable or capable of being made
determinate without the need for a new or further agreement between
A and B.
2. In 1911, the sale of alcoholic drinks to members of the non-Christian

tribes is prohibited. During that time, A sold B (a member of the non-
Christian tribe) an alcoholic drink. In 1912, Congress passed a law
decriminalizing the sale of alcoholic drinks to members of non-
Christian tribes. Is the sale between A and B valid?
No. The contract of sale is still void for being illegal. The validity of the
contract is determined as of the time it is perfected.
3. A sold B a very old lottery ticket (dated 1965). Is the sale valid?
It is void as it is a sale of vain hope. However, if the lottery ticket is a
collector’s item, there is a valid sale.
* PRICE
Art. 1469: In order that the price may be considered certain, it shall be
sufficient that it be so with reference to another thing certain, or that the
determination thereof be left to the judgment of specified person or
persons.
Should such person or persons be unable or unwilling to fix it, the
contract shall be inefficacious, unless the parties subsequently agree
upon the price.
If the third person or persons acted in bad faith or by mistake, the
courts may fix the price.
Where such third person or persons are prevented from fixing the price
or terms by fault of the seller or the buyer, the party not in fault may
have such remedies against party in fault as are allowed the seller or the
buyer, as the case may be.
Art. 1470: Gross inadequacy of price does not affect a contract of sale,
except as it may indicate a defect in the consent or that the parties really
intended a donation or some other act or contract.
Art. 1355: Except in cases specified by law, lesion or inadequacy of

cause shall not invalidate a contract, unless there has been fraud,
mistake or undue influence.
Alarcon vs. Inadequacy of price may be a ground for setting

Kasilag aside an execution sale but is not a sufficient
27
ground for cancellation of a voluntary contract

of sale otherwise free from invalidating effects.
Pascua vs. Gross inadequacy of price may avoid judicial sale
Simeon only when it is shocking to the conscience of man.
Art. 1471: If the price is simulated, the sale is void, but the act may be
shown to have been in reality a donation, or some other act or contract.
Art. 1346: (simulated contract) An absolutely simulated or fictitious

contract is void. A relative simulation, when it does not prejudice a
third person and is not intended for any purpose contrary to law,
morals, good customs, public order or public policy binds the parties
to their real agreement.
Art. 1472: The price of securities, grain, liquids, and other things shall
also be considered certain, when the price fixed is that which the thing
sold would have on a definite day, or a particular exchange or market, or
when an amount is fixed above or below the price on such day, or in
such exchange or market, provided said amount be certain.
Art. 1473: The fixing of the price can never be left to the discretion of
one of the contracting parties. However, if the price fixed by one of the
parties is accepted by the other, the sale is perfected.
(The owner of a thing has the right to quote his own price, reasonable
or unreasonable. It is up to the prospective buyer to accept or reject
it.)
Art. 1474: Where the price cannot be determined in accordance with the
preceding articles, or in any other manner, the contract is inefficacious.
However, if the thing or any part thereof has been delivered to and
appropriated by the buyer, he must pay a reasonable price therefor.
What is a reasonable price is a question of fact dependent on the
circumstances of each particular case.
Requisites of 1474 as exception (however, if the thing or any part
thereof has been delivered to and appropriated by the buyer…):
a. Meeting of the minds as to the subject matter;
b. Agreement that a price will be paid; and
c. Delivery and appropriation
o Article 1249, par. 2 – is applicable only to negotiable instruments

issued by a person other than the debtor. Otherwise, there will be an
unjust enrichment in favor of the debtor.
28
Why should the price be certain?

If the price is not certain then the requisite that there must be a
meeting of the offer and acceptance upon the thing and the cause which
are to constitute the contract will not be satisfied.
What is the meaning of ―or its equivalent‖?

This means that there is certainty as to the price but what is given as
payment is an object (e.g. P50k worth of Maggi noodles)
* ―or its equivalent‖ does not refer to negotiable instruments. A
negotiable instrument, by its form, is intended as a substitute for
money.
Simulated price vs Simulated contract?

Art. 1346: (simulated contract) An absolutely simulated or fictitious
contract is void. A relative simulation, when it does not prejudice a
third person and is not intended for any purpose contrary to law,
morals, good customs, public order or public policy binds the parties
to their real agreement.
Simulated price: The contract is not simulated, but the price (cause)
is.
Art. 1471: If the price is simulated, the sale is void, but the act may
be shown to have been in reality a donation, or some other act or
contract.
ELEMENTS OF PRICE
1. Real (not simulated) – when at the perfection of the contract, there is
every intention on the part of the buyer to pay the price, and every
intention on the part of the seller to receive such price.
2. Certain or Ascertainable
a. Certain – expressed and agreed in terms of specific pesos and
centavos
b. Ascertainable –
i. By third persons
ii. By the courts – where the third person fixes the price in
bad faith or by mistake

iii. By reference to a definite day, particular exchange or
market iv. By reference to another thing certain

3. In money or its equivalent
4. Manner of payment must be agreed upon (Marnelego vs. Banco Filipino
Savings and Mortgage Bank)
29
1. A offered to sell his parcel of land to B. B accepted the offer. However,

there is no agreement as to the price. A appointed C to fix the price. C
fixed the price at P500k. Is there a perfected contract?
No, there is none. There must be an agreement between A and B as to
the price.
* STAGES IN THE LIFE OF A CONTRACT OF SALE
* NEGOTIATION STAGE (OPTION CONTRACT, RIGHT OF FIRST REFUSAL)
Art. 1324: When the offerer has allowed the offeree a certain period to
accept, the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded upon
a consideration, as something paid or promised.
Art. 1479: A promise to buy and sell a determinate thing for a price certain
is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported
by a consideration distinct from the price.
What is an Option Contract? o It is a contract that grants an

exclusive right in one person, for which he has paid a separate
consideration, to buy a certain object within an agreed period.
o An option is a contract granting a privilege to buy or sell within
an agreed time and at a determined price. [Laforteza vs.
Machuca; Spouses Buot vs. CA]
Contract of Sale vs. Option Contract?
Is an option contract necessary to have a perfected contract of sale?

o No.
Is an Option Contract a consensual contract? Can there be an option

contract without a consideration?
Option Contract vs. Right of First Refusal?

OPTION CONTRACT RIGHT OF FIRST REFUSAL
30
Principal contract; stands on Accessory; cannot stand on its

its own own
Needs separate consideration Does not need separate
consideration
Subject matter and price must There must be subject matter
be valid but price not important
Not conditional Conditional
Not subject to specific Subject to specific performance
performance
Option Money vs. Earnest Money?

OPTION MONEY EARNEST MONEY
Ownership is reserved, and is Title passes to the buyer upon
not to pass until full payment delivery of the thing sold
In cases of non-payment, there In case of non-payment, an
can be action for specific action for specific performance
performance or for rescission can be filed by
the injured party
Money given as a distinct Part of the purchase price
consideration for an option
contract
The would-be buyer is not When given, the buyer is bound
required to buy to pay the balance
Applies to a sale not yet There is already a sale
perfected
1. On 1 June 2009, A offered to sell a parcel of land to B for P500k. B

was given a period to accept the offer (up to 1 July 2009). B said he
will give the consideration on 30 August 2009. Rule the case.
There is an offer, but there is no option contract. Even if B paid the
consideration on 30 June, there is still no option contract unless A
agreed to enter into an option contract should B pay on 30 June.

was given a period to accept the offer (up to 1 July 2009). On 2 July
2009, B accepted the offer. Rule the case.
There is no perfected contract of sale because A’s offer already
expired.
31

was given a period to accept the offer (up to 1 July 2009). On 2 June
2009, B accepted the offer. Rule the case.
The sale between A and B is perfected.

2009, B accepted the offer. However, on 3 June 2009, A said that he
is no longer interested in selling the land. Rule the case.
A can no longer withdraw the offer because B has already accepted the
same. (Art. 1324)

2009, A wanted to withdraw the offer, but he was unable to
communicate the withdrawal to B. B accepted the offer on 3 June
2009. Rule the case.
The sale is perfected. Withdrawal of the offer, in order to be valid,
must be communicated to the offeree.

was given a period to accept the offer (up to 1 July 2009). They
further agreed that should B give P5k, A will not withdraw the offer
prior to the expiration of the period given to B. On 2 June 2009, B
offered to A the P5k consideration. A, however, said that he would not
accept the P5k as he is willing to enter into an option contract with B
even without the payment of P5k. Rule the case. (?)

was given a period to accept the offer (up to 1 July
2009). They further agreed that should B give P5k, A will not
withdraw the offer prior to the expiration of the period given
to B. On 2 June 2009, B offered to A the P5k consideration. A,
however, said that he is no longer willing to sell the land to B. Rule
the case.
Jurisprudential Doctrines:
Southwestern When an option is not supported by a

Sugar and separate consideration, it is void and can
Molasses Co. vs be withdrawn notwithstanding the
Atlantic Gulf & acceptance made previously by the
Pacific Co. offeree.
(1955)
32
Atkins Kroll & Upon accepting the offer, a bilateral

Co. vs Cua Hien promise to sell and to buy ensues; the
Tek (1958) buyer assumes ipso facto the obligations
of a purchaser, and not merely the right
subsequently to buy or not to buy. The
concurrence of both acts – the offer and
the acceptance – generates a binding
contract of sale.
Navarro vs A consideration in an option to buy is
Sugar essential for a perfection of a contract. In
Producers, Inc. the case at bar, the sale lacks the most
(1961) essential element- the manner of
payment of the purchase price, therefore
there was no complete meeting of the
minds of the parties necessary for the
perfection of a contract of sale.
Consequently, defendant was justified in
withdrawing its offer to sell the molasses
in question.
Sanchez vs If acceptance is made before withdrawal,
Rigos (1972) it constitutes a binding contract of sale
although the option is given without
consideration. Before acceptance, the
offer may be withdrawn as a matter of
right. Be that as it may, the offerer
cannot revoke, before the period has
expired, in an arbitrary manner the offer
without being liable for damages which
the offeree may suffer under Article 19 f
the Civil Code.
This view has the advantage of avoiding
a conflict between Article 1324 and
Article 1479, in line with the cardinal
rule of statutory construction that, in
construing different provisions of one and
the same law or code, such interpretation
should be favored as will reconcile or
hamonize said provisions and avoid a
conflict between the same. The decision
in Soutwestern case considers Article
1479 as an exception to Article 1324, and
exceptions are not favored unless the
intention to the contrary is clear, and it is
not so insofar as said two articles are
concerned.
33
(The doctrine laid down in the Atkins

case is reaffirmed, and, insofar as
inconsistent therewith, the view adhered
to in Southwestern case should be
deemed abandoned or modified.)
Rural Bank of The commitment by a bank to resell a

Paranaque vs property within a specified period,
CA (1985) although accepted by the party in whose
favor it was made, was considered an
option not supported by a consideration.
Lacking such consideration, the option
was held void pursuant to Southwestern
Sugar and Molasses Co. case.
Natino vs IAC Citing Rural Bank of Paranaque, Inc.
(1991) case, the Supreme Court held that the
promise made by the President of a bank
to allow the petitioners to buy (or to re-
sell them) the foreclosed property (not
redeemed since the offer took place after
the expiration of the redemption period)
at any time they have money is not
binding on the bank because it was a
promise unsupported by a consideration
distinct from the re-purchase price.
Ang Yu Rules where a period is given to the
Asuncion vs CA offeree within which to accept:
(1994) 1. If the period itself is not founded
upon or supported by a separate

consideration, the offerer is still free
and has the right to withdraw the
offer before its acceptance, or if an
acceptance has been made, before the
offeror’s coming to know of such fact,
by communicating that withdrawal to
the offeree. (this is in accordance with
Sanchez doctrine)
2. The right to withdraw, however, must
not be exercised whimsically or

arbitrarily; otherwise, it could give
34
rise to a damage claim under Article

19 of the Civil Code.
3. If the period has a separate
consideration, a contract of option is

deemed perfected, and it would be a
breach of that contract to withdraw
the offer during the agreed period.
4. The option, however, is an
independent contract by itself, and it

is to be distinguished from the
projected main agreement (subject
matter of the option) which is
obviously yet to be concluded. If, in
fact, the optionerofferor withdraws
the offer before its acceptance
(exercise of option) by the optionee-
offeree, the latter may not sue for
specific performance on the proposed
contract (object of the option) since it
has failed to reach its own stage of
perfection. The optioner-offeror,
however, renders himself liable for
damages for breach of the option.
5. In these cases, care should be taken
of the real nature of the consideration
given, for if in fact, it has been
intended to be part of the
consideration for the main contract
with a right of withdrawal on the part
of the optionee, the main contract
could be deemed perfected; a similar
instance would be an earnest money
in contract of sale that can evidence
its perfection.
Nietes vs CA Notice of the exercise of the option need
(1972) not be coupled with actual payment of
the price, so long as this is delivered to
the owner of the property upon
performance of his part of the agreement.
* PERFECTION STAGE (OFFER AND ACCEPTANCE)
A contract of sale is perfected by mere consent. (Art. 1475)

35
Consent = meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. (Art. 1319)
ELEMENTS OF CONSENT:
5. Subjects / Contracting parties
6. Concurrence of offer and acceptance (Arts. 1319 - 1326)
7. Legal Capacity of the Contracting parties (Arts. 1327 – 1329)
8. The consent must be intelligent, free and spontaneous (Arts. 1330 –
1336)
ELEMENTS OF OFFER:
1. Complete
2. Definite as to the certainty of price and identity of the object
3. Intentional
Mirror Image theory – The person making the offer may fix time, place,
and manner of acceptance, all of which must be complied with. (Art.
1321)
Cognition theory – the offer is deemed accepted when the acceptance has
come to the knowledge of the offeror.
*Form of offer
Article 1319: Consent is manifested by the meeting of the offer and

the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain, and the acceptance absolute.
A qualified acceptance constitutes a counter-offer.
Article 1325: Unless it appears otherwise, business advertisements of

things for sale are not definite offers, but mere invitation to make an
offer.
Article 1326: Advertisements for bidders are simply invitations to

make proposals, and the advertiser is not bound to accept the highest
or lowest bidders unless the contrary appears.
* Form of acceptance
Article 1319: Consent is manifested by the meeting of the offer and

the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain, and the acceptance absolute.
A qualified acceptance constitutes a counter-offer.
36
Article 1320: An acceptance may be express or implied.
Article 1321: The person making the offer may fix the time, place, and
manner of acceptance, all of which must be complied with.
Article 1322: An offer made through an agent is accepted from the

time acceptance is communicated to him.
* When offer becomes ineffective
Article 1323: An offer becomes ineffective upon the death, civil

interdiction, insanity, or insolvency of either party before acceptance
is conveyed
Acceptance must be plain and unconditional. Any condition necessarily

involves a new proposal, which must be accepted by the other party to
give rise to a binding agreement. Acceptance must be in accordance with
the terms and conditions of the offer to effectively bind the offeror.
*The object need not be owned by the seller at the time of perfection. It is
sufficient that the seller has the right to transfer the ownership of the
object at the time of delivery.
- LEGAL BASES: Art. 1459 (vendor must have the right to transfer the
ownership of the thing at the time of perfection); and Art. 1434 (When
a person who is not the owner of a thing sells or alienates and delivers
it, and later the seller or grantor acquires title thereto, such title
passes by operation of law to the buyer or grantee.) - EXCEPTION to
this rule: CDB vs Lim and Nool vs CA
Cavite In the case at bar, a contract of sale was

Development perfected. The sum of P30,000.00, although
Bank, et al denominated in the offer to purchase as
vs Cyrus "option money," is actually in the nature of
Lim, et al. earnest money or down payment when
considered with the other terms of the offer.
Contracts are not defined by the parties
thereto but by principles of law. In
determining the nature of a contract, the
courts are not bound by the name or title
given to it by the contracting parties.
- However, a legal obstacle has rendered it
impossible in the case at bar, to perform its
obligation. The sale to Lim of the property
mortgaged by Rodolfo is deemed a nullity for
37
CDB never acquired a valid title to the

property because the foreclosure sale, in
which CDB has been awarded the property
is also a nullity since the mortgagor is not
the real owner of the said property.
Conchita Nool Article 1505 of the Civil Code provides that

vs CA "where goods are sold by a person who is
not the owner thereof, and who does not sell
them under authority or with consent of the
owner, the buyer acquires no better title to
the goods than the seller had, unless the
owner of the goods is by his conduct
precluded from denying the seller's
authority to sell." Here, there is no
allegation at all that petitioners were
authorized by DBP to sell the property to
the private respondents. Jurisprudence, on
the other hand, teaches us that "a person
can sell only what he owns or is authorized
to sell; the buyer can as a consequence
acquire no more than what the seller can
legally transfer." As petitioners "sold"
nothing, it follows that they can also
"repurchase" nothing. In this light, the
contract of repurchase is also inoperative —
and by the same analogy, void.
1. A offered to transfer the ownership of and deliver a piano to B for

P5k. B accepted the offer. However, before delivery by A and
payment by B, A sold the piano to C. Rule the case.
There is a double sale. (See Double Sale)
2. A offered to sell a bag of shabu to B for P500k. B accepted the

offer. Is there a perfected contract of sale? Yes. There is a
perfected, yet void, contract.
3. A (a 15 year old boy) bought a kilo of rice from B for P35. Is the
sale perfected? Yes, this is considered a sale of necessaries.
38
4. A owns Lot 1. B, a stranger to A, sold Lot 1 to C. Is the sale

between B and C perfected? Yes, the sale is perfected but the
same is unenforceable as between A and B.
[Art. 1403. The following contracts are unenforceable, unless they
are ratified:
(1) Those entered into in the name of another person by one who
has been given no authority or legal representation, or who has
acted beyond his powers xxx]
5. A wanted to sell his only car for P500k. He advertised this in a

newspaper. B read the advertisement, and thereafter went to A to
purchase the car. A, however, told B that he is no longer
interested in selling the car. Can B compel A to sell the car? No.
See Article 1325.
6. B offered to sell a parcel of land to A, and told the latter that the
acceptance should be made only on the 3rd day after the offer was
communicated. Furthermore, B said that the acceptance of the
offer should be sent through fax. A was very much interested to
buy the land, so he sent B an e-mail message on the 3rd day after
the offer was communicated, informing B that he is accepting the
offer. Was there a perfected contract of sale?
No. See Article 1321.
*CONSUMMATION STAGE
EXTINGUISHMENT OF OBLIGATIONS
Obligations are extinguished:
1. by payment or performance
2. by loss of the thing due
3. by condonation or remission
4. by confusion or merger of the rights of creditor and debtor
5. by compensation
6. by novation
Other causes of extinguishment of obligations, such as annulment,

rescission, fulfillment of a resolutory condition, and prescription, are
governed elsewhere in this Code.
*For purposes of extinguishing an obligation, payment and

performance of the obligation are the same. (Arts. 1232 and
1233)
Art. 1232; Payment means not only the delivery of money but also the
performance, in any other manner, of an obligation. (n)
39
Art. 1233: A debt shall not be understood to have been paid unless
the thing or service in which the obligation consists has been
completely delivered or rendered, as the case may be.
* Question: In a contract of sale, is delivery of the property the only

means to transfer ownership? No. See Article 1434
(Estoppel: the seller is not the owner of the thing) - construe Art. 1434 in
relation to Art. 1403(1)
Art. 1434: When a person who is not the owner of a thing sells or
alienates and delivers it, and later the seller or grantor acquires title
thereto, such title passes by operation of law to the buyer or grantee.
Art. 1403: The following contracts are unenforceable, unless they are
ratified:
(1) Those entered into in the name of another person by one who
has been given no authority or legal representation, or who has
acted beyond his powers xxx
EFFECT OF ESTOPPEL
Hypothetical Question: A owns Lot 1. B, a stranger to A, sold Lot 1 to
C. Thereafter, B was able to purchase Lot 1 from A.
(1) Was the sale of between B and C prior to B’s
purchase of the land perfected? Yes. The sale

is perfected. However, it is unenforceable.
(2) Who has the better right to Lot 1? (Stated
differently, who owns Lot 1?) C is the owner.

Title passes to C by operation of law.
* FORMATION OF CONTRACTS
* Article 1483: Subject to the provisions of the Statute of Frauds and of any
other applicable statute, a contract of sale may be made:
1. In writing
2. Word of mouth
3. Partly in writing and partly by word of mouth
4. May be inferred from the conduct of parties
*Form of Contract:
Art. 1356: Contracts shall be obligatory, in whatever form they may

have been entered into, provided all the essential requisites for their
40
validity are present. However, when the law requires that a contract be
in some form in order that it may be valid or enforceable, or that a
contract be proved in a certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties stated in the
following article cannot be exercised.
Art. 1357: If the law requires a document or other special form, as in

the acts and contracts enumerated in the following article, the
contracting parties may compel each other to observe that form, once
the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract.
Art. 1358: The following must appear in a public document:

(1) Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights over
immovable property; sales of real property or of an interest therein are
governed by Articles 1403, No. 2, and 1405; (2) The cession,
repudiation or renunciation of hereditary rights or of those of the
conjugal partnership of gains;
(3) The power to administer property, or any other power which has for
its object an act appearing or which should appear in a public

document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in
a public document.
All other contracts where the amount involved exceeds five hundred
pesos must appear in writing, even a private one. But sales of goods,
chattels or things in action are governed by Articles, 1403, No. 2 and
1405.
*If notary public is not authorized – deed of sale of land is still valid
because public instrument is not even essential for the validity of the sale
(Sorfano v Latono)
*The only purpose of the Statute of Frauds is to prove the existence of

contracts. It cannot be made to apply to contracts which are not executory.
* Can there be a reformation of an oral contract of sale?

An oral contract of sale cannot be reformed.
* Electronic Commerce Act
Section 7, Republic Act No. 8792, Electronic Commerce Act: Legal

Recognition of Electronic Documents. – Electronic documents shall have
41
the legal effect, validity or enforceability as any other document or legal

writing, and -
(a) Where the law requires a document to be in writing, that requirement
is met by an electronic document if the said electronic document

maintains its integrity and reliability and can be authenticated so as
to be usable for subsequent reference, in that -
(i) The electronic document has remained complete and
unaltered, apart from the addition of any endorsement and

any authorized change, or any change which arises in the
normal course of communication, storage and display; and
(ii) The electronic document is reliable in the light of the purpose
for which it was generated and in the light of all the relevant
circumstances.
(b) Paragraph (a) applies whether the requirement therein is in the form
of an obligation or whether the law simply provides consequences for

the document not being presented or retained in its original form.
(c) Where the law requires that a document be presented or retained in
its original form, that requirement is met by an electronic document if

-
(i) There exists a reliable assurance as to the integrity of the
document from the time when it was first generated in its

final form; and
(ii) That document is capable of being displayed to the person to
whom it is to be presented: Provided, That no provision of this

Act shall apply to vary any and all requirements of existing
laws on formalities required in the execution of documents for
their validity.
For evidentiary purposes, an electronic document shall be the functional

equivalent of a written document under existing laws. This Act does not
modify any statutory rule relating to the admissibility of electronic data
messages or electronic documents, except the rules relating to
authentication and best evidence.
Section 8, Republic Act No. 8792, Electronic Commerce Act Legal
Recognition of Electronic Signatures. - An electronic signature on the
electronic document shall be equivalent to the signature of a person on a
written document if that signature is proved by showing that a prescribed
procedure, not alterable by the parties interested in the electronic
document, existed under which -
(a) A method is used to identify the party sought to be bound and to
indicate said party’s access to the electronic document necessary for

his consent or approval through the electronic signature;
(b) Said method is reliable and appropriate for the purpose for which the
electronic document was generated or communicated, in the light of

all the circumstances, including any relevant agreement;
42
(c) It is necessary for the party sought to be bound, in order to proceed

further with the transaction, to have executed or provided the
electronic signature; and
(d) The other party is authorized and enabled to verify the electronic
signature and to make the decision to proceed with the transaction
authenticated by the same.
Section 11, Republic Act No. 8792, Electronic Commerce Act

Authentication of Electronic Data Messages and Electronic Documents. -
Until the Supreme Court by appropriate rules shall have so provided,
electronic documents, electronic data messages and electronic signatures,
shall be authenticated by demonstrating, substantiating and validating a
claimed identity of a user, device, or another entity in an information or
communication system, among other ways, as follows:
(a) The electronic signature shall be authenticated by proof that a letter,
character, number or other symbol in electronic form representing the

persons named in and attached to or logically associated with an
electronic data message, electronic document, or that the appropriate
methodology or security procedures, when applicable, were employed
or adopted by a person and executed or adopted by such person, with
the intention of authenticating or approving an electronic data
message or electronic document;
(b) The electronic data message and electronic document shall be
authenticated by proof that an appropriate security procedure, when

applicable was adopted and employed for the purpose of verifying the
originator of an electronic data message and/or electronic document,
or in detecting error or alteration in the communication, content or
storage of an electronic document or electronic data message from a
specific point, which, using algorithm or codes, identifying words or
numbers, encryptions, answers back or acknowledgment procedures,
or similar security devices.
The Supreme Court may adopt such other authentication procedures,
including the use of electronic notarization systems as necessary and
advisable, as well as the certificate of authentication on printed or
hard copies of the electronic document or electronic data messages by
electronic notaries, service providers and other duly recognized or
appointed certification authorities.
The person seeking to introduce an electronic data message and
electronic document in any legal proceeding has the burden of
proving its authenticity by evidence capable of supporting a finding
that the electronic data message and electronic document is what the
person claims it to be.
In the absence of evidence to the contrary, the integrity of the information
and communication system in which an electronic data message or
electronic document is recorded or stored may be established in any legal
proceeding -
43
(a) By evidence that at all material times the information and

communication system or other similar device was operating in a
manner that did not affect the integrity of the electronic data message
and/or electronic document, and there are no other reasonable
grounds to doubt the integrity of the information and communication
system;
(b) By showing that the electronic data message and/or electronic
document was recorded or stored by a party to the proceedings who is
adverse in interest to the party using it; or
(c) By showing that the electronic data message and/or electronic
document was recorded or stored in the usual and ordinary course of
business by a person who is not a party to the proceedings and who
did not act under the control of the party using the record.
1. A entered into a contract of sale with B where the former engages to

sell a parcel of land for P500k. Is the contract valid? The contract is
valid but unenforceable. See Art. 1403 (2)(d).
1.1May the contracting parties compel each other to observe the

form?
Yes. See Arts. 1357 and 1406.
[Art. 1357. If the law requires a document or other special form, as
in the acts and contracts enumerated in the following article, the
contracting parties may compel each other to observe that form,
once the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract.
Art. 1406. When a contract is enforceable under the Statute of
Frauds, and a public document is necessary for its registration in
the Registry of Deeds, the parties may avail themselves of the right
under Article 1357.]

sell a parcel of land for P500k. B already paid 500k but A refused to
deliver the land arguing that the contract they entered into is
unenforceable. A’s argument is untenable. The Statute of Frauds is
applicable only to executory contracts.
3. A owns a parcel of land. B is an agent of A. B sold A’s land to C. What

is the status of the contract?
The contract is void, absent any written document giving B the
authority to sell A’s land. See Regina Dizon vs CA.
44
Regina Article 1874 of the Civil Code is

Dizon vs CA explicit that: "When a sale of a piece of
land or any interest therein is through
an agent, the authority of the latter
shall be in writing; otherwise, the sale
shall be void."
4. A owes B P500k. To defraud B, A sold his only property to C, who was

in good faith. What are the remedies available to B?
See Article 1177.
Art. 1177: The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may exercise all the
rights and bring all the actions of the latter for the same purpose,
save those which are inherent in his person; they may also impugn
the acts which the debtor may have done to defraud them.
(Hence, the remedies available to B are:
a. To Exact fulfilment with right to damages
b. To Exhaust the debtor’s properties still in his possession – writ
of attachment (before judgment) or writ of execution (for final

judgment not yet executed)
c. ACCION SUBROGATORIA – an action where the creditor whose
claims had not been fully satisfied, may go after the debtors (3rd
person) of the defendant debtor.
d. ACCION PAULIANA – an action where the creditor files an
action in court for the RESCISSION of acts or contracts entered

into by the debtor designed to defraud the former.)

sell a parcel of land for P500k. There is no written note or
memorandum to prove the contract but the offer and acceptance were
made through e-mail. Is the contract valid and enforceable?
Yes. The Electronic Commerce Act (RA 8792) is applicable.
5.1 If the offer and acceptance were made through SMS, is the
contract still valid and enforceable? I think so.

sell a parcel of land for P500k. When the suit was brought to the
court to assail the enforceability of the contract, one party (A), failed
to object to the presentation of evidence aliunde made by B. Is the
contract valid? Yes. See Article 1405.
Art. 1405: Contracts infringing the Statute of Frauds, referred to in
No. 2 of Article 1403, are ratified by the failure to object to the
45
presentation of oral evidence to prove the same, or by the acceptance

of benefit under them.

sell a parcel of land for $500k. B was mistaken to believe that the
price is P500k. Is there a perfected contract? If in the affirmative, is
the sale valid? Can the contract be reformed?
* LEGALITY OF SALE
Article 1409: the following contracts are inexistent and void from the
beginning
(1) Whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy

(2) Those which are absolutely simulated or fictitious
(3) Those whose cause or object did not exist at the time of the transaction
(4) Those whose object is outside the commerce of men
(5) Those which contemplate an impossible service
(6) Those where the intention of the parties relative to the principal object of
the contract cannot be ascertained

(7) Those whose expressly prohibited or declared void by the law
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
Article 1411: when the nullity proceeds from the illegality of the cause or
object of the contract and the act constitutes a criminal offense, both
parties being in pari delicto, they shall have no action against each other
and both shall be prosecuted. Moreover, the provisions of the Penal Code
relative to the disposal of effects or instruments of a crime shall be
applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but the
innocent one may claim what he has given and shall not be bound to
comply with his promise.
IN PARI DELICTO RULE (for illegal cause or object)

1. BOTH are in pari delicto
▪ No action against each other

▪ BOTH will be prosecuted
▪ RPC provision relative to the disposal of
effects/instruments of a crime shall apply
2. ONLY ONE is guilty
▪ INNOCENT PARTY may claim what he has given

▪ INNOCENT PARTY not bound to comply with his promise
46
Article 1416: When the agreement is not illegal per se but is merely
prohibited, and the prohibition is designed for the protection of the
plaintiff, he may, if public policy is thereby enhanced, recover what he has
paid or delivered.
Article XII, Section 2, 1987 Constitution: All lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and
other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be under
the full control and supervision of the State. The State may directly
undertake such activities, or it may enter into co-production, joint venture,
or production-sharing agreements with Filipino citizens, or corporations or
associations at least sixty per centum of whose capital is owned by such
citizens. Such agreements may be for a period not exceeding twenty-five
years, renewable for not more than twenty-five years, and under such terms
and conditions as may be provided by law. In cases of water rights for
irrigation, water supply fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure and limit of
the grant.
The State shall protect the nation's marine wealth in its archipelagic
waters, territorial sea, and exclusive economic zone, and reserve its use
and enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural
resources by Filipino citizens, as well as cooperative fish farming, with
priority to subsistence fishermen and fish-workers in rivers, lakes, bays,
and lagoons.
The President may enter into agreements with foreign-owned corporations
involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country. In
such agreements, the State shall promote the development and use of local
scientific and technical resources.
The President shall notify the Congress of every contract entered into in
accordance with this provision, within thirty days from its execution.
Article XII, Section 3, 1987 Constitution: Lands of the public domain are
classified into agricultural, forest or timber, mineral lands and national
parks. Agricultural lands of the public domain may be further classified by
law according to the uses to which they may be devoted. Alienable lands of
the public domain shall be limited to agricultural lands. Private corporations
or associations may not hold such alienable lands of the public domain
except by lease, for a period not exceeding twenty-five years, renewable for
not more than twenty-five years, and not to exceed one thousand hectares
47
in area. Citizens of the Philippines may lease not more than five hundred
hectares, or acquire not more than twelve hectares thereof, by purchase,
homestead, or grant.
Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform, the
Congress shall determine, by law, the size of lands of the public domain
which may be acquired, developed, held, or leased and the conditions
therefor.
Article XII, Section 7, 1987 Constitution : Save in cases of hereditary

succession, no private lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to acquire or hold lands
of the public domain.
Article XII, Section 8, 1987 Constitution: Notwithstanding the provisions of

Section 7 of this Article, a natural-born citizen of the Philippines who has
lost his Philippine citizenship may be a transferee of private lands, subject
to limitations provided by law.
* OBLIGATIONS OF A VENDOR
1. Deliver the thing to the vendee (Article1458)
2. Transfer the ownership over the thing to the vendee (Article 1458)
3. Preservation of the thing (Article 1163)
4. Deliver the fruits and accessories (Arts. 1164, 1166, 1495, 1537)
5. Make Warranties
6. Taking-out Insurance Coverage (Art. 1523)
7. Expenses for the execution and registration of the sale, unless there
is a stipulation to the contrary (Article 1487)
*DELIVERY
- the ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.

- See Arts. 1477, 1496, 1497
Art. 1477: The ownership of the thing sold shall be transferred to

the vendee upon the actual or constructive delivery thereof.
Art. 1496: The ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from
the vendor to the vendee.
Art. 1497: The thing sold shall be understood as delivered, when it
is placed in the control and possession of the vendee.
48
-The vendor must have the right to transfer the ownership of the thing
at the time it is delivered (Art 1459)
Reason for this rule: NEMO DAT QUOD NON HABET (He who does
not own the thing cannot dispose of the same)
Philippine The Court held that in the absence of
Suburban an express stipulation to the contrary,
Development the payment of the purchase price of
Corp. vs the goods is not a condition precedent
Auditor to the transfer of title to the buyer, but
General title passes by the delivery.
Balatbat vs Devoid of any stipulation that
CA "ownership in the thing shall not pass
to the
purchaser until he has fully paid the
price", ownership in thing shall pass
from the vendor to the vendee upon
actual or constructive delivery of the
thing sold even if the purchase price
has not yet been fully paid. The failure
of the buyer to make good the price
does not, in law, cause the ownership
to revest to the seller unless the
bilateral contract of sale is first
rescinded or resolved pursuant to
Article 1191 of the New Civil Code.
Non-payment only creates a right to
demand the fulfillment of the obligation
or to rescind the contract.
* REQUISITES OF DELIVERY (3 I’s)

1. Identity
2. Integrity
Consing SC recognized the right of a buyer in a

vs CA subdivision land to compel the seller to
complete the roads and other facilities of
the subdivision, even when nothing to that
effect is stipulated in the contract of sale.
A seller’s duty is to deliver the thing
sold in a condition suitable for its
enjoyment by the buyer for the purposes
contemplated… and a proper access to a
residence is essential to its enjoyment. The
seller cannot shift to the buyer the burden
49
of providing for an access to and from the

subdivision, and when the seller has so
defaulted in such obligation, the
buyer should be entitled to a proportionate
reduction in her purchase price of the two
lots.
3. Intention
Abuan vs The critical factor in all different modes
Garcia of effecting delivery, which gives legal
effect to the act, is the actual intention of
the seller to deliver, and its acceptance by
the buyer. Without that intention, there is
no tradition
Quijada In all forms of delivery, it is necessary
vs CA that the act of delivery, whether
constructive or actual, should be
coupled with the intention of delivering
the thing. The act, without the
intention, is insufficient. The critical
factor in the
different modes of effecting delivery which
gives legal effect to the act, is the actual
intention of the vendor to deliver, and its
acceptance by the vendee.
Without that intention, there is no
tradition.
The Supreme Court recognized that the
sale of a land previously donated by the
seller to a local government unit under a
resolutory condition, was a valid sale
even though at the time of sale,
ownership in the property was still with
the local government. However, when the
resolutory condition did occur which
effectively reverted ownership back to the
seller, under Article 1434 the seller’s title
passes by operation of law to the buyer.
The Court expressly recognized that the
rule under Article 1434 of the Civil Code
applies not only to sale of goods, but also
to other kinds of property, including real
property.
50
1. A and B entered into a contract of sale whereby A engages to sell

his watch at P1k to B. Because B was so excited to have the watch,
he stole the same from A. Three days later, he sold the same to C.
Was there already a delivery of the watch to B?
There was no delivery. Delivery must be intentional. There must be
an actual intention on the part of the vendor to deliver.
Consequently, the contract of sale between B and C is
unenforceable [1403(1)].
2. A and B are friends. They entered into an agreement whereby A

would deliver and transfer the ownership of a gold bar to B in
exchange of P500k. Instead of delivering a gold bar, A delivered a
silver bar. Rule the case.
A’s obligation to B as to the delivery of the gold bar still subsists as
there was no delivery of the subject matter yet. In order to effect the
delivery, the very object of the contract of sale (gold bar) must be
delivered (this pertains to the identity).
* SALE OF GOODS BY DESCRIPTION OR BY SAMPLE
Art. 1481: In the contract of sale of goods by description or by sample,

the contract may be rescinded if the bulk of the goods delivered do not
correspond with the description or the sample, and if the contract be
by sample as well as description, it is not sufficient that the bulk of
goods correspond with the sample if they do not also correspond with
the description.
The buyer shall have a reasonable opportunity of comparing the bulk
with the description or the sample.
By SAMPLE – sale where a small quantity of a commodity is exhibited

by the seller as a fair specimen of the bulk, which is not present and
as to which there is no opportunity to inspect or examine; goods must
correspond with sample shown
By DESCRIPTION – sale where a seller sells a thing as being of a

certain kind, and the buyer merely relies on the seller’s
representations or representations; goods must correspond with
description
Where the goods delivered do not correspond with the description or

sample or, as in the case of sale by description and sample, the goods
51
do not correspond with either the description or sample – the remedy

is RESCISSION.
* 2 KINDS OF DELIVERY
1. ACTUAL – when the thing sold is placed in the control and
possession of the vendee

2. CONSTRUCTIVE
a. Execution of public instrument (Article 1497)

Exception:
i. when there is stipulation to contrary, execution does not
produce effect of delivery ii. when at the time of execution
of instrument, subject matter was not subject to control of
the seller.
ii.i subject matter should be within control of seller; he
should have capacity to deliver at the time of execution of

public instrument when he wants to effect actual delivery
Addison vs Felix The Code imposes upon the
and Tioco vendor the obligation to deliver
the thing sold. The thing is
considered to be delivered when
it is placed ―in the hands and
possession of the vendee.‖ (Civ.
Code, art. 1462.) It is true that
the same article declares that
the execution of a public
instrument is equivalent to the
delivery of the thing which is the
object of the contract, but, in
order that this symbolic delivery
may produce the effect of
tradition, it is necessary that the
vendor shall have had such
control over the thing sold that,
at the moment of the sale, its
material delivery could have
been made. It is not enough to
confer upon the purchaser the
ownership and the right of
possession. The thing sold must
be placed in his control. When
there is no impediment whatever
to prevent the thing sold passing
into the tenancy of the
purchaser by the sole will of the
52
vendor, symbolic delivery

through the execution of a
public instrument is sufficient.
But if, notwithstanding the
execution of the instrument, the
purchaser cannot have the
enjoyment and material tenancy
of the thing and make use of it
himself or through another in
his name, because such tenancy
and enjoyment are opposed by
the interposition of another will,
then fiction yields to reality —
the delivery has not been
effected.
ii.ii such capacity should subsist for a reasonable time after

execution of instrument (reasonable time depends on
circumstances of persons, places & things)
Vda. De Although it is postulated that

Sarmiento vs the execution of a public
Lesaca document is equivalent to
delivery, this legal fiction only
holds true when there is no
impediment that may prevent
the passing of the property from
the hands of the vendor into
those of the vendee.
Since tradition is an obligation
on the part of the seller, then
the burden must continue to lie
with the seller to grant the
buyer reasonable period to take
possession of the subject
matter.
Effect when these 2 requisites do not concur: no constructive

delivery; no compliance on part of SELLER to deliver
b. Traditio constitutum possessorium – at the time of perfection,

the seller held possession of the subject matter in the concept
of owner, and pursuant to the contract, the seller continues to
hold physical possession thereof as lessee or other form of
possession other than the concept of owner. (Art. 1500)
53
c. Traditio brevi manu – opposite of constitutum possessorium;

Before contract of sale, the would-be buyer was already in
possession of the would-be subject matter of sale (ex: as
lessee) (Art. 1499)
d. Traditio longa manu –Delivery of thing by mere agreement;

when SELLER points to the property without need of actually
delivering (as when the thing sold cannot be transferred to the
possession of the vendee at the time of sale. (Art. 1499)
e. Symbolic delivery – with regard to movable property, delivery

may be effected by the delivery of the keys of the place or
depository where it is stored or kept. (Art. 1498)
f. Delivery through carrier (will be discussed later)
g. Delivery by negotiable document of title (will be discussed

later)
h. Delivery of incorporeal property (will be discussed later)
1. A entered into a contract of pledge with B where A is about to give

his car to B in exchange of P500k loan. The document is duly
notarized. Is the delivery of the car to B equivalent to transfer of
ownership? No. The transfer of ownership through delivery is
applicable only to a contract of sale.
2. A and B entered into a contract whereby A engages to deliver his

car to B, and B to pay a price therefor in the amount of P50k.
They executed a public instrument. Was there a delivery of the
car? Yes. The rule is applicable to both immovable and movable
properties.
3. A sold B a parcel of land. They executed a public instrument.

However, B lost his copy of the instrument. Was there a delivery
of the land?
Yes. Mere execution of the public instrument constitutes delivery.
4. A sold B a parcel of land at P500k. The sale is not evidenced by a

public instrument, but B took possession of the land after their
agreement. When B died, his heir, C, took possession of the land.
A contended that he is still the owner of the land as there was no
54
delivery of the land to B, and that the contract was unenforceable

pursuant to the statute of frauds. Rule the case.
A’s contention is untenable. Being the heir of B, C is now the owner
of the land. The statute of frauds is not applicable because this is
not an executory contract. Likewise, there is no need to execute a
public instrument to effect delivery as there was already an actual
delivery of the land when B took possession of the land.
Presumption of Good Faith

Tablante vs The placing of the titles of ownership in
Aquino the possession of the vendee or the use
which he may make of his right with the
consent of the vendor shall be considered as
a delivery.
Any person who is aware that there is in
his title or in the manner of acquiring it any
flaw invalidating the same shall be
considered a possessor in good faith. Good
faith is always presumed, and any person
alleging bad faith on the part of the
possessor is obliged to prove it.
Possession of the Thing / Physical Presence in the Property bought

Gonzales The execution of the public instrument,
vs Haberer without actual delivery of the thing, transfers
the ownership from the vendor to the vendee,
who may thereafter exercise the rights of an
owner over the same. In the instant case,
vendor Roque delivered the owner's
certificate of title to herein private
respondent. It is not necessary that vendee
be physically present at every square inch of
the land bought by him, possession of the
public instrument of the land is sufficient to
accord him the rights of ownership.
Execution Sale and Notice of Sale in Mortgage Foreclosure Sale

Flores vs A purchaser of real property at an ordinary
Lim execution sale is not entitled to possession
at an ordinary execution rents and profits
until after the period of redemption has
expired and the legal title to the land had
become vested in him.
55
Gonzales The effective conveyance of the land is

vs Calimbas accomplished by the deed which is issued
only after the period of redemption has
expired.
- The certificate of sale issued to the
purchaser at an auction sale is intended to
be a mere memorandum of the purchase. It
does not transfer the property but merely
identifies the purchaser and the property,
states the price and the date when the
right of redemption expires. The effective
conveyance is made by the deed of absolute
sale executed after the expiration of the
period of redemption.
Tambunting failure to advertise a mortgage foreclosure
vs CA sale in compliance with statutory
requirements constitutes a jurisdictional
defect invalidating the sale and that a
substantial error or omission in a notice of
sale will render the notice insufficient and
vitiate the sale.
Non-payment of Purchase Price

EDCA Non-payment of the purchase price by the
Publishing impostor, although amounting to fraud, did
vs Santos not amount to unlawful deprivation under
Article 559, but merely may be considered
vitiation of consent as to make the contract
voidable; but that so long as the contract
has not been annulled, it remained valid,
and the subsequent sale and delivery by the
impostor of the books to Santos effectively
transferred ownership to Santos.
Other cases
Bean vs Actual manual delivery of an article sold is
Cadwaller not essential to the passing of the title
thereto (art 1450, Civil Code) unless made
so by the terms of the contract or by an
understanding of the parties. The parties to
the contract may agree when and on what
conditions the property in the subject of the
contract was passed to the prospective
owner.
56
In the present case the parties agreed that

the delivery of the logs should be made
alongside a vessel of the defendant. That
was done by the plaintiff. The vessel of the
defendant was sent to the point of delivery
and the said defendant attempted to load on
said vessel the logs delivered along its side
by the plaintiff. It is a rule well established
that a mere contract for the sale of goods,
where nothing remains to be
done by the seller before making delivery,
transfers the right of property, although the
price has not been paid, nor the thing sold
actually delivered to the purchaser.
Sps. Pingol The distinction between a contract of sale
vs CA and a contract to sell is important for in a
contract of sale, the title passes to the
vendee upon the delivery of the thing sold,
whereas in a contract to sell, by agreement,
ownership is reserved in the vendor and is
not to pass until the full payment of the
price. In a contract of sale, the vendor has
lost and cannot recover ownership until and
unless the contract is resolved or rescinded,
whereas in a contract to sell, title is retained
by the vendor until the full payment of the
price, such payment being a positive
suspensive condition, failure of which is not
a breach but an event that prevented the
obligation of the vendor to convey title from
becoming effective.
Bucton vs By the delivery of the possession of the
Gabar land, the sale was consummated and title
was transferred to the appellee, that the
action is actually not for specific
performance, since all it seeks is to quiet
title, to remove the cloud cast upon
appellee's ownership as a result of
appellant's refusal to recognize the sale
made by his predecessor, and that as
plaintiff-appellee is in possession of the
land, the action is imprescriptible.
57
DELIVERY THROUGH CARRIER

* Is there an instance where the goods are delivered to a third person
and yet delivery to the buyer is effected? YES, in case of delivery to
carrier.
General Rule: When the seller is authorized or required to send goods

to the buyer (in pursuance of a contract), delivery to carrier (whether
named by the buyer or not) is delivery to buyer [Art. 1523].
Exceptions:
1. FAS (Free Along Side)
-the seller pays all charges and is subject to risk until the goods
are placed alongside the vessel.
2. FOB (Free on Board)
- the seller shall bear all expenses until the goods are delivered
according as to whether the goods are to be delivered ―F.O.B.‖ at
the point of shipment or at the point of destination determines the
time when property passes.
3. CIF (Cost, Insurance, Freight)
- under an arrangement ―C.I.F. Pacific Coast (destination), the

vendor is to pay not only the cost of the goods, but also the freight
and insurance expenses, and, as it was judicially interpreted, this
is taken to indicate that the delivery is to be made at the port of
destination.
4. Article 1503, first, second and third paragraphs (where the
ownership is retained by the seller)

(a) Where goods are shipped and by the bill of lading the goods
are deliverable to the seller or his agent, or to the order of

seller or agent
(b) Where goods are shipped and by the bill of lading the goods
are deliverable to the order of the buyer or his agent but the
possession of the bill of lading is retained by the seller or his
agent
(c) Where the seller of goods draws on the buyer for the price and
transmits the bill of lading and bill of exchange to the buyer

to secure acceptance or payment of the bill of exchange, and
the buyer does not honor the bill of exchange [Here, the
drawer is the seller and the drawee is the buyer. If the buyer
does not honor the bill of exchange, he shall return the bill of
lading. If he retains the same, he acquires no added right
thereby.]
* Without the bill of lading, or that the bill of lading is not

deliverable to bearer or to the buyer or his order, the buyer
does not acquire the direct obligation of the bailee to hold the
goods for him.
58
DELIVERY THROUGH NEGOTIABLE DOCUMENTS OF TITLE
Document of Title, defined

Document of title to goods includes any bill of lading, dock warrant,
quedan or warehouse receipt or order for the delivery of goods, or any
other document used in the ordinary course of business in the sale or
transfer of goods, as proof of the
possession or control of the goods, or authorizing or purporting to
authorize the possessor of the document to transfer or receive, either
by indorsement or by delivery, goods represented by such document.
(Article 1636)
Negotiable Document of Title, defined

A document of title in which it is stated that the goods referred to
therein will be delivered to the bearer, or to the order of any person
named in such document (Art. 1507)
Siy Cong Warehouse receipt represents the goods, but the

Bieng vs intrusting of the receipt is more than the mere
Hongkong delivery of the goods; it is a representation that the
& one to whom the possession of the receipt has
Shanghai been so entrusted has the title to the goods.
bank
Bill of Lading – a document that serves as evidence of receipt of goods

for shipment issued by a common carrier
Warehouse Receipt – a document of title which is issued by a

warehouseman
Quedan – a warehouse receipt that covers sugar
Dock warrant – a warrant given by dock-owners to the owner of

merchandise imported and warehoused on the dock upon the faith of
the bills of lading, as a recognition of his title to the goods
How Negotiated (Arts. 1508-1509)
Art. 1508: A negotiable document of title may be negotiated by

delivery:
(1) Where by the terms of the document the carrier, warehouseman
or other bailee issuing the same undertakes to deliver the goods to

the bearer; or
(2) Where by the terms of the document the carrier, warehouseman
or other bailee issuing the same undertakes to deliver the goods to

59
the order of a specified person, and such person or a subsequent

endorsee of the document has indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are
deliverable to bearer or where a negotiable document of title has been
indorsed in blank or to bearer, any holder may indorse the same to
himself or to any specified person, and in such case the document
shall thereafter be negotiated only by the endorsement of such
endorsee. (n)
Art. 1509: A negotiable document of title may be negotiated by the

endorsement of the person to whose order the goods are by the
terms of the document deliverable. Such endorsement may be in
blank, to bearer or to a specified person. If indorsed to a specified
person, it may be again negotiated by the endorsement of such
person in blank, to bearer or to another specified person.
Subsequent negotiations may be made in like manner.
Who can Negotiate (Art. 1512)
Art. 1512: A negotiable document of title may be negotiated:

(1) By the owner therefor; or
(2) By any person to whom the possession or custody of the
document has been entrusted by the owner, if, by the terms of the
document the bailee issuing the document undertakes to deliver
the goods to the order of the person to whom the possession or
custody of the document has been entrusted, or if at the time of
such entrusting the document is in such form that it may be
negotiated by delivery.
Effects of Negotiation (Art. 1513)
Art. 1513: A person to whom a negotiable document of title has

been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the document
to him had or had ability to convey to a purchaser in good faith for

value and also such title to the goods as the person to whose order
the goods were to be delivered by the terms of the document had or
had ability to convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold
possession of the goods for him according to the terms of the

document as fully as if such bailee had contracted directly with
him.
Unauthorized Negotiation (Art. 1518)

As between the owner of a negotiable document of title who
indorsed it in blank and entrusted it to a friend, and the holder of
60
such negotiable document of title to whom it was negotiated in good

faith and for value, the latter is preferred, under the principle that
as between two innocent persons, he who made the loss possible
should bear the loss.
Art. 1518: The validity of the negotiation of a negotiable document

of title is not impaired by the fact that the negotiation was a breach
of duty on the part of the person making the negotiation, or by the
fact that the owner of the document was deprived of the possession
of the same by loss, theft, fraud, accident, mistake, duress, or
conversion, if the person to whom the document was negotiated or a
person to whom the document was subsequently negotiated paid
value therefor in good faith without notice of the breach of duty, or
loss, theft, fraud, accident, mistake, duress or conversion.
Non-Negotiable Documents of Title
How transferred or assigned (Art. 1514)

Effects of transfer (Art. 1514)
Art. 1514: A person to whom a document of title has been

transferred, but not negotiated, acquires thereby, as against the
transferor, the title to the goods, subject to the terms of any
agreement with the transferor.
If the document is non-negotiable, such person also acquires the
right to notify the bailee who issued the document of the transfer
thereof, and thereby to acquire the direct obligation of such bailee
to hold possession of the goods for him according to the terms of
the document.
Prior to the notification to such bailee by the transferor or
transferee of a non-negotiable document of title, the title of the
transferee to the goods and the right to acquire the obligation of
such bailee may be defeated by the levy of an attachment of
execution upon the goods by a creditor of the transferor, or by a
notification to such bailee by the transferor or a subsequent
purchaser from the transfer of a subsequent sale of the goods by
the transferor.
Negotiable Instrument vs Negotiable Document of Title

NEGOTIABLE INSTRUMENT NEGOTIABLE DOCUMENT
OF TITLE
61
Operates as a substitute for (to facilitate goods)

money - operates as proof of the
possession or control of the
goods, or
- authorizing or purporting
to authorize the possessor of
the document to transfer or
receive, either by indorsement
or by delivery, goods
represented by such
document.
Governed by the Negotiable Governed by the Civil Code,
Instruments Law and in some cases, by the
Warehouse Receipt Law and
Code of Commerce
A bearer instrument is always The special indorsement of a
a bearer instrument even if a bearer instrument has the
special indorsement is made effect of converting the bearer
instrument into an order
instrument
If words ―non-negotiable‖ or
the like are placed on the
document which contains that
it should be delivered to the
bearer, such document may
nevertheless be negotiated by
the holder
1. A executed and gave B a negotiable document of title payable to the

order of B. B negotiated the same through indorsement and
delivery to C. C, in turn, negotiated it to D, and D to E. Meanwhile,
X, A’s creditor was able to obtain a favorable judgment allowing for
the attachment of the document of title in question. May X attach
the document of title to satisfy A’s indebtedness?
No. See Article 1519.
2. A executed and gave B a negotiable document of title. B forged the

document and indorsed the same to C. Who has the title, A or C?
See Article 1518.
RESERVATION OF OWNERSHIP DESPITE DELIVERY

1. When there is an express reservation (Art. 1478)
62
2. Sale on Acceptance (Art. 1502)

- Ownership passes to the buyer only when:
(a) He signifies his approval or acceptance to the seller or does any
act adopting the transaction; or

(b) he does not signify his approval or acceptance but retains the
goods without giving notice of rejection, then if a time has been

fixed for the return of the goods, on the expiration of such time,
and, if no time has been fixed, on the expiration of a reasonable
time.
[In ―Sale or Return‖ ownership passes to the buyer on delivery but
he may revest the ownership in the seller by returning the goods
within the time fixed in the contract, or if there is no time fixed,
within a reasonable time]
3. Article 1503, first, second and third paragraphs
(a) Where goods are shipped and by the bill of lading the goods
are deliverable to the seller or his agent, or to the order of

seller or agent
(b) Where goods are shipped and by the bill of lading the goods
are deliverable to the order of the buyer or his agent but the
possession of the bill of lading is retained by the seller or his
agent
(c) Where the seller of goods draws on the buyer for the price and
transmits the bill of lading and bill of exchange to the buyer

to secure acceptance or payment of the bill of exchange, and
the buyer does not honor the bill of exchange [Here, the
drawer is the seller and the drawee is the buyer. If the buyer
does not honor the bill of exchange, he shall return the bill of
lading. If he retains the same, he acquires no added right
thereby.]
COMPLETENESS OF DELIVERY
*MOVABLES (Article 1522)

Where, in relation to what is contracted to sell, the quantity of goods
delivered is –
❖ LESS
- Buyer has 2 options:
(a) Reject the goods
(b) Accept them
[When the acceptance is with knowledge that the seller is not

going to perform the contract = buyer shall pay at contract rate;
When knowledge is after the acceptance and
consummation or disposal of the goods = buyer is not liable for
more than the fair value to him of the goods delivered]
63
❖ LARGER
(a) Accept per contract and reject the rest
(b) Accept the whole and pay at contract rate
(c) If indivisible, reject the whole or accept it entirely
❖ MIXED WITH GOODS OF DIFFERENT DESCRIPTION

(a) Accept the goods which are in accordance with the contract
and reject the rest

(b) If indivisible, reject the goods entirely or accept them entirely
* IMMOVABLES (Article 1522)
❖ SOLD PER UNIT OR NUMBER (Art. 1539 - 1540)

- With statement of area at the rate of a certain price for a unit or
measure or number
- If the vendee should demand, the vendor shall deliver ALL that
may have been stated in the contract.

- If what is delivered is:
▪ LESS IN AREA / OF INFERIOR/DIFFERENT QUALITY =

(a) Rescission if lack in area is not less than 1/10 (or 1/10
+) of area agreed upon (b) Proportional reduction of price
▪ GREATER IN AREA
(a) Accept per stipulation and reject the rest
(b) Accept the whole and pay at contract rate
[Articles 1539 and 1540 shall apply to judicial sales (Art.

1541)
❖ SOLD FOR LUMP SUM (Art. 1542) - a cuerpo cierto / por precio
alzado
- Where price per unit is not indicated
▪ GREATER / LESSER
-No adjustment of price
-- action shall prescribe in six months (Article 1543)
TIME AND PLACE OF DELIVERY (Art. 1521 in relation to Art. 1251)
Art. 1251: Payment shall be made in the place designated in the

obligation.
64
There being no express stipulation and if the undertaking is to

deliver a determinate thing, the payment shall be made wherever
the thing might be at the moment the obligation was constituted.
In any other case the place of payment shall be the domicile of the
debtor.
If the debtor changes his domicile in bad faith or after he has
incurred in delay, the additional expenses shall be borne by him.
These provisions are without prejudice to venue under the Rules of
Court. (1171a)
Art. 1521: Whether it is for the buyer to take possession of the

goods or of the seller to send them to the buyer is a question
depending in each case on the contract, express or implied,
between the parties. Apart from any such contract, express or
implied, or usage of trade to the contrary, the place of delivery is
the seller's place of business if he has one, and if not his
residence; but in case of a contract of sale of specific goods, which
to the knowledge of the parties when the contract or the sale was
made were in some other place, then that place is the place of
delivery.
Where by a contract of sale the seller is bound to send the goods to
the buyer, but no time for sending them is fixed, the seller is bound
to send them within a reasonable time.
Where the goods at the time of sale are in the possession of a third
person, the seller has not fulfilled his obligation to deliver to the
buyer unless and until such third person acknowledges to the
buyer that he holds the goods on the buyer's behalf.
Demand or tender of delivery may be treated as ineffectual unless
made at a reasonable hour. What is a reasonable hour is a
question of fact.
Unless otherwise agreed, the expenses of and incidental to putting
the goods into a deliverable state must be borne by the seller.
TIME = at a reasonable hour (question of fact)
PLACE
1. Stipulation of the parties; or
2. Seller’s place of business if he has one; or
3. Seller’s residence; or
4. In case of sale of specific goods, in the place where the thing is.
[Q] Who bears the expenses of delivery?

For execution and registration of sale
= seller (Art. 1487) For delivery =
Buyer (Arts. 1521 and 1251)
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SALE BY NON-OWNER OF GOODS (Art. 1505 in relation to Art. 559)

- As aforementioned, the seller need not have the title to the goods
at the time of perfection of the contract. However, he must have the
title at the time of delivery.
Art. 1505: Subject to the provisions of this Title, where goods are
sold by a person who is not the owner thereof, and who does not
sell them under authority or with the consent of the owner, the
buyer acquires no better title to the goods than the seller had,
unless the owner of the goods is by his conduct precluded from
denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any other
provision of law enabling the apparent owner of goods to dispose

of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of sale
or under the order of a court of competent jurisdiction;

(3) Purchases made in a merchant's store, or in fairs, or markets, in
accordance with the Code of Commerce and special laws.
Art. 559: The possession of movable property acquired in good

faith is equivalent to a title. Nevertheless, one who has lost any
movable or has been unlawfully deprived thereof may recover it
from the person in possession of the same.
If the possessor of a movable lost or which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale,
the owner cannot obtain its return without reimbursing the price
paid therefor.
- GENERAL RULE: In a sale by the non-owner, the buyer acquires

no better title to the goods than the seller had (he merely steps into
the shoes of the seller)
EXCEPTIONS (in which case the true owner cannot recover the thing):
1. Estoppel or when the owner is precluded, by his own conduct, from
denying the seller’s authority to sell (apply Art. 1438 by analogy) –

[Art. 1438: One who has allowed another to assume apparent
ownership of personal property for the purpose of making any
transfer of it, cannot, if he received the sum for which a pledge has
been constituted, set up his own title to defeat the pledge of the
property, made by the other to a pledgee who received the same in
good faith and for value.]
2. PD 1529 (Recording Laws; Torrens Title)
66
- even when the sale is void, the general rule that the direct result
of a previous void contract cannot be valid is inapplicable when it
will directly contravene the Torrens system of registration. The
Court cannot disregard such rights and order the cancellation of
the certificate, since the effect of such outright cancellation will be
to impair public confidence in the certificate of title.
3. Statutory power of sale or under the order of a court of competent
jurisdiction
4. Sale in merchant’s store, or in fairs, or markets (Arts. 85 – 86,
Code of Commerce)
- to allow recovery would retard commerce
Application of Article 559

Art. 559 provides for the right of recovery of the real owner of the
movable property
- If the real/previous owner of a movable property has lost it or is
unlawfully deprived of it, he may recover it from the person who

possesses the same without reimbursement, notwithstanding the
good faith of the latter.
- If, however, the person who possesses the movable property has
acquired the same in good faith at a public sale, the owner has to
reimburse him in order to recover the property.
Public Sale is defined as one where there has been a public notice of
sale in which anyone is allowed to bid for the object he desires to buy.
The exceptions to right to recover and exceptions to the rule that the
buyer in a sale by non-owner does not acquire a better title to the
property than the seller had are just the same.
Art. 1505 in relation to rules on Co-ownership

a. co-owner sells whole property prior to partition – sale of property
itself is void but valid as to his spiritual share
b. co-owner sells definite portion to partition – sale is void as to other

co-owner but valid as to his spiritual share if the buyer would have
still bought such spiritual share had he known that the definite
portion sold would not be acquired by him.
- Exceptions to (b):
i. Subject matter is indivisible ii. Sale of definite portion is with
consent of other co-owners iii. co-owner sells 1 of 2 commonly-
owned lands & does not turn over ½ of the proceeds, other co-
owner, by law & equity, has exclusive claim over remaining land.
SALE WITH A VOIDABLE TITLE

67
As aforementioned, the seller need not have the title to the goods at
the time of perfection of the contract. However, he must have the title
at the time of delivery.
Art. 1506: Where the seller of goods has a voidable title thereto, but
his title has not been avoided at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in good
faith, for value, and without notice of the seller's defect of title.
If title has not been avoided, buyer acquires
good title if he acquires them - (a) in good faith;
(b) for value; and
(c) without notice of the seller’s defect of title
HYPOTHETICAL QUESTIONS (1505 and 1506):
1. A owns a Rolex watch. B stole A’s watch, and sold the same to C. C
does not know that the watch was stolen and he bought the same
from B for value. May A recover the watch from C?
Yes. He may recover it without the need of reimbursing C. See Art.
559.
knows that the watch was stolen and he bought the same from B
for value. May A recover the watch from C?
Yes. The requirement that the possessor or the purchaser of the
movable thing must be in good faith does not pertain to the right of
the owner to recover the property but to the doctrine of
irrevindicability (that the possession of movable property is
equivalent to title). If A has the right to recover even if C is in good
faith, it is but logical to give A the right to recover the property from
a possessor in bad faith. Likewise, it may be said that B may be
held criminally liable for violating the Anti-Fencing Law.
3. Given the same facts in Question #2 only that B sold the watch at
a public sale, where C, the highest bidder, was the one who was
able to purchase the watch. C, however, knows that the watch was
stolen. If A has the right to recover as stated in #2, should he
reimburse C in recovering the watch?
No. Art. 559 implies that a possessor in bad faith (in this case, C)
has no right to be reimbursed. But A may still recover the property.
4. A owns a Rolex watch. B stole A’s watch, and pawned the same to
Villarica Pawnshop. For failure to pay the loan, Villarica Pawnshop
sold the watch at a public auction. C was the one who bought the
watch. Rule the case.
68
A may recover the watch from C. He must, however, reimburse C

as C obtained the watch from a public sale.
5. A owns a Rolex watch. B stole A’s watch, and sold the same to C, a
merchant’s store. D, who does not know that the watch was stolen,
bought the same from C. May A recover the watch from D?
No. In this case, Article 1505 is applicable. To allow A to recover
would retard commerce.
merchant’s store. D, in bad faith, purchased the watch from C.
May A recover the watch from D?
No. Article 1505 does not require that the purchaser or buyer in a
sale by non-owner must be in good faith.
seller of ―bagoong.‖ D saw the watch from the bagoong-seller while
he was buying a ―bagoong.‖ Without knowing that the watch was
stolen, he offered to buy the same from C. C accepted the offer.
Thereafter, D bought the watch from C for P5k. May A recover the
watch from D?
Yes. The sale is not made in a merchant’s store, or in fairs, or
markets.
8. If D (referring to Question #6) purchased the same from a fish stall

in a public market, may A still recover?
sold the same at ebay. D, in good faith, bought the watch. May A
recover the watch from D?
Yes. He must, however, reimburse D as a sale in ebay may be
considered a public sale.
10. A entered into a contract of sale with B where A engages to deliver

100 sacks of corn for P100k. Before delivery, A became insane. A
delivered the sacks of corn to B while A is insane. May the
guardian of A recover the goods delivered to B?
No. The delivery was void pursuant to Article 1239, which provides
that ―payment made by one who does not have the free disposal of
the thing due and capacity to alienate it shall not be valid.‖
However, Article 1427 provides that in payment by incapacitated
such as this one, there shall be no right to recover the goods from
the obligee who has spent them or consumed them in good faith.
* LOSS OF THE THING DUE

69
WHO BEARS RISK OF LOSS/DETERIORATION/FRUITS
Before perfection
• Res perit domino
• Seller still owns the thing because there is no delivery or transfer of
ownership yet; hence, seller bears the risk of loss
At Perfection
• Contract is merely inefficacious because loss of the subject matter
does not affect the validity of the sale Seller cannot anymore
comply with obligation so buyer cannot anymore be compelled
After Perfection but before delivery

a. Loss – confused state
2 views:
Justices Paras & Vitug / Padilla (as well as Atty. Casino) :
BUYER bears the risk of loss [Res perit creditori] - Art. 1504,
which embodies res perit domino, only covers goods.
[Art. 1504: Unless otherwise agreed, the goods remain at the
seller's risk until the ownership therein is transferred to the
buyer, but when the ownership therein is transferred to the buyer
the goods are at the buyer's risk whether actual delivery has been
made or not xxx]
- The obligation of the obligor (seller, in a contract of sale) is
extinguished in applying Art. 1262.

[Art. 1262: An obligation which consists in the delivery of a
determinate thing shall be extinguished if it should be lost or
destroyed without the fault of the debtor, and before he has
incurred in delay.]
- the obligation to pay on the part of the buyer is not extinguished (as
he is not the obligor)
Tolentino / Jurado / Baviera / Villanueva : SELLER bears the risk of loss

[Res perit domino]
- in reciprocal obligations, the extinguishment of the obligation due to
loss of the thing affects both debtor and creditor; the entire juridical
relation is extinguished.
b. Deterioration & fruits - Buyer bears loss (Article 1189)

Art. 1189: When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement, loss
or deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation
shall be extinguished;
70
(2) If the thing is lost through the fault of the debtor, he shall be
obliged to pay damages; it is understood that the thing is lost
when it perishes, or goes out of commerce, or disappears in such
a way that its existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor; (4) If it deteriorates

through the fault of the debtor, the creditor may choose between
the rescission of the obligation and its fulfillment, with indemnity
for damages in either case;
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor; (6) If it is
improved at the expense of the debtor, he shall have no other right
than that granted to the usufructuary.
After delivery
• The buyer is the owner; hence, buyer bears risk of loss
Roman vs The facts clearly show that no contract of sale

Grimalt had been perfected between the parties, and
therefore the loss of the vessel must be borne by
its owner and not by a party who only intended to
purchase it.
Jose De Except as to quality and quantity, the first of
Leon vs which is itself generic, the contract sets no
Asuncion bounds or limits to the palay to be paid, nor was
Soriano there even any stipulation that the cereal was to
be the produce of any particular land. Any palay
of the quality stipulated regardless of origin on
however acquired (lawfully) would be obligatory
on the part of the obligee to receive and would
discharge the obligation. It seems therefore plain
that the alleged failure of crops through alleged
fortuitous cause did not excuse performance.
Union The general rule is that after perfection but
Motor before delivery, the risk of loss is borne by the
Corp. vs seller under the rule of res perit domino.
CA
Lawyer’s The ownership of the books purchased on
Cooperative installment were retained by the seller, although
Publishing they have already been delivered to the buyer,
Company under the condition that ownership thereof will
vs be transferred to the buyer upon his full
71
Tabora payment of the purchase price, it was held that

despite the loss of the books in a fire, the risk of
loss would be borne by the buyer although he
was not the owner yet, not only because such
was agreed merely to secure the performance by
the buyer of his obligation, but also because in
the very contract itself, it was agreed that loss or
damage to the books after delivery to the buyer
shall be borne by the buyer.
Yu Tek Co Gonzales (seller), who received payment,
vs delivered no part of sugar promised. When a suit
Gonzales was brought against him for failure to deliver, he
interposed the defense of force majeure (there
was a storm). SC held that he was still liable
because no specific lot of sugar was segregated
and specifically designated to make the subject
matter of the contract determinate or specific;
sugar being generic, there was no risk of it being
lost.
Bunge It appearing that the obligation of appellants is
Corp. vs to deliver copra in a generic sense, this obligation
Camenforte cannot be deemed extinguished by the
destruction or disappearance of the copra they
had already stored in Samar. Their obligation
subsists as long as that commodity is available. A
generic obligation is not extinguished by the loss
of a thing belonging to a particular genus. Genus
nunquam pereat.
* DOUBLE SALES
Art. 1544: If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence thereof,
to the person who presents the oldest title, provided there is good faith.
General Rule: FIRST IN TIME, PRIORITY IN RIGHT (PRIMUS TEMPORE,

POTIOR JURE)
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Application of the general rule: when not all requisites embodied in Art.
1544 concur
SPECIAL RULE: ART. 1544
* REQUISITES
1. exactly same subject matter
2. exactly same immediate seller
3. buyers represent conflicting interest
4. both sales are valid
* RULES ACCORDING TO ART. 1544:
1. MOVABLE
• the owner is the one who is first to posses in good faith
2. IMMOVABLE
• First to register in good faith
• No inscription, first to possess in good faith
• No inscription & no possession in good faith – Person who presents
oldest title in good faith
GOOD FAITH
- one who buys property without notice that another person has a right or
interest in such property

- one who has paid price before notice that another has claim or interest
• lis pendens – notice that subject matter is in litigation

• adverse claim – notice that somebody is claiming better right
- he who asserts the status of a purchaser in good faith and for value has
the burden of proving such assertion. (legal presumption of good faith

cannot be invoked)
POSSESSION
• Both actual or constructive
REGISTRATION
- any entry made in the books in the registry, including both registration in
its ordinary and strict sense, and cancellation, annotation, and even
marginal notes. It is the entry made in the registry which records solemnly
and permanently the right of ownership and other real rights.
1. registered under Torrens system
Art. 1544 applies
2. not registered under the Torrens system Art. 1544 does not apply
Under Act No. 3344, registration of documents affecting unregistered
land is ―without prejudice to a third party with a better right.‖ The mere
73
registration of a sale in one’s favor does not give him any right over the
land if the vendor was not anymore the owner of the land, having
previously sold the same to somebody else, even if the earlier sale was
unrecorded.
3. if sale 1 occurs when land is not yet registered & sale 2 is done when land
is already registered – apply FIRST IN TIME, PRIORITY IN RIGHT
4. Registration by the first buyer under Act 3344 can have the effect of
constructive notice to the second buyer that can defeat his right as such
buyer.
1. A, the owner of Lot 1, applied for registration of his title to the said
lot. During the pendency of the application, he sold Lot 1 to B.
However, after the certificate of title was granted to him, he sold the
lot to C, to whom a transfer certificate of title was issued. Who owns
the land, B or C?
C. To grant B the ownership over the said lot would directly
contravene the Torrens system of registration. The Court cannot
order the cancellation of the certificate, since the effect of such
outright cancellation will be to impair public confidence in the
certificate of title. Person dealing with registered land have the legal
right to rely on the fact of the Torrens certificate of title and to
dispense with the need to inquire further except when the party
concerned has actual knowledge of facts and circumstances that
would impel a reasonable cautious man to make such inquiry.
(Naawan Community Rural Bank vs CA)
2. A sold 100 sacks of corn to B through the execution of a public

instrument. A day after, A sold the same goods to C, in which case C
was given the bill of lading to the goods. Who owns the sacks of corn?
It would seem that B is the owner because the execution of a public
instrument operates as a transfer of the ownership of the goods to
him. However, C’s possession of the bill of lading gives him the right
to the direct obligation of the bailee to hold the goods in trust for him
and give the goods to him upon his presentment of the bill of lading.
(?)
3. A sold a parcel of land to B through an oral contract of sale. When A

died, his heir, X (who does not know of the sale between A and B) sold
the same land to C, who bought the land in good faith and for value.
The sale of the land was through the execution of public instrument.
Who owns the land, B or C?
74
C. The requisite that there be one immediate seller has been

complied with, notwithstanding that it is X who made the second sale,
because as A’s heir, X merely steps into the shoes of A. The decedent
and his heir have only 1 personality, as the heir’s ownership and
possession of a property are merely continuation of the ownership
and possession of the decedent. The public instrument executed by A
and C gives C the oldest title to the property.
4. A, the owner of Lot 1, applied for registration of his title to the said
lot. During the pendency of the application, he sold Lot 1 to B, who
immediately took possession of the land. However, after the certificate
of title was granted to A, a levy was made upon the land in favor of C.
Who owns the land, B or C? (Compare with #1)
B. Section 35, Rule 39 of the Rules of Court (on execution sale) shall
govern. The judgment creditor merely steps into the shoes of the
judgment debtor. Since the land was previously sold to the first
buyer, the second buyer (judgment creditor) at the execution sale
actually bought nothing since the judgment debtor no longer had
rights to the property previously sold. (Dagupan Trading Co. vs
Macam)
5. A sold his unregistered land to B. Thereafter, he sold the same land to C

where a public instrument was executed. The sale was duly registered.
Who owns the land?
B. Art. 1544 does not apply to sale of unregistered land. Under Act
No. 3344 (now PD 1529), registration of documents affecting
unregistered land is ―without prejudice to a third party with a better
right.‖
* WARRANTIES
Condition vs Warranty
CONDITION WARRANTY
Purports to existence of Purports to performance of
obligation obligation
Condition must be stipulated to Need not be stipulated; may form
form part of the obligation part of obligation by provision of
law
May attach itself to obligation of Relates to the subject matter itself
seller to deliver possession & or to obligation of the seller as to
transfer ownership the subject matter of the sale
Warranty vs Promise (See Art. 1545)

75
Art. 1545. Where the obligation of either party to a contract of sale

is subject to any condition which is not performed, such party may
refuse to proceed with the contract or he may waive performance of
the condition. If the other party has promised that the condition
should happen or be performed, such first mentioned party may also
treat the nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may
treat the fulfilment by the seller of his obligation to deliver the same
as described and as warranted expressly or by implication in the
contract of sale as a condition of the obligation of the buyer to
perform his promise to accept and pay for the thing.
Kinds of Warranty
1. Express (Art. 1546)
Art. 1546: Any affirmation of fact or any promise by the seller
relating to the thing is an express warranty if the natural
tendency of such affirmation or promise is to induce the buyer to
purchase the same, and if the buyer purchases the thing relying
thereon. No affirmation of the value of the thing, nor any
statement purporting to be a statement of the seller's opinion
only, shall be construed as a warranty, unless the seller made
such affirmation or statement as an expert and it was relied
upon by the buyer.
- Requisites:
1. it must be an affirmation of fact or any promise by seller
relating to the subject matter of sale

2. natural tendency of affirmation or promise is to induce buyer
to purchase subject matter

3. buyer purchases the subject matter relying thereon
when breached, seller is liable for damages
Art. 1340: The usual exaggerations in trade, when the other

party had an opportunity to know the facts, are not in
themselves fraudulent.
Art. 1341: A mere expression of an opinion does not signify

fraud, unless made by an expert and the other party has relied
on the former's special knowledge.
Art. 1343: Misrepresentation made in good faith is not

fraudulent but may constitute error.
Art. 1338: There is fraud when, through insidious words or

machinations of one of the contracting parties, the other is
76
induced to enter into a contract which, without them, he would

not have agreed to. (CAUSAL FRAUD / DOLO CAUSANTE =
FRAUD IN THE PERFECTION OF THE CONTRACT)
Art. 1344: In order that fraud may make a contract voidable, it

should be serious and should not have been employed by both
contracting parties.
Incidental fraud only obliges the person employing it to pay
damages. (INCIDENTAL FRAUD / DOLO
INCIDENTE)
Art. 1170: Those who in the performance of their obligations

are guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof, are liable for
damages.
2. Implied (Art. 1547)

Art. 1547: In a contract of sale, unless a contrary intention
appears, there is:
(1) An implied warranty on the part of the seller that he has a
right to sell the thing at the time when the ownership is to pass,
and that the buyer shall from that time have and enjoy the legal
and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from any
hidden faults or defects, or any charge or encumbrance not
declared or known to the buyer.
This Article shall not, however, be held to render liable a sheriff,
auctioneer, mortgagee, pledgee, or other person professing to sell
by virtue of authority in fact or law, for the sale of a thing in
which a third person has a legal or equitable interest.
IMPLIED WARRANTIES
* warranty that seller has a right to sell

• refers to consummation stage since in consummation stage, it is
where ownership is transferred by tradition
• not applicable to sheriff, auctioneer, mortgagee, pledgee (the
principle applicable to execution sales is caveat emptor)
* warranty against eviction

• implied, unless contrary provision appears in contract
• when ownership is transferred, buyer shall enjoy the legal and
peaceful possession of the thing
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[There are 2 general classifications of implied warranty: (1) warranty

against eviction; and (2) warranty against hidden defects.]
REQUISITES OF BREACH OF WARRANTY AGAINST EVICTION : [EFBS]

1. buyer is evicted in whole or in part from the subject matter of
sale (Art. 1548)

2. there is a final judgement (Art. 1557)
3. basis of eviction is a right prior to sale or an act imputable to
vendor (Art. 1548)

4. seller has been summoned in the suit for eviction at the
instance of buyer; or made 3rd party defendant through 3rd

party complaint brought by buyer (Art. 1558)
• no appeal needed nor a need for buyer to resist eviction for right to
accrue; it is enough that the aforementioned requisites are
complied with [Art. 1549]
• warranty cannot be enforced until aforementioned requisites
concur
• applies to judicial sale; judgment debtor responsible for eviction
unless otherwise decreed in judgment [Art. 1552]
• vendor not liable for eviction if adverse possession had been
commenced before sale but prescriptive period is completed after
transfer [Art. 1550]
• If the property is sold for nonpayment of taxes due and not made
known to the vendee before the sale, vendor is liable for eviction
[Art. 1551]
• Rescission is not a remedy in case of eviction because rescission
contemplates that the one demanding it is able to return whatever
he has received under the contract. Since the vendee can no longer
restore the subject-matter of the sale to the vendor, rescission
cannot be carried out. [See Art. 1385]
• The suit for the breach can be directed only against the immediate
seller, unless the sellers of the seller had promised to warrant in
favor of later buyers or the immediate seller has expressly assigned
to the buyer his own right to sure his own seller.
• The disturbance referred to in the case of eviction is a disturbance
in law which requires that a person go to courts of justice claiming
the thing sold, or part thereof and invoking reasons.
• Mere trespass in fact does not give rise to the application of the
doctrine of eviction.
• Vendor’s liability is waivable but any stipulation exempting the
vendor from the obligation to answer for eviction shall be void if he
acted in bad faith. [Art. 1553]
• KINDS OF WAIVER: [Art. 1554]

78
1. CONSCIENTE – voluntarily made by the vendee without the

knowledge and assumption of the risks of eviction (vendor
shall only pay the value which the thing sold had at the time
of the eviction)
2. INTENCIONADA – made by the vendee with knowledge of the
risks of eviction and assumption of its consequences (vendor
shall not be liable)
LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole subject

matter) [TISED]
1. value of thing at time of eviction ( be it greater/lesser than price of
sale )
2. value of income of fruits
3. costs of suit which caused the eviction
4. expenses of contract if buyer paid for them
5. damages & interests and ornamental expenses if sale was made in
bad faith
RIGHT OF BUYER WHEN DEPRIVED OF ONLY PART OF THE SUBJECT MATTER BUT
WOULD NOT HAVE BOUGHT SUCH PART IF NOT
IN RELATION TO THE WHOLE:
1. demand rescission but with the obligation to return the thing
without other encumbrances than those which it has when the
subject matter was acquired.
2. Enforce vendor’s liability for eviction (TISED)
1. A found a ring which he sold to B, honestly believing and

representing to B that it was a diamond ring. In truth, the ring was
ordinary glass. Is there a breach of warranty?
No breach of warranty. A merely expressed an opinion. (Arts. 1341
on mere expression of opinion; and Art. 1343 on misrepresentation
made in good faith)
2. Advertisement: ―the cigarette that will give you utmost smoking

pleasure.‖ Is this a warranty?
No. Consequently, breach of the same is not breach of warranty.
(Arts. 1340 on usual exaggerations on trade)
3. A sold to B a parcel of land which is claimed by C, who has been in

possession of the property in the concept of owner publicly and
continuously for 30 years. Rule the case.
79
C is deemed to have acquired ownership over the land by

prescription without need of title or good faith (apply Art. 1137).
Hence, A shall be liable to be in case of eviction. (Art. 1550)
4. Same facts as #3, only that C was in adverse possession of the land
for only 25 years at the time of sale, and the prescriptive period is
completed after the sale.
S shall not be liable to B in case of eviction as B could have
brought action against C during the remaining 5 year period to
recover the property. (Art. 1550)
5. B purchased land from A after having been informed of prior right

of another to purchase the same based on prior occupancy. Is B
entitled to the vendor’s warranty against eviction and damages
under Art. 1555?
No. He had knowledge of facts which should have put him upon
such inquiry and investigation as might be necessary to acquaint
him with the defects in the title of his vendor. (J.M Tuazon vs CA)
* WARRANTY AGAINST NON-APPARENT BURDEN OR SERVITUDES (ART. 1560)

-REQUISITES:
a. immovable sold is encumbered with non–apparent burden or
servitude not mentioned in the agreement

b. nature of non–apparent servitude or burden is such that it must be
presumed that the buyer would not have acquired it had he been
aware thereof
When breach of warranty exist, buyer may ask for:

(a) rescission; or
(b) indemnity
warranty not applicable when: [ARAK]

(a) servitude is apparent
(b) non – apparent burden or servitude is recorded in the Registry of
Property (EXCEPT when there is express warranty that the thing is

free from all burdens & encumbrances)
(c) the servitude is mentioned in the agreement
(d) vendee had knowledge of servitude
* PRESCRIPTION (Rescission): 1 year

- after 1 year, only action for damages may be brought (to be counted
from the date on which the burden or servitude was discovered).
80
* WARRANTY AGAINST HIDDEN DEFECTS: (Art. 1561)

- When liability attaches, REQUISITES: [Art. 1561] – [HIS-NRW]
(a) the defect is hidden
HIDDEN – not known or could not have been known to the vendee;
- hidden to the eyes and cannot be discovered by ordinary careful
inspection.
(b) the defect is serious or important such that –
(b.1) the hidden defect should render the subject matter UNFIT for
the use for which it is intended; or

(b.2) the hidden defect should DIMINISH the thing’s FITNESS such
that the BUYER WOULD NOT HAVE ACQUIRED IT OR WOULD

HAVE GIVEN A LOWER PRICE FOR IT HAD HE BEEN AWARE
OF IT.
(c) the defect must exist at the time of sale
(d) vendee must give notice of the defect to the vendor within a reasonable
time
(e) the action must be brought within a reasonable period
(f) there must be no waiver of warranty
- Vendor is not liable

for: (a) patent defects;
or
(b) those that are not visible but should have been known by an
expert by reason of his profession.
-KNOWLEDGE OF VENDOR, NOT IMPORTANT (CAVEAT VENDITOR

or SELLER BEWARE): [1566, NCC]
Art. 1566: The vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware
thereof.
This provision shall not apply if the contrary has been stipulated, and
the vendor was not aware of the hidden faults or defects in the thing
sold.
GENERAL RULE: Seller or vendor is liable even though he is not
aware of the hidden defect. [Art. 1566, par. 1]
EXCEPTION: there is a stipulation to the contrary and the seller
is not aware of it. [Art. 1566, par. 2] Rationale behind Caveat
Venditor: a sound price warrants a sound article
-OBLIGATION of seller for breach of warranty:

* IF THERE WAS NO WAIVER OF WARRANTY: [Art.
1568] - the thing is lost in consequence of hidden
defects.
81
- When vendor is AWARE of the hidden defects:

(a) Bear the loss
(b) Return the price
(c) Refund the expenses of the contract
(d) Pay damages
- When vendor is NOT AWARE of the hidden defects:

(a) Bear the loss
(b) Return the price and interest
(c) Reimburse expenses of the contract
* IF THERE WAS A WAIVER OF THE WARRANTY: [Art.

1566, par. 2] - When vendor is AWARE of the
hidden defects:
- waiver is in bad faith; as a corollary, seller
is still liable - When vendor is NOT AWARE of
the hidden defects:
- not liable
* IF THE DEFECTIVE THING IS LOST BY FORTUITOUS
EVENT OR FAULT OF VENDEE: [Art. 1569, par. 2]
-the thing must be defective at
the time of sale - BUYER may
DEMAND for:
Price paid minus value of the thing at the time it was lost
-the aforesaid formula represents the damage suffered and the benefits
incurred by the buyer
- REMEDY OF BUYER in case of breach of warranty against hidden

defect: [Art. 1567] - buyer may choose any of the following:
(a) ACCION REDHIBITORIA (Redhibitory Action)
- withdrawing from the contract
- avoidance of the sale due to vice in the thing sold
(b) ACCION QUANTI MINORIS

- proportionate reduction of price
- APPLICABILITY TO JUDICIAL SALES (Art. 1570) – however,

judgment debtor is not liable for damages for the reason that he is
merely compelled to sell his property.
- PRESCRIPTIVE PERIOD: [Art. 1571]

- SIX MONTHS from delivery
COMPARATIVE TABLE OF PRESCRIPTIVE PERIODS

RELATING TO WARRANTIES and OTHER ACTIONS in
case of breach
82
CONTRACT OF CONTRACT OF OTHER WARRANTY

SALE with SALE with CONTRACT under RA 7394
EXPRESS IMPLIED (in case of
WARRANTY WARRANTY breach of
contract itself)
(a) Follow (a) In case
stipulation of (a) In case of (a) with
in the Warranty RESCISSION, IMPLIED
contract against apply Art. WARRANTY
(b) If there is non- 1389 (general AND
no apparent rule on EXPRESS
stipulation, burden: 1 rescission): 4 WARRANTY:
apply other year years of equal
provisions of (Action for (b) In case of duration
the Civil Rescission) any other
Code, i.e. (Art. 1560) action (b) with
(b) In case concerning IMPLIED
In case of of the written WARRANTY
RESCISSION Warranty contract of only (no
of against sale, apply warranty
contract, hidden Art. 1144 card, etc.):
apply Art. defect: 6 (general rule not
1389 months from on less than 60
(general rule delivery prescription): days nor
on (Both Accion 10 years more than 1
rescission): 4 Redhibitoria year
years and following the
Accion sale of new
In case of Quanti consumer
any other Minoris) (Art. products
action 1571)
concerning (c) In case
the written of
contract of Warranty
sale, apply against
Art. 1144 redhibitory
(general rule defect on
on animals:
prescription): 40 days
10 years from
delivery
(Art.1577) –
this action
can only be
recognized
83
with respect
to faults and
defects which
are
determined
by law or by
local customs
(d) In case
the disease
which
caused the
death of
the animal
existed at
the time of
contract: 3
days after
purchase
(Art. 1578)
* WARRANTY AGAINST REDHIBITORY DEFECTS ON ANIMALS:

- When considered redhibitory defect; REQUISITE (Arts. 1576 and 1578)
[EVA]
(a) expert knowledge is not sufficient to discover it [1576, 1st par., NCC];
or
(b) The veterinarian failed to discover or disclose it through ignorance or
bad faith [1576, 2nd par., NCC]; or

(c) the animal dies within three days after its purchase and the disease
which caused the death existed at the time of the contract: [Art. 1578]
-Instance where THERE IS NO WARRANTY: [Art. 1574] - here, caveat

emptor governs.
-sale of animals at public auction or fairs or of livestock as
condemned (animals are not bought because of their quality or capacity
for work)
- Sale of 2 OR MORE ANIMALS: [Art. 1572]

GENERAL RULE: the defect of one will only give rise to its redhibition
EXCEPTION: when the buyer would not buy them if one is defective
(or would not buy one without the other) *The exception is PRESUMED
when what is bought is a TEAM, YOKE, PAIR or SET (even if separate
price has been fixed for each one of the animals composing the same).
84
- REMEDY in case of sale of animals with redhibitory defects: [Arts. 1580

and 1577]
(a) Accion Redhibitoria
(b) Accion Quanti Minoris
- When SALE OF ANIMALS IS CONSIDERED VOID: [Art. 1575]

(a) sale of animals with CONTAGIOUS DISEASES
(b) Sale of UNFIT animals, i.e. the use or service for which the animals are
acquired has been stated and they are found to be unfit therefor.
- LIABILITY OF BUYER IN CASE SALE OF ANIMAL IS RESCINDED

- animal shall be returned in the condition in which it was sold and
delivered, the vendee being answerable for any injury due to his
negligence, and not arising from the redhibitory fault or defect.
* IMPLIED WARRANTIES ON SALE OF GOODS / IMPLIED WARRANTY OF

QUALITY:
QUALITY – state or condition (as to promote high standard in

business)
- When implied warranty exists; REQUISITES: [Art. 1562, NCC]

(a) Buyer makes known to the seller the particular purpose
(expressly or by implication) for which goods are acquired

and the buyer relied on seller’s skills or judgment. (There is
here WARRANTY FOR FITNESS FOR A PARTICULAR
PURPOSE)
(b) Sale by Description. (There is here WARRANTY THAT THE
THING IS OF MERCHANTABLE QUALITY)

- warranty that goods are reasonably fit for general purpose
- MERCHANTABLE QUALITY – requires identity with what is
described or what is tendered (synonyms: saleable, average

quality)
* Art. 1481 provides for rescission in case where the bulk of the goods
delivered does not correspond with the sample or description.
QUESTION / INQUIRY: If the vendee does not inform seller of the

purpose, is there still warranty?
ANSWER: Yes, in the following cases:
- Long and continuous contract
- Numerous contract involving same parties and same subject matter
entered into on a regular basis
85
- Annexed by usage of trade (Art. 1564)
- SALE OF SPECIFIED ARTICLE UNDER PATENT OR TRADE NAME

(Art. 1563)
- there is NO WARRANTY AS TO FITNESS FOR PARTICULAR PURPOSE
(the buyer relied on his own judgment)
- SALE OF GOODS BY SAMPLE: [Art. 1565, NCC].

- There is a WARRANTY THAT THE THING IS OF MERCHANTABLE
QUALITY (the same with sale by description)
- Buyer’s REMEDIES in Case of Breach of Warranties in Sale of Goods:

[Art. 1599] – Remedies are alternative, at the election of the buyer
(a) accept or keep the goods and set up breach of warranty by way of
recoupment in diminution or extinction of price (reduce or extinguish)

(b) accept or keep and set up action for damages (counterclaim for
damages)
(c) refuse to accept and set up action for damages (action)
(d) rescind the contract (rescission)
* IMPLIED WARRANTIES FOR CONSUMER GOODS: (RA 7394)

CONSUMER PRODUCTS – primarily for personal, family, household or
agricultural purposes (e.g. food, drugs, cosmetics and devices)
- Retailer is subsidiarily liable
- DURATION of WARRANTY:
- with IMPLIED WARRANTY AND EXPRESS WARRANTY:
- of equal duration
- with IMPLIED WARRANTY only (no warranty card, etc.):
- not less than 60 days nor more than 1 year following the sale of new
consumer products
- REMEDY in case of breach:

- in case of EXPRESS WARRANTY:
(a) repair of goods (prescription: 30

days, but may be extended) (b) refund of
purchase price - in case of IMPLIED
WARRANTY:
(a) retain the goods and recover damages
(b) reject the goods, cancel the contract, and recover damages.
86
Albert Bryan The evidence shows that where this kind of

vs Thomas lumber is used and is thoroughly seasoned,
Handkins and with proper care and treatment, the life of a
J. Biaglowski boat will be from ten to twelve years, but where
palosapis lumber used is green and is painted
and covered with coal tar, its life is very short,
and it is very apparent that the lumber used
here was green and that even at the time of
the sale the vessel had but little actual value.
The defendants knew or should have known of
the quality of the lumber used in the
construction of the vessel. The plaintiff did
not, and its actual condition could not be
determined without a physical inspection. In
other words, the defects in the lumber and
material used in the construction of the vessel
were hidden and concealed and unknown to
the plaintiff until the official inspection.
Gochanco vs It was not proven that the declaration made by
Dean the defendant in the contract of exchange was
made fraudulently. It does not appear in the
record that the defendant deliberately violated
the truth in stating his belief that there were
such a number of coconut trees on said lands.
Furthermore, it was shown that the plaintiff
viewed the lands and estimated that there
were there more than six thousand coconut
trees.
Mccullough vs There is no evidence to show that any
Aenle representations as to the quality of the tobacco
were made to the plaintiff by the defendant
prior to the contract of August 27, nor that
there was any agreement prior to that time as
to an exhibition of samples nor that the
plaintiff prior to that time made any
examination or inquiry as to the quality of the
tobacco. The fact is that the plaintiff in order to
get the building had to buy the factory and
everything that went with it. He saw himself
obliged to take all the tobacco which the
defendant had, no matter what its quality was.
The plaintiff bound himself by the contract of
August 27 to take all the tobacco which the
defendant then had and pay therefor the prices
that the company had paid. He could relieve
87
himself from this obligation only by showing

either that the tobacco in the inventory was not
owned by the defendant on August 27 or that
the prices stated therein were not the prices
which the defendant paid for it. He undertook
to do neither of these things, and his action
must fail. The fact that an article is of one grade
or quality instead of another does not
constitute a hidden defect within the meaning
of that article.
Note that the sole purpose of the inventory was

to ascertain what the total purchase price was.
If it correctly gave the number of bales and the
price paid therefor by the appellant, according
to the invoices, it was a sufficient compliance
with the contract. The fact that
the tobacco was described as of one class

instead of another would be unimportant. The
appellee did not purchase by class or quality,
but by quantity.
Chang Yong In the case at bar, The ONLY defense presented
Tek vs Santos by the defendant was that the tobacco
delivered by the plaintiff was not of good
quality. The defendant admits that she had
sold the tobacco in question. The record does
not disclose when the defendant sold the
tobacco in question.
In the absence of an express warranty, a vendor
or merchandise only warrants:
First. The legal and peaceable possession of the
thing sold; and
Second. That there are no hidden faults or
defects therein. (Art. 1474, Old Civil Code.)
It not being proven that the plaintiff made any
warranty or any misrepresentations with
reference to the quality of the tobacco in
question, and it having been proven that the
defendant had an opportunity to and did
examine the tobacco in question at the time of
purchase and not having made any objection
whatever until after a lapse of more than three
years and not then until after an action had
been brought, and making no objection
88
whatever as to the price agreed upon, nor as to

the quantity of the tobacco delivered, in our
opinion she should be held liable for the
payment of the amount agreed upon.
(defendant is therefore liable for the balance of
the purchase price).
Martinez vs CA There is no weight in the appellants' argument

that, being a purchaser for value and in good
faith of Lot No. 2, the nullification of its
registration would be contrary to the law and
to the applicable decisions of the Supreme
Court as it would destroy the stability of the
title which is the core of the system of
registration. Appellants cannot be deemed
purchasers for value and in good faith by virtue
of the deed of absolute conveyance which they
executed.
Before purchasing a parcel of land, it cannot be

contended that the appellants who were the
vendees did not know exactly the condition of
the land that they were buying and the
obstacles or restrictions thereon that may be
put up by the government in connection with
their project of converting Lot No. 2 in question
into a fishpond. Nevertheless, they willfully and
voluntarily assumed the risks attendant to the
sale of said lot. One who buys something with
knowledge of defect or lack of title in his vendor
cannot claim that he acquired it in good faith
(Leung Lee v. Strong Machinery Co., et al., 37
Phil. 664).
The ruling that a purchaser of a registered

property cannot go beyond the record to make
inquiries as to the legality of the title of the
registered owner, but may rely on the registry
to determine if there is no lien or
encumbrances over the same, cannot be
availed of as against the law and the accepted
principle that rivers are parts of the public
domain for public use and not capable of
89
private appropriation or acquisition by

prescription.
Jerry Moles vs When an article is sold as a secondhand item,

IAC a question arises as to whether there is an
implied warranty of its quality or fitness. It
is generally held that in the sale of a designated
and specific article sold as secondhand, there
is no implied warranty as to its quality or
fitness for the purpose intended, at least where
it is subject to inspection at the time of the sale.
On the other hand, there is also authority to
the effect that in a sale of a secondhand
articles there may be, under some
circumstances, an implied warranty of
fitness for the ordinary purpose of the
article sold or for the particular purpose of
the buyer.
Article 1562 of our Civil Code: Art. 1562. In a
sale of goods, there is an implied warranty or
condition as to the quality or fitness of the
goods, as follows: (1) Where the buyer,
expressly or by implication, makes known to
the seller the particular purpose for which the
goods are acquired, and it appears that the
buyer relies on the seller's skill or judgment
(whether he be the grower or manufacturer or
not), there is an implied warranty that the
goods shall be reasonably fit for such purpose;
In the case at bar, a certification to the effect
that the linotype machine bought by
petitioner was in A-1 condition was issued
by private respondent in favor of the former.
This cannot but be considered as an express
warranty.
90
It must be remembered that the certification

was a condition sine qua non for the release
of petitioner's loan which was to be used as
payment for the purchase price of the
machine. Private respondent failed to refute
this material fact. Neither does he explain why
he made that express warranty on the condition
of the machine if he had not intended to be
bound by it. In fact, the respondent court, in
declaring that petitioner should have availed of
the remedy of requiring repairs as provided for
in said certification, thereby considered the
same as part and parcel of the verbal contract
between the parties.
We disagree with respondent court that
private respondent’s express warranty as to
the A-1 condition of the machine was
merely dealer's talk. Private
respondent was not a dealer of printing or
linotype machines to whom could be ascribed
the supposed resort to the usual exaggerations
of trade in said items. His certification
as to the condition of the machine was not

made to induce petitioner to purchase it
but to confirm in writing for purposes of
the financing aspect of the transaction his
representations thereon. Ordinarily, what
does not appear on the face of the written
instrument should be regarded as dealer's or
trader's talk; conversely, what is specifically
represented as true in said document, as in
the instant case, cannot be considered as
mere dealer's talk.
91
Engineering & The contract in question is one for a piece of

Machinery work. It is not petitioner's line of business to
Corp vs CA manufacture air-conditioning systems to be
and Almeda sold "off-the-shelf." Its business and particular
field of expertise is the fabrication and
installation of such systems as ordered by
customers and in accordance with the
particular plans and specifications provided
by the customers. Naturally, the price or
compensation for the system manufactured
and installed will depend greatly on the
particular plans and specifications agreed
upon with the customers.
a close scrutiny of the complaint filed in the trial
court reveals that the original action is not
really for enforcement of the warranties against
hidden defects, but one for breach of the
contract itself. It alleged that the petitioner, "in
the installation of the air conditioning system
did not comply with the specifications
provided" in the written agreement between the
parties.
Having concluded that the original complaint is
one for damages arising from breach of a
written contract - and not a suit to enforce
warranties against hidden defects - we here -
with declare that the governing law is Article
1715. However, inasmuch as this provision
does not contain a specific prescriptive period,
the general law on prescription, which is
Article 1144 of the Civil Code, will apply. Said
provision states, inter alia, that actions "upon
a written contract" prescribe in ten (10) years.
Since the governing contract was executed on
September 10, 1962 and the complaint was
filed on May 8, 1971, it is clear that the action
has not prescribed.
92
Carlos De Since no warranty card or agreement was

Guzman vs attached to the complaint, the contract of sale
Toyota Cubao of the subject pick-up carried an implied
warranty that it was free from any hidden
faults or defects, or any charge or
encumbrance not declared or known to the
buyer. The prescriptive period thereof is six (6)
months under the Civil Code (Art. 1571).
Under RA No. 7394, the provisions of the Civil
Code on conditions and warranties shall
govern all contracts of sale with condition and
warranties (Art. 67). The duration of the
implied warranty (not accompanied by an
express warranty) shall endure not less than
sixty days nor more than one (1) year following
the sale of new consumer products (Art.
68, par. [e]). The two (2) year prescriptive period
under Art. 169 cannot prevail over Art. 68
because the latter is the specific provision on
the matter.
Since petitioner filed the complaint on April 20,
1999, or more than nineteen months counted
from November 29, 1997 (the date of the
delivery of the motor vehicle), his cause of
action had become time-barred. Consequently,
even if the complaint is made to fall under the
Republic Act No. 7394, the same should still be
dismissed since the prescriptive period for
implied warranty thereunder, which is one
year, had likewise lapsed.
(Relative to plaintiff’s argument that the claim
for moral and exemplary damages and
attorney’s fees is based on quasi-delict or
breach of contract, such are merely ancillary
to the main cause of action which is based on
warranty against hidden defects. Without the
latter, the former cannot stand alone.)
Jaime Ang vs Soledad gave an implied warranty of title in
CA and declaring that he owned and had clean title to
Soledad the vehicle. In pledging that he "will defend
the same from all claims or any claim
whatsoever [and] will save the vendee from
any suit by the government of the Republic of
the Philippines," Soledad gave a warranty
against eviction.
93
Since what Soledad, as seller, gave was an

implied warranty, the prescriptive period to
file a breach thereof is six months after the
delivery of the vehicle, following Art. 1571. But
even if the date of filing of the action is
reckoned from the date petitioner instituted
his first complaint for damages on November
9, 1993, and not on July 15, 1996 when he
filed the complaint subject of the present
petition, the action just the same had
prescribed, it having been filed 16 months
after July 28, 1992, the date of delivery of the
vehicle.
Coca-Cola The vendee's remedies against a vendor with
Bottlers, Inc. respect to the warranties against hidden
vs CA defects of or encumbrances upon the thing
sold are not limited to those prescribed in
Article 1567 of the Civil Code. The vendor
could likewise be liable for quasi-delict under
Article 2176 of the Civil Code, and an action
based thereon may be brought by the vendee.
While it may be true that the pre-existing
contract between the parties may, as a general
rule, bar the applicability of the law on quasi-
delict, the liability may itself be deemed to
arise from quasi-delict, i.e., the acts which
breaks the contract may also be a
quasi-delict. Otherwise put, liability for quasi-
delict may still exist despite the presence of
contractual relations.
Natividad As regards the contention that the action for
Villostas vs rescission is barred by prescription under Art.
CA,
et al. 1571 of the Civil Code, the same is bereft of
merit. It must be pointed out that at the time
the Electrolux Aqua Guard water purifier was
delivered and installed at petitioner Villostas'
residence a Warranty Certificate was issued by
private respondent Electrolux.
The foregoing is clearly an express warranty
regarding the efficiency of the water purifier.
On this regard the court said that while it is
true that Article 1571 of the Civil Code
provides for a prescriptive period of six
months for a redhibitory action, a cursory
94
reading of the ten preceding articles to which

it refers will reveal that said rule may be
applied only in case of implied warranties. The
present case involves one with an express
warranty. Consequently, the general rule on
rescission of contract, which is four years
(Article 1389, Civil Code) shall apply.
Inasmuch as the instant case involves an
express warranty, the filing of petitioner's
amended answer on September 30, 1988 is
well within the four-year prescriptive period
for rescission of contract from September 13,
1986, which was the delivery date of the unit.
1. A mortgaged his unregistered parcel of land to X. Thereafter A sold

the land to B, without informing the latter that the land was
mortgaged. The mortgage was foreclosed. X was the one who was able
to buy the land in question. By virtue of the same, B was evicted from
the land. Is A liable for warranty against hidden defect?
No. A is liable for warranty against eviction, i.e. warranty against non-
apparent burden or servitude.
2. A sold Brand X pork and beans to B. When B opened the can, he

found out that the pork and beans does not have pork. Is there a
violation of any warranty?
3. On 11 June 2009, A and B entered into a contract of sale whereby A

engages to deliver a particular car on or before 8 July 2009. The car
incurred a hidden defect after the perfection of the contract but before
delivery. When must the defect exist, 11 June 2009 or 8 July 2009?
The defect must exist ―at the time of sale‖
4. A sold a car with hidden defect to B, who does not have a knowledge
of the defect. B sold the car to C. Does A have an implied warranty in
favor of C?
Yes. See Moles vs IAC.
* OBLIGATIONS OF THE VENDEE
(Art. 1582) The vendee must:

95
(a) Accept delivery

(b) Pay the price
- RULES ON ACCEPTANCE AND PAYMENT:

(a) Both must be performed at the time and place stipulated
(b) When there is no stipulation as to time and place of payment,
payment must be made at the time and place of delivery.

(c) Apply Article 1524 (in relation to Article 1169, last paragraph),
where payment and delivery are simultaneous
- apply Arts. 1251 and 1521 (Time and Place of Delivery)
TIME = at a reasonable hour (question of fact)
PLACE
5. Stipulation of the parties; or
6. Seller’s place of business if he has one; or
7. Seller’s residence; or
8. In case of sale of definite or specific goods, in the place where the
thing is.
1. A and B entered into a contract of sale where it is stipulated that B,

the buyer, is bound to pay 15 days after the perfection of the
contract. May B demand the delivery of the thing from A even before
the arrival of the day he is bound to pay?
Yes. A’s obligation, not being dependent on a condition or a period, is
pure. His obligation is thus demandable at once, even at the time the
contract is perfected (Art. 1179)
2. A and B entered into a contract of sale of a parcel of land. A delivered

the parcel of land to B upon perfection. B, on the other hand, is
bound to pay on October 9. A became incapacitated on October 8. On
October 9, B went to A to pay. Is payment of B to A valid?
As a rule, payment to the incapacitated is void. However, if the
incapacitated has kept the thing delivered or if payment has been
beneficial to him, the payment is valid (Article 1241).
*Article 1427 implies that the incapacitated who voluntarily pays the
buyer does not have the right to recover the price from the seller who
spent it in good faith.
3. (?) A sold sacks of corn to B for P500k. They agreed that A will deliver
on 1 June 2009, and B will pay on 31 July 2009. A lives in Davao,
96
while B lives in Manila. On 1 June 2009, A delivered the sacks of

corn. B, on the other hand, did not pay the price on 31 July 2009. A
went to Manila and spent P6k for airfare and P5k for hotel
accommodation in order to get the payment of the purchase price
from B. B tendered P500k, but A refused to accept. A contends that B
should also pay P11k which the former spent for airfare and hotel
accommodation. Is A’s contention correct?
Yes. It is the duty of the debtor to correct payment. Applying Art.
1582 in relation to Art. 1521, B is bound to pay at the place of
delivery, in the absence of stipulation as to the place of payment. The
place of delivery, when there is no stipulation as to where the same is
to be made, is the seller’s place of business or residence. Hence, B is
bound to go to Davao to pay A.
- COMPANY BOUGHT-OUT
- if involves not considerable amount – mere continuance of business
- if involves considerable amount such that the company is bought out to
stop its operations – there is no assumption of obligations
(Art. 1583): VENDOR IS NOT BOUND TO ACCEPT PARTIAL DELIVERY

- relate Article 1233: There is no payment until the thing is completely
delivered
- relate Article 1248: One cannot be compelled to receive partial payment;
one has no right to make partial payment
* SEPARATE PRICE FOR EACH INSTALLMENT

- BREACH AFFECTS THE WHOLE CONTRACT (Injured party may sue for
breach of entire contract)

- when seller makes defective or incomplete deliveries; or
- buyer wrongfully neglects or refuses to accept delivery; or
- buyer fails to pay any installment
- BREACH IS SEVERABLE
- only claim for compensation for particular breach may be allowed
(Art. 1584): BUYER’S RIGHT TO EXAMINE GOODS

ACCEPTANCE – assent to become owner of the specific goods when
delivery of them is offered to the buyer EXAMINATION – is a condition
precedent to transfer ownership
* Art. 1584 refers to ACTUAL DELIVERY
* RULES:
97
(a) Examination before delivery should be made by request.

Vendor is not bound to offer the thing for examination before
delivery without the request of the vendee.
(b) When the thing is delivered, the thing is not considered
accepted if the vendee has not examined it or has no

reasonable opportunity to examine it…
(c) In case of COD (collect on delivery) – buyer is not entitled to
examine until payment is made, EXCEPT when there is an

agreement or that the usage of trade permits the same
* In COD, goods are not to be delivered by the carrier to the buyer unless
the latter pays.
(Art. 1585): MODES OF MANIFESTING ACCEPTANCE

1. EXPRESS ACCEPTANCE – the buyer
intimates to the seller that he accepts the thing 2.
IMPLIED ACCEPTANCE – may be either of the
following:
a. Buyer does an act inconsistent with the seller’s ownership; or
b. Buyer’s retention of goods without intimating rejection after the
lapse of reasonable time.
*NOTE: Delivery and Acceptance are separate acts.

Receipt and acceptance are not synonymous
(Art. 1586): ACCEPTANCE IS NOT A BAR TO ACTION FOR DAMAGES.

However, notice must be given to the seller within a reasonable time.
(Art. 1587): WHERE BUYER’S REFUSAL TO ACCEPT IS JUSTIFIED

- Buyer is not bound to return the goods; but he must notify
seller (It is the seller who is required to recover the goods from
the buyer)
- The risk of loss is still with the seller
- Buyer is not liable as DEPOSITARY unless he voluntarily
constitutes himself as such
QUESTION / INQUIRY: Is the buyer bound to take care of the goods?

(whether Art. 1163 is applicable in this case)
(Art. 1588): REFUSAL OF THE BUYER WITHOUT JUST CAUSE

- Title passes to the buyer the moment it is placed at his disposal
(Art. 1589): INTEREST (for the period between delivery and payment):
- Contemplates a situation where DELIVERY AND PAYMENT ARE
NOT SIMULTANEOUS
98
- Vendee is bound to pay interest in any of the following

instances: [IFV (Inday’s Funniest Videos)] (a) Interest is
stipulated
- may be oral
- interest which must be in writing refers only to loan (Art. 1956)
(b) Fruits or income are received by vendee from the thing sold
-even if a term has been fixed for the payment of price
(c) Vendee is guilty of Default (see Art. 1169)
[Under Art. 1169, the debtor incurs in delay from the time of
judicial or extra-judicial demand. However, demand is not
necessary to constitute delay in the following cases: [LTD]
1. The law or obligation expressly so provides;
2. Time is of the essence; or
3. Demand would be useless as when the obligor has rendered it
beyond his power to perform.]
(Art. 1590): RIGHT OF VENDEE TO SUSPEND PAYMENT

- Contemplates a situation where the CONTRACT IS NOT YET
CONSUMMATED - GENERAL RULE: Applicable in 2 cases:
(a) Where the vendee is disturbed in possession or ownership of
the thing bought; or

(b) Vendee has reasonable ground to fear that his possession or
ownership would be disturbed (by a vindicatory action or a

foreclosure of a mortgage)
* In both instances, the vendee may retain only the price that
has not been paid to the vendor. He is not entitled to recover
what has already been paid.
- EXCEPTIONS TO SUSPENSION OF PAYMENT (where vendee

has no right to suspend payment): [SSCTP]
(a) S: vendor gives security for the return of the price
(b) S: stipulation that vendee must make payment
notwithstanding such contingency (c) C: cessation of

disturbance or danger
(d) T: disturbance is a mere act of trespass
(e) P: vendee has paid the price in full
- When the disturbance is caused by non-apparent servitude, the

remedy is rescission, not suspension of payment.
1. A sold a parcel of land to B. Thereafter, C filed a suit against
A and B for quieting of title. During pendency, may B

suspend payment?
99
Yes. B has reasonable ground to fear that his possession or

ownership would be disturbed by a vindicatory action.
2. (?) Same facts as #1 but C only claims for a part of the land.
May there be suspension of payment? Yes, B may still
suspend payment for the entire amount.
(Art. 1591): RIGHT OF VENDOR TO RESCIND SALE OF

IMMOVABLE PROPERTY / ANTICIPATORY BREACH -
REQUISITES:
(a) There is delivery of immovable property
(b) Vendee has not paid the price
(c) Vendor has reasonable ground to fear the:
a. LOSS of PROPERTY; AND
b. LOSS of PRICE
- When there is no such reasonable ground, Art. 1191 shall be

observed (when the vendee does not comply with what is
incumbent upon him).
(Art. 1592): WHERE AUTOMATIC RESCISSION OF SALE OF IMMOVABLE

PROPERTY IS STIPULATED
Art. 1592: In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at the
time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the
period, as long as no demand for rescission of the contract has
been made upon him either judicially or by a notarial act. After
the demand, the court may not grant him a new term.
- According to Villanueva and Pineda, the phrase ―even though‖

means that this provision is also applicable in a case where
there is no stipulation in the contract as to automatic
rescission. Atty. Casiňo does not agree with them (this time, he
agrees with De Leon)
- Vendor is given an option to rescind UPON JUDICIAL OR
NOTARIAL DEMAND
- However, when there is no judicial or notarial demand, vendee
may still pay. Offer to pay is sufficient to defeat vendor’s
prerogative.
- Vendor’s right to rescind is not absolute. o Art. 1191, par. 3
provides that the court may grant vendee a new term o However,
if there is already a demand, the court may no longer fix a term.
- Breach must be substantial as to defeat the very object of
parties.
100
- NOT APPLICABLE TO: o Sale on installment of real estate

(Caridad Estates vs Santero) – governed by Maceda Law o
Mere promise to sell real estate / Conditional sale – there
can be no rescission in contract to sell o Cases under RA 6552
(RA 6552 recognizes the vendor’s right to cancel unqualifiedly in
case of industrial lots, commercial buildings, etc. with a refund
of certain percentages of payments made on account of
cancelled contract).
*In other words, the vendee in such cases may no longer

pay the price after the expiration of the time agreed upon
although no demand has yet been made upon him by suit
or notarial act.
(Art. 1593): WHERE AUTOMATIC RESCISSION OF SALE

OF MOVABLE PROPERTY IS STIPULATED -
Vendor can rescind the contract as a matter of
right if the vendee does not:
(a) Accept; or
(b) Pay unless credit period for payment is stipulated
- Reason for the rule: Personal properties are not capable of

maintaining stable price in the market. Hence, any delay is
prejudicial to the vendor.
- Not applicable if the thing has already been delivered (reason:
the vendor cannot take the law in his hands)
*REMEDIES OF PARTIES IN CASE OF BREACH OF CONTRACT OF SALE
A. Sale of Personal Property
1. Sale of personal property on installments:
Requisites (Art. 1484)

(a) contract of sale
(b) personal property
(c) payable in installments
(d) in case of 2nd and 3rd remedies, there has been a failure to pay two or
more installments
Alternative remedies of the vendor: [Art. 1484, NCC]

(a) exact fulfillment of the obligation should the vendee fail to pay
(b) cancel the sale should the vendee’s failure to pay cover two or more
installments
101
foreclose the chattel mortgage on the thing sold (if one has been
(c)
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.]
Delta Motors The remedies under Art. 1484 have been

Sales Corp. v. recognized as alternative, not cumulative, in
Niu Kim Duan, that the exercise of one would bar the exercise
213 SCRA259 of the others.
Elisco Tool The Court has long been aware of the practice
Manufacturing of vendors of personal property of
Corp. v. CA, 307 denominating a contract of sale on
SCRA 731 installment as one of lease to prevent the
ownership of the object of the sale from
passing to the vendee until and unless the
price is fully paid.
What constitutes sale on installment:

Levy Hermanos, When there is only one payment to be paid in
Inc. v. Gervacio, the future, there is no basis to apply the Recto
69 Phil. 52 law, since under the language of then Article
1454-A, the buyer needs to have defaulted in
the payment of two or more installments to
allow the seller to rescind or foreclose on the
chattel mortgage.
Specific Performance:
GENERAL RULE: when the seller has chosen specific performance, he can
no longer seek for rescission nor foreclosure of the chattel mortgage
constituted on the thing sold.
EXCEPTION [Art. 1191]: Even if the seller had chosen specific performance,
if the same has become impossible, the seller may still choose rescission
see Chieng v. Sps. Santos, G.R. No. 169647, Aug. 31, 2007
Rescission
*When rescission is deemed chosen:

When the seller has clearly indicated to end the contract such as when –
[NPA]
(a) he sends a notice of rescission, or
102
(b) he takes possession of the subject matter of the sale,

or (c) he files an action for rescission.
*Forfeiture of installment or rentals paid:

GENERAL RULE [Art. 1385]: Rescission creates the obligation to return the
things which were the object of the contract, together with the fruits, and
the price with interests. It can be carried out only when he who demands
rescission can return whatever he may be obliged to restore.
EXCEPTION [Art. 1486]: A stipulation that the installments or rents paid
shall not be returned to the vendee or lessee shall be valid insofar as the
same may not be unconscionable under the circumstances.
* Effect of rescission:
Nonato v. IAC When the seller’s assignee, a financing

company, is able to take back possession of
the motor vehicle with a condition that the
vehicle could be redeemed by the buyers
within
15 days, then such taking of possession is
clearly with the intent to cancel the contract.
Delta Motor Sales A stipulation in a contract that the
Corp. v. Niu Kim installments paid shall not be returned to the
Duan, vendee is valid insofar as the same may not
be unconscionable under the circumstances.
The Court took pains to show that the
treatment of the forfeited installments as
rental is more than justified by the retention
and use of the air-conditioning units by the
buyer for 22 months.
Foreclosure of chattel mortgage
When remedy is deemed chosen:

At the time of actual sale of the subject property at public auction
pursuant to the foreclosure proceedings commenced.
Rule:
Manila Motor Co. vs The remedies under Article 1484 are
Fernandez alternative, not cumulative, in that the
exercise of one would bar the exercise of the
others.
103
Vda de Quiambao Only the taking back of the property coupled

vs Manila Motor Inc with an unequivocal desire on its part to
rescind its contract or for the purpose of
appropriating the same, would suffice to bar
the seller form proceeding with specific
performance. In this case, it was not the seller
who demanded a return of the subject motor
vehicle, but rather it was the buyer who
voluntarily returned the same to postpone the
satisfaction of the enforcement of the
judgment debt obtained by the seller on the
unpaid balance of the purchase price.
Northern Motors vs If prior to the actual sale of the subject
Sapinoso property at public auction, the seller had
received further payments from the buyer, the
seller is not obliged to refund said payments
after foreclosure to the buyer.
Universal Motors vs The filing by the seller of an action for the
Dy Hian Tat issuance of a writ of replevin, and the actual
recovery of possession of the subject property,
would not amount to foreclosure, even
with the attachment of the mortgage contract
itself, since no actual foreclosure pursuant to
the relevant provisions of the Rules of Court
have been pursued.
The mere fact that the seller has secured
possession of the truck in question does not
necessarily mean that it will foreclose its
mortgage. Indeed, there is no showing at all
that the seller is causing the sale thereof at
public auction or is even preparing to do so. It
is quite possible that the seller wanted merely
to be sure that the truck is not lost or
rendered valueless, preparatory to having it
levied upon under a writ of attachment.
Effect of foreclosure of the chattel mortgage:

No further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary is void. [Art. 1484(3)] [Note:
unpaid balance here pertains to purchase price] EXCEPTION:
Filipinas Investment When a defaulting buyer-mortgagor refuses to
& Finance Corp, v. surrender the chattel to the seller to allow the
Ridad latter to be able to proceed with foreclosure,
then the seller, even after foreclosure, should
104
be allowed to recover expenses and attorney’s

fees incurred in trying to obtain possession of
the chattel.
Barring Effect of Other Securities Given for Payment of Price

Cruz v. Filipinas - The ―further action‖ being barred under
Investment & Art. 1484 is not limited to judicial
Finance Corp proceedings, but should include extrajudicial
proceedings by virtue of which the seller may
be enabled to exact recovery of the supposed
unsatisfied balance of the purchase price
from the purchaser or his privy.
- A seller is precluded from having a
recourse against the additional security put
up by a third party insofar as the burden
would ultimately fall on the buyer himself is
concerned (e.g. the guarantor will later on
proceed against the buyer). To rule otherwise
would be a circumvention of Art. 1484.
Assignor-Assignee; Financing Transaction

When the seller assigns his credit to another person, the latter is likewise
bound by the same law. (Borbon II vs Servicewide Specialists)
Assignment with recourse basis

Filipinas Art. 1484 (3) does not bar one to whom the
Investment & vendor has assigned on with a recourse basis his
Finance credit against the vendee from recovering from the
Corp. vs vendor the assigned credit in full although the
Vitug vendor may have no right of recovery against the
vendee for the deficiency.
QUESTION/INQUIRY: What if it is the buyer who assigned or alienated the

property to another person (whether the other person is bound by the same
law)?
Applicability of Recto Law: [Art. 1485]: Art. 1484 applies also to contracts
purporting to be leases of personal property with option to buy (when the
lessor has deprived the lessee of the possession or enjoyment of the thing)
105
PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging,

Inc., G.R. No. 142618, July 12, 2007; BA Finance Corp. v.
CA, 228 SCRA 530; Vda. de Jose v. Barrueco, 67 Phil. 191]
1. A lease of personalty with option to buy was entered into by A and B.

For failure to pay rentals, the lessor (A) took possession of the thing sold.
May A still collect the unpaid rentals?
No. Lessor is estopped from further action to recover the unpaid rentals
which are deemed waived. The remedies are alternative. The exercise of one
would bar the exercise of the other.
2. The vendor elected to foreclose the chattel mortgage on the car sold.
He filed an action for replevin. Before the vendee filed his answer, he paid
two installments amounting to P1,250. May the vendor retain the amount
paid to him?
Yes. The said amount could be retained by the vendor since it was paid
before the actual foreclosure of the chattel mortgage. See Northern Motors,
Inc vs Sapinoso.
3. A and B entered into a contract of sale where A bound himself to

deliver upon perfection a particular car. B, on the other hand, is bound to
pay half of the price at the time of perfection and the other half 15 days
thereafter. There was no payment made by B.
(a) Is Art. 1484 applicable?
No. This is a sale on straight term. See Levy Hermanos, Inc. v.

Gervacio.
(b) May A foreclose the chattel mortgage if one has been constituted?
Yes, under the Chattel Mortgage Law.

(c) May A cancel the contract?
Yes, under Art. 1191.

(d) May A recover the balance after foreclosing the chattel mortgage?
Yes. There is no barring effect because Art. 1484 is not

applicable.

deliver upon perfection a particular car. B, on the other hand, bound to
pay P100k on ten equal monthly installments. B failed to pay the 4th, 5th
and 6th installments (on 4th, 5th, and 6th months). On the 7th month, B went
to A and paid P10k. A accepted the payment and issued a receipt. May A
avail of the remedies stated in Art. 1484?
No. The receipt of a later installment of a debt without reservation as to
prior installments shall raise the presumption that such installments have
been paid. (Art. 1176, par. 2)
106

deliver upon perfection a particular car. B, on the other hand, bound
himself to pay P100k on ten equal monthly installments. B failed to pay the
4th, 5th and 6th installments (on 4th, 5th, and 6th months). May A rescind the
contract?
No. There is no demand. In order for Art. 1484 to apply, the vendee must
be in default. Applying Art. 1169, vendee is not in default when there is no
judicial or extra-judicial demand.

himself to pay P100k on ten equal monthly installments. B failed to pay 1
installment. May A rescind the contract? No. The non-payment must
pertain to two or more installments.
7. [(?) ESCALATION CLAUSE] A and B entered into a contract of sale

where A bound himself to deliver upon perfection a particular car. B, on
the other hand, bound himself to pay P100k on ten equal monthly
installments. There is a stipulation in the contract that failure to pay one of
the installments shall automatically make all of the installments due and
demandable. B failed to pay 1 installment. Assuming that there is a
demand to pay on the part of A as to the unpaid installment, may A
rescind the contract?
8. [(?) FACTS UNCLEAR] A and B entered into a contract of sale where A

bound himself to deliver upon perfection a particular car. B, on the other
hand, bound to pay P100k on ten equal monthly installments. A chattel
mortgage was constituted to secure B’s payment of the price. Meanwhile, a
real estate mortgage is also constituted on the property in favor of C. B
failed to pay the 4th, 5th and 6th installments (on 4th, 5th, and 6th months). If
A would choose foreclosure of the chattel mortgage, may he proceed
against C as to the payment of the balance?

himself to pay P100k on ten equal monthly installments. C guaranteed B’s
payment of the price. B failed to pay the 4th, 5th and 6th installments (on
4th, 5th, and 6th months). May A proceed against C, the guarantor, for the
payment of the unpaid balance? No. Check Ridad case. A seller is
precluded from having a recourse against the additional security put up by
a third party insofar as the burden would ultimately fall on the buyer
himself is concerned (e.g. the guarantor will later on proceed against the
buyer). To rule otherwise would be a circumvention of Art. 1484 (Cruz v.
Filipinas Investment & Finance Corp). Furthermore, a guarantor is only
107
subsidiarily liable, unlike a surety who is primarily and solidarily liable

with the principal.
10. Same facts as #9 only that A did not choose foreclosure. C, the
guarantor, paid the price of the car in behalf of B. Rule the case.
There is here a legal subrogation where even without the knowledge of B,
the debtor, C, a person interested in the fulfillment of the obligation, pays
(Art. 1302)

himself to pay P100k on ten equal monthly installments. B paid the 1st
installment but before the 2nd installment was due, B became insolvent.
May A avail of the remedies stated in Art. 1484 even without a demand?
Yes. B lost his right to a period, he having become insolvent who gave no
guaranty or security for the payment of the price (Art. 1198).
B. Sale of Immovable Property
(1) Remedies of Vendor/Seller:
1.Anticipatory Breach:
(Art. 1591): RIGHT OF VENDOR TO RESCIND SALE OF
IMMOVABLE PROPERTY / ANTICIPATORY BREACH -
REQUISITES:
(a) There is delivery of immovable property
(b) Vendee has not paid the price
(c) Vendor has reasonable ground to fear the:
a. LOSS of PROPERTY; AND
b. LOSS of PRICE
When there is no such reasonable ground, Art. 1191 shall be observed

(when the vendee does not comply with what is incumbent upon him).
2.AUTOMATIC RESCISSION: [1592, NCC; Laforteza vs. Machuca, 333 SCRA

643]
(Art. 1592): WHERE AUTOMATIC RESCISSION OF SALE OF IMMOVABLE
PROPERTY IS STIPULATED
- According to Villanueva and Pineda, the phrase ―even though‖
means that this provision is also applicable in a case where
there is no stipulation in the contract as to automatic
rescission. Atty. Casiňo does not agree with them (this time, he
agrees with De Leon)
108
- Vendor is given an option to rescind UPON JUDICIAL OR

NOTARIAL DEMAND
- However, when there is no judicial or notarial demand, vendee
may still pay. Offer to pay is sufficient to defeat vendor’s
prerogative.
- Vendor’s right to rescind is not absolute. o Art. 1191, par. 3
provides that the court may grant vendee a new term o
However, if there is already a demand, the court may no longer
fix a term.
- Breach must be substantial as would defeat the very object of
parties.
- NOT APPLICABLE TO: o Sale on installment of real estate
(Caridad Estates vs Santero) o Mere promise to sell real estate /
Conditional sale
o Cases under RA 6552 (RA 6552 recognizes the vendor’s
right to cancel unqualifiedly in case of industrial lots,
commercial buildings, etc. with a refund of certain
percentages of payments made on account of cancelled
contract.
*In other words, the vendee in such cases may no longer pay the price after
the expiration of the time agreed upon although no demand has yet been
made upon him by suit or notarial act.
*Article 1592, not applicable to Contract to Sell:

[Pangilinan vs. CA, 279 SCRA 590 (1997); Alfonso vs. CA, 186 SCRA 400
(1990);
Valarao vs. CA, 304 SCRA 155 (1999);
People’s Industrial and Commercial Corp. vs. CA, 281 SCRA 206 (1997)].
(2) Remedies of Buyer
1. Right to Suspend Payment:
(Art. 1590): RIGHT OF VENDEE TO SUSPEND PAYMENT

- Contemplates a situation where the CONTRACT IS NOT YET
CONSUMMATED - GENERAL RULE: Applicable in 2 cases:
(c) Where the vendee is disturbed in possession or ownership of
the thing bought; or

(d) Vendee has reasonable fear ground to fear that his possession
or ownership would be disturbed (by a vindicatory action or a

foreclosure mortgage)
109
* In both instances, the vendee may retain only the price that
has not been paid to the vendor. He is not entitled to recover
what has already been paid.
- EXCEPTIONS TO SUSPENSION OF PAYMENT (where vendee has

no right to suspend payment): [SSCTP]
(f) S: vendor gives security for the return of the price
(g) S: stipulation that vendee must make payment
notwithstanding such contingency (h) C: cessation of

disturbance or danger
(i) T: disturbance is a mere act of trespass
(j) P: vendee has paid the price in full
- When the disturbance is caused by non-apparent servitude, the

remedy is rescission not suspension of payment.
*Rule applicable in cases not involving subdivision or condominium

projects
*Rule applicable in cases involving sale of subdivision lots or condominium

units
Ground for suspension of payment:

No installment payments made by the buyer in a subdivision or
condominium project for the lot or unit he contracts to buy shall be
forfeited in favor of the owner or developer when the buyer, after due notice
to the owner or developer desists from further payment due to the failure of
the owner or developer to the develop the subdivision or condominium
project according to the approved plans and within the time limit for
complying with the same. [Sec. 23, PD 957]
[1.2.2] Alternative remedies of the buyer: [Sec. 23, PD 957]

Relucio v. Brillante-Garfin, 187 SCRA 405;
Casa Filipina Realty Corp. v. Office of the Pres., 241 SCRA 165].
2. Right to Grace Period:
Bricktown When a grace period is provided for in the contract

Development of sale, it should be construed as a right, not an
Corp. v. Amor obligation of the debtor, and when unconditionally
Tierra conferred, the grace period is effective without
Development further need of demand either calling for the
Corp. payment of the obligation or for honoring the right.
110
C. The Maceda Law (RA 6552)
Purpose of law : Protect buyers in installments against oppressive

conditions
1. Applicability:
Transactions Covered:
Transaction or contracts involving the sale of financing of real estate on
installment payments, including residential condominium apartments.
- Covers:
1. contract of sale
2. contract to sell 3. financing transactions

Excluded:
1. industrial
2. commercial
3. sale to tenants under agrarian laws [Sec. 3, RA 6552].
Applicability:
[Sec. 2, RA 6552].
Applies even to contract to sell:

[Villanueva, Sales, 432; Rillo v. CA, 274 SCRA 461; Leano v. CA, 369 SCRA
674].
2. Rights Granted to Buyer Under Maceda Law:
If the buyer has paid at least two years of installments:

(a) The buyer must pay, without additional interest, the unpaid
installments due within the total grace period earned by him. There
shall be 1 month grace period for every 1 year of installment
payments made. [NOTE: This is to be exercised only once in every 5
years or the life of the contract and its extensions.
(b) Actual cancellation can only take place after 30 days from receipt by
the buyer of the notice of cancellation or demand for rescission by a

notarial act and upon full payment of the cash surrender value to
buyer. [NOTE: The seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to 50% of the total
payments made, After 5 years of the installments, there shall be an
additional 5% every year but not to exceed 90% of the total payments
made.
(c) The buyer shall have the right to sell his rights or assign the same to
another person or to reinstate the contract by updating the account

during the grace period and before actual cancellation of the contract.
111
(d) The buyer shall have the right to pay in advance any installment or
the full unpaid balance of the purchase price any time without
interest and to have such full payment of the purchase price
annotated in the certificate of title covering the property.
If the buyer has paid less than two years installments:

(a) the seller shall give the buyer a grace period of not less than 60 days
from the date the installment became due. If the buyer fails to pay the
installments due at the expiration of the grace period, the seller may
cancel the contract after 30 days from receipt by the buyer of the
notice of cancellation or the demand for rescission of contract by
notarial act.
(b) c and d above
[NOTE: downpayments, deposits or options on the contract shall be

included in the computation of the total number of
installment payments made.]
3. Requisites for valid cancellation of contract covered by Maceda Law:
Requisites:
Actual cancellation can only take place after 30 days from receipt by the
buyer of the notice of cancellation or demand for rescission by a notarial
act and upon full payment of the cash surrender value to buyer. [NOTE:
The seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to 50% of the total payments made,
After 5 years of the installments, there shall be an additional 5% every year
but not to exceed 90% of the total payments made.
[Sec. 3, RA 6552; Siska Development Corp. vs. Office of the President of the
Philippines, 231 SCRA 674 and Marina Properties Corp. vs. CA, 294 SCRA
272 (1998)]
Effect of failure to comply:

[Active Realty & Development Corp. vs. Daroya, 382 SCRA 152; Olympia
Housing v. Panasiatic Travel Corp., G.R. No. 140468, Jan. 16, 2003; Layug
vs. Court of Appeals, 369 SCRA 36]
Effect of contrary
stipulation [Sec. 7, RA
6552].
112
1. (?) A and B entered into a contract of sale whereby A bound himself to

deliver a parcel of land through a public document on 1 July 2010,
and B bound himself to pay on 31 December 2010. On 31 July 2010,
however, B became insolvent. Can A sue for rescission?
Yes. B loses his right to a period because of his insolvency pursuant
to Article 1198.
2. (?) A and B entered into a contract of sale whereby A bound himself to

and B bound himself to pay on 31 December 2010. On 31 July 2010,
however, B absconded. Can A sue for rescission?
Yes. B loses his right to a period pursuant to Article 1198
3. A and B entered into a contract of sale whereby A bound himself to

and B bound himself to pay on 31 December 2010. B did not pay A
on 31 December 2010. What is/are the remedy/ies of A?
A may choose between fulfillment and rescission of the obligation with
payment of damages in either case on the ground that B does not
comply with what is incumbent upon him (Article 1191). Should there
be a reasonable ground to fear the loss of property sold and its price,
A may immediately sue for rescission of the sale (Article 1591)
4. (?) (Soria/Suria?) A and B entered into a contract of sale whereby A

bound himself to deliver a parcel of land through a public document
on 1 July 2010, and B bound himself to pay on 31 December 2010. A
real estate mortgage was constituted on the property, having A as the
mortgagee. B did not pay A on 31 December 2010. May A rescind the
sale? No. Upon the constitution of Real estate mortgage, the contract
has been changed into one of payment of a loan.
D. Sale of Goods
Remedies of Unpaid Seller:
[Art. 1526] – Notwithstanding that the ownership of the

goods may have passed to the buyer: (a) Possessory
lien
(b) Stoppage in transitu
(c) Right of resale (can only be exercised when the two prior
remedies have been exercised) (d) Rescission (can only be

exercised when the two prior remedies have been exercised)
Who is considered an unpaid seller?

113
[Art. 1525]
(a) when the whole of the price has not been paid or tendered to the
seller; or
(b) when a bill of exchange or other negotiable instrument has been
received (as conditional payment), and the condition on which the

instrument was received was broken by reason of the dishonor of the
instrument, insolvency of buyer, or otherwise.
* Lien on goods or right of retention:
When right of lien exists: [Art.1527] [WEI]

(a) goods have been sold without any stipulation as to credit
(b) goods have been sold on credit, but the term of credit has expired
(c) buyer becomes insolvent (as he had already lost his right to a period
pursuant to Art. 1198)
When unpaid seller loses his lien: [Art.1529] [CLW]

(a) he delivers to a carrier or other bailee
-for the purpose of transmission to the buyer

- without reserving the ownership in the goods or the right of
possession thereof
(b) buyer or his agent lawfully obtains possession of the goods
(c) waiver
Part delivery of goods had been made [Art. 1528]

– lien on the remainder
Effect of sale of goods by buyer: [Art.1535]

Seller’s right of lien or stoppage in transitu is not affected.
EXCEPTION:
(a) Seller assented thereto
When a negotiable document of title has been issued for goods (reiteration
of Art. 1532 and in consonance with Art. 1518)
* Stoppage In Transitu:
When can it be invoked: [Arts.

1526, 1530 and 1532] - seller has
parted with the possession of the
goods - REQUISITES:
(a) unpaid seller
(b) insolvent buyer
(c) goods are in transit
(d) The exercise of stoppage in transitu is either by:

114
(i) obtaining actual possession of the goods

(ii) giving notice of his claim to the carrier or other bailee in whose
possession the goods are.

- (1532) Notice may be given either to the person in actual
possession of the goods or to his principal.
- When notice is given to the carrier or other bailee in possession
of the goods, he must redeliver the goods according to the
directions of the seller [NOTE: Expenses must be borne by the
seller]
EXCEPTION: a negotiable document of title representing the
goods has been issued (in which case the carrier or bailee is not
obliged to redeliver the goods unless the seller surrendered the
document for cancellation)
When are the goods considered ―in transit‖ (Art. 1531)

1. After delivery to a carrier or other bailee and before the buyer or his
agent takes delivery of them; and

2. Goods are rejected by the buyer and the carrier or other bailee
continues to possess them (even if the seller refused to receive them

back)
When are the goods considered no longer in transit (Art. 1531)

1. After delivery to buyer or his agent
2. Buyer or his agent obtains delivery of the goods (before their arrival at
the appointed destination)

3. After the arrival at the appointed destination, the carrier or bailee
acknowledge to the buyer or his agent that he is holding the goods in

his behalf and continues in possession of them as bailee for buyer or
his agent 4. Carrier or bailee wrongfully refuses to deliver the
goods to the buyer or his agent in that behalf
Effect of sale of goods by buyer: [Art.1535]

Seller’s right of lien or stoppage in transitu is not affected.
EXCEPTION:
(b) Seller assented thereto
(c) When a negotiable document of title has been issued for goods
(reiteration of Art. 1532 and in consonance with Art. 1518)
* Resale of the Goods
REQUISITES: [Art. 1533]

(1) first two remedies have been exercised
115
- unpaid seller has right of lien or has

stopped goods in transitu (2) under any
of the following conditions:
(a) goods are perishable
(b) seller expressly reserves the right of resale in case buyer defaulted
(c) buyer has been in default in payment for an unreasonable time
Seller is not liable to original buyer for profit made by virtue of resale
Seller may recover from buyer damages for loss due to breach of contract of
sale
Buyer acquires good title as against original buyer
* Rescission of sale:
[A] Special right to rescind [Art.1534]

- seller has parted with possession of the goods
- seller may recover from the buyer damages for any loss due to breach of
contract
- there must be NOTICE or some other OVERT ACT of intention to rescind
[Overt act need not be communicated BUT the giving of notice is relevant
in case of default for an unreasonable time.
REQUISITES:
(1) first two remedies have been exercised
- unpaid seller has right of lien or has
stopped goods in transitu (2) under any
of the following conditions:
(a) seller expressly reserves the right of resale in case buyer defaulted
(b) buyer has been in default in payment for an unreasonable time
[B] Technical Rescission [Art. 1597]

- There is no delivery of goods yet
- seller may totally rescind by giving notice of his election to do so to the
buyer
(1) Buyer has repudiated the contract of sale;
(2) Buyer has manifested his inability to perform obligations; or
(3) Buyer committed a breach
116
1. A entered into a contract of sale with B whereby B bound himself

to pay P500k for the 100 sack of corn, which is to be delivered by
A. A gave B a bill of lading, deliverable to B or order. Subsequently,
B became insolvent. May A exercise to right of stoppage in
transitu?
Yes.
2. A and B entered into a contract of sale of 100 sacks of corn. A is
bound to send the goods to B through his ship, which is being
operated by C. Assuming that A became an unpaid seller, may he
exercise the right of stoppage in transitu while the goods are in the
possession of C?
No. A is still in the possession of the goods. C’s possession is
merely that of a holder, as he was acting as A’s employee. Because
A has not yet parted with the possession of the goods, his remedy
is to exercise his lien on the goods.
Actions in case of breach of contract of sale of goods
[A] REMEDIES OF SELLER

1. Action for the price / Specific performance (Art. 1595)
(a) when the ownership of the goods has passed to the buyer and he
wrongfully neglects or refuses to pay for the goods according to the

terms of the contract
(b) when price is payable on certain day, irrespective of delivery or
transfer of title, and the buyer wrongfully neglects or refuses to pay

[BUT: it is a defense to such action that seller has manifested an
inability or lack of interest to perform his obligation before
judgment]
(c) if goods cannot readily be resold for a reasonable price, although
transfer of ownership has not passed – seller may offer to deliver

the goods to the buyer; if buyer refuses to receive, seller may notify
the buyer that he holds the goods as bailee for the buyer.
Thereafter, the seller may treat the goods as buyer’s and may
maintain an action for the price.
2. Action for Damages (Art. 1596)
- When buyer wrongfully neglects or refuses to ACCEPT and PAY

for the goods
- MEASURE OF DAMAGES = estimated loss directly and naturally
resulting in the ordinary course of events from the buyer’s
breach
- MEASURE OF DAMAGES (WHEN THERE IS AVAILABLE
MARKET) = difference between the contract price and the market
or current price at the time the goods ought to have been
accepted, or at the time of refusal to accept when there is no
time fixed
117
3. Rescission (Art. 1597)

- There is no delivery of goods yet
- seller may totally rescind by giving notice of his election to do so to
the buyer
(1) Buyer has repudiated the contract of sale;
(2) Buyer has manifested his inability to perform obligations; or
(3) Buyer committed a breach
[B] REMEDIES OF BUYER
1. Specific performance, without giving the seller the option of retaining

the goods on payment of damages. [Judgment may be unconditional,
or upon such terms and conditions as to damages, payment of the
price and otherwise, as the court may deem just] (Art. 1598)
2. In case of seller’s breach of warranty (Art. 1599)
(a) Recoupment – accept the goods and set up the seller’s breach to
reduce or extinguish the price

(b) Accept the goods and maintain an action for damages for breach of
warranty
(c) Refuse to accept and maintain an action for damages for breach of
warranty
(d) Rescission – rescind the contract; refuse to receive the goods; or if
goods have already been received, return them and recover what
was paid or any part of it concurrently with return or immediately
after it.
- These remedies are alternative, without prejudice to paragraph 2 of
Art. 1191 (that a party may still seek rescission after choosing specific
performance if the latter is impossible)
- Buyer cannot rescind if he knew of the breach and accepted the goods
without protest, or fails within reasonable time to notify the seller of
his election to rescind, or fails to return or offer to return the goods in
substantially as good condition as it was
- If seller refuses to accept an offer to return the goods and the buyer
elected rescission, buyer shall be deemed to hold the goods as bailee
for the seller subject to lien to secure payment of any portion of the
price which has been paid.
- LOSS (in case of breach of warranty of quality) = difference between
value of the goods at the time of delivery and value they would have
had if they had answered to the warranty
Provisions on Rescission
1191 (Judicial Rescission based on substantial breach) – at the instance of
aggrieved party
1381 (rescission based on lesion) - at the instance of aggrieved party
1591 (for Anticipatory breach - immovable) – at the instance of vendor
118
1592 (Automatic rescission when there is stipulation - immovable) - at the

instance of vendor
1593 (Automatic rescission when there is stipulation – movable) - at the
instance of vendor
1534 (Special right to rescind) - at the instance of vendor
1597 (Technical Rescission) - at the instance of vendor
1599(4) (where there is breach of warranty on the part of seller) – at the
instance of vendee
Rescission in case of breach of a party or lesion

RESCISSION (RESOLUTION) RESCISSION – 1381
1191
legal basis is substantial breach legal basis is lesion (rescissible
contract)
principal remedy, retaliatory vs. subsidiary remedy – cannot be
unjust party instituted except when other
remedies are exhausted
mutual restitution mutual restitution
Rescission at the instance of vendor - immovable

1591 1592
Rescission based on Anticipatory Rescission based on stipulation
breach regarding automatic rescission
(b) There is delivery of - Vendor is given an option to
immovable property rescind UPON JUDICIAL OR

(c) Vendee has not paid the NOTARIAL DEMAND
price - However, when there is no
(d) Vendor has reasonable judicial or notarial demand,

ground to fear the: vendee may still pay. Offer to
a. LOSS of PROPERTY; pay is sufficient to defeat
AND
b. LOSS of PRICE vendor’s prerogative.
- Vendor’s right to rescind is
not absolute.
o Art. 1191, par. 3 provides
that the court may grant
vendee a new term
However, if there is already a
demand, the court may no longer
fix a term.
Principal/subsidiary (?)
119
Rescission at the instance of vendor – movable / goods

1534 1597
Special right to rescind Technical Rescission
Seller has already parted with There is no delivery of goods
possession of the goods… yet…
(1) Seller expressly reserved (1) Buyer has repudiated the
the right to do so in case contract of sale;

the buyer should make (2) Buyer has manifested his
default; or inability to perform

(2) The buyer has been in obligations; or
default in the payment of (3) Buyer committed a breach
the price for an

unreasonable time.
Rescission at the instance of vendor - movable

1593 1534 / 1597
Movable Property Movable Property / goods
Automatic rescission of sale of (See requisites)
movable is stipulated
Comparative Table of Remedies in case of breach
REMEDIES
VENDOR/SELLER VENDEE/BUYER
1191 1191
1170 1170
(IMMOVABLE) (IMMOVABLE)
1. Rescission under 1591 1. Suspension of payment under
2. Rescission under 1592 1591

3. Re provisions on Maceda 2. Right to grace period under
Law Maceda Law
(MOVABLE / GOODS) (MOVABLE / GOODS)

1) Action for the price / 1. (1598)
Specific performance (1595) 2. In case of breach of
2) Action for Damages warranty of seller (1599)

3) Rescission under 1597 3. Remedies of Unpaid Seller
(1526)
120
4) Rescission under 1593

(there is stipulation)
* EXTINGUISHMENT OF SALE
Art. 1600: Sales are extinguished by the same causes as all other
obligations, by those stated in the preceding articles of this Title, and by
conventional or legal redemption.
Sales are extinguished by the same causes as all other obligations (Art.
1600), such as:
1. Payment or performance of obligation
2. Loss of the thing due
3. Condonation or remission of debt
4. Confusion or merger of rights
5. Compensation
6. Novation
7. Rescission
8. Annulment
Sales are also extinguished by CONVENTIONAL OR LEGAL REDEMPTION.
*Conventional Redemption
Conventional redemption:
• seller reserved the right to repurchase thing sold
• coupled with obligation to return price of the sale, expenses of contract
& other legitimate payments and the necessary & useful expenses made
on the thing sold
• right is exercised only by seller in whom right is recognized in the
contract or by any person to whom right was transferred
* A right of repurchase is an alienable right and within the commerce of

man. It may be sold, attached and levied upon.
Equitable Mortgage (requisites):

1. the parties entered into a contract denominated as sale
2. the intention was to secure an existing debt by way of mortgage

121
Rationale Behind Provision on Equitable Mortgage

1. To avoid circumvention of usury law
2. To avoid circumvention of prohibition against pactum commissorium –
creditor cannot appropriate the things given by way of pledge or

mortgage; remedy here is foreclosure
Art. 1601: Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the obligation to
comply with the provisions of Article 1616 and other stipulations which
may have been agreed upon.
Art. 1602: The contract shall be presumed to be an equitable mortgage,

in any of the following cases: [IPERTOD]
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting

a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the

payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as interest
which shall be subject to the usury laws.
Art. 1603: In case of doubt, a contract purporting to be a sale with right to

repurchase shall be construed as an equitable mortgage.
Art. 1604: The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.
Art. 1605: In the cases referred to in Articles 1602 and 1604, the apparent
vendor may ask for the reformation of the instrument. (See Art. 1359)
Art. 1606: The right referred to in Article 1601, in the absence of an

express agreement, shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty
days from the time final judgment was rendered in a civil action on the
basis that the contract was a true sale with right to repurchase.
122
(This is not applicable to absolute sale. This is applicable only where the
nature or character of the transaction, as to whether it is a pacto de retro
sale or equitable mortgage, was put in issue before the court.)
Art. 1607: In case of real property, the consolidation of ownership in the

vendee by virtue of the failure of the vendor to comply with the provisions of
article 1616 shall not be recorded in the Registry of Property without a
judicial order, after the vendor has been duly heard.
(pertains to the recording of the consolidation of ownership)
Art. 1608: The vendor may bring his action against every possessor whose
right is derived from the vendee, even if in the second contract no mention
should have been made of the right to repurchase, without prejudice to the
provisions of the Mortgage Law and the Land Registration Law with respect
to third persons.
Art. 1609: The vendee is subrogated to the vendor's rights and actions.
Art. 1610: The creditors of the vendor cannot make use of the right of
redemption against the vendee, until after they have exhausted the
property of the vendor.
(This is in consonance with Art. 1177)
Art. 1611: In a sale with a right to repurchase, the vendee of a part of an

undivided immovable who acquires the whole thereof in the case of article
498, may compel the vendor to redeem the whole property, if the latter
wishes to make use of the right of redemption.
Art. 1612: If several persons, jointly and in the same contract, should sell
an undivided immovable with a right of repurchase, none of them may
exercise this right for more than his respective share.
The same rule shall apply if the person who sold an immovable alone has
left several heirs, in which case each of the latter may only redeem the part
which he may have acquired.
Art. 1613: In the case of the preceding article, the vendee may demand of all
the vendors or co-heirs that they come to an agreement upon the purchase
of the whole thing sold; and should they fail to do so, the vendee cannot be
compelled to consent to a partial redemption.
Art. 1614: Each one of the co-owners of an undivided immovable who may
have sold his share separately, may independently exercise the right of
repurchase as regards his own share, and the vendee cannot compel him
to redeem the whole property.
123
Art. 1615: If the vendee should leave several heirs, the action for
redemption cannot be brought against each of them except for his own
share, whether the thing be undivided, or it has been partitioned among
them.
But if the inheritance has been divided, and the thing sold has been
awarded to one of the heirs, the action for redemption may be instituted
against him for the whole.
Art. 1616: The vendor cannot avail himself of the right of repurchase
without returning to the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments
made by reason of the sale;

(2) The necessary and useful expenses made on the thing sold.
(construe with Art. 547 and Art. 547; enumeration is not exclusive; tender of
payment is enough because other expenses are still subject to validation)
Art. 1617: If at the time of the execution of the sale there should be on the
land, visible or growing fruits, there shall be no reimbursement for or
prorating of those existing at the time of redemption, if no indemnity was
paid by the purchaser when the sale was executed.
Should there have been no fruits at the time of the sale and some exist at
the time of redemption, they shall be prorated between the redemptioner and
the vendee, giving the latter the part corresponding to the time he possessed
the land in the last year, counted from the anniversary of the date of the
sale.
Art. 1618: The vendor who recovers the thing sold shall receive it free from
all charges or mortgages constituted by the vendee, but he shall respect
the leases which the latter may have executed in good faith, and in
accordance with the custom of the place where the land is situated.
1. A land was sold in 1971 for P50k. Later, the vendor claims sale to be
an equitable mortgage because of unusual inadequacy of the price. Is

he correct?
No. Price is not inadequate because of circumstance and time the
thing was sold. In 1971, P50k is already a big amount. Inadequacy of
price is determined at the time of sale.
2. (?) A third person acquires right of repurchase of vendor, which was
attached and sold at a public auction where the former became the
highest bidder. May vendor still exercise right of repurchase?
3. (?)(?)(?) A owes B P100k. B filed an action to collect; and judgment is
rendered in his favor. The subject parcel of land was awarded to B.

May A be compelled to immediately deliver the land? No, there is one
year right of repurchase.
124
4. A and B entered into a contract of sale with right of repurchase. They

agreed that the right of repurchase is fixed at P600k. Is the
stipulation valid?
Yes. Conventional redemption is subject to such ―other stipulations
which may have been agreed upon.‖ (Art. 1601) (Solid Homes vs CA)
5. A and B entered into a pacto de retro sale. B, the vendee a retro, sold
the subject property to C through an absolute sale. May A exercise
the right of repurchase as against C?
Yes. The vendor may bring his action against every possessor whose
right is derived from the vendee, even if in the second contract, there
is no mention as to the right to repurchase (Art. 1608)
6. A and B entered into a pacto de retro sale. B, the vendee a retro,
leased the subject property to C. May A evict C? No. A is bound to
respect the lease (Art. 1618)
7. B entered into a pacto de retro sale with C. A is a creditor of B. May A
proceed directly against C (or levy upon the subject property which is
in the possession of C) for the satisfaction of B’s debt?
No. The creditors of the vendor cannot make use of the right of
redemption against the vendee until after they have exhausted the
property of the vendor. (Art. 1610 in connection with Art. 1177)
[Noted: exceptions to this rule are: (a) a mortgage which is recorded
prior to sale and (b) mortgage that was foreclosed]
8. A, B, and C are co-owners of an undivided immovable. A sold his
share to D, which made D a new co-owner. Partition of the property
took place. Subsequently, B and C sold their part of the property to D.
Rule the case. A may be compelled to redeem the whole property if he
wishes to redeem (Art. 1611)
9. A, B, and C are co-owners of an undivided immovable. They jointly
entered into a contract of pacto de retro sale of the immovable
property to D. Rule the case.
None may exercise right to repurchase more than his share. (Art.
1612)
10. X owns a parcel of land. When he died, he left the said land to A, B
and C. A, B, and C jointly entered into a contract of pacto de retro
sale of the immovable property to D. Rule the case.
None may exercise right to repurchase more than his share. (Art.
1612)
11. In #s 8, 9 and 10, May the vendee demand from vendors to agree to
purchase the whole?
Yes. If the vendors cannot agree, the vendee cannot be compelled to
consent to partial redemption. (Art. 1613)
12. A, B, and C are co-owners of an undivided immovable. They entered
into separate contracts of pacto de retro sale of their shares in favor of
one vendee, D. May D compel either of A, B and C to redeem the
whole?
125
No, they cannot be compelled, but each of them may independently

exercise the right of repurchase as regards his share. (Art. 1614)
13. A entered into a pacto de retro sale of an undivided immovable with
B. B, the vendee, died leaving C, D, and E as his heirs. May A compel
one of the heirs to redeem the whole prop? If the property has already
been partitioned, would the answer be the same?
Whether the property is undivided or partitioned, the heirs cannot be
compelled to redeem the whole property, except when after partition,
the whole property has been awarded to one of the heirs, in which
case, he may be compelled to redeem the whole.
14. Suria case (Art. 1616)
15. A entered into a pacto de retro sale of a parcel of land with B. The
property is to be redeemed within 3 years from sale. The land was
sold to B at P500k. B further paid P50k for the growing and visible
fruits on the land. On the 3rd year after sale, A sought to redeem the
property –
(a) If A will exercise redemption, he must pay P550k as price for sale.
(b) If B did not pay, he is not entitled to reimbursement for crops
existing at the time of redemption.

(c) If no crops at the time of sale and some exist at redemption, B is
entitled to crops during the last year, i.e. 2nd year.

(d) If there were crops at the time of sale and B paid them, B must
receive reimbursement or is entitled to fruits for the last year

because having paid them, the effect is the same as if there were no
crops on the land when it was sold. (Art. 1617)
16. A entered into a pacto de retro sale with B. B, the vendee a retro,
mortgaged the property to C. Should B redeem the mortgage prior to
A’s exercise of his right of repurchase?
Yes. The vendor who recovers the thing sold shall receive it free from
all charges or mortgages constituted by the vendee. (Art. 1618)
17. A, the vendor a retro, before the expiration of the period of
redemption, brought an action to declare that such sale is really a
simple mortgage. Several years later, it was declared as pacto de
retro. Can the vendor a retro still redeem the property?
Yes. See Art. 1601, par. 3
* Legal Redemption
• Legal redemption is not applicable to: (enumeration is not exclusive)

(a) barter,
(b) donation
(c) transmission of things by hereditary title,
(d) mortgage,
(e) lease
126
• Article 1492 provides that the prohibitions as laid down in Arts. 1490
and 1491 are also applicable to legal redemption.
Art. 1619: Legal redemption is the right to be subrogated, upon the same
terms and conditions stipulated in the contract, in the place of one who
acquires a thing by purchase or dation in payment, or by any other
transaction whereby ownership is transmitted by onerous title.
(purpose is to minimize co-ownership)
Art. 1303: Subrogation transfers to the persons subrogated the credit

with all the rights thereto appertaining, either against the debtor or
against third person, be they guarantors or possessors of mortgages,
subject to stipulation in a conventional subrogation.
Art. 1620: A co-owner of a thing may exercise the right of redemption in

case the shares of all the other co-owners or of any of them, are sold to a
third person. If the price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption,
they may only do so in proportion to the share they may respectively have
in the thing owned in common.
Requisites:
1. Co-ownership
2. Alienation of all or any of the shares
3. Sale to a stranger
4. Before partition
Art. 1621: The owners of adjoining lands shall also have the right of
redemption when a piece of rural land, the area of which does not exceed
one hectare, is alienated, unless the grantee does not own any rural land.
This right is not applicable to adjacent lands which are separated by
brooks, drains, ravines, roads and other apparent servitudes for the benefit
of other estates.
If two or more adjoining owners desire to exercise the right of redemption at
the same time, the owner of the adjoining land of smaller area shall be
preferred; and should both lands have the same area, the one who first
requested the redemption.
-Requisites:
1. both lands are rural
2. adjacent
3. there is an alienation
4. less than 1 hectare
- purpose is to encourage maximum development and utilization of
agricultural lands
127
Art. 1622: Whenever a piece of urban land which is so small and so

situated that a major portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought merely for
speculation, is about to be re-sold, the owner of any adjoining land has a
right of pre-emption at a reasonable price. (Right of Pre-emption)
If the re-sale has been perfected, the owner of the adjoining land shall
have a right of redemption, also at a reasonable price. When two or more
owners of adjoining lands wish to exercise the right of pre-emption or
redemption, the owner whose intended use of the land in question appears
best justified shall be preferred. (Right
of redemption)
Art. 1623: The right of legal pre-emption or redemption shall not be

exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of sale
shall not be recorded in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice thereof to all
possible redemptioners. The right of redemption of co-owners excludes
that of adjoining owners.
HYPOTHETICAL QUESTIONS
1. A, B and C are co-owners of a parcel of land. A donated his share to
X. May B or C exercise legal redemption as against X?

No. The transmission of ownership is not by onerous title. See Article
1619.
2. A, B and C are co-owners of a parcel of land. A, through a will,

awarded his share to X. May B or C exercise legal redemption as
against X?
No. The transmission of ownership is not by onerous title. See Article
1619.
3. A owns a land adjoining B’s, C’s, and D’s lands, all of which are of
10,000 sq. m. (1 hectare). Supposing B, C, and D separately sold
their lands to X who owns a rural land, may A redeem all of the lands
sold to X? Yes. All the requisites are satisfied.
4. A owns a rural land adjoining B’s, C’s, and D’s rural lands, all of
which are of 10,000 sq. m. (1 hectare). Supposing B, C, and D, in a
single contract, sold their lands to X who owns a rural land, may A
redeem all of the lands sold to X? Yes. All the requisites are satisfied.
It is not necessary that the sales are made in separate contracts.
There are still 4 parcels of land, each not exceeding 1 hectare.
128
5. A owns a rural land adjoining B’s, C’s, and D’s rural lands, all of
which are of 10,000 sq. m. (1 hectare). Supposing B sold his land to
C, whose land is adjoining B’s and A’s land, may A exercise the right
of redemption? No. Look into the purpose of the law.
6. A owns a rural land adjoining B’s, C’s, and D’s rural lands. B sold his
land to X for P500k but the property is only valued at
P300k –
(a) May A exercise the right of repurchase? Yes
(b) How much should A pay? P500k. Art. 1620 (on grossly excessive
price) applies only to co-owners

(c) If A, B, C and D are co-owners, how much should A pay? P300k,
for Art. 1620 would be the applicable provision. (d) What if B and
X freely agreed that subject is to be sold for P500k, may A compel
X to resell the land to him for P300k only? Yes.
7. A, B, and C are brothers and co-owners of a parcel of land. C died,

leaving X as his sole heir. B sold his share to X. May A redeem the
share sold by B to X?
NO. X is not a stranger to a contract. He is a co-owner.
8. Same facts as # 7, only that X is C’s wife. May A redeem the share
sold by B to X? NO. X is not a stranger to a contract. He is a co-
owner.
* Assignment of Credit
Art. 1624: An assignment of creditors and other incorporeal rights shall be

perfected in accordance with the provisions of Article 1475.
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.
Art. 1625: An assignment of a credit, right or action shall produce no effect

as against third person, unless it appears in a public instrument, or the
instrument is recorded in the Registry of Property in case the assignment
involves real property. General Rule: Assignment of credit is binding as to
third persons Exceptions:
1. Art. 1625
2. Document of title (when assigned)
129
Art. 1626: The debtor who, before having knowledge of the assignment,
pays his creditor shall be released from the obligation. Art. 1285: The
debtor who has consented to the assignment of rights made by a creditor
in favor of a third person, cannot set up against the assignee the
compensation which would pertain to him against the assignor, unless
the assignor was notified by the debtor at the time he gave his consent,
that he reserved his right to the compensation.
If the creditor communicated the cession to him but the debtor did not
consent thereto, the latter may set up the compensation of debts
previous to the cession, but not of subsequent ones.
If the assignment is made without the knowledge of the debtor, he may
set up the compensation of all credits prior to the same and also later
ones until he had knowledge of the assignment.
Art. 1627: The assignment of a credit includes all the accessory rights,
such as a guaranty, mortgage, pledge or preference.
-reiteration of Art. 1637
Art. 1537: The vendor is bound to deliver the thing sold and its
accessions and accessories in the condition in which they were upon
the perfection of the contract.
All the fruits shall pertain to the vendee from the day on which the
contract was perfected. (1468a)
Art. 1628: The vendor in good faith shall be responsible for the existence and
legality of the credit at the time of the sale, unless it should have been sold
as doubtful; but not for the solvency of the debtor, unless it has been so
expressly stipulated or unless the insolvency was prior to the sale and of
common knowledge.
Even in these cases he shall only be liable for the price received and for
the expenses specified in No. 1 of Article 1616. The vendor in bad faith
shall always be answerable for the payment of all expenses, and for
damages.
(WARRANTIES)
Art. 1629: In case the assignor in good faith should have made himself
responsible for the solvency of the debtor, and the contracting parties should
not have agreed upon the duration of the liability, it shall last for one year
only, from the time of the assignment if the period had already expired.
If the credit should be payable within a term or period which has not yet
expired, the liability shall cease one year after the maturity.
Art. 1630: One who sells an inheritance without enumerating the things of
which it is composed, shall only be answerable for his character as an heir.
(Sale of Hereditary Rights)
130
Art. 1631: One who sells for a lump sum the whole of certain rights, rents,
or products, shall comply by answering for the legitimacy of the whole in
general; but he shall not be obliged to warrant each of the various parts of
which it may be composed, except in the case of eviction from the whole or
the part of greater value.
Art. 1632: Should the vendor have profited by some of the fruits or received
anything from the inheritance sold, he shall pay the vendee thereof, if the
contrary has not been stipulated.
Art. 1633: The vendee shall, on his part, reimburse the vendor for all that
the latter may have paid for the debts of and charges on the estate and
satisfy the credits he may have against the same, unless there is an
agreement to the contrary.
Art. 1634: When a credit or other incorporeal right in litigation is sold, the
debtor shall have a right to extinguish it by reimbursing the assignee for the
price the latter paid therefor, the judicial costs incurred by him, and the
interest on the price from the day on which the same was paid.
A credit or other incorporeal right shall be considered in litigation from the
time the complaint concerning the same is answered. The debtor may
exercise his right within thirty days from the date the assignee demands
payment from him.
Art. 1635: From the provisions of the preceding article shall be excepted
the assignments or sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is subject to
the right in litigation assigned.
Manila The character of the transaction between the parties

Banking is not, however, determined by the language used in
Corp. vs. the document but by their intention.
Anastacio In case of doubt as to whether a transaction is a
Teodoro pledge or a dation in payment, the presumption is in
favor of a pledge, the latter being the lesser
transmission of rights and interests.
The deed of assignment merely guarantees said
obligations.
131
Rodriguez In subrogation, the third party pays the obligation of

vs. Ca, the debtor to the creditor with the latter’s consent. As
Lucman a consequence, the paying third party steps into the
shoes of the original creditor as subrogee of the latter.
An assignment of credit on the other hand is the
process of transferring the right of the assignor to the
assignee who would then have the right to proceed
against the debtor. The assignment may be done
either gratuitously or onerously in which case the
assignment has an effect similar to that of a sale.
Consent of the debtor is not essential in assignment.
(Art. 1624 in relation to Art. 1475)
His knowledge thereof affecting only the validity of the
payment he might make (1626). Art. 1626 mandates
that such payment of the existing obligation shall
already be made to the new creditor from the time the
debtor acquires knowledge of the assignment of the
obligation.
What the law requires in an assignment of credit is
not the consent of the debtor but merely notice to
him. A creditor may, therefore, validly assign his
credit and its accessories without the debtor’s
consent. The purpose of the notice is only to inform
the debtor that from the date of the assignment,
payment should be made to the assignee and not to
the original creditor.
LEASE
*Nature of contract of lease:

Art. 1842: The right to an account of his interest shall accrue to any
partner, or his legal representative as against the winding up partners or
the surviving partners or the person or partnership continuing the
business, at the date of dissolution, in the absence of any agreement to the
contrary.
Employees A lease is a contract by which one of the parties
Club vs. agrees to give to the other for a fixed time and price
China the use or profit of a thing, or of his service.
Banking A lease is not a contract imposed by law. With the
Corporation terms thereof also fixed by law… Without the
agreement of both parties, no contract of lease can
be said to have been created or established. Nobody
132
can force another to let the latter lease his property

if the owner refuses. So the owner may not be
compelled by action to give his property for lease to
another.
Lim Si vs. A lease is a consensual, bilateral, onerous and
Lim commutative contract by virtue of which the owner
temporarily grants the use of his property to another
who undertakes to pay the rent therefor.
De Guzman A lease is a consensual, bilateral, onerous and
vs. Fiel commutative contract by which one person binds
himself to grant temporarily the use of a thing or the
rendering of some service to another who
undertakes to pay some rent, compensation or price.
* Kinds of Leases:
1. Lease of things or properties whether immovable or movable
property;
2. Lease of work which refers to contract for a piece of work such as
the making of a suit by a tailor; 3. Lease of service such as the

repair of a car by a mechanic or painting of one’s picture by a
painter.
[Art. 1642: The contract of lease may be of things, or of work and service.]
* Lease of Personal Property; When it is a sale:

A leas of personal property with option to buy, where title is transferred at
the end of the contract provided rents have been fully paid, is a sale in
installments and not a lease (Art. 1484; Heacock Co. vs. Buntal Mfg. Co.).
*Lease vs. Sale

SALE (Art. 1458) LEASE (Art. 1642)
The delivery of the thing sold No transfer of ownership results
transfers ownership as the rights of the lessee are
limited to the use and enjoyment
of the thing leased
Price must be in money or its Price may be money, fruits, or
equivalent some other useful things or other
prestation.
*Lease vs. Usufruct

LEASE (Art. 1642) USUFRUCT (Art. 562)
Ownership on the part of the Ownership of the thing on the
lessor is not necessary to part of the grantor is necessary
constitute a contract of lease to constitute a usufruct
133
It is a real right only by It is always a real right

exception, that is, when it
involves land, and it is for more
than 1 year or is registered
It is limited to the use specified It includes all possible uses and
in the contract enjoyment of the thing
Lessor places and maintains the Owner allows the usufructuary to
lessee in the peaceful enjoyment use and enjoy the property
of the thing
Its term is generally for a definite Its term may be for an indefinite
period (If the period is not fixed period
and made dependent upon the
lessee, the court may fix the
period)
It may be created by contract as It may be created by law,
a rule. contract, last will, or prescription
Exceptions: Art. 1670 and Art. (Art.
448 563)
*Lease vs. Commodatum

LEASE (Art. 1642) COMMODATUM (Art. 1933)
Grantor cede the use of property Grantor cede the use of property
to another person to another person
onerous Gratuitous
*Lease vs. Deposit

LEASE (Art. 1642) DEPOSIT (Art. 1962)
Grantor cede the use of a Grantor cede the use of a
property to another for a property to another for a
consideration consideration
Not a real but a consensual Real contract; delivery is required
contract for perfection
Object may be real or personal Only movable things can be the
property object of the contract
Its purpose is the renting out of Its purpose is for safekeeping
the thing for a consideration
Period may be definite or Period is generally definite, there
indefinite but in no case can it being an obligation on the part of
exceed more than 99 years the depositary to return
HYPOTHETICAL QUESTION:
134
A parks his car in the parking area of B everyday upon payment of a fixed
amount paid daily without special stipulations. Is the contract one of
deposit or lease?
If the owner of the lot has no obligation to take care of the car, it is a lease
contract with an accessory obligation of securing the parking area. If the
car is parked there for safe keeping purposes, it is a deposit.
* General Provisions
Art. 1643: In the lease of things, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a period
which may be definite or indefinite. However, no lease for more than ninety-
nine years shall be valid. - Only things which are within the commerce of
man may be the subject of lease.
- The lease of a building includes the lease of the lot where the building
stands. If the building is lost, the lease does not continue with the land in
the absence of any contrary agreement.
- The death of the party does not excuse the non-performance of the
contract (lease with option to buy) which is a property right, by the heirs
of the deceased. There is privity of interest between the heirs and their
predecessor.
Art. 1644: In the lease of work or service, one of the parties binds himself
to execute a piece of work or to render to the other some service for a price
certain, but the relation of principal and agent does not exist between
them.
CONTRACT OF PIECE OF CONTRACT OF LEASE OF
WORK (Locatio operis) SERVICES (Locatio Operarum)
The object of contract is the The object of contract is the
result of the work without service itself and not the result
considering the labor that which it generates
produced it.
If the result promised is not Even if the result intended is not
accomplished, the lessor or attained, the services of the
promissor is not entitled to lessor must still be paid
compensation
Art. 1645: Consumable goods cannot be the subject matter of a contract of

lease, except when they are merely to be exhibited or when they are
accessory to an industrial establishment
* LEASE OF RURAL AND URBAN LANDS
135
Art. 1646. The persons disqualified to buy referred to in Articles 1490 and
1491, are also disqualified to become lessees of the things mentioned
therein. (n)
-See Arts. 110 and 145 of Family Code; Arts. 1403 and 1876 of Civil Code
Art. 1647. If a lease is to be recorded in the Registry of Property, the following
persons cannot constitute the same without proper authority: the husband
with respect to the wife's paraphernal real estate, the father or guardian as
to the property of the minor or ward, and the manager without special power.
(1548a)
Art. 1648. Every lease of real estate may be recorded in the Registry of
Property. Unless a lease is recorded, it shall not be binding upon third
persons. (1549a)
Art. 1649. The lessee cannot assign the lease without the consent of the
lessor, unless there is a stipulation to the contrary. (n)
Art. 1650. When in the contract of lease of things there is no express
prohibition, the lessee may sublet the thing leased, in whole or in part,
without prejudice to his responsibility for the performance of the contract
toward the lessor. (1550)
Art. 1651. Without prejudice to his obligation toward the sublessor, the
sublessee is bound to the lessor for all acts which refer to the use and
preservation of the thing leased in the manner stipulated between the
lessor and the lessee. (1551)
-GENERAL RULE: There is no juridical relationship between the lessor and
the sublessee. The lessee is directly liable to the lessor and the sublessee.
Exceptions: Arts. 1651 and 1652.
Art. 1652. The sublessee is subsidiarily liable to the lessor for any rent due
from the lessee. However, the sublessee shall not be responsible beyond the
amount of rent due from him, in accordance with the terms of the sublease,
at the time of the extrajudicial demand by the lessor.
Payments of rent in advance by the sublessee shall be deemed not to have
been made, so far as the lessor's claim is concerned, unless said payments
were effected in virtue of the custom of the place. (1552a)
-The purpose of the second paragraph is to prevent collusion between
lessee and sublessee.
Art. 1653. The provisions governing warranty, contained in the Title on
Sales, shall be applicable to the contract of lease.
In the cases where the return of the price is required, reduction shall be
made in proportion to the time during which the lessee enjoyed the thing.
(1553)
SECTION 2. - Rights and Obligations of the
Lessor and the Lessee Art. 1654. The lessor is obliged:
(1) To deliver the thing which is the object of the contract in such a
condition as to render it fit for the use intended;

(2) To make on the same during the lease all the necessary repairs in
order to keep it suitable for the use to which it has been devoted,
unless there is a stipulation to the contrary;
136
(3) To maintain the lessee in the peaceful and adequate enjoyment of

the lease for the entire duration of the contract.
(1554a)
-The lessor is also obliged not to alter the form in such a way as to
impair the use to which the thing is devoted [See Art. 1661]
Art. 1655. If the thing leased is totally destroyed by a fortuitous event, the
lease is extinguished. If the destruction is partial, the lessee may choose
between a proportional reduction of the rent and a rescission of the lease.
(n)
Art. 1656. The lessor of a business or industrial establishment may
continue engaging in the same business or industry to which the lessee
devotes the thing leased, unless there is a stipulation to the contrary. (n)
Art. 1657. The lessee is obliged:
(1) To pay the price of the lease according to the terms stipulated;
(2) To use the thing leased as a diligent father of a family, devoting it to
the use stipulated; and in the absence of stipulation, to that which

may be inferred from the nature of the thing leased, according to
the custom of the place;
(3) To pay expenses for the deed of lease. (1555)
-The lessee is also obliged to bring to the knowledge of the proprietor,

within the shortest possible time, every usurpation or untoward act
which any third person may have committed or may be openly
preparing to carry out upon the thing leased [See Art. 1663].
Art. 1658. The lessee may suspend the payment of the rent in case the
lessor fails to make the necessary repairs or to maintain the lessee in
peaceful and adequate enjoyment of the property leased. (n)
Art. 1659. If the lessor or the lessee should not comply with the obligations
set forth in Articles 1654 and 1657, the aggrieved party may ask for the
rescission of the contract and indemnification for damages, or only the latter,
allowing the contract to remain in force. (1556)
Art. 1660. If a dwelling place or any other building intended for human
habitation is in such a condition that its use brings imminent and serious
danger to life or health, the lessee may terminate the lease at once by
notifying the lessor, even if at the time the contract was perfected the former
knew of the dangerous condition or waived the right to rescind the lease on
account of this condition. (n)
Art. 1661. The lessor cannot alter the form of the thing leased in such a
way as to impair the use to which the thing is devoted under the terms of
the lease. (1557a)
Art. 1662. If during the lease it should become necessary to make some
urgent repairs upon the thing leased, which cannot be deferred until the
termination of the lease, the lessee is obliged to tolerate the work, although
it may be very annoying to him, and although during the same, he may be
deprived of a part of the premises.
137
If the repairs last more than forty days the rent shall be reduced in
proportion to the time - including the first forty days - and the part of the
property of which the lessee has been deprived.
When the work is of such a nature that the portion which the lessee and
his family need for their dwelling becomes uninhabitable, he may rescind
the contract if the main purpose of the lease is to provide a dwelling place
for the lessee. (1558a)
Art. 1663. The lessee is obliged to bring to the knowledge of the proprietor,
within the shortest possible time, every usurpation or untoward act which
any third person may have committed or may be openly preparing to carry
out upon the thing leased.
He is also obliged to advise the owner, with the same urgency, of the need
of all repairs included in No. 2 of Article 1654.
In both cases the lessee shall be liable for the damages which, through his
negligence, may be suffered by the proprietor.
If the lessor fails to make urgent repairs, the lessee, in order to avoid an
imminent danger, may order the repairs at the lessor's cost. (1559a)
Art. 1664. The lessor is not obliged to answer for a mere act of trespass
which a third person may cause on the use of the thing leased; but the
lessee shall have a direct action against the intruder.
There is a mere act of trespass when the third person claims no right
whatever. (1560a)
Art. 1665. The lessee shall return the thing leased, upon the termination of
the lease, as he received it, save what has been lost or impaired by the
lapse of time, or by ordinary wear and tear, or from an inevitable cause.
(1561a)
Art. 1666. In the absence of a statement concerning the condition of the
thing at the time the lease was constituted, the law presumes that the
lessee received it in good condition, unless there is proof to the contrary.
(1562)
Art. 1667. The lessee is responsible for the deterioration or loss of the thing
leased, unless he proves that it took place without his fault. This burden of
proof on the lessee does not apply when the destruction is due to earthquake,
flood, storm or other natural calamity. (1563a)
See Art. 1265
Art. 1668. The lessee is liable for any deterioration caused by members of
his household and by guests and visitors. (1564a)
Art. 1669. If the lease was made for a determinate time, it ceases upon the
day fixed, without the need of a demand. (1565)
Art. 1670. If at the end of the contract the lessee should continue enjoying
the thing leased for fifteen days with the acquiescence of the lessor, and
unless a notice to the contrary by either party has previously been given, it
is understood that there is an implied new lease, not for the period of the
original contract, but for the time established in Articles 1682 and 1687. The
other terms of the original contract shall be revived. (1566a)
-Tacita Reconducion or Implied New Lease; Requisites:
138
a. The term of the original contract must have already expired;

b. Neither the lessor or lessee has given notice to vacate; and
c. The lessee continues to possess the property leased for at least fifteen
days with the acquiescence of the lessor
Art. 1671. If the lessee continues enjoying the thing after the expiration of
the contract, over the lessor's objection, the former shall be subject to the
responsibilities of a possessor in bad faith. (n)
Art. 1672. In case of an implied new lease, the obligations contracted by a
third person for the security of the principal contract shall cease with
respect to the new lease. (1567)
Art. 1673. The lessor may judicially eject the lessee for any of the following
causes:
(1) When the period agreed upon, or that which is fixed for the duration
of leases under Articles 1682 and 1687, has expired;

(2) Lack of payment of the price stipulated;
(3) Violation of any of the conditions agreed upon in the contract;
(4) When the lessee devotes the thing leased to any use or service not
stipulated which causes the deterioration thereof; or if he does not

observe the requirement in No. 2 of Article 1657, as regards the use
thereof.
-The demand of payment must be coupled with demand to vacate the
premises. Otherwise, the Unlawful Detainer case will not prosper
The ejectment of tenants of agricultural lands is governed by special laws.
(1569a)
Art. 1674. In ejectment cases where an appeal is taken the remedy granted
in Article 539, second paragraph, shall also apply, if the higher court is
satisfied that the lessee's appeal is frivolous or dilatory, or that the lessor's
appeal is prima facie meritorious. The period of ten days referred to in said
article shall be counted from the time the appeal is perfected. (n)
Art. 1675. Except in cases stated in Article 1673, the lessee shall have a
right to make use of the periods established in Articles
1682 and 1687. (1570)
Art. 1676. The purchaser of a piece of land which is under a lease that is not
recorded in the Registry of Property may terminate the lease, save when there
is a stipulation to the contrary in the contract of sale, or when the purchaser
knows of the existence of the lease.
If the buyer makes use of this right, the lessee may demand that he be
allowed to gather the fruits of the harvest which corresponds to the current
agricultural year and that the vendor indemnify him for damages suffered.
If the sale is fictitious, for the purpose of extinguishing the lease, the
supposed vendee cannot make use of the right granted in the first paragraph
of this article. The sale is presumed to be fictitious if at the time the supposed
vendee demands the termination of the lease, the sale is not recorded in the
Registry of Property. (1571a)
139
Art. 1677. The purchaser in a sale with the right of redemption cannot
make use of the power to eject the lessee until the end of the period for the
redemption. (1572)
Art. 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form
or substance of the property leased, the lessor upon the termination of the
lease shall pay the lessee onehalf of the value of the improvements at that
time. Should the lessor refuse to reimburse said amount, the lessee may
remove the improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more impairment upon
the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no
damage is caused to the principal thing, and the lessor does not choose to
retain them by paying their value at the time the lease is extinguished. (n)
Art. 1679. If nothing has been stipulated concerning the place and the time
for the payment of the lease, the provisions or Article
1251 shall be observed as regards the place; and with respect to the time,
the custom of the place shall be followed. (1574)
SECTION 3. - Special Provisions for Leases of Rural Lands
Art. 1680. The lessee shall have no right to a reduction of the rent on account
of the sterility of the land leased, or by reason of the loss of fruits due to
ordinary fortuitous events; but he shall have such right in case of the loss of
more than one-half of the fruits through extraordinary and unforeseen
fortuitous events, save always when there is a specific stipulation to the
contrary.
Extraordinary fortuitous events are understood to be: fire, war, pestilence,
unusual flood, locusts, earthquake, or others which are uncommon, and
which the contracting parties could not have reasonably foreseen. (1575)
Art. 1681. Neither does the lessee have any right to a reduction of the rent
if the fruits are lost after they have been separated from their stalk, root or
trunk. (1576)
Art. 1682. The lease of a piece of rural land, when its duration has not been
fixed, is understood to have been for all the time necessary for the gathering
of the fruits which the whole estate leased may yield in one year, or which it
may yield once, although two or more years have to elapse for the purpose.
(1577a)
Art. 1683. The outgoing lessee shall allow the incoming lessee or the lessor
the use of the premises and other means necessary for the preparatory labor
for the following year; and, reciprocally, the incoming lessee or the lessor is
under obligation to permit the outgoing lessee to do whatever may be
necessary for the gathering or harvesting and utilization of the fruits, all in
accordance with the custom of the place. (1578a)
140
Art. 1684. Land tenancy on shares shall be governed by special laws, the
stipulations of the parties, the provisions on partnership and by the
customs of the place. (1579a)
Art. 1685. The tenant on shares cannot be ejected except in cases specified
by law. (n)
SECTION 4. - Special Provisions of the Lease of Urban Lands
Art. 1686. In default of a special stipulation, the custom of the place shall
be observed with regard to the kind of repairs on urban property for which
the lessor shall be liable. In case of doubt it is understood that the repairs
are chargeable against him. (1580a)
Art. 1687. If the period for the lease has not been fixed, it is understood to
be from year to year, if the rent agreed upon is annual; from month to month,
if it is monthly; from week to week, if the rent is weekly; and from day to day,
if the rent is to be paid daily. However, even though a monthly rent is paid,
and no period for the lease has been set, the courts may fix a longer term for
the lease after the lessee has occupied the premises for over one year. If the
rent is weekly, the courts may likewise determine a longer period after the
lessee has been in possession for over six months. In case of daily rent, the
courts may also fix a longer period after the lessee has stayed in the place
for over one month. (1581a)
Art. 1688. When the lessor of a house, or part thereof, used as a dwelling for
a family, or when the lessor of a store, or industrial establishment, also
leases the furniture, the lease of the latter shall be deemed to be for the
duration of the lease of the premises. (1582)
1. A leased a dwelling place to B for P4,500. After a year, A asked for an
increase in the rent equivalent to 5%. Is this valid?

2. A leased to B a parcel of land for 15 years. B obliged himself to
construct a building on A’s land. Is this a contract of lease?

3. B, the guardian of A, lease a land on behalf of A to C for 3 years to be
recorded in the Registry of Property. What is the nature of the contract

entered into?
4. A leased to B a commercial land for 50k per month. B assigned his
rights to C. Assignment was made without the consent of A. is this

valid?
5. Can a foreigner be a sublessor of a real property?
Yes. In a contract of lease, lessor need not be the owner of the property
leased.
6. Can foreigners be lessees of property in the Philippines?
Yes
7. Demand was made but lessee refused to pay rent. May lessor
immediately sue sublessee for the unpaid rentals?

No. Sublessee’s obligation is only subsidiary, hence, lessor must
exhaust the property of lessee first. Moreover, mere refusal to pay does
not mean inability to pay.
141
8. Jude owned a building which he had leased to several tenants. Without

informing his tenants, Jude sold the building to Ildefonso. Thereafter,
the latter notified all the tenants that he is the new owner of the
building. Ildefonso ordered the tenants to vacate the premises within
30 days from notice because he had other plans for the building. The
tenants refused to vacate, insisting that they will only do so when the
term of their lease shall have expired. Is Ildefonso bound to respect the
lease contracts between Jude and his tenants? (Bar question, 2009)
142

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SALES AND LEASE REVIEWER

(by Diory Rabajante)

* CONTRACT OF SALE, defined (Art. 1458, CC)

* SOURCES OF RIGHTS / OBLIGATIONS (Art. 1156)

4. Acts or omissions punished by law; and

* CHARACTERISTICS OF A CONTRACT OF SALE

1. Nominate - law gave it a name, i.e . ―SALE‖

2. Principal - can stand on its own, unlike an accessory contract

3. Bilateral - imposes obligation on both parties

b. obligation of buyer – pay price

Consequence of being bilateral: power to rescind is implied in bilateral

4. Onerous – imposes valuable consideration

5. Commutative – a thing of value is exchanged for equal value

o Inadequacy of price or aleatory character not sufficient

6. Consensual – a contract of sale is perfected by mere consent.

On its own, sale is not a mode which transfers ownership. It creates an

* CONTRACT OF ABSOLUTE SALE VS. CONTRACT OF CONDITIONAL SALE

1. A and B entered into a contract of sale whereby A obliges himself to

2. A and B entered into a contract of sale whereby A obliges himself to

People's There was no perfected sale of a lot when it was

Furthermore, all the elements of a valid contract of sale

* CONTRACT OF SALE VS. CONTRACT TO SELL

CONTRACT OF SALE CONTRACT TO SELL

CONTRACT OF CONTRACT TO SELL

With respect to sale to third With respect to sale to third

* CONTRACT OF SALE VS. CONTRACT FOR A PIECE OF WORK

to call them special requiring extraordinary

CONTRACT OF SALE CONTRACT FOR A PIECE OF

* CONTRACT OF SALE VS. CONTRACT OF AGENCY TO SELL

Article 1868: By a contract of agency, a person binds himself to render

SALE CONTRACT OF AGENCY TO SELL

beds and in turn, pay for the stipulated price, are

*that on dates determined by the rubber company,

* CONTRACT OF SALE VS. DACION EN PAGO

Article 1245: Dation in payment, whereby property is alienated to the

SALE DACION EN PAGO

Giving of the price may Giving of the object in lieu of the

* CONTRACT OF SALE VS. BARTER

Article 1638: By a contract of barter or exchange, one of the parties

BARTER: if value of the thing given as part of the consideration

―Manifest intention‖ – judged by the parties’ contemporaneous and

* CONTRACT OF SALE VS. LEASE

3. Foreclose the chattel mortgage

Article 1485: Art 1484 is also applicable to contracts purporting to be

*PARTIES TO A CONTRACT OF SALE

Article 1489: All persons authorized in this Code to obligate

▪ Art 1399,Civil Code: obligation of incapacitated person who

Article 234, Family Code: Emancipation takes place by the attainment

(2) Other corporations, institutions and entities for public

interest or purpose, created by law; their personality

interest or purpose to which the law grants a juridical

Article 1327: The following cannot give consent to a contract:

(2) Insane or demented persons and

(3) Deaf-mutes who do not know how to write

Article 1390: The following contracts are voidable or annullable, even

undue influence or fraud (vitiated consent) These contracts are binding,

Article 1393: Ratification may be effected expressly or tacitly. It is

Article 1397: The action for annulment of the contracts may be

Article 1399: When the defect of the contract consists in the