CHAPTERS 5 & 6 (7) Negotiable Document of title – represents actual goods stored in a warehouse, etc.

FORMATION AND CONSUMMATION OF CONTRACTS OF SALE Document of Title

Requisites:
Modes of Delivery 1. Transferred in good faith and for value; and
2. Seller/transferor had the ability to convey or indorse.
Thing sold is placed in the CONTROL and POSSESSION of the
Actual Delivery
buyer. (Art. 1497) (a) Freight Delivery of the goods alongside the vessel
Alongside Ship completes the effect of tradition/delivery – buyer
Constructive Delivery
(F.A.S.) bears risk of loss during carriage.
(1) Execution of GR: Execution of public document has the same legal effect as actual
F.O.B. shipping point – delivery of the goods to
Public Document or physical delivery.
the carrier is equivalent to delivery to the buyer –
Exceptions:
buyer bears risk of loss during carriage.
1. Stipulation to the contrary
(b) Free on
2. Subject matter was not subject to control of the buyer
Board (F.O.B.) F.O.B. destination – only when the vessel has
3. Ability to transfer physical possession and enjoyment did not
arrived at the point of destination would there be
subsist for a reasonable length of time after the instrument’s
delivery to the buyer – seller bears risk of loss
execution
during carriage.
For immovables, registration is separate. There is sufficient delivery Price fixed includes cost of goods and expenses of
when the “customary steps” are followed and delivered: (8) Through freight and insurance to be paid by the seller.
1. Owner’s duplicate copy of the Torrens title Carrier
2. Signed deed of absolute sale If buyer pays freight, it may be presumed that the
3. Tax declaration goods have become his at the point of shipment –
4. Latest tax receipts (Parañaque Kings v. Galido, 2009) buyer bears risk of loss during carriage.
(2) Symbolic Must involve the subject matter, and cannot take a form relating to the (c) Cash, If seller pays freight, title does not pass until the
Delivery payment of the purchase price. Insurance, goods have reached their destination – seller bears
Freight (C.I.F.) risk of loss during carriage.
For movables, delivery may be made by the delivery of the symbol
(ex. keys) to the depositary where the movable is kept. (Art. 1498)
GR: When the seller ought to know that it is usual
(3) Constitutum Used to possess property in the concept of owner, to insure the goods, he shall give notice to the
possessorium but after the transaction becomes possessor in the buyer. If seller fails to do so, he bears risk of loss
Possession concept of a holder (ie., lessor) during carriage.
never changes; Exception: Stipulation to the contrary.
(4) Traditio brevi only ownership Used to possess property in the concept of a holder,
manu but after the transaction becomes possessor in the Expenses of Delivery
concept of an owner.
GR: Borne by the seller:
(5) Traditio longa Delivery of a thing merely by agreement – such as when the seller (1) Expenses for execution and registration
manu points to the property subject matter as the act of “delivery” without
(2) Causing issuance of new title in favor of the buyer in case of real estate
need of actually delivering physical possession thereof.
(3) Duty to withhold Capital Gains Tax
(4) Expenses for delivery of movables
Contemplates a situation where the thing sold cannot be transferred to
the possession of the buyer at the time of the sale. Exception: Stipulation to the contrary.
(6) Incorporeal Delivery by EITHER:
Property 1. Execution of public instrument
Double Sales
2. Placing titles of ownership in the possession of the buyer
3. Use and enjoyment by the buyer of the rights pertaining to the 1. 2 valid sales; If movable – person taking If no inscription – first
incorporeal property – with seller’s consent 2. Exact same object; first possession in GF possessor in GF. If no
3. Exact same seller; If immovable – person who possession – oldest title.
4. Buyers with acquired in GF and If not applicable – prius
conflicting interests. registered in GF tempore, potior jure.

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Rules on Delivery of IMMOVABLES
Rules on Delivery of MOVABLES
1. SPECIFIC PERFORMANCE – seller is obliged
Situation Actions/Remedies of the Buyer to deliver all stipulated when buyer demands.
1. ACCEPT and PAY
However, if the seller cannot comply, then –
a. CONTRACT RATE - if buyer knows
that seller does not intend to complete. 1. PROPORTIONAL REDUCTION
(1) Deficiency – quantity delivered b. FAIR VALUE – if buyer (1) Sold per Unit/Number – if of the price
If LESS
LESS than that stipulated. used/disposed the goods before made with a statement of its area. 2. RESCIND if lacking area is at
knowledge that seller does not intend least 10% of stipulated area.
to complete.
1. ACCEPT ONLY THOSE
2. REJECT
BOUGHT and reject the rest.
If MORE
1. ACCEPT ONLY THOSE ORDERED – and 2. ACCEPT EVERYTHING and pay
reject the rest. everything CONTRACT RATE.
(2) Surplus – quantity delivered
2. ACCEPT EVERYTHING and pay at
MORE than that stipulated. 1. GR: NO REMEDY (no increase or reduction of
CONTRACT RATE.
price), especially if “more or less” is indicated in
3. REJECT EVERYTHING if indivisible.
the contract.
(3) Mixed – delivery of goods 1. ACCEPT ONLY THOSE ORDERED – and 2. Exception: DAMAGES when there is gross
(2) Sold for Lump Sum – when 2
contracted mixed with goods of reject the rest. inadequacy of price. (Lietz v. CA, 2005)
or more immovables are sold for a
different description. 2. REJECT EVERYTHING if indivisible. 3. Exception to exception: NO REMEDY when
single price.
buyer who has been occupying is actually
Sale by sample – when a small quantity is exhibited
deemed to take risk on the actual size of the
as a fair specimen of the bulk, the latter not being
property bought at lump sum (Garcia v. Velacso,
present.
1941)
(4) Sale by Description/Sample Sale by description – when the buyer has not seen the
and bulk of the goods delivered do item sold but relies on the description given by the 1. SPECIFIC PERFORMANCE
(3) Conflict between Boundaries
not correspond with description seller, or sees the goods but there is want of identity. unless impossible
and the Area/Number, and based
OR sample. 2. PROPORTIONAL REDUCTION of the price
on boundaries, greater than actual.
1. RESCIND – buyer must have reasonable 3. RESCIND
opportunity of comparing the bulk with the
(4) If price per unit of measure or
description or sample. 1. PROPORTIONAL REDUCTION of the price
number is NOT expressly
2. RESCIND
Ownership passes to buyer upon delivery, but may – provided.
1. REVEST ownership in the seller by returning
(5) On sale; On return 1. GR: NO REMEDY
the goods within the time fixed in the contract.
2. Exception: ASSAILED if it is made to appear
If no time fixed, reasonable time.
that:
Dependent on the buyer, since the perfection of a (5) Judicially sold in Mass – to pay a. A larger sum could have been realized
valid contract depends on the acceptance of rejection for the debt from a sale in parcels; or
of the buyer. b. Sale of less than the whole would have
already been sufficient to satisfy the
Approval is expressed, but may be implied such as debt.
when the buyer retains the goods without giving
notice of rejection (1) within the stipulated period; or
(6) Sale on
(2) if no period, within reasonable time.
Approval/Satisfaction/Acceptance
1. ACCEPT
2. REJECT

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CHAPTER 10 & 11 Special Remedies of Unpaid Seller of Goods (HIERARCHICAL; No court)
REMEDIES OF THE PARTIES
Remedies Requisites How Exercised
REMEDIES OF THE SELLER IN SALE OF MOVABLES (1a) Possessory Either – GR: RETAIN the thing sold if the
Lien 1. Goods sold without buyer has not paid.
General Remedies of Seller in Sales of Movables stipulation as to credit. Exception: If delivery was already
2. Goods sold on credit, but made, but payment was not yet
Situation Remedies
term expired. made, ownership has transferred.
Requisites: Where the buyer – 3. Buyer becomes insolvent. Exception to exception:
1. does not appear to have received the goods; or Stipulation to the contrary
(1) Sale of
2. received it but has not tendered the price (i) at the time of If negotiable document of title (ie., seller reserves ownership until
Movables in
delivery, or (ii) upon expiration of the period/term. issued – possessory lien prevails. full payment)
General
1. RESCIND the sale. If part delivery effected – LIEN LOST by either –
exercise remedy on remainder, 1. Seller delivers to bailee
If OWNERSHIP 1. SPECIFIC PERFORMANCE
unless part delivery was with without reserving ownership;
TRANSFERRED to buyer who – for the price of the goods.
intent to waive possessory lien. 2. Buyer/agent lawfully obtains
refuses to pay
possession; OR
1. OFFER to deliver the goods to 3. Waiver.
buyer. If he refuses –
(1b) Stoppage in 1. Buyer of goods is/becomes Either –
2. SPECIFIC PERFORMANCE
(2a) Sale of If NO OWNERSHIP transitu insolvent; AND 1. OBTAIN actual possession of
for the price of the goods – but
Goods transferred, not yet delivered, 2. Goods still in transit – (a) the goods; OR
first NOTIFY buyer that the
and cannot be resold at still in delivery, or (b) buyer 2. Seller must give NOTICE OF
goods are then held by seller
NO PAYMENT reasonable price rejects and bailee continues CLAIM to carrier/bailee in
as “bailee of the buyer” then
OF PRICE in possession. possession or his principal.
seller may treat goods as the
buyer’s already.
If negotiable document of title NO LONGER IN TRANSIT –
If price is payable on a 1. SPECIFIC issued or if partly delivered ^ 1. Buyer/agent obtains delivery.
CERTAIN DAY, regardless of PERFORMANCE, even 2. Goods arrived at destination,
transfer of ownership or not, and though ownership has not If goods covered by negotiable and carrier/bailee notifies
buyer wrongfully refuses to pay passed. document of title – bailee is not buyer/.
DEFENSE of buyer – that the seller at any time before judgment in such action has obliged to deliver goods to 3. Carrier/bailee wrongfully
manifested unpaid seller unless document is refuses to deliver to
first surrendered for cancellation. buyer/agent.
a) INABILITY to perform the sale on his part; or (2a) Right of 1. 1a or 1b exercised; 1. RESELL the goods, no need
b) INTENTION not to perform it. Resale 2. Goods perishable by nature; to rescind first.
(2b) Sale of 1. DAMAGES for non-acceptance, following these rules: 3. Resale expressly reserved 2. If obliged to resell at less than
Goods a. Damages includes estimated loss arising from the GR: Buyer need in case of buyer’s default; contract price, SELL then
ordinary course of events the spring from the breach of not be notified of 4. Buyer has been in default RECOVER difference from
BUYER the contract. intent to resell. for unreasonable time; buyer.
WRONGFULLY b. If there is an available market for the goods in question, Ex: (a) Goods AND 3. Seller CANNOT buy goods.
REFUSES formula for damages is (contract price minus not perishable; or 5. Sale is still in executory
TO PAY market/current price (i) at the time the goods should have (b) Stipulation stage.
been accepted; or (ii) if no time stipulated, at the time of (2b) Right to 1. 1a or 1b exercised; 1. EXTRAJUDICIALLY
refusal). Rescind 2. Rescission expressly RESCIND the sale.
c. If buyer repudiates the contract, he is liable for labor reserved in case of buyer’s 2. RECOVER damages for any
performed or expenses of material necessarily made default; AND loss occasioned from breach.
before seller receives notification of repudiation. 3. Buyer has been in default
d. Profits seller would have made is considered. for an unreasonable time.

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Recto Law Maceda Law (Remedies of Buyer in Sales of Residential Immovables)
COVERAGE: Sales of PERSONAL PROPERTY in installments. COVERAGE: Sales in installments covering RESIDENTIAL LOTS/LANDS.
(ie., down-payment first, then 2 or more installments) Protects the BUYER.
DOES NOT COVER: Initial payment and payment of balance (once only) in the future, and DOES NOT COVER: industrial lots, commercial lots, sale to tenants under agrarian reform,
contracts to sell, EXCEPT financing transactions derived from sales of movables on CANNOT BE INVOKED: by highest bidder in foreclosure nor by developer.
installments (ex. car loan assigned to financing bank). (Zayas, Jr. v. Luneta Motor, 1977)
Situation Remedies
Remedies When Deemed Chosen Barring Effects
(1) At least 2 years of 1. GRACE PERIOD of 1 month for every 1 year of
(1) Specific 1. When he FILES an action in 1. Remedies are installments already paid installments paid from the date the installment became
Performance court for recovery. ALTERNATIVE. due.
2. NO RECOVERY of a. May be exercised only ONCE every 5 years.
Mere sending of demand letters to balance in rescission and b. There is an “additional” grace period of 30 days
buyer should not be considered. foreclosure, EXCEPT after notice of cancellation is given.
when other guarantees (McLaughlin v. CA, 1986)
(2) Rescission Either –
were foreclosed first. 2. If contract is cancelled, recover CASH SURRENDER
1. When he SENDS notice of
3. NO RECOVERY of VALUE of 50% of the total payments made + 5%
rescission;
balance in specific additional for every year after 5 years of installments paid
2. TAKES possession of the
performance ONLY if it BUT must not exceed 90% of the total payments made.
subject matter of the sale; OR
has the same effects as (ie., Buyer never reimbursed full amount)
3. FILES action for rescission
foreclosure (Southern
(2) Less than 2 years of 1. GRACE PERIOD of 60 days from date the installment
(3) Foreclosure of 1. At the time of actual sale of Motors v. Moscoso, 1961)
installments already paid became due.
Chattel Mortgage the subject property at public
a. There is an “additional” grace period of 30 days
auction pursuant to In rescission, barring of
after notice of cancellation is given.
foreclosure proceedings recovery is not expressed in the
(McLaughlin v. CA, 1986)
commenced. law, but implied from mutual
2. NO CASH SURRENDER VALUE.
restitution.
Other Remedies Granted to Buyer
Remedies of Seller in Sales of Immovables 1. To SELL his rights or ASSIGN them to another person;
2. REINSTATE the contract by updating the account during the grace period and before
Situation Remedies actual cancellation of the contract; OR
1. RESCISSION under Art. 1591 – should the vendor have 3. To PAY in advance any installment or the full unpaid balance of the purchase price any
reasonable grounds to fear the loss of immovable property sold and time without interest, and to have such full payment of the purchase price annotated in
(1) Anticipatory
its price, he may immediately sue for the rescission of the sale. the certificate of title covering the property.
Breach
2. If there is no anticipatory breach, RESCISSION or better called as
“RESOLUTION” under Art. 1191.
Remedies of Buyer in Sales of Movables
1. RESCISSION under Art. 1592, follow rules –
Situation Remedies
a. If rescission not yet demanded, buyer may still pay after
expiration of the period to pay. (1) Failure of the 1. SPECIFIC PERFORMANCE to direct that the contract be
(2) Failure of b. GR: Court cannot extend after demand. seller to deliver performed specifically. Seller has no right of retention.
buyer to pay c. Exception: Court can extend after demand in cases of 1. ACCEPT the goods and SET UP the breach against the seller for
price residential immovables. diminution or extinction of the price.
d. DOES NOT COVER: 2. ACCEPT the goods and DAMAGES for breach of warranty.
a) Contracts to Sell; OR 3. REFUSE and DAMAGES for breach of warranty.
b) Substantial compliance in sales of residential property. (2) Breach of
4. RESCIND and REFUSE/RETURN the goods, and RECOVER
seller’s warranty
payment already made.
– BYE SELLER –

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1. SUSPEND PAYMENT of the price until seller caused the
disturbance or danger to cease.
a. Exceptions:
i) Seller gives security for the return of the price in a
(3) Anticipatory proper case, except when there is pendency of suit over
Breach the subject matter.
ii) Stipulation that nonetheless buyer is bound to make
payment.
iii) Mere trespass does not authorize suspension of
payment.

Remedies of Buyer in Sales of Immovables

Situation Remedies
1. SUSPEND PAYMENT of the price until seller caused the
disturbance or danger to cease.
a. Exceptions:
i) Seller gives security for the return of the price in a
(1) Anticipatory proper case, except when there is pendency of suit
Breach over the subject matter.
ii) Stipulation that nonetheless buyer is bound to
make payment.
iii) Mere trespass does not authorize suspension of
payment.
Secs. 23, 24 of PD 957
1. Installment payments made by the buyer in a subdivision or
(2) Condominium/ condominium project for the lot or unit he contracts to buy
Subdivision projects SHALL NOT BE FORFEITED in favor of the owner or
developer – so long as due notice to the owner is made.
2. Option to be REIMBURSED the total amount paid.

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