BLR Reviewer (Prelims) ● Nominate -it is given a special name or

designation in the Civil Code, namely, “sale”

Chapter 1: ● Principa​l -it can stand on its own and does
Nature and Form of Contract not depend for its existence and validity upon
another contract.
Contract of sale ​-is an agreement whereby the
vendor obligates himself to deliver a ​determinate Essential requisites of a contract of sale​.
thing ​to the vendee who on ● Consent ​-Manifested by the meeting of the
his part, binds himself to pay therefor a sum of offer and the acceptance upon the thing and
money or its equivalent. the cause which are to constitute the
Determinate thing​- designated or physically agreement.
segregated from others of the same class ● Object -​This refers to the ​determinate thing
which is the object of the contract.
Stages of a contract of sale ● Price ​-This refers to the “price certain
1. Negotiation ​-It covers the period from the in money or its equivalent”
time the prospective contracting parties
indicate interest in the contract to the time Equivalen​t- check or a promissory note, which is
the contract is perfected. the consideration for the thing sold. It does not
2. Perfection -​It takes place upon the include goods or merchandise although they have
concurrence of the essential elements of the their own value in money.
sale, which is the meeting of the minds of the The fixing of the price can never be left to the
parties as to the object of the contract and decision of one of the contracting parties, But, a
upon the price(includes manner of payment) price fixed by one of the contracting parties, if
3. Consummation - ​It begins when the parties accepted by the other, gives rise to a perfected sale.
perform their respective undertakings under It is not enough for the parties to agree on
the contract of sale, culminating in the the price of the property. The parties must also
extinguishment thereof. agree on the manner of payment of the price. ​The
disagreement on the manner of the payment is
Two kinds of a contract of sale tantamount to a failure to agree on the price.
1. Absolute ​-There are no conditions attached The absence of any of the above essential
to the contract. elements negates the existence of a perfected
2. Conditional ​-There are certain conditions contract of sale.
attached in the contract.
Natural and accidental elements.
Characteristics of a contract of sale​. Natural elements ​-those which are deemed to exist
(CBOCNP) in certain contracts, in the absence of any contrary
● Consensual ​-it is perfected by mere consent stipulations, like warranty against eviction or hidden
without any further act; defects
● Bilateral -both the contracting parties are Accidental elements -those which may be present
bound to fulfill correlative obligations towards or absent depending on the stipulations of the
each other — ​seller to deliver and transfer parties, like conditions, interest, penalty, time or
ownership of the thing sold ​buyer to pay the place of payment, etc.
price Non-payment of the purchase price
● Onerous - the thing sold is conveyed in is a resolutory condition for which the
consideration which is the price certain in remedy is either rescission or specific performance
money It constitutes a very good reason to rescind a sale,
● Commutative -The thing of value is for it violates the very essence of
exchanged for equal value the contract of sale.
 But the failure to pay the price in full within a
condition such as the In fact, if there had
fixed period does not, by itself, dissolve a contract of full payment of the been previous delivery
sale in the absence of any agreement that payment purchase price, for of the subject property,
on time is essential. instance, cannot be the seller’s ownership
deemed buyer in bad or title to the property is
Contract of sale and contract to sell with faith and the automatically
reserved title distinguished. prospective buyer transferred to the buyer
(1) Transfer of title. cannot seek the relief of such that, the seller will
reconveyance of the no longer have any title
— In a ​contract of sale​, title passes to the
property. There is no to transfer to any third
buyer upon delivery of the thing sold,
double sale in such person.Applying article
—A ​contract to sell(exclusive right and case. Title to the 1544 of the civil code,
privilege to purchase”)​, where it is stipulated that property will transfer to such second buyer of
ownership in the thing shall not pass to the the buyer after the property who may
purchaser until he has fully paid the price registration because have had actual or
(2) Payment of price. there is no defect in the constructive knowledge
— In a ​contract of sale​, non-payment of the owner seller’s title per of such defect, cannot
price is a negative resolutory condition and the se, but the latter, of be a registrant in good
course, may be sued faith. Such second
remedy of the seller is to exact fulfillment or to
for damages by the buyer cannot defeat the
rescind the contract
intending buyer first buyers title. In case
—In a ​contract to sell,​ full payment a title is issued to the
is a positive suspensive condition, the failure of second buyer, the first
which is not a breach, casual or serious, of the buyer may seek
contract but simply an event that prevents the reconveyance of the
obligation of the vendor to convey title from property subject of the
acquiring binding force. Where the seller promises sale
to execute a deed of absolute sale upon full
payment of the purchase price, the agreement Requisites concerning object.
is a contract to sell. (1) Things​.
(3) Ownership of vendor (a) determinate thing
— ​Contract of sale​, the vendor has lost (b) licit or lawful- that is, it should not be contrary to
and cannot recover the ownership of the thing sold law, morals, good customs, public order, or public
and delivered, actually or constructively until and policy
unless the contract of sale itself is resolved and set (c) not be impossible - the thing must be within the
aside. commerce of men.
—In the ​Contract to sell​, however, the title (2) Rights​. — All rights which are not
remains in the vendor if the vendee does not comply intransmissible or personal
with the condition precedent of making payment at Intransmissible rights​ - right to vote, right
the time specified in the contract. to public office, marital and parental rights, etc.
Contract of sale and Conditional contract of sale No contract may be entered upon future inheritance
except in cases expressly authorized by law. While
Contract to sell services may be the object of a contract they cannot
be the object of a contract of sale.
There being no Upon the fulfillment of Kinds of illicit things. (illicit - unlawful)
previous sale of the the suspensive illicit per se - i​llegal by nature
property, a third person condition, the sale Ex. Decayed food unfit for consumption
buying such property becomes absolute and Illicit per accidents - ​some provisions of law
despite the fulfillment of this will definitely affect
declaring it illegal
the suspensive the seller’s title thereto.
Ex. lottery tickets, Land sold to an alien,
 Goods which may be the object of sale.
Right to transfer ownership. Kinds of goods
(1) Seller must be owner or authorized by the 1. Existing goods
owner of the thing sold. Those goods that are owned by the
(2) Right must exist at the time of delivery.​ —.. seller
(3) Where property sold registered in the name 2. Future goods
of seller who employed fraud in securing his Those goods that are to be
title. manufactured, raised, acquired by the seller
​(4) Where properly sold in violation of a right of after the perfection of the contract of sale​.
first refusal of another person.
(5) Where real property, subject of unrecorded ● Sale of undivided interest in a thing.
sale, subsequently mortgaged by seller which The sole owner of a thing may sell the entire thing;
mortgage was registered. or only a specific portion thereof; or an undivided
interest therein and such interest may be designated
The requisite that a thing be determinate is satisfied as an aliquot part of the whole.
if at the time the contract is entered into, the thing
is capable of being made determinate without the (1) Meaning of fungible goods. — It means goods
necessity of a new or further agreement between are treated as the equivalent of any other unit such
the parties. as grain, oil, wine, gasoline, etc.

​ hen a thing is determinate. — it is particularly

(1) W ● A ​resolutory condition​ is an uncertain
designated from all others of the same class. event upon the happening of which the
(2) Sufficient if subject matter capable of being obligation (or right) subject to it is extinguished.
made determinate. Hence, the right acquired in virtue of the obligation is
also extinguished.
Sale of things having potential existence.
This is a future thing that can be the object
Contract of sale Agency to sale
of sale.
Sale of a mere hope or expectancy The buyer receives the The agency receives
This is the subject to the thing will come into good as owner the goods as goods of
existence. the principal who
Emptio Rei Speratae vs. Emptio Spei retains his ownership
over them.

Emptio Rei Speratae Emptio Spei The buyer pays the The agent delivers the
price. price, which he got from
Sale of a thing with Sale of a mere hope or his buyer, to his
potential existence. expectancy that the principal
thing will come to
existence. The buyer, as a general The agent can return
Sale of the hope itself. rule cannot return the the goods in case he is
object rule. unable to sell the same
Sale is subject to the Sale is effective even if to a third person.
condition that the thing the thing does not come
will exist; If it does not, into existence unless it
there is no contract. is a vain hope,
Contract of sale Contract for a piece of
The object is a future The object is a present work
thing. thing which is the hope
or expectancy. The thing is Specially done at the
 Exception: If the thing or any part thereof has been
manufactured or order of another.
procured for the general delivered to and appropriated by the buyer he must
market pay a reasonable price therefor,

Take Note: ​The sale is a consensual contract thus,

Contractor- ​Person undertakes to do a specific job
it is perfected by mere consent meaning the moment
or piece of work for other persons.
there is a meeting of mind.

Sale Barter Sale by auction is perfected:

When the auctioneer announces perfection
A thing is given in Given in exchange for
by the fall of the hammer, or in other customary
exchange for a price another thing.
certain in money or its manner
equivalent,
BEFORE the fall of the hammer:
If the consideration is partly in money and partly in 1. Any bidder may retract his bid
another thing: 2. The auctioneer may withdraw the goods from
1. Transaction is characterized by the the sale unless the auction has been
manifest ​intention​ of the parties.
announced to be ​without reserved.
2. If there is no manifest intention:
a. Barter:​ Thing is more than money
b. Sale​: Thing is equal or less than Two aspects of delivery:
the amount of money. 1. De Jure delivery - execution of deeds of
conveyance
2. Delivery of the material possession

Requisites for a valid price:

● Unless a contract contains a ​stipulation ​that
1. Real ​- the price is not simulated not fictitious
ownership shall not pass until fully paid,
2. Certain or ascertainable​- expressed and
ownership shall be transferred upon the
agreed in terms of specific amount of money
actual or constructive delivery. Payment of
or its equivalent.
the purchase price is not essential in
3. In money or its equivalent
transferring ownership.
4. Manner of payment ​must be agreed upon.

Kinds of promise treated in Article 1479.

Simulated Price- ​ Fictitious price.
(1) An accepted unilateral promise to sell in which
Effect where price is simulated.
the promisee (acceptor) elects to buy;
(1) If the price is simulated or false such as when
(2) An accepted unilateral promise to buy in which
the vendor really intended to transfer the thing
the promisee (acceptor) elects to sell; and
gratuitously, then the sale is void but the contract
(3) A bilateral promise to buy and sell reciprocally
shall be valid as a donation.
accepted in which either of the parties chooses to
exact fulfillment.
ART 1473 Rationale: ​The fixing of the price cannot
be left to the discretion of one of them: The other
Meaning of option.
could not have consented to the price for he did not
An option is a privilege existing in one
know what it was,
person for which he has paid a consideration which
gives him the right to buy the object.,
ART. 1474. General Rule: ​Where the price cannot
- Refundable in nature
be determined in accordance with the preceding
articles, or in any other manner, the contract is
inefficacious.​ Hence, the sale is void.
 ● Object is lost before perfection: ​Seller bears A contract of sale may be made in writing, or
the loss. by word of mouth, or partly in writing and partly by
● Object is lost after delivery to the buyer: word of mouth, or may be inferred from the conduct
Buyer​ bears the loss of the parties.
● Object is lost after perfection but before Exceptions: ​When a sale of a piece of land or any
delivery: Buyer bears the loss(exception of interest therein is through an agent, the authority of
res perit domino) the latter shall be in writing, otherwise the sale shall
be void.
Res Perit Domino​- Property lost to the owner
Fungible​- Interchangeable with one another Form is required for enforceability
1. Sale of real property
Sale of goods by description and/or sample.​. 2. Sale of personal property not less than 500
(1) Sale by description. —The buyer not knowing 3. Sale of property not to be performed within a
whether the seller’s representations are true or false year from the date thereof
but relying on them as true or as otherwise stated
where the buyer has not seen the article sold and In a contract of sale of personal property the price of
relies on the description given to him by the seller which is payable in installments, the vendor may
(2) Sale by sample​. — To constitute a sale by exercise any of the following remedies:
sample, it must appear that the parties contracted (1) Exact fulfillment of the obligation, should the
solely with reference to the sample, Vendee fail to pay;
(3) Sale by description and sample​. — When a (2) Cancel the sale, should the vendee’s failure to
sale is made both by sample and by description, the pay cover two or more installments;
goods must satisfy all the warranties appropriate to (3) Foreclose the chattel mortgage on the thing
either kind of sale, and it is not sufficient that the sold; if one has been constituted, should the
bulk of the goods corresponds with the sample if vendee’s failure to pay cover two or more
they do not also correspond with the description, installments. In this case, he shall have no further
and vice versa. action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary
Earnest money is something of value given by the shall be void
buyer to the seller to show that the buyer is really in General Rule: ​The expenses for the execution and
earnest, and to bind the bargain. It is actually a registration of the sale shall be borne by the vendor
partial payment of the purchase price and is Exception​: Contrary stipulation
considered as proof of the perfection of the contract. The vendor has the duty to pay not only the
-Non refundable in nature expenses for the execution of the sale but also for
the ​registration of the same in the absence of any
Earnest money and option money distinguished. agreement between the parties to the contrary.
They may be distinguished as follows: Expenses incurred subsequent to the transfer of title
(1) Earnest money is part of the purchase price, are to be borne by the buyer, unless caused by the
while option money is the money given as distinct fault of the seller.
consideration for an option contract;
(2) Earnest money is given only where there is Expropriation - ​The procedure for the exercise of
already a sale, while option money applies to a sale the power of eminent domain is provided for in Rule
not yet perfected; and 67 of the Rules of Court. Expropriation must be
(3) When earnest money is given, the buyer is decreed by competent authority and for public use
bound to pay the balance, while the would-be buyer and always upon payment of just compensation.
who gives option money is not required to buy.
Chapter II: Capacity to Buy or Sell 2. When there has been a judicial separation of
property.
General Rule: ​All persons, whether natural or
juridical, who can bind themselves, have legal Take Note​: The prescription against sale of property
capacity to enter into a contract of sale. between spouses applies even to common law
Exception: ​Persons who are incapacitated. relationships.
Take note​: In a contract of agency, after the
Kinds of incapacity termination of the relationship, the agent is not
1. Absolute incapacit​y - persons who cannot prohibited to purchase a property belonging to the
enter into a contract of sale in all former principal.
circumstances. e.g., minors, insane,
demented persons, & deaf-mutes who don’t Chapter III: Effects of the contract when the
know how to write. thing sold has been lost
2. Relative incapacity - certain persons under
certain circumstances, cannot buy certain Loss of the object at the time of perfection of the
property. contract
Ex 1. Completely lost - If the thing which is the
● . Husband and wife object of the contract shall be without any
● Guardian for the property of the effect. The reason is because there is an
person under his guardianship absence of an essential element, i.e., the
● Agents, property entrusted to them object.
unless the consent of the principal 2. Partially lost - ​If the thing should have been
had been given lost in part only, the vendee may choose
● Public officers and employees for the between:
property of the state, government a. Withdrawing from the contract; &
owned or controlled corporation, b. Demanding the remaining part,
institution or administration which has paying its price in proportion to the
been entrusted to them. total sum agreed upon.
● Justices, judges, prosecuting Take Note: A thing is lost when it perishes or goes
attorneys, clerks of superior and out of commerce or disappears in such a way that
inferior courts and other officers and its existence is unknown or it can’t be recovered.
employees connected with the
administration of justice, the property Where the parties purport a sale of specific
and rights of litigation or levied upon goods, and the goods without the knowledge of the
an execution before the court within seller have perished in part or have wholly or in a
whose jurisdiction or territory they material part so deteriorated in quality as to be
exercise their respective functions. substantially changed in character, the buyer may at
● Any pther disqualified by law his option treat the sale:
(1) as avoided; or
Necessaries​- These covers everything (2) as valid in all of the existing goods or in so much
indispensable for sustenance, dwelling, clothing, thereof as have not deteriorated, and as binding the
medical attendance, education and transportation. buyer to pay the agreed price for the goods in which
the ownership will pass, if the sale was divisible​.
General Rule: ​The husband and the wife cannot
sell property to each other.
Exception:
1. When a separation of property was agreed upon
in the marriage settlements; &
Chapter IV: Obligations of the vendor buyer the object without the need to actually
Section 1: General Provisions delivering it.
Obligations of the vendor: d. Traditio Brevi Manu- Buyer had already the
1. To transfer ownership of the thing sold possession of the object before the contract
2. To deliver the thing of sale.
3. To warrant the object sold against eviction e. Traditio Constitutum Possessorium​-
and hidden defects Owners continuous possession of the
4. To take care of the object sold pending property he had already sold. Opposite of
delivery Brevi Manu.
5. To pay for the expenses for the execution
and registration of the contract of sale unless Public instrument- ​Document prepared by a notary
there is a stipulation of the contrary public in the presence of the parties who sign it
before witnesses.
● Ownership of the thing sold is acquired only Notary Public- A person authorized by state to
upon its delivery, actual or constructive to the administer oaths, certify documents, attest to the
buyer. authenticity of signatures, and perform official acts in
● Payment of the purchase price is not commercial matters such as protesting negotiable
essential to transfer of ownership as long as instruments
the property sold has been delivered.
Exception: Delivery of incorporeal property
1. When the seller and the buyer agree that the 1. Execution of public instrument
ownership shall remain with the seller until 2. The placing of the titles of ownership in
the full payment of the purchase price the possession of the vendee
2. Contract to sell 3. The use by the vendee of his rights with
3. Sale on approval, trial or satisfaction the vendor’s consent.
4. Implied reservation of ownership
When goods are delivered to the buyer on
Section 2: Delivery of the thing sold approval or on trial or on satisfaction, or other similar
terms, the ownership therein passes to the buyer.
Kinds of delivery (1) When he signifies his approval or acceptance
1. Real or actual - ​The thing sold is placed in to the seller or does any other act adopting the
the control and possession of the vendee transaction;
2. Legal/constructive- ​Delivery by operation of (2) If he does not signify his approval or acceptance
law to the seller, but retains the goods without giving
3. Quasi tradition- ​Delivery of rights, credits or notice of rejection, then if a time has been fixed for
incorporeal property. the return of the goods, upon the expiration of such
time, and, if no time has been fixed, upon the
Kinds of legal/ Constructive delivery expiration of a reasonable time. What is a
a. Legal formalities- Sale is made through reasonable time is a question of fact.
public instrument which gives rise to prima
facie presumption of delivery which is
destroyed when actual delivery is not
affected due to legal impediment.
b. Symbolical tradition/ Traditio symbolica​-
The parties use a symbol to represent a
thing delivered
c. Traditio Longa Manu​- Deliver is by mere
consent where the seller points out to the
 Bill of lading- Indicates receipt of goods for shipment
Sale or return Sale on trial/ Sale on
approval/ Sale on issued by a common carrier,
acceptance/ Sale on Dock warrant- warrant given by dock owners to the
satisfaction owner of merchandise imported and warehoused on
the dock.
Ownership passes to Ownership remains in Quedan-​ Warehouse receipts that covers sugar
the buyer on delivery the seller until the buyer Warehouse receipt- evidencing goods stored with
and subsequent return signifies his approval or
someone else
reverts ownership in the acceptance to the seller
seller Negotiable document​- Goods are negotiable if: a.
The goods are deliverable to the bearer
Subject to a resolutory Subject to a suspensive B. Goods are deliverable to the order of a certain
condition condition person.
Non Negotiable Document​- Merely serves as
Depends entirely on the Depends on the quality
evidence of the goods covered
will of the buyer of goods

Risks of loss rests upon Risks of loss remains A negotiable document of title may be negotiated by
the buyer with the seller delivery:
(1) Where by the terms of the document the carrier,
Risks of loss of specific goods is borne by the seller warehouseman or other bailee issuing the same
until the ownership therein is transferred to the undertakes to deliver the goods to the bearer; or
buyer except that: (2) Where by the terms of the document the carrier,
(1) Where delivery of the goods has been made to warehouseman or other bailee issuing the same
the buyer or to a bailee for the buyer, in pursuance undertakes to deliver the goods to the order of a
of the contract and the ownership in the goods has specified person, and such person or a subsequent
been retained by the seller merely to secure indorsee of the document has indorsed it in blank or
performance by the buyer of his obligations under to the bearer.
the contract, the goods are at the buyer’s risk from Where by the terms of a negotiable
the time of such delivery; document of title the goods are deliverable to bearer
(2) Where actual delivery has been delayed or where a negotiable document of title has been
through the fault of either the buyer or seller the endorsed in blank or to bearer, any holder may
goods are at the risk of the party in fault. indorse the same to himself or to any specified
person, and in such case the document shall
General Rule -​Where good is sold by a person who thereafter be negotiated only by the indorsement of
is not the owner thereof and who does not sell them such indorsee.
under authority or with the consent of the owner.The
buyer acquires no better title to the goods than the Bailee- ​Has possession but not title to a property.
seller had. Responsible for keeping the property safe until it is
Note​: Before a voidable contract is annulled, it is returned to the owner.
considered valid.
Two Kinds of negotiation
Document of title to goods​- Includes Bill of lading, 1. Delivery- ​One issuing the same undertakes
dock warrant, quedan, or warehouse receipt or order to deliver the goods to the bearer
of the delivery of goods. 2. By indorsement and delivery-
-Proof of the possession of goods. Endorsement may be in blank, to bearer, or
to a specified person.
Goods​- Includes all chattels personal but not things
in action or money. Includes growing fruits or crops. Non negotiable​- Cannot be negotiated
Who can negotiate? 5. The goods are merchantable or fit for a
1. The owner of the negotiable document of title particular purpose
2. Any person to whom the possession of the
document has been entrusted Negotiation- ​Transfer of possession of an
a. By the terms of the document the instrument, whether voluntary or involuntary, by a
bailee undertakes to deliver the good person other than the issuer to a person who
to the order of the person whom thereby becomes its holder
possession of the document has Assignment- ​Transfer of rights or property
been entrusted.
b. At the time of entrusting the The indorsement of a document of title shall
document it is in the form that it can not make the indorser liable for any failure on the
be negotiated by delivery. part of the bailee who issued the document or
previous indorsers thereof to fulfill their respective
Rights of person to whom document has been obligations.
negotiated. -​Failure of the bailee to fulfill the obligation
(1) The title of the person negotiating the document, shall not make the present endorser liable
over the goods covered by the document;
(2) The title of the person (depositor or owner) to The validity of the negotiation of a negotiable
whose order by the terms of the document the document of title is not impaired by the fact that the
goods were to be delivered, over such goods; negotiation was a breach of duty on the part of the
(3) The direct obligation of the bailee person making the negotiation, or by the fact that
(warehouseman or carrier) to hold possession of the the owner of the document was deprived of the
goods for him, as if the bailee had contracted possession of the same by loss, theft, fraud,
directly with him. accident, mistake, duress, or conversion, if the
person to whom the document was negotiated or a
Rights of person to whom document person to whom the document was subsequently
has been transferred. negotiated paid value therefore in good faith without
(1) The title to the goods as against the transferor; notice of the breach of duty, or loss, theft, fraud,
(2) The right to notify the bailee of the transfer accident, mistake, duress or conversion.
thereof; and
(3) The right, thereafter, to acquire the obligation of If goods are delivered to a bailee by the
the bailee to hold the goods for him. owner or by a person whose act in conveying the
title to them to a purchaser in good faith for value
Transfer of order document without would bind the owner and a negotiable document of
indorsement. title is issued for them they cannot thereafter, while
(1) The right to the goods as against the transferor in possession of such bailee, be attached by
(2) The right to compel the transferor to indorse the garnishment or otherwise or be levied under an
indorsement. execution
Note: The negotiation shall take effect as of the time General Rule:​ No attachment
when the endorsement is actually made Exceptions:
1. The document be first surrendered to the
Warranties on negotiation or assignment bailee
1. Document is genuine 2. The documents negotiation is enjoined.
2. He has a legal right to negotiate or transfer it General Rule: ​The bailee shall in no case be
3. He has knowledge of no fact which would compelled to deliver up to the actual possession of
impair the validity or worth of the document the goods.
4. He has a right to transfer the title to the
goods
Exceptions:
1. The document is surrendered to the baillee The seller has not fulfilled his obligation to
2. The documents negotiation is enjoined. deliver to the buyer unless and until such third
person acknowledges to the buyer that he holds the
A creditor whose debtor is the owner goods on the buyer’s behalf
of a negotiable document of title shall be entitled to
such aid from courts of appropriate jurisdiction by Delivery of goods less than quantity contracted.
injunction and otherwise in attaching such document 1. buyer may reject the goods so delivered.
Creditor’s remedies to reach negotiable 2. The buyer may, however, accept the goods
documents. in which case he must pay for their
Inasmuch as the goods themselves cannot (a) price at the contract rate if he knew that
readily be attached or levied upon by ordinary legal no more were to be delivered or
process, as limited by the preceding article, this (b) the fair value to him of the goods, if he
article expressly gives the court full power to did not know that the seller is going to be
aid by injunction and otherwise a creditor seeking to guilty of a breach of contract.
get a negotiable document covering such goods.
However, if an injunction issued but the negotiable Delivery of goods more than quantity
document of title is negotiated to an innocent contracted.
person, the transfer is nevertheless effectual. 1. the buyer may accept the quantity contracted
for and reject the excess.
Note: ​A stipulation designating the place and 2. if he accepts all the goods delivered, and pay
manner of delivery is controlling on the contracting them at the contract rate
parties. The thing sold can only be understood as 3. If indivisible, the buyer may reject the whole
delivered to the buyer when it is placed in the goods
buyer’s control and possession at the agreed place
of delivery. Delivery of goods mixed with others.
Place of Delivery: 1. buyer may accept those which are in
1. The place of delivery agreed upon accordance with the contract and reject the
2. If there is no agreement, it is determined by rest.
usage of trade 2. The buyer, of course, may accept them all if
3. If there is no agreement and usage of trade, he so desires.
it is the seller’s place of business or
residence General Rule-​Delivery to the carrier is delivery to
4. In case of contract of sale of specific goods, the buyer, if the seller is required to send the goods
which to the knowledge of the parties when to the buyer
the contract or the sale was made where in
some other place, then that lace is the place
of delivery, Note -The vendor is bound to deliver if the parties
Note: Where the delivery was not affected at the stipulated in the different periods for deliver and
place specified in the contract but the buyer payment of price. The vendor must deliver on the
accepted the goods without complaint, the buyer time agreed up
would be deemed to have waived the seller’s failure Rationale​-Contract of sale is a reciprocal contract
to deliver according to the terms of the contract, and on despite non payment of price at the time of
woud be liable to pay the price agreep upon. delivery as price is considered due only upon the
expiration of the term agreed upon
Time of delivery
1. Stipulated time
2. Reasonable time
Unpaid seller
(1) When the whole of the price has not been paid or When right of stoppage in transit available?
tendered; 1. The unpaid seller has parted with the
(2) When a bill of exchange or other negotiable possession of the goods
instrument has been received as conditional 2. The buyer of goods is or becomes insolvent
payment, and the condition on which it was received
has been broken by reason of the dishonor of the
instrument, the insolvency of the buyer, or When goods are in transit.
otherwise. (1) after delivery to a carrier or other bailee
and before the buyer or his agent takes delivery of
Remedies of an unpaid seller them;
1. Possessory lien (2) if the goods are rejected by the buyer,
2. Right of stopping the goods in transit and the carrier or other bailee continues in
3. Right of resale possession of them.
4. Right to rescind When goods considered no longer in transit.
(1) After delivery to the buyer or his agent in
Lien- A legal right or interest that a creditor has in that behalf;
another’s property lasting usually until a debt or duty (2) If the buyer or his agent obtains
that it secures is satisfied. possession of the goods at a point before the
Possessory lien- ​A lien allowing the creditor to destination originally fixed;
keep possession of the encumbered property until (3) If the carrier or bailee acknowledges to
the debt is satisfied. hold the goods on behalf of the buyer; and
(4) If the carrier or bailee wrongfully refuses
When unpaid seller has possessory lien? to deliver the goods to the buyer.
1.​where the goods have been sold without any
stipulation as to credit How the right of stoppage in transitu be
2. Where the goods have been sold on credit, but exercised?
the term of credit has​ expired 1. By obtaining actual possession of the goods
3. Where the buyer becomes ​insolvent. 2. By giving notice of his claim to the carrier or
The seller may exercise his right of lien other baille
notwithstanding that he is in possession of the good To whom notice is given?
as agent or bailee for the buyer 1. To the person in actual possession of the
goods
General Rule: ​Where an unpaid seller has made 2. To his principal
part delivery of the goods, he may exercise his right Principal​- Someone who authorizes another to act
of lien on the remainder on his or her behalf as an agent
Exception: ​such part delivery has been made under
such circumstances as to show an intent to waive Unpaid seller’s right of resale.
the lien or right of retention​. (1) When resale allowable. — The third right of an
When unpaid seller loses his lien unpaid seller is the right of resale.)An unpaid seller
1. When he delivers the goods to a carrier or can exercise the right to resell only when he has
other bailee for the purpose of transmission either a right of lien or a right to stop the goods in
to the buyer without reserving the ownership transitu
in the goods or the right to the possession [2.) and under any
thereof of the three following cases:
2. When the buyer or his agent lawfully obtains (a) where the goods are perishable in nature;
possession of the goods (b) where the right to resell is expressly
3. By waiver thereof reserved in case
the buyer should make a default; and other disposition of the goods which the buyer may
(c) where the buyer delays in the payment of have made
the price for an unreasonable time. Exception: ​The seller has assented or given his
Note: ​The right of resale applies only if the title to consent thereto:
goods has already passed to the buyer. Otherwise,
the goods cannot be resold. The vendor is NOT bound to deliver the thing
sold because the vendee has lost the right to
Profit or loss in resale: make use of the term:
(1) When after the obligation has been contracted,
he becomes insolvent, unless he gives a guaranty or
Profit Loss
security for the debt [price];
The seller shall not be The seller may receiver (2) When he does not furnish to the creditor [vendor]
liable to the original from the buyer the guaranties or securities which he has promised;
buyer for any profit damages for any loss (3) When by his own acts he has impaired said
made by such resle occasioned by the guaran-ties or securities after their establishment,
breach of the contract and when through a fortuitous
of sale
event they disappear, unless he immediately gives
new ones equally satisfactory;
Unpaid seller’s right of rescission​. (4) When the debtor [vendee] violates any
When seller may rescin​d. — The fourth right of an undertaking, in consideration of which the creditor
unpaid seller is the right to rescind the sale. An agreed to the period;
unpaid seller has a right to rescind only if he has (5) When the debtor [vendee] attempts to abscond.”
either a right of lien
1.) or a right to stop the goods in transitu The vendor is bound to deliver the thing sold and its
2.) and under either of two situations: accessions and accessories in the condition in
(a) where the right to rescind is expressly which they were upon the perfection of the contract.
reserved in case the buyer should make a default; or
Accessions Accessories
(b) where the buyer delays in the payment of
the price for an unreasonable time It signifies all of those It signifies all of those
things which are things which have for
Effect of rescission​. — seller shall not be liable to produced by the thing their b=object the
the buyer upon the contract of sale, the latter, which is the object of embellishment, use or
however, may be made liable to the seller for the obligation as well as preservation of another
damages for any loss occasioned by the breach of all those which are thing which is more
naturally or artificially important and to which
contract.
attached thereto: they are not
incorporated or
Manner of rescission. ​— An election by the seller Example: A partners attached. In other
to rescind may be manifested by notice to the buyer share in the profit in a words, it includes all of
or by some other overt act showing an intention to contract of partnership those things which are
rescind. Communication of such election to the “Earphone of a cell necessary for the
buyer is not necessary. But, as in regard to resale phone” “mouse pad of a perfection of another
the giving or failure to give notice is relevant in computer” thing such as the
determining the reasonableness of the time given equipment for a factory,
the spare parts and
the buyer to make good his obligations under the
tools of a machine. The
contract.
key of a house and
other of a similar nature
Golden Rule​: The unpaid seller’s right of lien or
stoppage in transitu is not affected by any sale or
Note: ​The fruits(natural, industrial or civil) pertain to real estate and that he ascertained its area and
the buyer from the day on which the contract was quality before the contract was perfected.
perfected. (2) Where area or number stated together with
boundaries​. — If the vendor cannot deliver to the
● If the thing is lost without the fault of the vendee all that is included within the boundaries
debtor, the obligation shall be extinguished; mentioned in the contract, the latter has the option
● If the thing is lost through the fault of the to reduce the price in proportion to the deficiency or
debtor, he shall be obliged to pay damages; to set aside the contract. The phrase “should he not
it is understood that the thing is lost when it be able to do so” refers to a situation when the
perishes, or goes out of commerce, or vendor, either because a part or parcel of the real
disappears in such a way that its existence is estate does not belong to him, cannot deliver all that
unknown or it cannot be recovered; is included within the boundaries
● (3) When the thing deteriorates without the
fault of the debtor, the impairment is to be Prescription of actions.
borne by the creditor; The actions based on Articles 1539 and 1542 for
● If it deteriorates through the fault of the either rescission of the contract or proportionate
debtor, the creditor may choose between the reduction of the price must be brought within six
rescission of the obligation and its fulfillment, months counted from the day of delivery.
with indemnity for damages in either case;
● If the thing is improved by its nature, or by Requisites of DOUBLE SALE
time, the improvement shall inure to the ​1. ​ ​Two or more valid contract sale
benefit of the creditor 2. Two or more buyers who are at odds over the
● If it is improved at the expense of the debtor, rightful ownership of the object must represent
he shall have no other right than that granted conflicting interests.
to the usufructuary.” 3. They must pertain exactly to the same object
4. They must be bought from the same seller
Sale of real property by unit of measure or
number. Principle of double sale not applicable
If the area or number in the immovable is 1 Some or all of the elements as mentioned above
greater than that stipulated in the contract, the are not present
vendee may accept the area included in the contract 2. The two different contracts of sale are made by
and reject the rest. If he accepts the whole, he two different persons, one of them not being the
makes himself liable for the price of the same at the owner of the property sold.
contract rate. The vendee may not withdraw from 3. Where one of the contract of sale is forgery
the contract. 4. Where one of the contract of sale is simulated
What is judicial sale? and other is genuine
A sale conducted under the authority of a Where one of the contract of sale is subject to a
judgement or court order, such as an execution sale. suspensive condition which was not complied with
and the other is an absolute sale.
Sale of real estate made for a lump sum.
(1) Mistake in area stated in contract immaterial. Rules of preference in case of double sale
— If the sale is made for a lump sum, and not so 1. Movable Property
much per unit of measure or number, the cause of First possessor in good faith
the contract is the thing sold independent and 2. Immovable property
irrespective of its number or measure. a. First registrant in good faith
In this case, the law presumes that the b. First possessor in good faith
purchaser had in mind a determinate price for the c. Person with the oldest title in good
faith
 Express Warranty: ​It is any affirmation of fact or
any promise by the seller relating to the thing if the
Warranty Condition
natural tendency of such affirmation or promise is to
Goes into the Goes into the root of induce the buyer to purchase the same and if the
performance of such the existence of the buyer purchases the thing relying thereon
obligation and in fact obligation
may constitute an Meaning of implied warranty.
obligation in itself An implied warranty is that which the law derives by
May form part of the Must be stipulated by implication or inference from the nature of the
obligation or contract the parties in order to transaction or the relative situation or circumstances
and provision of the law form part of an of the parties irrespective of any intention of the
without the parties obligation seller to create it.
having agreed thereto Examples:
1. Warranty that the seller has a right to sell
Non-fulfillment of a Although it may
2. Warranty against eviction
warranty would extinguish the
constitute a breach of obligation upon which it 3. Warranty against non-apparent burden or
contract is based, it generally servitudes
does not amount to a 4. Warranty against hidden defects
breach of contract of 5. Warranty against redhibitory defects on
sale animals
Note: ​Although a seller is bound by implied
warranties in law, nevertheless an agent of the seller
may bind himself to such warranties by express
Condition imposed on Condition imposed on contractual stipulation.
perfection of contract performance of
obligation
Subsection 1: Warrant in case of Eviction
It prevents the juridical It gives the option to the
relation from coming party either to refuse or Meaning of eviction.
into existence proceed with the Eviction may be defined as the judicial
contract of sale and process, whereby the vendee is deprived of the
waive the condition whole or part of the thing purchased by virtue of a
final judgment based on a right prior to the sale or
. Any affirmation of fact or any promise by an act imputable to the vendor.
the seller relating to the thing is an express warranty Requisites: ​In order that a vendor’s liability for
if the natural tendency of such affirmation or promise eviction may be enforced, the following requisites
is to induce the buyer to purchase the same, and if must concur
the buyer purchases the thing relying thereon. No a. There must be final judgement
affirmation of the value of the thing, nor any b. The purchaser has been deprived of the
statement purporting to be a statement of the whole or part of the thing sold
seller’s opinion only, shall be construed as a c. Said deprivation was by virtue of a right prior
warranty, unless the seller made such affirmation or to the sale made by the vendor
statement as an expert and it was relied upon by the d. The vendor has been summoned and made
buyer a co-defendant in the suit for eviction at the
The above stated article refers to express
warranty
 The vendee’s right against the vendor is not assumed its consequences. The vendor shall
lost because he, the vendee, did not appeal. With a not be liable,
judgment becomes final whatever be the cause of
finality, the requirement of the law is deemed When the warranty has been agreed
satisfied. upon or nothing has been stipulated on this point, in
What is prescription? case eviction occurs, the vendee shall have the right
The effect of the lapse of time in creating and to demand of the vendor:
destroying rights (1) The return of the value which the thing sold
had at the time of the eviction, be it greater or less
If the property is sold for nonpayment of than the price of the sale;
taxes due and not made known to the vendee (2) The income or fruits, if he has been ordered to
before the sale, the vendor is liable for eviction. deliver them to the party who won the suit against
him;
Deprivation for nonpayment of taxes. (3) The costs of the suit which caused the eviction
If the vendee is deprived of the ownership of and, in a proper case, those of the suit brought
the property because it is sold at public for against the vendor for the warranty;
nonpayment of taxes due from the vendor, the latter (4) The expenses of the contract, if the vendee has
is liable for eviction for an act imputable to him. It is paid them;
required, however, that at the time of the sale, the (5) The damages and interests and ornamental
non-payment of taxes was not known to the vendee. expenses, if the sale was made in bad faith
Rescission is not a remedy in case of total
The judgment debtor is also responsible for eviction because recission contemplates mutual
eviction in judicial sales, unless it is otherwise restitution meaning both parties must be able to
decreed in the judgment. return whatever they received under the contract. In
total eviction, the vendee cannot return the object of
What is judgement debt? the contract of sale
A debt that is evidenced by a legal
judgement or brought by a successful lawsuit Remedy in case of partial eviction
against the debtor 1. Rescission
2. Enforcement of vendor’s liability for eviction
What is judicial sale? Note: In case of partial eviction, the vendee can
A sale conducted under the authority of a shall return a portion of the remaining object of sale,
judgement or court order such as an execution sale thus, rescission is allowed

Any stipulation exempting the vendor The warranty cannot be enforced until a final
from the obligation to answer for eviction shall be judgment has been rendered, whereby the vendee
void, if he acted in bad faith. loses the thing acquired or a part thereof.

Kinds of Waiver Final judgment of eviction essential.

1. Waiver Consciente The above article merely reiterates two of the
The waiver is made by the vendee without essential elements for the enforcement of warranty
the knowledge of the risk of eviction. The in case of eviction, namely:
vendor shall only pay the value which the (1) deprivation of the whole or of a part of the thing
thing sold had at the time of eviction. sold; and
2. Waiver Intencionada (2) the existence of a final judgment.
The waiver is made by the vendee with
knowledge of the risk of eviction and
 The vendor shall not be obliged to make
good the proper warranty, unless he is summoned in Requisites for warranty against hidden defects.
the suit for eviction at the instance of the vendee. (1) The defect must be important or serious;
-​In order to give the vendor an opportunity to (2) It must be hidden;
intervene and defend the title that he has transferred (3) It must exist at the time of the sale;
(4) The vendee must give notice of the defect to the
The defendant vendee shall ask, within the vendor within a reasonable time
time fixed in the Rules of Court for answering the (5) The action for rescission or reduction of the price
complaint, that the vendor be made a co-defendant. must be brought within the proper period — 6
months from the delivery of the thing sold or within
Vendor to be made co-defendant. 40 days from the date of
As previously stated, the notification required by the delivery in case of animals
Article 1559 refers to a case where the vendee is (6) There must be no waiver of warranty on the part
the defendant in a suit instituted to deprive him of of the vendee.
the thing purchased.
When defect important.
What is servitude? (1) it renders the thing sold unfit for the use for
Servitude is an encumbrance imposed upon which it is intended;
an immovable for the benefit of another immovable (2) if it diminishes its fitness for such use to such an
belonging to a different owner. extent that the vendee would not have acquired it
had he been aware thereof or would have given a
Warranty against Non-apparent burden or lower price for it.
servitude requisites:
1. The immovable sold should be encumbered When defect hidden.
with any non-apparent burden or servitude, The defect is hidden (or latent) if it was not
not mention, not mentioned in the agreement known and could not have been known to the
2. The nature of the non-apparent burden or vendee
servitude is presumed that the vendee would
not have acquired it had he been aware Warranty of fitness or implied warranty of fitness
thereof for a particular purpose
Remedy where the immovable sold is A warranty - imposed by law if the seller has
encumbered with non apparent burden reason to know of the buyer’s ​special purposes ​for
1. Rescission the item- that the item is suitable for those purposes.
2. Indemnity The seller warrants that the thing sold is
Prescriptive Period: Within one year, to be reasonably fit for the known ​particular purpose for
computed from the execution of the deed, the which it was acquired by the buyer. The requisites
vendee may bring an action for rescission, or sue for are:
damages. 1. Where the buyer, expressly or by implication,
Note​: One year having elapsed, he may only bring makes known to the seller the particular
an action for damages within an equal period, to be purpose for which the goods are acquired:
counted from the date on which he discovered the 2. Where the buyer relies on the seller’s skill or
burden or servitude. judgement.

Subsection 2: Warranty against Hidden Defects Warranty of merchantability or implied warranty

of or Encumbrances Upon the thing sold of merchantability.
A merchant seller’s warranty- implied by law-
that the thing sold is fit for its​ ordinary purpose
 The seller warrants that the goods are If the thing sold should be lost in
reasonably fit for the ​general purpose for which they consequence of the hidden faults, and the vendor
are sold. In here, the goods were brought by was aware of them, he shall bear the loss, and shall
description. be obliged to return the price and refund the
expenses of the contract, with damages. If he was
Sale of a specified article under its patent or not aware of them, he shall only return the price and
other trade name interest thereon, and reimburse the expenses of the
General rule: ​There is no warranty as to its fitness contract which the vendee might have paid.
for any particular purpose.
Exception: ​Stipulation to the contrary
Vendor is aware of Vendor is not aware
hidden defects of the hidden defects
An implied warranty or condition as to the
quality or fitness for a particular purpose may be He shall bear the loss He shall return the
annexed by the usage of trade. price.

He shall return the price He shall return the

Effect of usage of trade.
interest
A warranty as to the quality or fitness for a
particular purpose may be attached by usage to a He shall refund the He shall reimburse the
contract containing no express provision in regard express expenses of the
to warranty, though in the absence of usage no contract
warranty would be implied. The usage is relied on
He shall pay damages
for the purpose of showing the intention of the
parties. If there is no usage, the parties would
naturally express their intention.
Effect in the defective thing was lost through a
In the case of a contract of sale by fortuitous event or through buyer’s fault.
sample, if the seller is a dealer in goods of that The buyer may demand of the vendor the
kind, there is an implied warranty that the goods price which he paid, less the value which the thing
shall be free from any defect rendering them had when it was lost.
unmerchantable, which would not be apparent
on reasonable examination of the sample. Warranty in judicial sales​.
(1) As to judgment debtor. ​— In a judicial sale, it is
General Rule: ​The vendor is responsible to the not really the sheriff who sells but the judgment
vendee for any hidden defects, even though he was debtor. Hence, the provisions regarding warranty
not aware thereof. are also applicable to judicial sales
Exception​: If the contrary has been stipulation and (2) As to government. — In judicial sales, the
the vendor was not aware of the hidden defects: principle of caveat emptor applies, according to
Note​: If the vendee is aware of the defect of the which the purchaser acquires by his purchase no
thing he buys or the lack of title in the vendor, he is higher or better title or right than that of the
deemed to have willfully and voluntarily assumed judgment debtor. If the latter has no right, interest, or
the risk attendant to the sale. lien in and to the property sold, the purchaser
acquires none
Remedies in case of hidden defects:
1. Action of redhibitoria or withdrawal or Right of purchaser in judicial sales.
rescission plus damages (1) The purchaser of property on sale under
2. Accion Quanti Minores or proportionate execution and levy takes as assignee only.
reduction in the price plus damages. 2) Where a judicial sale is voided or set aside
without fault of the purchaser, the latter is entitled to
reimbursement of the purchase money paid by him This article is a limitation to the provisions of
subject to set-off for benefits enjoyed while he had Article 1570. It is based on the assumption that the
possession of the property. As a general rule, a defects must have been clearly known to the buyer.
judicial sale can only be set aside upon the return to
the buyer of the purchase price with simple interest Void sale of animals:
and other expenses incurred by him. He is ordinarily 1. The sale of animals suffering from
entitled to a lien on the property until he is repaid contagious diseases
whatever may be due him 2. Sale of unfit animals

Prescription of actions in cases of Redhibitory effect:

implied/express warranty. If the hidden defect of animals, even in the
(1) The action for rescission of the contract or case of professional inspection has been made,
reduction of the purchase price prescribes six should be of such a nature that expert knowledge is
months from the date of delivery of the thing sold. not sufficient to discover it.
Outside this period the action is barred. It follows
that a vendee should not be permitted to offer as a The redhibitory action, based on the faults or
defense, hidden defects in the thing sold six months defects of animals, must be brought within forty days
after he had received it. from the date of their delivery to the vendee. This
(2) With respect to an express warranty, in action can only be exercised with respect to faults
accordance with the general rule on rescission of and defects which are determined by law or by local
contract, the prescriptive period which is four (4) customs.
years, shall apply
Prescriptive period: ​Forty days from the date of
General Rule: ​The redhibitory defect of one shall their delivery to the vendee
only give rise to its redhibition, and not that of
others. Animal dies within 3 days after its purchase
Exception: The vendee would not have purchased The vendor shall be liable if the disease
the sound animal or animals without the defective which caused the death existed at the time of the
one. This is presumed when a team, yoke pair, or contract and not at the time of delivery.
set is bought, even if a separate price has been
fixed for each one of the animals composing the Effect of rescission of sale of animal with
same. redhibitory defect.
1. The animal shall be returned in the condition
The provisions of the preceding article with in which it was sold and delivered
respect to the sale of animals shall in like manner 2. The vendee is answered for any injury due to
be applicable to the sale of other things. his negligence

Sale of two or more things together. Remedies in case of hidden defects

The points considered in the preceding 1. Accion redhibitoria or withdrawal or
article apply also to sale of two or more things where rescission plus damages
only one or more of them but not all have hidden 2. Accion Quanti Minores or proportionate
defects. reduction in the price plus damages.
Note: The prescription period to exercise the two
Sale of animals at fairs or at public auctions or remedies above stated is 40 days from the date of
as condemned. delivery of the animals to the vendee.
-​There is no warranty against hidden defects
The form of sale of large cattle shall be
governed by special laws.
Form of sale of large cattle. (3) when the buyer has committed a breach of the
The special law governing the sale of large contract of sale.
cattle is Act No. 4117, now found in Sections 511 to
536 of the Revised Administrative Code, as Note:
amended, providing for the registration, branding, ● The seller committed a breach of contract by
conveyance, and slaughter of large cattle. The sale not delivering the specific goods to the buyer
must appear in a public document​. ● The buyer applies with the court for specific
performance to compel the seller to deliver
Chapter 6: Actions for breach of contract of sale the specific goods
of goods ● There must be an order from the court for
specific performance
​Actions for breach of the contract of sale of
goods shall be governed particularly by the Remedies of buyer for breach of warranty by
provisions of this Chapter, and as to matters not seller.
specifically provided for herein, by other applicable (1) accept the goods and set up the seller’s breach
provisions of this Title. to reduce or extinguish the price;
(2) accept the goods and maintain an action for
Provisions governing breach of contract damages for the breach of the warranty;
of sale of goods. (3) refuse to accept the goods and maintain an
“Goods” includes all chattels personal but not things action for damages for the breach of the warranty;
in action or money of legal tender in the Philippines. (4) rescind the contract of sale by returning or
The term includes growing fruits or crops offering the return of the goods, and recover the​,
after the vendor has been duly heard​.
Measure of damages: ​It is the estimated loss
directly and naturally resulting in the ordinary course Chapter 8: Assignment of credits and other
of events from the buyer’s breach of contract incorporeal rights.

Measure of damages where there is an available ART. 1624. An assignment of credits and other
market for the goods The difference between the incorporeal rights shall be perfected in
contract price and the market or current price at the accordance with the provisions of article 1475.
time when the goods ought to have been accepted,
or, if no time was fixed for acceptance, then at the Assignment of credit is a contract by which the
time of the refusal to accept. owner (assignor/creditor) of a credit and other
incorporeal rights transfers, either onerously or
Measure of damages for repudiation or gratuitously, to another (assignee) his rights and
countermand actions against a third person
a. The labor performed and expenses incurred
for materials before receiving notice of the
Contract of sale Assignment of credit
buyer’s repudiation or countermand
b. The profit he would have realized if the sale The object is property The object is credit,
had been fully performed incorporeal rights or
rights of actions
Seller’s right of rescission before delivery.
It need not appear in a It must appear in a
(1) when the buyer has repudiated the contract of
public instrument to public instrument to
sale; affect third person. produce effect as
2) when the buyer has manifested his inability to against third person. In
perform his obligations thereunder; and case the assignment
involves real property,
 Warranties of the assignor of credit
the instrument is
recorded in the registry 1. The existence of the credit at the time of the
of property. assignment
2. The legality of the credit at the time of the
assignment unless the assignor sold it as
Requirement to produce effect against third
doubtful
person
3. If the expressly stipulated or unless the
1. If personal property is involved
insolvency was prior to the sale and common
A public instrument is required to make the
knowledge, the solvency of the debtor.
assignment effective against third person
Liabilities for violation of warranties
2. If real property is involved
1. Assignor in good faith
The instrument is recorded in the Registry of
a. Price received
Property to make the assignment effective against
b. Expenses of the contract
third person.
c. Any other legitimate payments by
Note: ​A gratuitous assignment is in essence a
reason of the assignment
donation, hence, t must comply with the formalities
2. Assignor in bad faith
of a donation
a. Payment of the price
b. All the expenses
The debtor who, before having knowledge of
c. Damages
the assignment, pays his creditor shall be released
from the obligation
Duration of warranty as to debtor’s solvency
1. Period stipulated
Consent of debtor to assignment not required.
2. If there is no stipulation
In an assignment of credit, the consent of the debtor
a. If the period has already expired
is not essential in order that it may produce legal
One year from the time of the assignment
effects. Hence, the duty to pay does not depend on
b. If the period has not yet expired
the consent of the debtor; otherwise, all creditors
One year from maturity
would be prevented from assigning their credits
because of the possibility of the debtors’ refusal to
One who sells an inheritance without
give consent.
enumerating the things of which it is composed,
shall only be answerable for his character as an
The assignment of a credit includes all the
heir.
accessory rights, such as a guaranty, mortgage,
pledge or preference.
Note: ​The above stated article speaks of present
inheritance which is valid as long as the essential
Extent of assignment of credit. The
elements of a contract are present. It is the sale of
assignment of credit includes not only the credit
future inheritance which is prohibited, as a rule.
itself but also all rights accessory thereto. This
follows the familiar rule that the accessory follows
One who sells for a lump sum the whole of
the principal. But the parties may stipulate that the
certain rights, rents, or products, shall comply by
accessory rights shall not be included in the
answering for the legitimacy of the whole in general;
assignment.
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.
Note: ​The warranty is on the legitimacy of the world
of the whole in general.
 (4) The right must be exercised by the debtor within
General Rule: ​The vendor shall pay the vendee he thirty (30) days from the date the assignee demands
have profited by some of the fruits or received or (judicially or extra-judicially) payment from him. A
anything from the inheritance sold debtor who has paid the full amount of a litigated
Exception: ​The above liability is subject to contrary credit to one who has purchased such litigated credit
stipulation: cannot counterclaim the difference between the
amount paid by such debtor and the amount paid by
the purchaser. of such litigated credit unless such
General Rule: The vendee shall, on his part, debtor shall make use of his right to do so within the
reimburse the vendor for all that the latter may have prescribed period.
paid for the debts of and charges on the estate and
satisfy the credits he may have against the same, From the provisions of the preceding article
unless there is an agreement to the contrary. shall be excepted the assignments or sales made:
Exception: ​The above liability is subject to contrary (1) To a co-heir or co-owner of the right assigned;
stipulation. (2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land
When a credit or other incorporeal right in which is subject to the right in litigation assigned.
litigation is sold, the debtor shall have a right to
extinguish it by reimbursing the assignee for the Exceptions to debtor’s right to legal
price the latter paid therefor, the judicial costs, redemption
incurred by him, and the interest on the price from (1) Sale to a co-heir or co-owner. — This exception
the day on which the same was paid. A credit or is based on the desire to do away with co-ownership
other incorporeal right shall be considered in or pro-indivision. Moreover, if the right of redemption
litigation from the time the complaint concerning the is granted to the debtor, it would not terminate
same is answered. litigation which is the purpose of this article because
The debtor may exercise his right within thirty days the co-owner or co-heir may still sue the debtor for
from the date the assignee demands payment from the share that corresponds to the former in the credit
him. (2) Sale to a creditor. — There is a lawful basis for
the assignment as the assignee cannot be
The following are the requisites before the right considered as a vendee of a right in litigation and as
of legal redemption can be exercised: a speculator. It really refers to a dation in payment.
(1) There must be a sale or assignment of a credit. (3) Sale to the possessor of property in question. —
The concept of sale must be understood in its The reason for this exception is that the assignee is
restricted sense. The right cannot be exercised if the moved by a desire to preserve the property and not
transaction is exchange or donation to speculate at the expense of the debtor.
(2) There must be a pending litigation at the time of
the assignment. The complaint by the assignor must Chapter 9: General Provisions
have been filed and answered by the creditor before
the sale of the credit. Article 1634 applies only to a ART. 1636. In the preceding articles in this Title
claim in litigation the meaning of which is not a claim governing the sale goods, unless the context or
open to litigation, but one which is actually litigated; subject matter otherwise requires:
that is to say, disputed or contested, which happens (1) “Document of title to goods” includes any bill
only after an answer interposed in a suit(3) The of lading, dock warrant, “quedan,” or warehouse
debtor must pay the assignee: receipt or order for the delivery of goods, or any
(a) the price paid by him; other document used in the ordinary course of
(b) the judicial costs incurred by him; and business in the sale of transfer of goods, as proof of
(c) the interest on the price from the date of the possession or control of the goods, or
payment; and 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. “Goods” includes all chattels
personal but not things in action or money of legal
tender in the Philippines. The term includes growing
fruits or crops. “Order” relating to documents of title
means an order by indorsement on the documents.
“Quality of goods” includes their state or condition.
“Specific goods” means goods identified and agreed
upon at the time a contract of sale is made. An
antecedent or pre-existing claim, whether for money
or not, constitutes “value” where goods or
documents of title are taken either in satisfaction
thereof or as security therefor.
(2) A person is insolvent within the meaning of this
Title who either has ceased to pay his debts in the
ordinary course of business or cannot pay his debts
as they become due, whether insolvency
proceedings have been commenced or not.
(3) Goods are in a “deliverable state” within the
meaning of this Title when they are in such a state
that the buyer would, under the contract, be bound
to take delivery of them.

Note: The above stated article defines the terms

used in the preceding articles governing the sale of
goods only.

ART. 1637. The provisions of this Title are subject to

the rules laid down by the Mortgage Law and the
Land Registration Law with regard to immovable
property.