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LAW ON SALES III

Completeness of Delivery of Immovables
1. Sale of Real Estate for a Unit of Measure (Articles 1539-1540)
a. Contains a statement of the area at the rate of a certain price for a unit, measure, or number
1. If the vendee should demand, the vendor shall deliver all that is mentioned in the contract
2. If what is delivered is:
a. Less in area or of inferior or different quality
Buyer may:
i. Ask for the proportionate reduction on the price if the lack in area is less than one-
tenth (1/10) of that stated in the contract, unless the vendee would not have bought
the thing had he known of its smaller area, in which case, he may opt to rescind the
sale (Accion quanti minoris); or
ii. Rescind the sale if the lack in area exceeds or is at least one-tenth of that stated, i.e.,
the lack in area is more than or equal to one-tenth. (Accion redhibitoria).
b. Greater in area
Buyer may:
i. Accept the area stated in the contract and reject the rest; or
ii. Accept the whole area and pay for them at a contract rate.

2. Sale of Real Estate for a Lump Sum (Article 1542)

In the sale of real estate for a lump sum (a cuerpo cierto/ por precio alzado), there shall be no increase
or decrease in the price although there be a greater or lesser area or number than that stated in the
contract.

Same rule applies when two (2) or more immovables are sold for a single price. But if besides
mentioning the boundaries, which is indispensable, its area or number should be designated in the
contract, the vendor is bound to deliver all that is included within the boundaries stated in the
contract although there be a greater or lesser area or number than that stated in the contract.

In case where the vendor does not deliver the area within the boundaries stated in the contract, the
buyer may:
a. Ask for a proportionate reduction on the price; or
b. Rescind the contract.

Note: The prescriptive period for filing the legal action concerning the sale of real estate is six (6) months
from the date of delivery.

Rules of Preference in Case of Double Sale

Double sale applies when two (2) or more valid contracts of sale of the same subject matter were entered
with the very same seller, where two (2) or more buyers at odds over the rightful ownership represent
conflicting interests and the price of which has been fully paid to the former. This rule does not apply to
contract to sell.

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1. Movables
Ownership should be transferred to the person who took first possession of the property in good faith,
(i.e., first possessor in good faith,) either actually or constructively.

2. Immovables
In the sale of immovable properties to different vendees, in order of priority:
a. Ownership shall belong to the person who in good faith registered the sale in the Registry of
Property (i.e., first registrant in good faith).
b. If no one registered the sale, ownership should belong to the person who first took possession of
the thing in good faith (i.e., first possessor in good faith).
c. In the absence of both registration and possession, ownership should belong to the person who
presents the oldest title in good faith.

Note: In all of the above cases, good faith is essential, being the basic premise of preferential rights
granted to the person claiming ownership of the immovable.

Applicability of the Rule of “Caveat Emptor” (Buyer Beware)

The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor, and
one who buys without checking the vendor’s title takes all the risks and losses consequent to such failure
(Caram, Jr. v. Laureta, No. L-28740, 1981).

Thus, one who purchases real property, which is in actual possession of others, should make some inquiry
concerning the rights of those in possession.

Purchaser in Good Faith

This is one who:
1. Buys the property without notice that some other person has a right to, or interest in, such
property; and
2. Pays a full and fair price for the same at the time of such purchase, or before he has notice of the
claim or interest of some other person in the property (Agricultural and Home Extension
Development Group v. Court of Appeals, G.R. No. 92310, 1992).

Burden of Proof
As a rule, he who asserts the status of the purchaser in good faith and for value has the burden of proving
such assertion (Mathay v. Court of Appeals, G.R. No. 115788, 1998).

Conditions and Warranties

Conditions in a Contract of Sale
Condition is an uncertain event or contingency upon the happening of which the obligation or right of the
contract depends. In such case, the obligation of the contract does not attach until the condition is
performed (Soriano, 2016).

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Effect of Non-fulfillment of Condition (Article 1545)

1. The other party may:
a. Refuse to proceed with the contract; or
b. Proceed with the contract, waiving performance of the condition.
2. 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.

Warranty
A statement or representation made by the seller of goods, contemporaneously and as part of the
contract of sale, having reference to the character, quality or title of the goods, and by which he promises
or undertakes to ensure that certain facts are or shall be as he then represents (De Leon, 2016).

Kinds of Warranties (Soriano, 2016)

1. Express warranties
Any affirmation of fact or any promise by the seller relating to the thing in which 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 (Article 1546). It includes all warranties derived from the language of the
contract, so long as the language is express. Thus, the warranty may take the form of affirmation, a
promise or a representation (Parish v. Kotthoff).

The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not
in themselves fraudulent. This is in accordance with the principle “caveat emptor.”

A mere expression of opinion, no matter how positively asserted, does not import a warranty unless
the seller is an expert and his opinion was relied upon by the buyer (Article 1341).

2. Implied warranties (Article 1547)

These are which the law derive by implication or inference from the nature of the transaction or the
relative situation or circumstances of the parties, irrespective of any intention of the seller to create it.
In a contract of sale, unless a contrary intention appears, there is:
a. 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 (i.e., warranty against eviction);
b. 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 (i.e., warranty against hidden
defects);
c. The goods must be reasonably fit for the purpose in which it was acquired; and
d. The goods must be merchantable in quality.

A. Warranty that seller has a right to sell

Although Article 1547 uses the phrase “unless a contrary intention appears”, there can be no legal
waiver of such warranty without changing the basic nature of the relationships, for the warranty on
the part of the seller that he has the capacity to sell, i.e. to transfer ownership of the subject matter

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pursuant to the sale, is the essence of sale, unless, it amounts to clear assumption of risk on the part
of the buyer, as when the obligation of the seller is subject to a condition (Villanueva, 2009).
B. Warranty in Case of Eviction
Eviction is a juridical process whenever by a final judgment based on a right prior to the sale or an
act imputable to the vendor, the vendee is deprived of the whole or a part of the thing purchased
(Article 1548).

1. Basis for eviction

The deprivation is based on a right prior to the sale or an act imputable to the vendor.

2. Requisites (Soriano, 2016)

The following are the requisites in order that the seller’s warranty against eviction may be
enforced:
a. Final judgment;
b. The vendee has been deprived of the whole or part of the thing sold;
c. The deprivation is based on a right prior to the sale or an act imputable to the vendor; and
d. The vendor must have been notified of the suit at the instance of the vendee.

3. Instances when the seller is liable for breach of warranty against eviction
a. If the property is sold for nonpayment of taxes due and not made known to the vendee before
the sale, the vendor is liable for eviction (Article 1551).
The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise
decreed in the judgment (Article 1552).

4. Vendor’s liability

Total Liability (Article 1555)

a. If the seller acted in bad faith, any stipulation exempting him from the obligation to answer
for eviction should be void (Article 1553).
Vendor shall be liable for the following (Soriano, 2016):
i. Value of the thing at the time of eviction;
ii. Income or fruits of the thing
iii. Cost of suit which caused the eviction
iv. Expenses of the contract, if the vendee has paid them; and
v. Damages and interests, and ornamental expenses, if the sale was made in bad faith.

Where no warranty has been agreed upon, or there was no stipulation exempting the vendor
from liability, he shall still be liable from the same items above, if he acted in bad faith.

b. If the seller acted in good faith, and there was no stipulation exempting him from liability, the
vendor shall be liable for the following:
i. Value of the thing at the time of eviction;
ii. Income or fruits of the thing;
iii. Cost of suit which caused the eviction; and

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iv. Expenses of the contract, if the vendee has paid them

Note: There is no liability for damages and interests.

5. Partial eviction (Article 1556)

Vendee may:
a. Enforce vendor’s liability for eviction (VICED); or
b. Demand rescission of the contract

The choices are available in the following instances:

a. When the vendee is deprived of a part of the thing sold if such part is of such importance to
the whole that he would not have bought the thing without the said part (Article 1556); or
b. When two or more things are jointly sold, whether for a lump sum or a separate price for
each, and the vendee would not have purchased one without the other (Article 1556).

6. Waiver of warranty

Kinds of Waiver
a. Waiver consciente/ simple
The waiver is voluntarily made by the vendee without the knowledge and assumption of the
risks of eviction. The vendor shall be liable only for the value of the things at the time of
eviction.

b. Waiver intencionada/ calificada

The waiver is made by the vendee with the knowledge of the risks of eviction and assumption
of its consequences, in which case, the vendor shall not be liable for anything provided he did
not act in bad faith (Article 1554).

C. Warranty against non-apparent burden or easement/servitude (Article 1560)

Easement or servitude is an encumbrance imposed upon an immovable for the benefit of another
immovable belonging to a different owner (Article 613).

1. Kinds of Easement
a. Apparent – Those which are made known and continually kept in view by external signs that
reveal its use and enjoyment.
b. Non-apparent – One which shows no external indication of its existence.

2. Requisites for vendor’s liability

a. The easement must be non-apparent.
b. It must not have been mentioned in the agreement.
c. It must be of such nature that it must be presumed that the vendee would not have acquired
the property had he known of the encumbrances.

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3. When vendor is not liable

a. When the easement is apparent
b. When the easement is recorded in the Registry of Property unless there is an express warranty
that the thing is free from encumbrances
c. When the buyer had knowledge of the encumbrances at the time of sale

4. Remedies of the vendee

The prescriptive period for the warranty against non-apparent burden on immovable is one (1)
year from the execution of the deed of sale or discovery of encumbrance or burden. The vendee
may ask for:
a. Rescission; or
b. Indemnification for damages.

If the one-year period from the execution of the deed of sale has already elapsed, the vendee may
only ask for indemnification for damages within one (1) year from discovery of easement.

D. Warranty against hidden defects

Vendor guarantees that the thing sold is free from any hidden faults or defects or any charge or
encumbrance not declared or known to the buyer (Article 1561).

Hidden faults or defects pertain only to those that make the object unfit for the use for which it was
intended at the time of the sale (Investments & Dev’t. Inc. v Court of Appeals G.R. No. L-51377).
1. Requisites (De Leon, 2016)
The following requisites must concur for the existence of the warranty against hidden defects:
a. The defect must be important or serious;
b. It must be hidden (not known or could not have been known to the vendee);
c. It must exist at the time of the sale;
d. The vendee must give notice of the defect to the vendor within a reasonable time;
e. The action for rescission or reduction of the price must be brought within the proper period
– six (6) months from the delivery of the thing sold or within 40 days from the date of the
delivery in case of animals; and
f. There must be no waiver of warranty on the part of the vendee (Article 1548, par. 3).

2. Responsibility for hidden defects (Article 1566)

General rule: The vendor shall be liable to the vendee for any hidden faults or defects in the thing
sold because the ignorance of the vendor does not relieve him from liability.

Exception: The vendor shall not be liable if there is a stipulation exempting him from such defects
and he was not aware thereof.

3. Remedies of the vendee

a. Accion redhibitoria – Rescission with damages
b. Accion quanti minoris – Proportionate reduction in the price with damages

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Note: These remedies are alternative, i.e., they cannot be filed simultaneously because they are
incompatible with each other.
The prescriptive period for filing a legal action to enforce the seller’s liability is six (6) months from
the delivery of the thing sold.

4. Effect of loss of the thing with hidden defects (Article 1568) (De Leon, 2016)
a. If there is no waiver of warranty and the loss is due to hidden defects:
i. Vendor aware of hidden defects – He shall bear the loss because he acted in bad faith.
In such case, the vendee has the right to recover:
1) the price paid;
2) the expenses of the contract; and
3) the damages.

ii. Vendor not aware of hidden defects – He is not guilty of bad faith and thus shall be
obliged only to return:
1) the price paid;
2) the interest thereon; and
3) the expenses of the contract if paid by the vendee.

b. If there is a waiver of warranty and the loss is due to hidden defects (Article 1566):
i. When the vendor is aware of the hidden defects, the waiver is in bad faith; thus, the
seller is still liable; and
ii. When the vendor is not aware of the hidden defects and if the contrary has been
stipulated, the vendor is not liable.

c. If the loss is due to a fortuitous event or the fault of the vendee:

i. Vendor aware of hidden defects – He shall bear the loss because he acted in bad faith.
In such case, the vendee has the right to recover:
1) the price paid less the value of the thing at the time of loss; and
2) the damages.
ii. Vendor not aware of hidden defects – He is not guilty of bad faith and thus shall be
obliged only to return:
1) the price paid less the value of the thing at the time of loss.

E. Warranty against redhibitory defects on animals

If the hidden defect of animals should be of such a nature that expert knowledge, even in case of
professional inspection, is not sufficient to discover, the defect shall be considered redhibitory.
However, if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he
shall be liable for damages (Article 1576).

Redhibitory vice or defect is a defect in the article sold against which defect the seller is bound to
warrant.

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Redhibition is the avoidance of a sale on account of some vice or defect in the thing sold, which
renders its use impossible, or so inconvenient and imperfect that it must be supposed that the buyer
would not have purchased.

1. Sale of team
General rule: If two (2) or more animals are sold together, whether for a lump sum or a separate
price for each of them, the redhibitory defect of one shall only give rise to its redhibition, and not
that of the others.Exception: The redhibitory defect of one shall give rise to the redhibition of all
the animals sold, including the sound ones, if it should appear that the vendee would not have
purchased the sound animal or animals without the defective one (Article 1572).

The vendee’s remedy may be:

a. Accion redhibitoria – Rescission of the sale; or
b. Accion quanti minoris – Proportionate reduction in the price.

2. When the sale of animals is void

a. When the animals are suffering from contagious diseases; and
b. When the animals are found to be unfit for use or service stated in the contract for which they
were acquired.

3. Requisites to make the vendor liable in sale of animals

a. The disease existed at the time of sale;
b. The disease must have been the cause of death; and
c. The animals died within three (3) days from the time of purchase.

4. Sale at fairs or public auctions, or as condemned

There is no warranty against hidden defects of animals sold at fairs or public auctions, or of
livestock sold as condemned (Article 1574).

5. Obligation of vendee to return

In case the sale is canceled, the 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 (Article 1579).

Note: The redhibitory action, based on the faults or defects of animals, must be brought within
forty (40) days from the date of their delivery to the vendee. This action can only be exercised
with respect to faults and defects which are determined by law or by local customs (Article 1577).

F. Warranties in sale of goods/ warranties of quality (Article 1562)

1. Warranty of fitness for a particular purpose
The vendor guarantees that the thing sold is reasonably fit for the known particular purpose for
which it was acquired by the buyer.

a. Requisites
i. Notice is given by the buyer of the particular purpose for which the goods are bought.

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ii. The buyer has relied on the seller’s skill or judgment.

b. If the goods are sold under their patent or trade name, there is no warranty as to the fitness
of such goods for a particular purpose, unless otherwise stipulated.

2. Warranty of merchantability
The vendor guarantees, where the goods were bought by description, that they are reasonably fit
for the general purpose for which they are sold.

In sale by description, the vendor warrants that the goods are merchantable, saleable or of
medium quality. In a sale by sample, there is an implied warranty that the goods shall be free from
any defect rendering them unmerchantable, which would not be apparent upon reasonable
examination of the sample.
a. Remedy (Article 1567)
i. Accion redhibitoria
ii. Accion quanti minoris

Obligations of the Vendee

Principal obligations of vendee (Article 1582)
1. To accept delivery of the thing sold;
2. To pay the price of the thing sold at the time and place stipulated in the contract; and
3. To bear the expenses for the execution and registration of the sale and putting the goods in a
deliverable state, if such is the stipulation.

To accept the delivery of the thing sold (Article 1585)

1. The buyer is deemed to have accepted the goods:

a. When he intimates to the seller that he is accepting them;
b. When he does not act in relation to the goods which is inconsistent with the ownership of the
seller; and
c. When he retains the goods after the lapse of a reasonable time without intimating to the seller
that he has rejected them.

2. Delivery of goods in installments

General Rule: The buyer of goods is not bound to accept delivery thereof by installments (Article
1583).
If there is a stipulation for installment delivery, and the seller makes defective deliveries in respect
of one or more installments, or the buyer neglects or refuses without just cause to take delivery
of or pay one or more installments, the remedies available to the injured party are:
a. Refuse to proceed with the contract and sue for damages for breach of the entire contract; or
b. Claim compensation for damages, if the breach is severable.

3. Examination of the goods

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General rule: The buyer has the right to examine the goods delivered to ascertain whether they
conform with the contract, before accepting them and paying for the price thereof.

Exceptions:
The following are exceptional cases when the buyer cannot examine the goods before accepting
them:
a. When there is an agreement that the buyer cannot examine the goods before accepting them;
b. When there is stipulation that the goods shall not be delivered to the buyer until he has paid
the price; and
c. When the goods are marked with the words “collect on delivery,” unless there is an agreement
or usage of trade permitting such examination.

4. Effect of acceptance of goods on seller’s liability

General rule: In the absence of express or implied agreement of the parties, acceptance of the
goods by the buyer shall not discharge the seller from liability in damages or other legal remedies
for breach of any promise or warranty in the contract of sale.

Exceptions: The seller is discharged from the liability:

a. If there is an agreement, whether express or implied; and
b. If after acceptance of the goods, the buyer fails to give notice to the seller of the breach in
any promise of warranty within a reasonable time after the buyer knows, or ought to know
of such breach, the seller shall not be liable therefor.

5. Buyer’s refusal to accept delivery

a. If refusal to accept delivery is with just cause:
i. The buyer has no duty to return the goods to the seller unless otherwise stipulated;
ii. Title to the goods does not pass on to him;
iii. He shall not be obliged to pay the price; and
iv. If he constitutes himself as depositary of the goods, he shall be liable as such.

b. If refusal to accept delivery is without just cause:

Title to the goods passes to the buyer from the moment the goods are placed at his disposal,
except when (1) there is a stipulation to the contrary, and (2) the seller has reserved the
ownership of the goods as a security for the payment of the price.

To pay the price of the thing

1. The vendee shall owe interest for the period between the delivery of the thing and the payment
of the price, in the following cases (De Leon, 2016):
a. Should it have been so stipulated;
Note: If interest was stipulated but the rate was not indicated, the rate shall be 6% which is
the legal rate.
b. Should the thing sold and delivered produce fruits or income; and
c. Should he be in default, from the time of judicial or extrajudicial demand for the payment of
the price.

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2. Suspension of payment of the price by the vendee (Article 1590)

a. Grounds:
i. Disturbance in the vendee’s possession or ownership of the thing purchased; and
ii. Reasonable grounds to fear such disturbance, by a vindicatory action or foreclosure
of mortgage.

The vendee can suspend the payment until the vendor has caused the disturbance or danger
to cease.

b. When vendee not entitled to suspension of payment

i. When the vendor gives security for the return of the price;
ii. When it has been stipulated that, notwithstanding any disturbance, the vendee shall
pay the price; and
iii. When the disturbance is a mere act of trespass.

3. Rescission by vendor
a. Immovables (Article 1591)
The vendor may immediately sue for rescission of the sale if there are reasonable grounds to
fear:
i. loss of the immovable sold; and
ii. loss of price.

If one or both grounds do not exist, the vendor may choose between:
1) Fulfillment of the contract, with damages; or
2) Rescission of the contract, with damages.

Pactum Commissorium
This is an agreement between the vendor and the vendee in the sale of an immovable that
rescission of the contract shall of right take place if the vendee fails to pay the price at the
time agreed upon (Article 1592).

This agreement is not valid. Accordingly, the vendee may pay even after the expiration of
the period as long as no demand for rescission has been made upon him either judicially or
by notarial act. After the demand, the court may not grant him a new term.

b. Movables (Article 1593)

With respect to movable property, the rescission of the sale shall take place in the interest of
the vendor if:
i. the vendee, upon the expiration of the period fixed for the delivery of the thing,
should not have appeared to receive it; or
ii. having appeared, he should not have tendered the price at the same time, unless a
longer period has been stipulated for its payment.

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In connection with the above obligations, the following rules must be remembered (De Leon, 2016):
1. In a contract of sale, the vendor is not required to deliver the thing sold until the price is paid nor
the vendee to pay the price before the thing is delivered in the absence of an agreement to the
contrary;
2. If stipulated, then the vendee is bound to accept delivery and to pay the price at the time and
place designated;
3. If there is no stipulation as to the time and place of payment and delivery, the vendee is bound to
pay at the time and place of delivery;
4. In the absence also of stipulation, as to the place of delivery, it shall be made wherever the thing
might be at the moment the contract was perfected (Article 1251); and
5. If only the time for delivery of the thing sold has been fixed in the contract, the vendee is required
to pay even before the thing is delivered to him; if only the time for payment of the price has been
fixed, the vendee is entitled to delivery even before he pays the price.

Actions for Breach of Contract of Sale

Actions by the seller (Soriano, 2016)
1. Maintain an action for the price of the goods if the buyer wrongfully neglects or refuses to pay.
2. Maintain an action for damages if the buyer wrongfully neglects or refuses to accept and pay for
the goods.
3. Rescind the contract if the buyer has repudiated the sale, or manifested his inability to perform
his obligation, or has committed a breach of contract, where the goods have not been delivered
to the buyer.
Actions by the buyer
1. Bring an action for specific performance if the seller has broken the contract to deliver specific or
ascertained goods.
2. In case of breach of warranty by the seller, the buyer may, at his election:
a. Accept or keep the goods and set up against the seller, the breach of warranty by way of
recoupment or diminution or extinction of the price;
b. Accept or keep the goods and maintain an action against the seller for damages for breach
of warranty;
c. Refuse to accept the goods and maintain an action against the seller for damages for
breach of warranty; and
d. Rescind the sale and refuse to receive the goods; or if the goods have already been
received, return them or offer to return them to the seller and recover the price or any
part thereof which has been paid.

References
De Leon, H. S. (2016). The law on sales, agency and credit transactions. Manila: Rex Book Store.
Philippines. (1949). Republic Act No. 386: An Act to Ordain and Institute the Civil Code of the Philippines. Retrieved on December 5, 2018 from
https://www.officialgazette.gov.ph/1949/06/18/republic-act-no-386
Soriano, F. R. (2016). Notes in business law. Manila: GIC Enterprises & Co., Inc.

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