(Lesley Claudio) Sales Finals Reviewer - Santiago

Sales Reviewer
Atty. RP Santiago
in the contract to the time the

CHAPTER 1 contract is perfected
INTRODUCTION
B. Perfection or “birth”
 Concurrence of the essential
SALE (Art. 1458)
elements
1. Nature of Obligations Created
C. Consummation or “death”
The perfection of a contract of sale brings about the
 Parties perform their respective
creation of two sets of obligations:
undertakings culminating in the
extinguishment thereof
A. Seller
1. To transfer ownership
Note: Until the contract of sale is perfected, it
2. To deliver possession of the
cannot as an independent source of obligation serve
subject matter
as a binding juridical relation between the parties
B. Buyer
1. To pay the price
5. Inclusion of Concept of “Contract to Sell”
 Both are real obligations “to give”
 Sale is either absolute or
 Can be the proper subject of actions for
CONDITIONAL
specific performance
 Conditional sale – “contract to sell”
Contract of Sale Deed of Sale
Contract to sell
Intangible or properly a Merely an evidence of
Ownership or title is retained by the seller until the
legal concept the contract
fulfillment of a positive suspensive condition
normally the payment of the purchase price in the
manner agreed upon
2. Subject Matter of Sale
Characteristics of Sale
 Art. 1458 and Art. 1460
 Determinate 1. Nominate and Principal
 Physical segregation or particular
designation – subject matter determinate at  Nominate – it has been given a particular
the point of performance (even if subject name by law
mater were generic-determinable)  Principal – it can stand on its own and does
not depend on another contract for its
3. Elements of a Contract of Sale validity or existence
a. Consent – meeting of minds to transfer 2. Consensual
ownership in exchange for the price
b. Determinate Subject Matter  Perfected at the moment there is a
c. Price certain in money or its equivalent meeting of the minds as to the OBJECT
and PRICE – from this moment parties
Situation Status of Contract may reciprocally demand performance
When all three elements a perfected contract of  Ownership of seller is NOT an element for
are present sale arises perfection – what the law requires is that
When an essential “no contract” situation the seller has the right to transfer
element is not present at instead of VOID or “there ownership
the meeting of the minds was no perfected  Perfection per se does not transfer
contract of sale”but ownership which occurs upon the actual or
courts use VOID constructive delivery of the thing sold
When there is defect or VOIDABLE – when there
illegality constituting any is vitiation of consent 3. Bilateral and Reciprocal
of the three elements
VOID – Art. 1409  Bilateral – imposes obligations on both
parties
 Reciprocal – “mutually obligatory” or
4. Stages in the life of sale concurrence of the promise of the vendor
to sell a determinate thing and the
A. Negotiation, preparation or policitacion promise of the vendee to receive and pay
stage for the property
 Power to rescind is implied
 From the time prospective  Remedy of specific performance
contracting parties indicate interest
Lesley Claudio (2A 2012) Page 1 of 69

THE WOMEN OF ALEITHEIA
TRUTH. HONOR. EXCELLENCE.
Sales Reviewer
Atty. RP Santiago
Art. 1468: Rule to determine whether contract is sale

or barter
4. Onerous A. Manifest intention of parties

B. When intention does not appear
 Imposes valuable consideration as 1. It is barter – where the value of
prestation – price certain in money or its the thing given as part of the
equivalent consideration exceeds the amount
 “Greatest reciprocity of interests” of money given or its equivalent
2. It is sale – where the value of the
thing given as part of the
consideration equals or is less than
5. Commutative the amount of money given
 A thing of value is exchanged for equal Note: Art. 1641 - – distinctions between barter or
value (ideally the value of the subject sale are academic
matter is equivalent to the price paid) Statute of Frauds which Art. 1639 and 1640 –
 The test for compliance therewith is not apply to the sale of real two rules specifically for
object but rather SUBJECTIVE – so long as property and personal barter
the party believes in all honesty that he is property bought at P500
receiving equal value for what he gave up or more does not apply Note: barter does not
for (subjective test of commutative nature to the contract of barter have the element of
of sale) price
6. SALE IS TITLE NOT MODE

Sale Contract for Piece-of-
 Sale is NOT a mode that transfers Work
ownership One of the parties binds The contractor binds
 Mode – legal means by which dominion or himself to deliver a thing himself to execute a
ownership is created, transferred, or in consideration of the piece of work for the
destroyed other’s undertaking to employer, in
 Title – legal basis by which to affect pay the price in money consideration of a certain
dominion or ownership or its equivalent price or compensation
 Sale is merely title – juridical justification In both instances, a transfer of ownership is involved
that creates obligation to transfer ownership and a party necessarily walks away with an object
 Delivery/tradition is mode – the Sale of an object “Sale of service”
consequence of sale that actually transfers The thing is The thing has been
ownership manufactured or manufactures specially
 Seller need not be the owner at the time of procured for the general for the customer and
the perfection of the contract of sale -> only market in the ordinary upon his special order
the right to transfer ownership at the time course of business
the subject matter is delivered
Obligation to give (real Obligation to do
 Perfection does not per se affect the title or
obligation) (personal obligation)
ownership over the subject matter of sale
Proper subject of an Would not allow an
action for specific action for specific
Sale distinguished from other contracts
performance performance
Art. 1467 – Two tests for distinction
Sale Donation
Onerous contract Gratuitous contract
1. Manufacturing in the ordinary course of
Perfected by mere Solemn contract – must business to cover sales contracts
consent comply with formalities 2. Manufacturing upon special order of
mandated by law for its customers to cover contracts for piece of
validity work
Note: Art. 1471 and Art. 726
“upon special order” – “nature of the product” or
“test of necessity”
Sale Barter
One of the parties binds One of the parties binds
himself to deliver a thing himself to give one thing Contract of Sale Agency to Sell
in consideration of the in consideration of the Not unilaterally Revocable (fiduciary
other’s undertaking to other’s promise to give revocable relationship)
pay the price in money another thing Buyer himself pays the The agent is not obliged
or its equivalent price of the object which to pay the price, but
constitutes his main merely obliged to deliver

Sales Reviewer
Atty. RP Santiago
obligation the price which he may stipulated in the contract is simulated, then the
receive from the buyer contract is void (Art. 1471, Civil Code). It is not the
The buyer, after The agent does not act of payment of price that determines the validity
delivery, becomes the become owner of the of a contract of sale. Payment of the price has
owner of the subject thing even if the object is nothing to do with the perfection of the contract.
matter delivered to him Payment of the price goes into the performance of
The seller warrants The agent who effects the contract. Failure to pay the consideration is
the sale assumes no different from lack of consideration. The former
personal liability results in a right to demand fulfillment or
Sale contract must A contract of agency to cancellation of the obligation under an existing valid
comply with Statute of sell is valid and contract while the latter prevents the existence of
Frauds for enforceability enforceable in whatever valid contract.
form
Art. 1466 – “essential clauses” of contract to NHA v. Grace Baptist Church (G.R. No. 156437)
distinguish sale from agency to sell A qualified acceptance constitutes a counter-offer as
expressly stated by Article 1319 of the Civil Code.
When there is absolutely no acceptance of an offer or
Sale Dacion en pago if the offer is expressly rejected, there is no meeting
of the minds. There being no concurrence of the
One of the parties binds Delivery and
offer and acceptance, it did not pass the stage of
himself to deliver a thing transmission of
generation to the point of perfection. Equity cannot
in consideration of the ownership of a thing by
give validity to a void contract, and this rule should
other’s undertaking to the debtor to the creditor
apply with equal force to inexistent contracts.
pay the price in money as an accepted
or its equivalent equivalent of the
Gaite v. Fonacier (No. L-11827)
performance of an
A contract of sale is normally commutative and
obligation
onerous: not only does each one of the parties
The perfection or coming Dation in payment
assume a correlative obligation but each party
into existence of a extinguishes a pre-
anticipates performance by the other from the very
contract of sale gives existing obligation to pay
start. While in a sale the obligation of one party can
rise to two sets of and actually novates the
be lawfully subordinated to an uncertain event, so
obligations relationship into a sale
that the other understands that he assumes the risk
Consensual contract Real contract since
of receiving nothing for what he gives, it is not in the
transfer of ownership is
usual course of business to do so, hence, the
its essence
contingent character of the obligation must clearly
Note: by express provision of law, dation in payment
appear.
is governed by law on sales (Art. 1245)
[CLV book: Gaite acknowledged that obligations in a
contract of sale can be subordinated to a suspensive
Sale Lease condition, with the party fully aware that “he
One of the parties binds The lessor binds himself assumes the risk of receiving what he gives”
himself to deliver a thing to give the lessee the although such stipulation would seem to be contrary
in consideration of the enjoyment or use of a to the commutative nature of a contract of sale]
other’s undertaking to thing for price certain,
pay the price in money and for a period which Celestino Co & Co. v. CIR (No. L-8506)
or its equivalent may be definite or The fact that windows and doors are made by it only
indefinite when customers place their orders does not alter the
A conditional sale may be made in the form of a nature of the establishment, for it is obvious that it
“lease with option to buy” only accepted such orders as called for the
employment of such materials, as it ordinarily
manufactured or was in a position habitually to
Case Doctrines manufacture. It is not true that it serves special
customers only or confines its services to them
Buenaventura v. CA (G.R. No. 126376) alone. The appellant could easily duplicate and mass-
A contract of sale is not a real contract, but a produce – it is mechanically equipped to do so. The
consensual contract. As a consensual contract, a Oriental Sash Factor does nothing more than sell
contract of sale becomes a binding and valid contract goods that it mass produces or habitually makes.
upon the meeting of the minds as to price. If there is When this Factory accepts a job that requires the
a meeting of the minds of the parties as to the price, use of extraordinary or additional equipment, or
the contract of sale is valid, despite the manner of involves services generally performed by it, it
payment, or even the breach of that manner of thereby contracts for a piece of work – filling special
payment. If the real price is not stated in the orders within the meaning of Article 1467.
contract, then the contract of sale is valid but subject
to reformation. If there is no meeting of the minds of
the parties as to the price, because the price

Sales Reviewer
Atty. RP Santiago
[CLV book: Celestino Co implies that the test of effects of a dation in payment which may extinguish
“special orders under Article 1467 of the Civil Code is the obligation. However, as in any other contract of
not one of time, or habit, but actually must be drawn sale, the vendor or assignor is bound by certain
from the nature of the work to be performed: it must warranties, as provided for in Article 1628 of the
be of the nature that the products are not ordinary Civil Code. Petitioner as vendor or assignor, is bound
products of the manufacturer, and that they would to warrant the existence and legality of the credit at
require the use of extraordinary skills or equipment, the time of the sale or assignment.
if to be performed by the manufacturer]
CHAPTER 2
CIR v. Engineering Equipment and Supply PARTIES TO A CONTRACT OF SALE
Company (No. L-27044)
The distinction between a contract of sale and
Articles 1489 – 1492
contract for work, labor, and materials is tested by
the inquiry whether the thing transferred is one not
GR: Any person who has capacity to contract or to
in existence and which never would have existed but
enter into obligations may enter into a contract of
for the order of the other party desiring to acquire it,
sale
or a thing which would have existed and has been
the subject of sale to some other persons even if the
I. Minors, insane, or demented persons, deaf-
order had not been given.
mutes
[CLV book: Engineering Equipment confirms the
GR: Disqualified from being parties to a contract of
abandonment of the timing application of the “upon
sale
special order” test under Article 1467 of the CC; and
that just because the thing came into existence
Status of contract: VOIDABLE subject to
after, and was motivated to be produced by reason
annulment or ratification
of, a special order, does not necessarily qualify the
transaction as a contract for a piece of work. The
Note: action for annulment cannot be instituted by
crucial application of “upon special order test” under
the capacitated person
Article 1467 in Engineering Equipment was the
“nature of the object” or “the test of necessity” when
EXCEPTIONS – VALID CONTRACT
it took into consideration the nature of execution of
1. For insane or demented persons, those
each order.]
contracts entered into during LUCID
interval are VALID
Gonzalo Puyat & Sons Inc. v. Arco Amusement
Company (G.R. No. 47538)
2. NECESSARIES (Art. 1489) – Where
The contract between the parties was one of
necessaries are sold and delivered to a
purchase and sale. In the first place, the contract is
minor or other person without capacity to
the law between the parties and should include all
act, he must pay a reasonable price
things they are supposed to have been agreed upon.
therefore, and the resulting contract of sale
What does not appear on the fact of the contract
is VALID
should be regarded merely as “dealer’s talk” or
 Requisites:
“trader’s talk” which cannot bind either party.
a. Perfection of the
contract of sale
In agency, the agent is exempted from all liability in
b. Delivery of the subject
the discharge of his commission provided he acts in
necessaries
accordance with the instructions received from his
principal, and the principal must indemnify the agent
II. Sales by and between spouses
for all damages which the latter may incur in
carrying out the agency without fault or imprudence
1. Contracts with third parties
on his part. It is out of ordinary for one to be the
agent of both the vendor and the purchaser.
GR: A spouse may, without the consent of
the other spouse, enter into sales
Lo v. KJS Eco-Formwork System Phil., Inc. (G.R.
transactions in the regular or normal pursuit
No. 149420)
of their profession, vocation, or trade
The undertaking really partakes in one sense of the
nature of sale, that is, the creditor, is really buying
Exception – ACP/CPG
the thing or property of the debtor, payment for
 Disposition or encumbrance of
which is to be charged against the debtor’s debt. As
ACP/CPG without authority of the
such, the vendor in good faith shall be responsible
court or consent of the other
for the existence and legality of the credit at the
spouse shall be VOID
same time of the sale but not for the solvency of the
 The transaction shall be considered
debtor, in specified circumstances. Hence, it may be
as CONTINUING OFFER on the part
well be that the assignment of credit, which is in the
of the consenting spouse and third
nature of a sale of personal property, produced the
person

Sales Reviewer
Atty. RP Santiago
 May be PERFECTED as a binding III. Specific incapacity mandated by law (Art.

contract upon: 1491 and Art. 1492)
o Acceptance by the other
spouse OR 1. Agent with respect to property of principal –
o Authorization by the court unless consent of the principal has been
o Before the offer is given
withdrawn 2. Guardian with respect to property of the
person under his guardianship
2. Sales between spouses 3. Executor and administrator, with respect to
the property of the estate under their
GR: Spouses cannot sell property to each administrations
other including sales in legal redemption, 4. Public officers and employees with respect
compromises, and renunciations (Article to property of the State, the administration
1490 and Article 1492) of which has been entrusted to them
5. Judges and other officers and employees
Status of contract: VOID connected with the administration of justice
with respect to property in litigation
EXCEPTIONS 6. Lawyers with respect to property in
1. When a separation of property was litigation
agreed upon in the marriage
settlements (Art. 1490) GR: Status of contract is INEXISTENT and VOID
2. When there has been a judicial
separation of property agreed upon Note: with the exception of agents, consent or
between them (Art. 1490) knowledge by the persons who is sought to be
protected by Art. 1491 DOES NOT validate
Who cannot assail the validity of the transaction
prohibited transaction:
1. spouses themselves – in pari delicto Note: Court approval DOES NOT validate sale
2. creditors who became such only after
the transaction – not prejudiced by Proper party to raise issue of nullity
transaction  Any person may invoke the inexistence of the
contract whenever juridical effects found
Who can assail the validity of the thereon are asserted against him
prohibited transaction:
1. heirs of either spouses who have been Rubias v. Batiller ruling
prejudiced 1. Guardians 1. Judges
2. Prior creditors 2. Agents 2. Judicial officers
3. State – payment of taxes due on 3. Executors and 3. Fiscals and
transactions administrators lawyers
Transactions may be
Rationale for prohibition “ratified” by means of a
1. To prevent a spouse defrauding his new contract, the
creditors by transferring his properties ratification or second Transactions cannot be
to the other spouse contract would be valid “ratified”
2. To avoid a situation where the from its execution and it
dominant spouse would unduly take does not retroact to the
advantage of the weaker spouse date of the first contract
3. To avoid indirect violation of the After inhibition has Even when the inhibition
prohibition against donations between ceased, the only real has ceased, there exists
spouses under Art. 133 of CC wrong that remains is a not only a private wrong
PRIVATE wrong but a PUBLIC wrong
Note: Absolute prohibition under Art. 133
on donations between spouses should also  private parties
be made to apply to sales between spouses, cannot ratify or
IRRESPECTIVE of their property regime compromise among
themselves public
3. Applicability of incapacity to Common interests
Law Spouses
 Fraud or lesion not relevant for nullity under
 Sales between common law Art. 1491
spouses are VOID  Brokers not included within the prohibition
therefore they are not prohibited to buy
themselves

Sales Reviewer
Atty. RP Santiago
 Agents do not have individual standing to

maintain action on a sale – not parties in Calimlim-Cannullas v. Fortun (1993)
interest The law expressly prohibits the spouses from selling
property to each other subject certain exceptions.
Macariola v. Asuncion Such a prohibition applies, more so, to a couple
“Property and rights in litigation” under Article living as husband and wife without benefit of
1491 applies only to the sale or assignment of marriage, otherwise, “the condition of those who
property under litigation, but sale and incurred in guilt would turn out to be better than
assignment must take place “during the those in legal union.”
pendency of the litigation involving the
property.” Rubias v. Batiller (1973)
The permanent disqualification of public and judicial
Rubias v. Batiller officers and lawyers grounded on public policy differs
“The nullity of such prohibited contract is from the first three cases of guardians, agents and
definite and permanent and cannot be cured by administrators (Article 1491, Civil Code), as to
ratification. The public interest and public policy whose transactions it had been opined that they may
remain paramount and do not permit of be "ratified" by means of and in "the form of a new
compromise or ratification” contract, in which cases its validity shall be
determined only by the circumstances at the time
Contingent Fee Arrangements the execution of such new contract. The causes of
 Director of Lands v. Ababa: “A nullity which have ceased to exist cannot impair the
contract for a contingent fee is not covered validity of the new contract. Thus, the object which
by Article 1491 because the transfer or was illegal at the time of the first contract, may have
assignment of the property in litigation already become lawful at the time of the ratification
takes effect only after the finality of a or second contract; or the service which was
favorable judgment” impossible may have become possible; or the
 However, a contingent fee intention which could not be ascertained may have
arrangement, although effective and been clarified by the parties. The ratification or
demandable only after litigation, may in fact second contract would then be valid from its
be negotiated and bargained for between execution; however, it does not retroact to the date
the lawyer and the client before or during of the first contract. But in the disqualification of
the pendency of litigation. public and judicial officers, even when the private
 A contingent fee arrangement parties seek to ratify the private wrong, such cannot
actually puts two negotiators toe-to-toe who resurrect and validate a relationship, which continues
are both handicapped to be tainted with a public wrong.
 Public policy for pauper litigants
 Subject to court’s supervision
Rodriguez v. Mactal (1934)
The proofs presented however do not substantiate
Case Doctrines the claim of the petitioners. In order to bring the
sale in this case within the part of Article 1459,
Medina v. CIR (1961) quoted above, it is essential that the proof submitted
The sale made by the petitioner to the wife is void establish some agreement between Silverio Choco
because according to Art. 1490 of the Civil Code, “ and Trinidad Mactal to the effect that Choco would
The husband and wife cannot sell property to each buy the property for the benefit of Mactal. The
other, except: evidence brought before this court do not establish
1. When a separation of property was agreed such agreement. Thus the sale is valid.
upon in the marriage settlements; or
2. When there has been a judicial separation Philippine Trust Co. v. Roldan (1956)
of property under Art. 191.” Guardianship is a trust of the highest order, the
Contracts made in violation of Art. 1490 are null and trustee cannot be allowed any inducement to neglect
void. his ward's interest. Socorro took by purchase her
ward's parcels through Ramos, and thus, Article
[CLV book: By allowing under Article 1490 spouses 1459 of the Civil Code applies. Though Socorro may
governed by complete separation of property regime have acted without malice and that there may have
to sell to one another, therefore, the law would allow been no previous agreement between her and
the circumvention of the prohibition against Ramos regarding the sale, sound principles of equity
donations between spouses governed by the and justice call for the annulment of the transaction,
complete separation of property regime. If Art. 1490 even if no actual collusion is proved between such
were meant to be a stop-gap measure to Article 133, guardian and the intermediate purchaser.
why would it leave sales between spouses governed
by the complete separation of property outside its [CLV: In Phil. Trust Co, the Court abandoned such
pale? They key, it seems to the writer, to the doctrine (in Rodriguez v. Mactal) and held that even
exceptions provided for the restrictions under Article without such proof, the sale can be rescinded… This
1490 lies in the psychology of the situation] writer believes that any matter relating to advantage

Sales Reviewer
Atty. RP Santiago
or benefit if wholly irrelevant under Article 1491 necessary to satisfy his lawful fees and
which by its clear language imposes an absolute disbursements.
disqualification]
Naval v. Enriquez (1904) CHAPTER 3

Executors, even in those cases in which they SUBJECT MATTER
administer the property pertaining to the estate, do
not administer the hereditary rights of any heir. This
Articles 1459 – 1465
right is vested entirely in the heirs, who retain it or
transmit it in whole or in part, as they may deem
I. Requisites of a valid subject matter
convenient, to some other person absolutely
independent of the executor, whose authority,
1. It must be a possible subject matter
whatever powers the testator may have desired to
a. existing
confer upon him, do not and cannot under any
b. having potential existence
circumstances in the slightest degree limit the power
c. contingent
of the heirs to dispose of the said right at will.
d. subject to resolutory condition
[CLV book: Hereditary rights are not included in the
2. It must be licit
coverage, since these pertain immediately to the
3. It must be determinate or at least
heirs upon the death of the decedent and do not
determinable
form part of the estate. However, such hereditary
rights derive their value only from the assets that
GR: Lack of any requisites results in a NON-
constitute the estate, which is within the fiduciary
EXISTENT SALE or “No contract of sale” or VOID
control of the administrator or executor.]
Art. 1411 Art. 1412
Macariola v. Asuncion (1982)
 Illegal  Unlawful or
While it is true that respondent Judge did not violate
cause or forbidden
paragraph 5, Article 1491 of the New Civil Code in
object cause
acquiring by purchase a portion of Lot 1184-E which
Elements  Act  Act does NOT
was in litigation in his court, it was, however,
constitutes constitute
improper for him to have acquired the same. Even if
criminal criminal
respondent honestly believed that Lot 1184-E was no
offense offense
longer in litigation in his court and that he was
purchasing it from a third person and not from the In pari delicto, no 1. Neither may
parties to the litigation, he should nonetheless have cause of action recover what
refrained from buying it for himself and transferring Both against each he has given
it to a corporation in which he and his wife were parties other 2. Neither may
financially involved, to avoid possible suspicion that at fault demand the
his acquisition was related in one way or another to performance
his official actuations in civil case 3010. of the other’s
undertaking
Director of Lands v. Ababa (1979) Innocent party: Guilty party:
Canon 13, however, allows for a reasonable 1. may claim 1. Cannot
contingent fee but should always be subject to the what he has recover what
supervision of a court. Only if it is shown that the given he has given
contract for a contingent fee was obtained by any 2. shall not be 2. Cannot ask for
undue influence or fraud of the attorney over his bound to fulfillment of
client will the court protect the aggrieved party. One comply with what has been
party at his promise promised him
[CLV book: But is not such a safeguard also present fault
with respect to the prohibited contracts entered into Innocent party:
by guardians, administrators or executors, who are 1. May demand
also court officers, and yet jurisprudence does not the return of
allow exception to their contracts?] what he has
given
Fabillo v. IAC (1991) 2. No obligation
A contract between a lawyer and his client stipulating to comply with
a contingent fee is not covered by said prohibition his promise
under Article 1491 (5) of the Civil Code because the
payment of said fee is not made during the pendency
of the litigation but only after judgment has been Note: Even if the contract is void, an innocent party
rendered in the case handled by the lawyer. In fact, may still recover under the principle of “unjust
under the 1988 Code of Professional Responsibility, a enrichment”
lawyer may have a lien over funds and property of
his client and may apply so much thereof as may be

Sales Reviewer
Atty. RP Santiago
A. First requisite: subject matter must be  Even when the specific quantity of the
“possible thing” goods have not been agreed upon,
 Must consider “possible thing” NOT in terms nevertheless the determination of such
of physical existence or non-existence but quantity shall be based upon a formula
whether the subject matter is of a type and agreed upon at perfection which may be
nature, taking into consideration the state effected to determine the finally quantity to
of technology and science at the time the consummation without need of anew or
contract of sale is perfected, that exists or further agreement between the parties
could be made to exist to allow the seller
reasonable certainty of being able to comply Note: Article 1246 covers only “quality of generic
with his obligations under the contract subject matter, so that when it is the “kind” and
 “possible things” vs. “impossible things” “quantity” that cannot be determined without need
of a new agreement of the parties, the contract is
Emptio Rei Speratae Emptio Spei VOID.”
Contract covering Contract involves a
future things present object Sale of undivided interest (Art. 1463)
Subject matter is Sale of mere hope or  The result is a co-ownership over the
determinate or specific expectancy subject matter
Limitation: Limitation:
Sale of undivided share in mass (Art. 1463)
Contract of sale Sale of vain hope or
 Gaite v. Fonacier: Subject matter of sale is
subject to a expectancy is VOID
a specific mass – determinate object is the
suspensive condition
mass and not the actual number of units
that the subject
matter will come to
Note: seller must be owner (right to transfer
existence
ownership) at the time of the delivery of the object
of the contract (not necessary be the owner at the
B. Subject matter must be licit
time of perfection of sale)
 A thing is LICIT when it is not outside the
commerce of man
 Art. 1505 – pertains to the consummation
 All rights which are not intransmissible
of the sale and does not affect the validity
 Sale of future inheritance is VOID
of the contract itself
 Sale of future hereditary rights vs. waiver
of acquired hereditary rights
GR: Seller need not be owner at the time of
perfection of contract of sale
C. Subject matter must be determinate or at
EX: judicial sale (foreclosure sale or forced sale)
least determinable
Note: In Art. 1434, transfer of ownership ipso jure –
Determinate
valid contract and previous physical delivery of
A thing is determinate or specific when it is
subject matter must have been done
particularly designated or physically segregated from
all others of the same class
II. Legality of Sale
Determinable (2 requisites)
1. Subject matter
1. If at the time the contract is entered into,
the thing is capable of being made
Special laws that declare sale as void where
determinate
subject matters are:
2. Without the necessity of a new or further
 Prohibited
agreement between the parties
 Narcotics
 Wild birds or mammals
Note: generic things must be “determinable” at the
 Rare wild plants
perfection of the contract of sale
 Poisonous plans or fruits
 Dynamited fish
Note: as long as the true intentions of the parties
 Gunpowder and explosives
are evident, the mistake will not vitiate the consent
 Firearms and ammunitions
of the parties or affect the validity and binding effect
 Sale of realty by non-Christians
of the contract between them
 Sale of friar land without consent of
Secretary of Agriculture
Quantity of subject matter
 The determination of the identity or the
2. Sale completely simulated
nature and quality of the subject matter are
essential for the purpose of perfection of the
Requisites
contract of sale
1. an outward declaration of will different
 Logically, the quantity of goods as subject
from the will of the parties
matter would be essential in the meeting of
the minds

Sales Reviewer
Atty. RP Santiago
2. the false appearance must have been

intended by mutual agreement [CLV book: Atilano emphasizes the point that the
3. the purpose is to deceive third persons true “contract of sale” is intangible or properly a
legal concept. The deed of sale is merely an evidence
 parties did not intend to be legally of the contract. The defect in the final deed would
bound not invalidate the contract where all the essential
 void, produces no legal effect, and elements for its validity are present and can be
not subject of ratification proven]
3. When motive nullifies sale Yu Tek & Co. vs. Gonzales (1915)
The argument of respondent is faulty in assuming
Cause Motive that there was a perfected sale. This court has
Particular reason for the consistently held that there is a perfected sale with
contracting party which regard to the “thing” whenever the article of sale has
does not affect the other been physically segregated from all other articles. It
party is clear that the defendant could only say that it was
GR: party’s motive for “sugar.” He could only use this generic name for the
Essential reason for the entering into a contract thing sold. There was no “appropriation” of any
contract does not affect the particular lot of sugar.” The contract in the case at
contract bar was merely an executory agreement. A promise
of sale and not a sale.
EX: when motive
predetermines the cause, [CLV book: A reading of Yu Tek shows that the SC
the motive may be did not treat the subject contract as a perfected sale
regarded as the cause but rather as a promise to sell precisely because the
object thereof has not been particularly designated
Case Doctrines or physically segregated, and therefore generic.
Under the new CC, it is still a contract of sale
Pichel v. Alonzo, G.R. No. 36902 because now, even generic things may be the object
Under Article 1461 of the New Civil Code, things of sale, provided they have the quantity of being
having a potential existence may be the object of the determinable at the perfection of the contract of
contract of sale. Pending crops which have potential sale]
existence may be the subject matter of sale.
National Grains Authority v. IAC (1989)
Noel v. CA, G.R. No. 60636 The fact that the exact number of cavans of palay to
In a contract of sale, it is essential that he seller is be delivered has not been determined does not
the owner of the property he is selling. The principal affect the perfection of the contract. Article 1349 of
obligation of a seller is “to transfer the ownership of” the New Civil Code provides “the fact that the
the property sold. quantity is not determinate shall not be an obstacle
to the existence of the contract, provided it is
Melliza v. City of Iloil0 (1968) possible to determine the same, without the need of
The requirement of the law that a sale must have for anew contract between the parties.” In this case,
its object a determinate thing, is fulfilled as long as, there was no need for NFA and Soriano to enter into
at the time the contract is entered into, the object of a new contract to determine the exact number of
the sale is capable of being made determinate cavans of palay to be sold. Soriano can deliver so
without the necessity of a new or further agreement much of his produce as long as it does not exceed
between the parties. The specific mention of some of 2640 cavans.
the lots plus the statement that the lots object of the
sale are the ones needed for the city hall site, [CLV book: the controlling doctrine in National Grains
avenues, and parks, according to the Arellano plan, Authority is that, specific quantity of the subject
sufficiently provides a basis as of the time of the matter is not important when it is still possible to
execution of the contract for rendering determinate determine the quantity “without the need of a new
said lots without the need of a new and further contract between the parties,” and therefore
agreement of the parties. complies with the requisite of being determinable]
Atilano v. Atilano (1969) Johannes Schuback & Sons Philipppine Trading

When one sells or buys real property one sells or Corp. v. CA (1993)
buys the property as he sees it, in its actual setting While we agree with the trial court’s conclusion that
and by its physical metes and bounds, and not by indeed a perfection of the contract was reached
the mere lot number assigned to it in the certificate between the parties, we differ as to the exact date
of title. The mistake did not vitiate the consent of the when it occurred, for the perfection took place not on
parties, or affect the validity and binding effect of the December 29, 1981, but rather on December 24,
contract between them. Reformation of the 1981. Although the quantity to be ordered was made
instrument is not necessary – all they should do is to determinate only on December 29, 1981, quantity is
execute mutual deeds of conveyance. immaterial in the perfection of a sales contract. What

Sales Reviewer
Atty. RP Santiago
is of importance is the meeting of the minds as to

the object and cause, which from the facts disclosed, Uy v. CA (1999)
show that as of December 24, 1981, these essential In other words, the quality of the land was an
elements had already occurred. implied condition for the NHA to enter into the
contract. On the part of the NHA, therefore, the
[from CLV book: However, nothing in the facts motive was the cause for its being a party to the
indicated that as of 24 December 1981, the quantity sale. NHA was justified in cancelling the contract.
of the objects ordered could be determined outside The realization of the mistake as regards the quality
of a subsequent agreement by the parties. To that of the land resulted in the negation of the
extent, Johannes Schuback is defected. The ruling motive/cause thus rendering the contract inexistent.
relied upon National Grains Authority and yet, in the
latter case, at the time of perfection of the contract,
there was in fact a maximum quantity agreed upon] CHAPTER 4
PRICE
Mananzala v. CA (1998)
The question whether the sale was void because it
(Articles 1469 – 1474)
was made within the one year period of prohibition
to petitioner as awardee was never briefed or in any
I. Price
way argued below. For all intents and purposes,
Signifies the sum stipulated as the equivalent of the
therefore, petitioner waived this ground and cannot
thing sold and also every incident taken into
now urge it as ground for reversing the decision of
consideration for fixing of the price put to the debit
the Court of Appeals.
of the buyer and agreed to by him
Londres v. CA (2002)
 one form of consideration
It is unthinkable for Filomena to have allowed
 deal consideration for a contract of sale
respondents to enjoy ownership of Lots 1320 and
1333 if she never really intended to sell the two lots
Price: Requisites
to private respondents or if she had Lot 2034 in mind
1. It must be real
when she signed the Absolute Sale. (same case as
2. It must be in money or its equivalent
Atilano)
3. It must be certain or ascertainable at the
time of the perfection of the contract
Nool v. Court of Appeals (1997)
It is clear that the sellers can no longer deliver the
A. Price must be real
object of the sale to the buyers, as the buyers
themselves have already acquired title and delivery
 Since a contract of sale is onerous and
thereof from the rightful owner, the DBP. Thus, such
commutative, it is essential that
contract may be deemed inoperative, and may thus
consideration agreed upon – the price –
fall by analogy under item No. 5 of Article 1409 of
must be real
the Civil Code: “those which contemplate an
impossible service.” Article 1459 provides that the
ownership thereof [object of the sale] at the time it
is delivered.” Here, delivery of ownership is no
longer possible. As petitioners “sold” nothing, it
follows that they can also “repurchase” nothing.
[CLV book: The problem with the doctrine proposed

by Nool is that in order to hold the contract void by
the fact that the seller is not the owner of the
subject matter thereof, it equates the primary
obligation to transfer ownership and deliver
possession as “service” therefore constitutes them as
personal obligations “to do.” That position is not
correct since the obligations of the seller in a
contract of sale are real obligations “to give” and
which would make them enforceable by specific
performance]
Quijada v. CA (1998)
The donor may have an inchoate interest in the
donated property during the time that ownership of
the land has not reverted to her. Such inchoate
interest may be the subject of contracts including a
contract of sale.

Sales Reviewer
Atty. RP Santiago

Sales Reviewer
Atty. RP Santiago
When price real When no price When price simulated When price false
Price is real when at the There is no Neither party had any intention The price is “false” when there is a
perfection of the contract cause or that the amount will be paid real price not declared, and what is
of sale, there is every consideration stated or declared in the sale is not
intention on the part of When price is completely he one intended to be paid
the buyer to pay the price, simulated – in pari delicto shall
and every expectation on apply – however such principle There is another price upon which
the part of the seller to applies to cases where the the minds of the parties have met
receive such price nullity arises from the illegality
of the consideration or cause Manresa: one that has in effect a
of the contract real consideration but the same is
not the one stated in the document
In pari delicto does NOT apply
to inexistent and void contracts
where the price is merely
simulated
The sale is VOID (but the act The sale is VALID but the deed is
may be shown to have been subject to reformation
donation or some other act or
contract) (Art. 1471) EX: However, the parties may be
VALID VOID held bound by the false price
indicated in the instrument especially
when the interest of the government
or third parties would be adversely
affected by the reformation of
instrument
Note: Article 1354 provides: Although the cause is Effect of non-payment of price
not stated in the contract, it is presumed that it  The failure to pay the price does not cancel
exists and is lawful, unless the debtor proves the a sale for lack of consideration, for there is
contrary. still consideration.
 The failure to pay a real price goes not into
Ong v. Ong: valuable consideration perfection but to consummation.
It is possible for parties to a contract of sale to agree  Non-payment of price is a cause either for
on an adequate consideration, and though they will specific performance or rescission
state a false or nominal consideration in their deed,  Non-payment of price is a resolutory
it would NOT affect the validity of the contract of condition which extinguishes the transaction
sale, PROVIDED that valuable consideration was in
fact agreed upon. Note: Accomodation does not make the sale void for
lack of price (Mate v. CA)
Note: Philippine jurisprudence has not accepted the
Anglo-Saxon concept that “any” consideration is Simulation of price affects delivery of subject
enough to support a contract. What prevails in this matter
jurisdiction is that for consideration to support an Delivery of the subject matter made pursuant to a
onerous contract, such as a contract of sale, it would contract of sale that is void for lack of consideration
have to be “valuable consideration” under the Roman does not transfer ownership to the buyer -> not title
Law concept. over the subject matter of the sale can be conveyed
Bagnas v. CA
Even though a consideration is real in the sense that B. Price must be n money or its equivalent
it was agreed upon and there is every intention of
the parties to pay and receive such price, it would Bagnas v. CA: requires that “equivalent” be
still be considered fictitious and render the sale VOID something representative of money, e.g., check or
if it is a mere nominal price. draft, citing Manresa, to the effect that services are
not equivalent of money, and that a contract is not a
Note: The essence of Bagnas was that evidence was true sale where the price consists of services or
adduced to indicate that there was no real intention prestations
to pay any valuable consideration
Art. 1468: shows that consideration for a valid
Note: the consideration is generally agreed upon as contract of sale can be the price and other additional
a whole even if it consists of several parts, and even consideration
if it is contained in one or more instruments.

Sales Reviewer
Atty. RP Santiago
Republic v. Phil. Resources Development: “a price

certain in money or its equivalent” means payment Note: If the designated party fixes the price in BAD
of the price need not be in money FAITH or by MISTAKE, those are the ONLY two
instances where the parties to the contract can seek
Note: Republic is not at all authority to say that court remedy to fix the price
under Article 1458 of the Civil Code, as it defines a
contract of sale, the term “equivalent” of price can Note: When the designated third party is either
cover other than money or other media exchange, unable or unwilling to fix the price, the parties do not
since Republic covers not the perfection stage of a have a cause of action to seek from the court the
contract of sale but rather the consummation stage fixing of the price
where the price agreed upon can be paid under the
mutual arrangements agreed upon by the parties to
the contract of sale, even by dation in payment Fixing of price by third Fixing of subject
party matter by third party
Note: The requisite that price must be in money or Provided by law, NOT provided by law,
its equivalent has not been as determinative of the designated by third party cannot be left to the will
validity of a contract of sale. This shows the essence to fix the price allowed of a third party who may
of a true contract of sale. Whereas price, although an choose a subject matter
essential element of a valid contract, being beyond the capacity of
essentially a generic obligation may be subject to the seller to comply with
variations his obligations
Obligation to pay the Test of fact
price is essentially a (determinate) and test of
3. Price must be certain or ascertainable at fungible obligation: any capacity (determinable)
perfection money can be used to The obligation to deliver
pay the price the subject matter and
When price certain the title thereto can only
A price is certain when it has been expressed and be complied with to the
agreed in terms of specific pesos and/or centavos point when the thing is
either physically
When price ascertainable segregated or
In order that the price may be considered particularly designated:
ascertainable, it shall be sufficient that it be so with Price is essentially Not a generic obligation
reference to another thing certain, or that the generic, and generally but rather a “species”
determination thereof be left to the judgment of a cannot be extinguished obligation
specified person or persons (Art. 1469) by fortuitous event
Note: Fixing of a price cannot be validly left to the Note: The price of a thing is certain at the point of
discretion of one of the contracting parties (Art. perfection by reference to another thing certain (Art.
1473) 1472)
Price fixed by third party Contract of sale inefficacious

 The designation of a third party to fix the  Where the price cannot be determined the
price is VALID contract of sale is inefficacious (Art. 1474)
 Even before the fixing of the price by the  NOT VOID, because of the clear
designation party, a contract of sale is acknowledgment that the existence of the
deemed to be perfected and existing albeit formula allowed by law at the point of
CONDITIONAL perfection have actually rendered a contract
 Even before the designated third party had valid albeit conditional, which cannot be
fixed a price there was already an existing rendered void by what happens after
contract of sale, as to prevent one party perfection
from unilaterally withdrawing from the
contract When there is sale even when no price agreed
 Such contract however was subject to a upon (Art. 1474)
suspensive condition, i.e., that the price will  Courts have authority to fix a reasonable
be fixed by the third party designated by price for the subject mater appropriated by
the parties the buyer
 When the designated third party does not  ONLY EXCEPTION when there would still be
fix the price, the condition imposed on the a valid contract of sale even when there has
contract of sale has not happened, and been no meeting of minds as to the price
therefore it extinguished the underlying  “Inefficacious” – inability to produce the
contract, and consequently there is no effect wanted; inability to get things done
longer a contract upon which the courts  The use of the term inefficacious was not
have any jurisdiction to fix the price - > meant to exclude void sales, but more to be
contract of sale inefficacious

Sales Reviewer
Atty. RP Santiago
able to include valid conditional contracts of Inadequacy of price

sale (which have become inefficacious)
 Art. 1474 is based on the principle of unjust Atty. RP Santiago: test - “shocking to the senses”
enrichment and estoppel
 Art. 1474 applies even when there is a “no Art. 1355 Art. 1470
contract situation” because of no meeting of Lesion or inadequacy of Gross inadequacy of
minds as to price, although there was cause shall not invalidate price does not affect a
meeting of the minds as to subject matter, a contract, unless there contract of sale except it
and therefore may also apply to void sale has been fraud, mistake, may indicate a defect in
contract situation where the defect is the or undue influence the consent, or that the
price parties really intended a
donation or some other
Art. 1474: Requisites contract
1. There was a meeting of minds of the parties
of sale and purchase as to the subject
matter Note: Although a sale is an onerous and
2. There was an agreement that price would commutative contract, there is no requirement that
be paid which fails to meet the criteria of the price given is exactly the value of the subject
being certain or ascertainable matter delivered
3. There was delivery by the seller and
appropriation by the buyer of the subject Note: inadequacy of price may be a ground for
mater of the sale SETTING ASIDE an execution sale, but it is NOT
Note: In spite of lack of agreement as to price or sufficient ground for the CANCELLATION of a
defect in the agreement as to price, there would voluntary contract of sale
nevertheless be a VALID contract of sale upon which
an action for specific performance would prosper for 1. Judicial Sale
the recovery of price when these elements are  Gross inadequacy of price may avoid judicial
present sale of real property
 Contract of sale is not the result of
Manner of payment of price must be agreed negotiations and bargaining
upon  For a judicial sale to be set aside on the
 Essential ingredient before a valid and ground of inadequacy of price, the
binding contract of sale can be said to exist, inadequacy must such as to be shocking to
because it is part of the prestation of the the conscience of man, and that there must
contract be a showing that in the event of a resale, a
 “terms of payment” would have the same better price can be obtained
requisites that the law imposes on price to  EXCEPT when there is a right of redemption
support a valid contract of sale: certain ort -> judicial sale will not be set aside
at lease ascertainable
 Should be qualified by the proper 2. Rescissible Contracts of Sale
understanding that terms of payment do not  Inadequacy of price is a ground for
always have to be expressly agreed upon, rescission of conventional sale in case of
when the law supplies by default such term rescissible contracts (Art. 1381)
 Presumption: Art. 1179 -> price is deemed a. Thos entered into by guardians
to be by operation of law immediately whenever the ward whom they
demandable upon the perfection of the represent suffer lesion by more
contract than ¼ of the value of the object of
sale
Receipts and other documents embodying price b. Those agreed upon in
 It does not matter if the written evidence representation of absentees, if the
issued pursuant to the contract of sale latter should suffer more than ¼ of
(agreement or a receipt) does not contain the value of the object of sale
all of the requisites. A valid contract of sale
should exist and the only issue would be its 3. Sales with right to repurchase
enforceability under the Statute of Frauds.  Gross inadequacy of price raises the
 Commercial forms are not always fully presumption of equitable mortgage
accomplished to contain all the necessary
information describing the whole business CASE DOCTRINES
transaction
 Written memorials of details of Rongavilla v. CA (1998)
consummation of contracts By the mere preponderance of evidence,
respondents were able to establish that there was
fraud exercised by the petitioners in securing the
signature of the deed. There was no consideration
whatsoever for the alleged sale, therefore the said

Sales Reviewer
Atty. RP Santiago
deed is simulated, fictitious and void. Since there Mate v. CA (1998)

was no consent, the deed of sale is void. Once the The fact that the checks were dishonored does not
disputed deed is found to be inexistent and void, the mean lack of consideration. Petitioner’s cause of
statute of limitations cannot apply. action would be to file a criminal case against Josie
Rey under BP 22. Furthermore the court said that
Yu Bun Guan v. Ong (2001) Mate should have been more careful since he already
In the present case, it is clear from the factual knew of the predicament Josie was in with regard to
findings of both lower courts that the Deed of Sale the prior bounced checks, he knew the risk that was
was completely simulated and, hence, void and involved in dealing with Josie and her checks. It was
without effect. No portion of the P200,000 his own greed of gaining a huge profit of p 420,000
consideration stated in the Deed was ever paid. And, that impelled him to enter such a contract.
from the facts of the case, it is clear that neither
party had any intention whatsoever to pay that
amount. Instead, the Deed of Sale was executed CHAPTER 5
merely to facilitate the transfer of the property to FORMATION OF CONTRACT OF SALE
petitioner pursuant to an agreement between the
parties to enable him to construct a commercial I. Stages in life of Sale
building and to sell the Juno property to their
children. Being merely a subterfuge, that agreement a. Negotiation or policitacion stage
cannot be taken as the consideration for the sale.  Period of negotiation and bargaining, ending
at the moment of agreement of the parties
Ong v. Ong (1985)  Covers the period from the time the
There is a legal presumption of sufficient cause or prospective parties indicate interest in the
consideration supporting a contract even if such contract to the time the contract is
cause is not stated therein (Art. 1354 CC), and the concluded (perfected)
execution of a deed purporting to convey ownership
is itself prima facie evidence of the existence of a b. Perfection or birth of contract
valuable consideration  The moment when the parties come to
agree on the terms of the contract
Bagnas v. CA (1989)  Takes place upon the concurrence of the
Respondents did not get to prove that there was no essential elements thereof
fraud in the alleged sale. They had the burden of
proof to show that they conveyances rested on valid c. Consummation or death of the contract
consideration, but this burden was not discharged.  Process of fulfillment or performance of the
terms agreed upon in the contract
Republic v. Phil. Resources Dev. Corporation  Begins when the parties perform their
(1958) respective undertakings under the contract
However, the same article (Art. 1459) provides that culminating in the extinguishments thereof
the purchaser may “pay a price certain in money or
its equivalent,” which means the payment of the A. Preparatory Stage
price need not be in money.  Deals with legal matters arising prior to the
perfection of the contract of sale
Navarra v. Planters Development Bank (2007)  Dealing with the concepts of offers,
Purchase price must first be established since the acceptances, rights of first refusal, and
agreement on the manner of payment goes into the option contracts
price such that a disagreement on the manner of  The rule is that policitacion or unaccepted
payment is tantamount to a failure to agree on the unilateral promise to buy or to sell, prior to
price. Though the Navarra letter expressed that the acceptance, does not give rise to any
P300,000 be considered as downpayment, the letter obligation or right.
failed to specify the definite amount of the purchase  Negotiation is formally initiated by an offer
price for the repurchase as there was also no clear  An imperfect promise (policitacion) is
indication of an installment payment agreed upon by merely an offer
the petitioner and the bank. Before a valid and  Public advertisements are ordinarily
binding contract of sale can exist, the manner of construed as mere invitations to make
payment of the purchase price must first be offers only or proposals – not considered as
established. binding commitments
 “Freedom to contract”
Mapalo v. Mapalo (1966)
A deed which states the consideration that in fact did 1. Offers
not exist is a contract without a consideration and  An offer prior to its acceptance is
therefore void ab initio. The inexistence of a contract subject to the complete will of the
is permanent and incurable and cannot be subject of offeror – not even necessary that
prescription. the offeree learns of the
withdrawal

Sales Reviewer
Atty. RP Santiago
 Upon the receipt of the conditional Bilateral contract – Unilateral contract –

offer, the offeree has only the reciprocal obligations optioner is only obliged
choice to accept or reject the offer under option contract
in its entirety Offer and acceptance are Unaccepted or
 Counter-offer is always considered concurrent since the unexercised contractual
as a REJECTION of the original minds of the contracting offer
offer parties meet in terms of
 An offer when it has not been the agreement
accepted absolutely would thereby Consideration: cash or Consideration: may be
be extinguished and cannot be that which is equivalent anything or undertaking
further accepted to cash of value
 Conditional acceptance will
constitute a counter-offer which Separate “Consideration”
must be accepted ABSOLUTELY in  Consideration of the deed of option is the
order to give rise to a valid “why of the contracts”: the essential reason
contract of sale which moves the contracting parties to
 An offer becomes ineffective upon enter into the contract
the death, civil interdiction,
insanity, or insolvency of either When option is without separate consideration
party BEFORE the acceptance is  Without a separate consideration distinct
conveyed and received by the from the purchase price, an option contract
offeror would be VOID as a contract, but would still
continue as a VALID offer (Sanchez v.
2. OPTION CONTRACTS Rigos) – can only apply if the option has
been accepted and such acceptance is
Option Contract communicated to the offeror
 Privilege existing in one person, for  The burden of proof to show that the option
which he had paid a consideration, contract was supported by a separate
and which gives him the right to consideration is with the party seeking to
buy certain merchandise or show it
specified property from another
person if he chooses, within the Period of exercise of option
agreed period at a certain price  When option contact does not contain a
 Continuing offer or contract period when the option can be exercised, it
 Unaccepted offer cannot be presumed that the exercise
 Secures the privilege to buy thereof can be made indefinitely
 NOT a sale of property but a sale  Art. 1144 (1) – Actions upon written
of right to purchase contract must be brought within 10 years
 It is separate and distinct from that
which the parties may enter into Proper exercise of option
upon the consummation of the  Notice of the exercise of option need not be
option coupled with actual payment of the price, so
 A PREPARATORY CONTRACT long as this is delivered to the owner of the
property upon performance of his part of
Contract of Sale Option Contract the agreement
Onerous, but must have  Carceller: notice within the option period of
a separate consideration clear intention to purchase the property
from the purchase price pursuant to the option, with request for
to be valid. leeway within which to be able to raise the
Onerous funds to close the deal is a valid or at least
An option without a substantial compliance of the option
separate consideration is  The acceptance or exercise of the option
VOID must still be made within the option period
Consensual: meeting of Consensual: meeting of to give rise to a valid and binding contract
minds as to subject minds as to subject of sale
matter and price matter and price
Effects of exercise of option
EVEN when the separate  When an option is properly exercised, then
consideration for the there is already a sale contract existing, and
option has not been paid the laws applicable to sales shall then apply
NOTE: Art. 1324 Option not deemed part of renewal of lease

Covered by Statute of NOT covered by Statute  An option to purchase attached to a
Frauds of Frauds – can be contract of lease when not exercised within
proved by oral evidence the original period is extinguished and

Sales Reviewer
Atty. RP Santiago
cannot be deemed to have been included in  Right of first refusal must be clearly
the implied renewal of lease embodied in a written contract
 Limited Application of Equitorial Realty
Summary rules when period is granted to ruling: Applies only to rights of first
offeree (Ang Yu Asuncion v. CA) refusal attached to a valid principal
1. If the period itself is not founded upon or contract, like a contract of lease
supported by a separate consideration, the  Prevailing doctrine is that a contract of
offeror is still free and has the right to sale entered into in violation of a right
withdraw the offer before its acceptance, or, of first refusal of another person is
if an acceptance has been made, before the RESCISSIBLE
offeror’s coming to know of such fact, by  Basis of the right of first refusal must
communicating that withdrawal to the be the current offer of the seller to sell
offeree (in accordance with Sanchez or the offer to purchase of a
doctrine) prospective buyer.
2. The right to withdraw must not be exercised  Only after the lessee grantee fails to
arbitrarily – could give rise to a claim of exercise its right under the same terms
damages under Article 19 of NCC and within the period contemplated can
3. If the period has a separate consideration, a the owner validly offer to sell the
contract of “option” is deemed perfected, property to a third person, again under
and it would be a breach of that contract to the same terms as offered to the
withdraw the offer during the agreed period granted
4. The option is an independent contract by
itself, and it is to be distinguished from the Note: Sublessee may not take advantage of
projected main agreement (subject matter right of first refusal of sublessor
of option). If the optioner withdraws the
offer before is acceptance (exercise of Proper doctrine on option contracts vis a vis
option), by the optionee-offeree, the latter right of first refusal rulings
may not sue for specific performance on the 1. In case an option is supported by a separate
proposed contract (object of the option) consideration, the optionee shall have the
since it has failed to reach its own stage of right to exercise the option or accept the
perfection. The optioner-offeror however, offer at anytime during the option period
renders himself liable for damages for and the same would give rise to a valid and
breach of the option binding contract of sale
5. Care should be taken of the real nature of 2. If a separate consideration has been
the consideration given, for if in fact, it has received by the optioner for the grant of the
been intended to be part of the option, he CANNOT withdraw the offer
consideration for the main contract with a during the option period, and any attempt
right of withdrawal on the part of the to withdraw the offer during the option
optionee, the main contract could be period shall be VOID.
deemed perfected. A similar instance would 3. If the optioner does not only withdraw the
be an “earnest money” in contract of sale offer during the option period but also
that can evidence its perfection SELLS the property to a third party during
that period, such a situation DOES NOT
Ang Yu Asuncion affect the general rule since the acceptance
 In an option contract, the granting of a of the offer (exercise of the option) by the
consideration separate and distinct from the optionee during the option period would still
purchase price of the intended contract of give rise to a valid contract of sale over the
sale DOES NOT guarantee to the optionee subject property, BUT the rules on third
that he has the absolute right to exercise party buyer in good faith should prevail
the option 4. If third party is in BAD FAITH (knows the
 Does not provide a “commercially sound” existence of option), specific performance is
doctrine remedy
5. If third party is in GOOD FAITH and bought
the property FOR VALUE, he is protected by
3. RIGHT OF FIRST REFUSAL law and the remedy of the optionee is to
sue the optioner for DAMAGES for breach of
Right of First Refusal contract of sale, NOT breach of the option
 A promise on the part of the owner that contract
if he decides to sell the property in the
future, he would sell it to the promisee 4. MUTUAL PROMISES TO BUY AND SELL
 Cannot be deemed a perfected contract
of sale nor an option contract, because  The promise to sell a determinate thing
it merely pertains to specific property coupled with a correlative promise to buy at
without containing an agreement as to a specified price is binding as an executory
the PRICE or TERMS of payment agreement – obligatory on the parties

Sales Reviewer
Atty. RP Santiago
 Action for specific performance is available accepted directly, would give rise to a valid
and binding contract of sale.
Contract to sell For exception to apply:

 Mutual promises to buy and sell as 1. When advertisement specifies a determinate
constituting merely a personal obligation to subject matter
enter into contract of sale, and breach 2. Price
which does not authorize an action for 3. terms of payment
specific performance but recovery of
damages  Equivalent to an offer certain = it
 In a contract to sell, upon the fulfillment of constitutes an offer -> “Unless it
the suspensive condition, which is the full appears otherwise”
payment of the purchase price, ownership
will NOT automatically transfer to the buyer Note: however, if this view were accepted, it
although the property may have been would mean that the general rule would never
previously delivered to him. The prospective apply to a situation when it covers a
buyer still has to convey title to the determinate subject matter, price certain, or
prospective buyer by entering into a ascertainable, and the manner of payment,
contract of absolute sale because such a situation would always be
covered by the exception
5. PERFECTION: OFFER AND ACCEPTANCE Acceptance must be absolute

 Acceptance must be plain and
 A contract of sale is born from the moment unconditional
that there is a meeting of minds upon the  Acceptance should be unequivocal and
thing which is the object of the contract and unconditional
upon the price.  Acceptance and proposition shall be
 Until a contract of sale is perfected, it without any variation whatsoever
cannot be an independent source of  To negotiate -> no absolute acceptance
obligation, nor serve as a binding juridical of the offer made
relation.  Limketkai Sons Milling v. CA: “An
acceptance may contain a request for
Consent may be vitiated by any of the following: certain changes in the terms of the
1. mistake offer and yet be a binding acceptance.”
2. violence  Limketkai Sons Milling v. CA (MR) :
3. intimidation Reversed its early resolution, holding
4. undue influence that the acceptance of the offer was not
5. fraud unqualified and absolute. In other
words, it was not identical in all
Status of contract: VOIDABLE respects with that of the offer so as to
produce consent or meeting of the
Consent that perfects contract of sale minds.
 Art. 1475 and Art. 1319  Ureca v. CA: from the moment a party
 Offer must be CERTAIN, acceptance accepts without qualification another
ABSOLUTE party’s offer to sell within the period
 Qualified acceptance constitutes a COUNTER stipulated therein, a contract of sale is
OFFER which must in turn be absolutely perfected. And although subsequently
acceptance to give rise to a binding and the seller required a much higher price
valid contract. than the original offer, and the buyer
negotiated on the matter but no final
Note: National Grains Authority v. IAC -> a contract agreement was reached, the first sale
of sale is also perfected even when the exact remained valid and binding and is not
quantity or quality of the subject matter is not deemed novated by the fact of
known, so long as the source of the subject is certain negotiation thereafter done on the
and fixed. price.
 Villonco v. Bormaheco : illustrates how
Status of Advertisements the rule on absolute acceptance is not
 Art. 1325 really “absolute” and that certain
 Not definite offers, but mere invitations to deviations may be made in the
make an offer acceptance and the same would still
 GR: they are less than offers – merely convert the offer into a valid and
invitations to make an offer binding contract of sale -> the
 EX: “it appears otherwise” – would subsequent letter response by
constitute offers, and if certain and Bormaheco was equivalent to a an
absolute acceptance that gave rise to a

Sales Reviewer
Atty. RP Santiago
valid and binding contract of sale since was acknowledged to have been
the deviations or amendments received under the concept of the
contained in the response were not old Civil Code as a guarantee that
material at all. the buyer would not back out, and
 Acceptance may be express or implied that if they should do so they
would forfeit the amount paid.
Acceptance by letter or telegram Spouses Doromal took into
 Does not bind the offeror except from consideration that even with the
the time it came to his knowledge (Art. payment of the earnest money,
1319) that would not by itself give rise to
 The offeror may still withdraw his offer a valid and binding contract of
anytime before he has knowledge of sale, considering that it is not clear
the acceptance that there was already a definite
agreement as to the price.
Suspensive condition  Although earnest money under Art.
 Even when there is a meeting of 1482 can be taken as proof of the
minds as to the subject matter and perfection of a contract of sale, the
the price, there is deemed to be no same is not conclusive.
perfected contract of sale if the
sale is subject to a suspensive Earnest money Option money
condition Part of the purchase Money given as a distinct
 To the author, the more price consideration for an
appropriate doctrine should be that option contract
when a contract of sale is made Given only when there is Applies to a sale not yet
subject to a suspensive condition, already a sale perfected
there is already a contract upon When earnest money is When the would-be
the meeting of the minds, but given, the buyer is buyer gives option
because the condition has not bound to pay the balance money, he is not
happened, the contract itself and required to buy, but may
its underlying obligations are not even forfeit it depending
yet demandable, and in case of on the terms of the
non-happening of the condition, option
then the contract is extinguished.
 Amounts received as part of the
Sales at auction downpayment and to be credited to the
 Art. 1476 payment of the total purchase price
 Perfected when the auctioneer could not be forfeited when the buyer
announces its perfection by the fall should fail to pay the balance of the
of the hammer, or in other price, especially in the absence of a
customary manner clear and express agreement thereon.
 A right to bid may be reserved  When the seller seeks to rescind the
expressly by or on behalf of the sale, under Art. 1385 of the Civil Code,
seller. such rescission creates the obligation to
 The owner of the property sold at return the things which were the object
auction may provide the terms of the contract together with their fruits
under which the auction will and interest.
proceed and the same are binding
upon all bidders, whether they Place of perfection
knew of such conditions or not.  GR: Place of perfection of the
contract of sale is where there is a
Earnest money meeting of the offer and the
 Art. 1482 acceptance upon the thing and the
 Whenever earnest money is given cause which are to constitute the
in a contract of sale, it shall be contract
considered as part of the price, and  In case of acceptance through
as proof of the perfection of the letter or telegram, it is presumed
contract that the contract was entered into
 The concept of earnest money in the place where the offer was
given under Art. 1482 is the made.
preferred concept under the law,  Art. 1319
but nothing prevents the parties to
the contract of sale to treat earnest Expenses of execution and registration
money differently  Art. 1487
 Spouses Doromal Sr. v. CA: the  Art. 1521
money given as earnest money

Sales Reviewer
Atty. RP Santiago
Performance should not affect perfection Exceptions:

 Sale is a consensual contract 1. The power to sell a piece of land or interest
 The ability of the parties to therein must be in writing, otherwise the
perform the contract (after the fact sale thereof by the agent (even when the
of perfection) does not affect the sale itself is in writing) would be void – Art.
perfection of the contract 1874
 Non-payment only creates a right 2. Sale of large cattle must be in writing,
to demand the fulfillment of the otherwise, the sale would be void; and no
obligation or to rescind the sale of large cattle shall be valid unless the
contract sale is registered with the municipal
 The comparison to “impossible treasurer who shall issue a certificate of
service” is misplaced because the transfer
obligations created under a valid 3. The sale of land by “non-muslim hill tribe
contract of sale are real obligations cultural minorities all throughout the
“to give” and not personal Philippines” is void if not approved by the
obligations or service. National Commission on Indigenous Peoples
(NCIP)
FORM OF SALES
Note: the authority of the individual agent
1. Form not important for validity of sale must be in writing otherwise the sale is void
 Art. 1483 cannot be saved under the principle of
 GR: no form is really required for its validity estoppel and apparent authority
A. Requirement for public instrument for immovables Note: the receipt by the supposed agent of
under Art. 1358 part of the purchase price does not validate
 Provisions thereof on the necessity of public the void sale
document are for purposes of convenience,
not for validity or enforceability. 2. Statute of Frauds: when form is important
 The article merely grants a cause of action for enforceability
to the party to the contract to sue to compel
the other party to have the document A. Nature and purpose of the Statute of Frauds
covering the contract acknowledged before  Prevent fraud and perjury in the
a notary public enforcement of obligations depending for
 Articles 1357, 1406, and 1358 their evidence upon the unassisted memory
 The remedy to compel the other party to of witnesses
observe such form may be exercised
simultaneously with the action upon the B. Coverage in Sales of Statute of Frauds
contract  Article 1403 (2) – the following agreements
 Art. 1358 is merely for greater efficacy or shall be unenforceable by action, “unless
convenience and the failure to comply the same, or some note or memorandum
therewith does not affect the validity and thereof, be in writing, and subscribed by the
binding effect of the act between the parties party charged, or by his agent:
1. A sale agreement which by its
B. Function of deed of sale terms is not to be performed within
 The deed of sale operates as a formal or a year from the making thereof
symbolic delivery of the property sold and 2. An agreement for the sale of
authorizes the buyer to use the document goods, chattels, or things in action,
as proof of ownership at a price not less than P500
 Nevertheless, nowhere in the Civil Code 3. A sale of real property or of an
does it provide that execution of a deed of interest therein
sale is a conclusive presumption of delivery Note: in any of the above transactions,
of possession evidence of the agreement cannot be
 Public document has in its favor the received without the writing, or a secondary
presumption of regularity evidence of its contents
 The fact that a deed of sale was not
notarized is not a guarantee of the validity C. Exceptions to the coverage of statute in sales
of its contents contracts
 The following sales would still not be
C. When form of sale affects its validity covered and would be enforceable:
1. When there is a note or
GR: Form is not important for the validity of the memorandum thereof in writing,
contract of sale and subscribed by the party
charged or his agent

Sales Reviewer
Atty. RP Santiago
2. When there has been partial  Partial performance must amount to

consummation of the contract of estoppel against the party sought to be
sale charged -> in accordance with Art. 1405
3. When there has been a failure to
object to the presentation of H. Waiver of provisions of Statute of Frauds
evidence aliunde as to the  The party against whom such oral contract
existence of a contract without is sought to be proven fails to object during
being in writing and which is trial to the presentation of oral evidence to
covered by the Statute of Frauds prove the contract
4. When sales are effected through  Art. 1405
electronic commerce
I. Value of business forms to prove sale
D. Nature of memorandum  Business forms are commonly recognized in
 Art. 1403 ordinary commercial transactions as valid
 Various correspondences when taken between the parties and at the very least
together would constitute sufficient they serve as an acknowledgment that a
memorandum business transaction has in fact transpired.
 While the sale of land appearing in a private
deed is binding between the parties, it 3. Sales effected as electronic commerce
cannot be considered binding on third
persons, if it is not embodied in a public A. Legal recognition of electronic data message
instrument and recorded in the Registry of  Information shall not be denied validity or
Deeds enforceability solely on the ground that it is
in the form of an electronic data message
E. Partial performance  Electronic document
 Art. 1403  Electronic signature
 Although Art. 1403 does not state that the  Under Sec. 7 of the Electronic Commerce
doctrine of partial performance applicable to Act, electronic documents shall have the
sale of real property or interest therein, the legal effect, validity, or enforceability as any
doctrine of partial performance should also other document of legal writing.
apply to such contracts, especially when  Under Sec. 8 of the Act, an electronic
Art. 1405 specifically states that contracts signature on the electronic document shall
covered by the Statute of Frauds ‘are be equivalent to the signature of a person
ratified… by acceptance of benefits under on a written document if the signature is an
them.” electronic signature and proved by showing
that a prescribed procedure, not alterable
F. Effect of partial execution on third parties by the parties interested in the electronic
 It would seem that the doctrine of partial document.
execution when covering sale of real
properties cannot be applied to third
parties, who are granted legal remedies 4. Form of equitable mortgage claims
against the contract  The Statute of Frauds does not stand in the
 Art. 1358 of the Civil Code, which requires way of treating an absolute deed as a
certain contracts to be embodied in a public mortgage, when such was the intention of
instrument, is only for convenience, and the parties, although the agreement for
registration of the instrument is needed redemption or defeasance rests wholly in
only to adversely affect third parties. parole, or is proved by parole evidence.
 Formal requirements are, therefore, for the  A contract should be construed as a
purpose of binding or informing third mortgage or a loan instead of a pacto de
parties. Non-compliance with formal retro sale when its terms are ambiguous or
requirements does not adversely affect the the circumstances surrounding its execution
validity of the contract or contractual rights or its performance are incompatible or
and obligation of the parties. inconsistent with a sale.
G. Nature and coverage of partial performance 5. Form in “Sales on return or approval”

 It is not only partial payment of the  Art. 1502 – govern the sales on return or on
purchase price that is the only manner of approval would have no application unless
partial performance to take the contract out such conditions to such effect have been
of the coverage of the Statute of Frauds distinctly provided for in the contract
 Partial performance to constitute an between the parties to a sale.
exception to the Statute of Frauds must by  Parol or extrinsic testimony could not be
itself pertain to the subject matter or to the admitted for the purpose of showing that an
price of the purported sale, and must invoice or bill of sale that was complete in
involve an act or “complicity” on the party every aspect and purporting to embody
sought to be charged.

Sales Reviewer
Atty. RP Santiago
without condition or restriction constituted a  Delivery produces its legal effect only
contract of sale or return. as a consequence of a VALID contract
of sale.
CHAPTER 6 2. Types of delivery

PERFORMANCE OR CONSUMMATION
Actual delivery Constructive delivery
OBLIGATIONS OF THE SELLER Actual or physical Can take several forms,
delivery when the thing and may be any “manner
1. To preserve the subject matter of sale sold is placed in the signifying an agreement
 Art. 1163 control and possession of that the possession is
 The seller, upon perfection and even the buyer (Art. 1497) transferred from the
prior to delivery, is already obligated to vendor to the vendee”
take care of the subject matter with the (Art. 1496)
proper diligence of a good father of a
family, otherwise, the seller becomes 3. Execution of a public instrument
liable for breach of such obligation, as  Art. 1498
when the thing deteriorates or is lost  GR: the execution of a public instrument
through the seller’s fault. has the same legal effects as actual or
physical delivery, i.e., it transfers ownership
2. To deliver subject matter of the subject matter to the buyer, and
 Art. 1495 and Art. 1458 – although constitutes valid compliance by the seller of
both provisions seem to separate his obligations under the contract of sale.
“delivery” of the subject matter from  The deed of sale operates as a formal or
the “transfer of ownership,” symbolic delivery of the property sold and
nevertheless, the only means by which authorizes the buyer to use the document
the seller can transfer the ownership of as proof of ownership.
the subject matter is by the mode of
tradition or delivery, whether actual or a. Constructive delivery has same legal effect as
constructive. actual or physical delivery
 Art. 1498: mere execution of the deed
3. To deliver fruits and accessories of conveyance in a public instrument is
 Art. 1164 equivalent to the delivery of the
 Art. 1537 property. Prior physical delivery or
 In a contract of sale involving a possession is not legally required.
determinate subject matter, even prior  Transfer of ownership by symbolic
to delivery and transfer of ownership delivery under Article 1498 can still be
thereof to the buyer, the buyer already effected through the execution of the
has certain rights enforceable against deed of conveyance.
the seller.
 Accessory follows the principal. b. When execution of public instrument does
NOT produce effects of delivery
4. To warrant subject matter  First: the execution of a public
 Art. 1495 instrument does not produce the effect
of delivery when there is a stipulation
TRADITION AS A CONSEQUENCE OF A VALID in the instrument to the contrary. (Art.
SALE 1498)
1. A certain date is fixed for the
1. Essence of Tradition purchaser to take possession
 Ownership of a thing sold is a real of the property subject of the
right, which the buyer acquires only conveyance
upon delivery of the thing to him in any 2. In case of sale by installments,
of the ways specified in Articles 1497 to it is stipulated that until the
1501 of the Civil Code, or in any other last installment is made, the
manner signifying an agreement that title to the property should
the possession is transferred from the remain with the seller
vendor to the vendee. 3. When the seller reserves the
 The critical factor in all different modes right to use and enjoy the
of effecting delivery is the actual property until the gathering of
intention of the seller to deliver, and its the pending crops
acceptance by the buyer; without that 4. Where the seller has no
intention, there is no tradition. control over the thing sold at
 Delivery is a composite act the moment of the sale, and
therefore, its material delivery
could not have been made.

Sales Reviewer
Atty. RP Santiago
allow the buyer a reasonable

 In the absence of a stipulation to the opportunity to have taken such control.
contrary, the payment of the purchase It is not necessary that the buyer had
price of the goods is not a condition actually been able to take control of the
precedent to the transfer of title to the subject matter; the mere passage of
buyer, but title passes by the delivery. such reasonable time to do so is
 Second: when at the time of the sufficient because after the passage of
execution of the public instrument, the such reasonable time, the buyer has
subject matter was not subject to the nobody to blame but himself for not
control of the seller having taken actual physical control.
 Addison v. Felix: symbolic delivery by  The execution of a public instrument
the execution of a public instrument is does not create a conclusive
equivalent to actual delivery ONLY presumption of delivery of possession,
when the thing sold is subject to the but is equivalent in law to delivery
CONTROL of the seller, so that “at the which presumption can be rebutted by
moment of the sale, its material clear and convincing evidence, such as
delivery could have been made.” The when the buyer failed to take actual
“moment of sale” referred to in Addison possession or there was continued
was of course the consummation stage enjoyment by the seller of possession.
of the contract of sale.
 Addison does not intend to place c. Special variation to Addison doctrine
constructive delivery at a sub-category  Dy Jr. v. CA: The only proper way to
level of actual delivery, and there is no treat the Dy Jr. ruling is to consider
implication in the ruling that for that when it comes to a third party and
constructive delivery to produce the the issue zeroes in only on the title or
effect of tradition, it has to be coupled ownership of the subject matter of a
by subsequent actual delivery of by sale, constructive delivery by the
actual taking of physical possession of execution of the public instrument
the buyer. would produce the effect of tradition
 The statement in Power Commercial only insofar as title is concerned,
and Industrial Corp. v. CA that “our law provided that at the time of the
does not admit the doctrine of transfer execution there was no legal
of property by mere consent,” is NOT impediment on the part of the seller to
accurate since under Article 1496 of the transfer title to the buyer, even if at the
Civil Code, the ownership of the thing time of the sale, control or possession
sold is acquired by the buyer from the of the subject matter was not in the
moment it is delivered to him in any of hands of the seller.
the ways specified by law, “or in any
other manner signifying an agreement 4. Symbolic delivery
that the possession is transferred from  Art. 1498
the vendor to the vendee.”
 Third: from the decision in Pasagui v. 5. Constitutum Possessorium
Villablanca, we can infer an additional  This mode of constructive delivery
element into the Addison doctrine, that takes effect when at the time of the
in order that execution of public perfection of the contract of sale, the
instrument to produce the effect of seller held possession of the subject
tradition, not only must the seller have matter in the concept of owner, and
actual control of the subject matter of pursuant to the contract, the seller
the sale at the time of the execution of continues to hold physical possession
the instrument, but such control or thereof, no longer in the concept of an
ability to transfer physical possession owner but as a lessee or any other
and enjoyment must subsist also for a form of possession other than in the
reasonable length of time after the concept of owner.
execution of the instrument.
 The rationale in both Addison and 6. Traditio Brevi Manu
Pasagui should apply equally to all  This mode of delivery is opposite that
forms of constructive delivery. of constitutum possessorium, where
 Constructive delivery shall produce the before the contract of sale, the would-
effects of tradition only if at the time be buyer was already in possession of
such particular form of constructive the would-be subject matter of the
delivery the seller had control of the sale, say as a lessee, and pursuant to
subject matter to have been capable of sale, he would now hold possession in
physically transferring it to the buyer, the concept of an owner.
and such capacity should remain for a
reasonable period thereafter so as to

Sales Reviewer
Atty. RP Santiago
7. Traditio Longa Manu the merchandise (i.e., the price), but

 This is delivery of a thing by mere also the cost of insurance and freight.
agreement, such as when the seller
points the property subject matter of Two schools of thought: CIF sales
the sale by way of delivery without 1st 2nd
need of actually delivering physical The cost of The seller takes
possession thereof. insurance and on the
 Art. 1409 freight is responsibility of
ultimately to be insuring the goods
8. Delivery by negotiable document of title borne by the and providing for
 Art. 1513 buyer as part of their shipment to
 Art. 1514 the price he has the buyer, and for
 Since an invoice is not a negotiable obligated himself which
document of title, the issuance thereof to pay responsibility he
would not constitute constructive delivery. gets a package
price
9. Delivery of incorporeal property Delivery to the Delivery by the
 Since an incorporeal property has no carrier is delivery seller of the goods
physical existence, its delivery can only be to the buyer (the to the carrier is
effected by constructive delivery. carrier acts as an not equivalent to
 Art. 1501 agent of the buyer delivery to the
who pays the buyer, and the
10. Delivery through carrier freight) seller must
 In the absence of stipulation or continue to bear
circumstances showing the contrary, the risk of loss
delivery to carrier is deemed delivery to the during the
buyer. shipment period
 Art. 1523
 Behn, Meyer & Co. v. Yangco, and
a. F.A.S. sales Pacific Vegetable Oil Corp. v. Singzon:
 “Free alongside ship” agree with the second school of though
 Under such agreement, the seller pays that since C.I.F includes both insurance
all charges and is subject to risk until and freight expenses to be paid by the
the goods are placed alongside the seller, ordinarily therefore, a C.I.F.
vessel. arrangement arises only when the
vessel arrives at the point of
b. F.O.B sales destination and risk of loss would be for
 “Free on Board” the account of the seller.
 The seller shall bear all expenses until  General Foods v. NACOCO: upholds the
the goods are delivered where they are first school of thought. General Foods
to be “FOB” according as to whether therefore holds that although it is the
the goods are to be delivered “FOB” at seller who may make the arrangement
the point of shipment or at the point of for the insurance coverage and
destination determines the time when freightage of the goods, he does this
property passes. for the account and benefit of the
buyer, who has agreed to pay for such
F.O.B. arrangement amounts.
“Shipping point” “Destination”
Delivery of the goods Only when the vessel  The lesson to be learned from all
to the carrier is has arrived at the these is that the shipping
equivalent to delivery point of destination is arrangements in a contract of sale
to the buyer, and at there deemed to be create, by commercial usage,
that point, the risk of delivery to the buyer certain presumptive effects;
loss pertains to the and prior to that point however such presumptive effects
buyer in time, the risk of loss must give way, rather easily to any
over the subject stipulation or even intimation to
matter of the sale will the contrary.
be borne by the seller
d. Taking-out of insurance coverage
c. C.I.F. sales  Art. 1523 (3)
 Costs, insurance, freight
 Under the arrangement, the amount
quoted by the seller and agreed to by
the buyer, covers not only the cost of

Sales Reviewer
Atty. RP Santiago
COMPLETENESS OF DELIVERY delivery of the goods since the

invoice is nothing more than a
1. In case of movables detailed statement of the
 Art. 1522 nature, quantity, and cost of
the thing sold, and it is not
a. when goods held by third party proof that the thing or goods
 Art. 1521 (3) were actually delivered to the
buyer or the consignee.
b. obligation as to accessories and
accessions 2. In case of immovables
 Art. 1537,
 The seller must deliver to the buyer a Where sold Where sold Where sold in
quantity of goods that should not be per unit or for a lump mass
less than what he contracted to sell, number sum
otherwise the buyer may reject them. Art. 1539 to Art. 1542 A sale in mass
Art. 1541 of separate
c. sale in mass of movables known lots or
 The sale of movables under Article parcels will not
1522 should be distinguished from be set aside,
the sale of specific mass under unless it is
Article 1480 which provides for the made to appear
“sale of fungible things, made that a larger
independently and for a single sum could have
price, or without consideration of been realized
their weight, number, or measure. from a sale in
 The rule in sale of specific mass of parcels or that
movable is practically the same as a sale of less
lump-sum sale of immovables. than the whole
would have
d. sale by description and/or sample been sufficient
 Art. 1481 to satisfy the
 Even in sales by description and/or debt.
sample, the purchaser will not be Santa Ana v. Hernandez:
released from his obligation to clarified the governing rule
accept and pay for the goods by whether to treat it as a lump sum
deviations on the part of the seller sale or a sale per unit or number.
from the exact terms of the If the price per unit or measure is
contract if the purchaser had not provided for in the contract,
acquiesced to such deviations after the rules of lump sum sale shall
due notice thereof. prevail in the sale of real property.
e. written proof of delivery -> What really defines a piece of

 In case of goods, delivery is land is not the area calculated
generally evidenced by a written with more or less certainty
acknowledgment of a person that mentioned in the description but
he has actually received the thing the boundaries therein laid down
or the goods, as in delivery as enclosing the land and
receipts. indicating its limits; where the
 Following rules on when such land is sold for a lump sum and
written acknowledgment would not so much per unit of measure
serve such purpose: or number, the boundaries of the
1. a bill of lading cannot land stated in the contract
substitute for a delivery determine the effects and scope of
receipt because it is a written the sale not the area thereof.
acknowledgment of receipt of
the goods by the carrier and Note: Although under Article 1542, in the sale of real
an agreement to transport and estate by lump sum, there shall be no increase or
deliver them at a specific place decrease of the price although there be a greater or
to a person named or upon his lesser area or number than that stated in the
order; it does not evidence contract, the rule admits of exception because the
receipt of the goods by the sale of land under description “more or less” or
consignee or the person similar words in designating quantity covers “only a
named in the bill of lading reasonable excess or deficiency.” The exception to
2. A factory consignment invoice this rule is when expressly the buyer assumes the
is not an evidence of actual risk on the actual area of the land bought.

Sales Reviewer
Atty. RP Santiago
f. When seller is not owner

3. Time and place of delivery  Delivery would produce the effect of
 Art. 1521 transferring ownership only if at the
time of delivery the seller still had
4. Effects of Delivery ownership over the subject matter.
 Art. 1477  This stems from the principle that
 Art. 1496 nobody can dispose of that which does
 The rule is that if the parties do not not belong to him.
stipulate otherwise, either actual or
constructive delivery will produce its legal 6. Rule when buyer refuses to accept
effect of transferring ownership over the  Since delivery of the subject matter of the
thing delivered to the buyer. sale is an obligation on the part of the
 Although the parties may stipulate that seller, the acceptance thereof by the buyer
ownership in the thing shall not pass to the is NOT a condition for the completeness of
purchaser until he has fully paid the price, delivery.
in the absence of an express stipulation to  Even with such refusal of acceptance,
the contrary, the payment of the purchase delivery, whether actual or constructive, will
price of the goods is not a condition produce its legal effects, as for example,
precedent to the transfer of title to the transferring the risk of loss of the subject
buyer, but title passes by the delivery of matter to the buyer who has become the
such goods. owner thereof.
 Art. 1588
5. When delivery does NOT transfer title  However, even under such circumstances,
the seller is still legally obliged to take
a. “On sale or return” certain steps as not to be held liable for
 Art. 1502 consequent loss or damage to the goods.
b. “Sale on acceptance” 7. Seller shall pay expenses of delivery

 Art. 1502  Art. 1521 (5) -> unless otherwise agreed,
 Vallarta v. CA: held that when the sale the expenses of and incidental to putting
of a movable is “sale on acceptance,” the goods into a deliverable state must be
no contract of sale existed at the time borne by the seller
of delivery of the subject matter, and
consequently, ownership could not have DOUBLE SALES
been transferred to the buyer although
he took possession thereof. 1. Double Sale Rules in Art. 1544 do not
overcome priority rules under Torrens System
c. Form of such special sales  Registration is the operative act by which
 Such stipulation making the agreement dealings on registered land, whether they
one of “sale on return” or “sale on be voluntary or involuntary, shall be
approval” must be in writing, and recognized as existing and binding.
cannot be proved by parol evidence.
a. Where property covered by two different
d. Reservation of ownership titles
 Despite delivery, ownership will not o When two certificates of title are
also transfer to the buyer in case of issued to different persons
express reservation, such as when the covering the same land in whole or
parties stipulate that ownership will not in part, the earlier in date must
transfer until the purchase price is fully prevail, and, in case of successive
paid or until certain conditions are registrations, where more than one
fulfilled. certificate is issued over the same
 Art. 1503 – instances when there is an land, the person holding a prior
implied reservation of ownership certificate is entitled to the land as
against a person who relies on a
e. When sale is not valid subsequent certificate.
 Delivery would produce the effect of o A certificate is not conclusive
transferring ownership to the buyer evidence of title if the same land
only when it is made pursuant to a had been registered and an earlier
valid contract of sale. When a contract certificate for the same is in
of sale is fictitious, and therefore void existence.
and inexistent, no title over the subject
matter of the sale can be conveyed.

Sales Reviewer
Atty. RP Santiago
b. Where property was originally

unregistered land 4. Rules in Article 1544 are special rules and do
o Invoking the rules on double sale not embody general principles in double sales
and “priority in time” would be  Art. 1544 is not the only rule pertaining to
misplaced by a first buyer who double sales
bought the land not within the  The MAIN rule is essentially the principle:
Torrens system but under Act “First in time, priority in right.”
3344, as against the second buyer  The peculiarity of it all is that the main rule
who bought the same property is NOT the primary rule, since the provisions
when it was already registered of Article 1544, although not the main rule,
under the Torrens System. constitute nevertheless the PRIMARY rule,
i.e., one has to go through the tests
2. Rules on double sales in Article 1544 do not provided in Article 1544 before one may
overcome priority rules under the Rules of apply the main rule of “first in time, priority
Court on sale by public auction in right.”
 Carumba v. CA: the first buyer had a  Art. 1544: Requisites
private deed of sale which was never 1. The two (or more) sales
registered, but he took possession of the transactions must constitute valid
land; whereas the second buyer was the sales
highest bidder in the public auction of the 2. The two (or more) sales
same land, and the sale to the second buyer transactions must pertain to
was registered under Act. 3344. Carumba exactly the same subject matter
held that granting priority to the buyer who 3. The two (or more) buyers at odds
registers in good faith over the other buyer over the rightful ownership of the
who takes possession in good faith is subject matter must each
inapplicable to unregistered land because represent conflicting interests
“the purchaser of unregistered land at a 4. The two (or more) buyers at odds
sheriff’s execution sale only steps into the over the rightful ownership of the
shoes of the judgment debtor, and merely subject matter must each have
acquires the latter’s interest in the property bought from the very same seller
sold as of the time the property was levied
upon. On the other hand, Carumba held  The lack of ownership on the part of the
that Article 1544 provisions on registration seller does not affect the validity of an
in good faith prevailing over possession in otherwise valid contract of sale, and the
good faith applies in double sales over failure of the seller to effect proper delivery
registered land. (i.e. transfer of ownership) does not render
 The earlier unregistered sale, although the contract void, but merely constitute a
coupled with possession, cannot overturn breach as the basis for rescission.
the effect of the registration in good faith of
the second judicial sale. a. Nature of two sales involved
 Both Carumba v. CA and Radiowealth o Both sales involved in the dispute
Finance Co. v. Palileo cannot be taken to must be valid or at least voidable
mean that Article 1544 is wholly sale
inapplicable to unregistered land, but cover
only the situation where the second sale is b. Applicability of Rules on Double Sales to
actually a judicial sale by way of levy on Contracts to Sell and Adverse Claims
execution. Outside of Carumba and o Article 1544 on double sales does
Radiowealth Finance situations, Article 1544 not apply where the earlier sale is
should apply to conflicting sales over the a contract to sell, and the buyer
same unregistered parcel of land. This under the contract of sale is always
conclusion is borne out of decisions of the preferred
SC applying the rules under Article 1544 to o In a contract to sell, there is no
doubles of unregistered lands. previous sale on the property.
Hence, a third person buying such
3. Rules on Double Sales under Article 1544 property despite the fulfillment of
 The rules embodied in Article 1544 the suspensive condition cannot be
presumes that the issues to be resolved do deemed a buyer in bad faith and
not fall within the priority rules of the first buyer cannot seek the relief of
Torrens System under PD 1529, nor of the reconveyance of the property.
specific rules on auction sale under the There is no double sale in such
Rules of Court. case.
 Art. 1544

Sales Reviewer
Atty. RP Santiago
c. There must be “sameness” of subject d. Land in adverse possession

matter  A buyer who could not have failed
o In a case where one buyer bought to know or discover that the land
the parcel of land, and the other sold to him was in adverse
buyer bough the right to redeem possession of another is a buyer in
the same parcel of land, Article bad faith
1544 was deemed to be
inapplicable, because the subject of e. Existence of lis pendens
the second sale is not the land  In the case of adverse claim (which
itself, but the right to redeem has a lower binding category than
lis pendens), its annotation is
d. Must involve the same seller equivalent to registration and
o Must be the same immediate seller would place a subsequent buyer in
o Successors and predecessors-in- bad faith
interest theories are not applicable
to be able to obtain application of f. Annotation of adverse claim
the provisions of Article 1544.  In the realm of double sales, the
registration of an adverse claim
5. When Article 1544 does not apply, what rule places any subsequent buyer of a
would apply? registered parcel of land in bad
 “First in time, stronger in right” -> main faith
rule in double sales
 Note: Article 1544 on double sales provide g. Existence of relationship
for special rules  Buyers, not being really third
parties, knew of the previous sales
6. Who is purchaser in good faith? and cannot be considered in good
faith, since the buyers are
a. The burden of proof “deemed to have constructive
 He who asserts the status of a knowledge by virtue of their
purchaser in good faith and for relationship” to the sellers
value has the burden of proving
such assertion h. Stipulations in deed showing bad faith
 There is no legal presumption of  A stipulation in a deed of sale
good faith, that everyone is providing that any loss which the
presumed to act in good faith buyer may incur in the event the
title turns out to be vested in
b. Requisite of full payment another person are to be borne by
 The definition of a purchaser in the buyer alone, showed that the
good faith includes as an element buyer did not purchase the subject
of good that there must be full matter in good faith without notice
payment on the part of the buyer of any defect in the title of the
before he can be considered to be seller
in good faith
7. Article 1544 is not a contest between two-
c. Obligation to investigate known facts protagonists running the same race
 Actual lack of knowledge of the  The first buyer in Article 1544 does not start
flaw in title by one’s transferor is from the same level as the subsequent
not enough to constitute a buyer to buyer or buyers of the same subject matter.
be in good faith Being the first buyer, he necessarily is in
 Where there are circumstances good faith compared to the subsequent
which would put a party on guard buyer.
and prompt him to investigate or  The good faith of the first buyer remains
inspect the property being sold to and subsists throughout despite his
him, such as the presence of subsequent acquisition of knowledge of the
occupants thereon it is expected second or subsequent sale.
from the purchaser of a valued  Whereas the second or subsequent buyer
piece of land to inquire first into who may have entered into the contract of
the status or nature of possession sale in good faith, would become a buyer in
of the occupants bad faith buy his subsequent acquisition of
 Failure of prospective buyer to take knowledge of the first sale.
such precautionary steps would  The first buyer of the property always has
mean negligence on his part priority rights over subsequent buyers of
the same property.

Sales Reviewer
Atty. RP Santiago
 The second buyer must show continuing ownership or a better right over
good faith (i.e. ignorance of the first sale the property. Article 1544 requires
and of the first buyer’s rights) and that such registration must be
innocence or lack of knowledge of the first coupled with good faith.
sale until his contract ripens into full
ownership prior registration as provided by b. Registration in good faith always pre-
law. empts possession in good faith
 The second buyer must register his sale o In double sale of real property,
without knowing of the first sale and before buyer who has in possession of
the first sale is registered; or take Torrens title and had the deed of
possession of the property without knowing sale registered must prevail.
of the first sale and before the first buyer o The buyer-registrant in good faith
takes possession thereof. always has preference to the
 The first buyer is basically the winner of the buyer-possessor in good faith,
race without doing anything, by the fact even when in point in time, the
that he is the first buyer. possession in good faith happened
 Knowledge of the first unregistered sale by ahead of the registration in good
the second buyer ends the race altogether faith.
either because:
1. The knowledge by the 9. Possession under Article 1544 refers to
second buyer of the first sale is material and symbolic possession
equivalent to registration in favor  The possession mentioned in Article 1544
of the first buyer for determining who has better right when
2. Knowledge of the first sale the same piece of land has been sold
makes the second buyer one in bad several times by the same seller include not
faith, and only a good faith second only material but also the symbolic
buyer is qualified to run the race. possession thereof (e.g., public instrument
– tantamount to delivery of the land
 Knowledge of the second unregistered sale resulting in the material and symbolic
by the first buyer is NOT equivalent to possession thereof)
registration in favor of the second buyer
because the act required of the second 10. When Article 1544 does not apply, priority
buyer under Article 1544 seems to be a in time rule applies
positive act of registration or taking  That means there is no race to run at all
possession, as the case may be, before he because the first buyer should always win
learns of the first sale. over subsequent buyers.
 The prior registration of the disputed  In an execution sale, the buyer shall be
property by the second buyer does not by substituted for and acquire all the rights,
itself confer ownership or a better right over title, interest, and claim of the judgment
the property. Article 1544 requires that obligor to the property as of the time of
such registration must be coupled with good levy.
faith.  Registration of instruments affecting
 Before the second buyer can obtain priority unregistered lands is “without prejudice to a
over the first, he must show that he acted third party with a better right.”
in good faith throughout, i.e., ignorance of
the first sale and of the first buyer’s rights –
from the time of acquisition until the title is OBLIGATIONS OF THE BUYER
transferred to him by registration or failing
registration, by delivery of possession. 1. Pay the price
 The buyer is obliged to pay for the price of
8. Requisites of prior registration the thing sold at the time and place
 Registration means any entry made in the stipulated in the contract (Art. 1582).
books of the registry, including both  Art. 1589 (obliged to pay interest)
registration, in its ordinary and strict sense,  Non-payment of the consideration in the
and cancellation, annotation, and even contract of sale does not prove simulation.
marginal notes. It is the entry made in the At most, it gives the seller the right to sue
registry which records solemnly and for collection. Generally, in a contract of
permanently the right of ownership and sale, payment of the price is a resolutory
other real rights. condition and the remedy of the seller is to
exact fulfillment or, in case of a substantial
a. prior registration must always be in good breach, to rescind the contract under Article
faith 1191 of the Civil Code
o The prior registration of the
disputed property by the second
buyer does not by itself confer

Sales Reviewer
Atty. RP Santiago
 Dealings through documents of

a. Relationship of delivery of subject matter title therefore represent a species
and payment of price of constructive delivery
 Payment or non-payment of the price
does NOT essentially affect the legal Rationale for documents of title
consequences of the delivery of the  Documents of title evolved from the
subject matter of the sale. commercial practices of merchants
 Non-payment only creates a right to  Documents of title have been recognized by
demand the fulfillment of the obligation the State as the medium by which
or to rescind the contract transactions in goods may be promoted by
 However, when the seller cannot show the instruments which evidence them.
title to the subject matter of the sale,
then he cannot compel the buyer to pay Types of documents of title
the purchase price, since the essence of
a sale is the transfer of title for a price Negotiable document Non-negotiable
paid or promised. of title document of title
A document of title in A document of title which
2. Accept delivery of thing sold which it is stated that does not state that the
 Art. 1582 the goods referred to goods referred to therein
 In case of goods: Art. 1585 therein will be delivered will be delivered either to
“to bearer” or “to order” bearer or to the order of
a. Goods sold on installments of any person named in any person named
 Art. 1583 such document (Art. therein
1507)
b. Goods as subject matter
 Art. 1584 (1) Effects of errors on document of title
 Clerical errors in the words of negotiability
c. COD sales does NOT destroy the negotiability of a
 Art. 1584 (3) warehouse receipt
d. Effect of acceptance of goods Negotiation of documents of title

 Art. 1586
1. Effects of use of “non-negotiable”
e. Refusal of acceptance of goods terms on negotiable document of title
 Art. 1587  Art. 1510
2. By Delivery Alone
 Art. 1508
CHAPTER 7
DOCUMENTS OF TITLE 3. By endorsement and delivery
 Art. 1509
Document of title of goods a. Who can negotiate

 Art. 1636 - Definition  Art. 1512
Documents of title serve two functions: b. Effect of unauthorized negotiation

1. as evidence of the possession or control of  In spite of Art. 1512, there is Art.
the goods described therein 1518
2. as a medium of transferring title and  Even when the owner should lose
possession over the goods described therein the document of title to a thief,
without having to effect actual delivery and it is deliverable to bearer, the
thereof latter may validly impart title
thereto to a buyer in good faith
 Through the use of a document of and for value.
title, the seller is allowed, by fiction  Practically, there is no real defense
of law, to deal with the goods against an assignee or holder of a
described therein as though he had negotiable document of title in
physically delivered them to the good faith and for value
buyer; and the buyer may take the
document of title as though he had c. Effects of negotiation
actually taken possession and  Art. 1513
control over the goods described  The result is that by dealing with
therein. the document of title, it is though
the parties to the sale were dealing

Sales Reviewer
Atty. RP Santiago
directly with the goods covered Civil Code, under Article 1628 thereof, the
thereby. seller/assignor of the document of title also
 Although the law does not include warrants the existence and legality of the
“one who takes by trespass or a documents of title at the time of the sale,
finder” within the description of unless it has been sold as doubtful; but that
those who may negotiate, the clear he does not warrant the solvency of the
import of these provisions is that if debtor (i.e., the bailee), unless it has been
the owner of the goods permits so expressly stipulated or unless the
another to have the possession or insolvency was prior to the sale and of
custody of negotiable warehouse common knowledge.
receipts running to the order of the
latter, or to bearer, it is a Rules of levy/garnishment of goods covered by
representation of title upon which documents of title
bona fide purchasers for value are
entitled to rely, despite breaches of 1. When non-negotiable document of title
trust or violations of agreement on  Under Article 1625 of the Civil
the part of the apparent owner. Code, when an assignment of
credit or other incorporeal right is
d. Effects of mere assignment or delivery of made through a public instrument,
negotiable document of title deliverable to it would also bind third persons.
order  Although the assignment of a non-
 Art. 1515 negotiable document of title would
involve the assignment of
Assignment of non-negotiable documents of incorporeal right, nevertheless, the
title of goods binding effect of the assignment on
the bailee and third persons would
1. How assignment made have to follow specific provisions
 Art. 1511 governing documents of title.
 Since a non-negotiable document  Art. 1514
of title constitute an incorporeal  The assignment or sale by the
right, its sale constitute actually an original owner of the non-
assignment which under Article negotiable document of title, even
1624 is perfected by mere consent, when executed in a public
but which under Article 1625 would instrument, does not transfer
require its appearance in a public possession or title over the goods
instrument, otherwise it “shall covered by the document of title,
produce no effect as against third until actual notification is made to
persons.” the bailee of the transfer or
assignment of the goods, actions
2. Effects of transfer or assignment can be taken by the original owner
 Art. 1514 to defeat the transfer of the title
 Unlike in the negotiation of a and/or possession of the goods.
negotiable document of title which  Even when by the execution of a
ipso jure makes the bailee liable to public instrument to assign the
the holder thereof, in the non-negotiable document of title,
assignment of a non-negotiable ownership over the document is
document of title, there is no legal transferred to the assignee,
relationship between the assignee nevertheless, the transferor can
and the bailee until the latter is still exercise possessory lien over
informed by the former of the the goods covered by the
assignment of the covering notification thereof to the bailee
document of title. Likewise, the prior to the time that the
assignee merely steps into the transferee-assignee shall have
shoes of his immediate assignor. notified the bailee of the
assignment to him of the document
Warranties on negotiation or assignment of title.
 Art. 1516  In case of a non-negotiable
 The warranties of one who negotiates a document of title, possession and
negotiable document of title, and one who ownership of the document of title
assigns a non-negotiable document of title (by assignment) does not
are the same. necessarily bring with it possession
 Art. 1517 or title over the goods covered
 Since the assignment of a document of title thereby; it is the notification of the
is covered by the species “assignment” bailee of the assignment that is the
under Chapter 8 of the Title on Sales of the operative act that will transfer title

Sales Reviewer
Atty. RP Santiago
and/or possession of the goods in  In a contract of sale, there is breach when

favor of the transferee-assignee. any party does not comply with what is
incumbent upon him under the contract.
2. When negotiable document of title  When there is breach, the other party NOT
 Art. 1519 at fault may then rescind or resolve the
 Ownership and possession of the contract of sale
document itself is equivalent to the  The concepts of breach and rescission
holder having actual ownership and therefore presuppose the existence of a
possession of the goods covered valid contract of sale
thereby.  When a contract of sale is void, it gives rise
 The goods are treated inseparable to no obligations that can be breached,
from the negotiable document of neither does it allow a rescission of a
title covering them and vice-versa. contract that in the first place has no legal
 Art. 1520 existence (although it may have factual
existence)
CHAPTER 8  Both breach and rescission are legal
SALE BY A NON-OWNER OR BY ONE HAVING concepts that necessarily pertain to the
VOIDABLE TITLE: THE “LIFE” OF A CONTRACT consummation or performance stage, and
OF SALE they do not attack the very essence of
perfection/
Note: The discussions hereunder would refer to  Breach and rescission therefore presuppose
“sale” as a person or a “being,” only for the purpose a valid perfection of the contract of sale.
of being able to demonstrate more clearly the
essence of its “life.” WHEN SELLER IS NOT OWNER AT PERFECTION
 Ownership of the subject matter is NOT an
PHILOSOPHICAL DISCUSSIONS ON STAGES IN essential requirement for the validity of the
LIFE OF SALE sale.
 Perfection of a contract of sale merely
A contract of sale has two stages creates the obligation on the part of the
Perfection Stage Consummation or seller to transfer ownership, but by its
Performance Stage perfection (i.e., meeting of the minds), does
not transfer ownership.
Point in time when the Covers the period when
 Ownership of a thing is not transferred by
contract of sale, as a the obligations that arise
perfection but “shall be transferred to the
legal reality, begins to from the legal existence
vendee upon actual or constructive delivery
exist: upon the meeting of the contract of sale
thereof.” (Art. 1477)
of minds as to the are to be performed:
 A contract of sale is valid even if at the time
subject matter to be delivery of possession
of its creation the subject matter does not
delivered and the price and transfer of
exist, or that the seller is not the owner
to be paid. ownership of the subject
thereof.
matter by the seller, and
 Art. 1434 -> uses the word “sells” to refer
the payment of the price
to the perfection stage of a contract of sale
by the buyer.
since it includes “and delivers it” as an
additional part of its qualification
Does not necessarily Presupposes that
result into the perfection stage has
WHEN SELLER IS NOT OWNER AT
consummation stage happened
CONSUMMATION
Goes into the very Goes into the
 Art. 1505 -> the article does not say that
essence or birth of the performance, or the
the sale of goods by a non-owner renders
contract manner by which the
the contract void. It describes the
sale as “being” leads out
consequences when delivery under a sale is
its life
effected when the seller is not the owner of
Perfection is the only Consummation stage
the thing delivered.
stage in the life of a merely is the “living-out”
 A seller may validly “sell” (enter into a valid
contract of sale that of that kind of life that
and binding contract of sale) properties
determines whether the has been set by the
which he entirely does not own. Such a
contract exists perfection stage.
contract is valid, and an action to annul
Perfection stage merely Consummation stage such contract or to have it declared null and
concerns itself with the concerns itself with the void is improper; and it is his failure to
creation of the actual transfer of comply with his obligation to transfer
obligations to transfer ownership of the subject ownership that would give rise to an action
and to pay matter and the payment for rescission with damages.
of the price  Mindanao Academy Inc. v. Yap: indicates
the difficulties of not distinguishing which
stage in the life of the contract of sale is

Sales Reviewer
Atty. RP Santiago
being referred to: is it the “contract” as an 2. Exceptions to rule on the effect of sale of
agreement that gives rise to obligations a definite portion by a co-owner
(perfected contract), or is it the living
contract as a manner of performance GR: The effect of the sale of the entire property
(consummated contract). owned in common by one of the co-owners, is
 In Development Bank of the Philippines v. VOID as a sale of the whole property or any
CA, the SC continued to view the sale by a definite portion thereof (i.e. to validly effect
non-owner of the subject property to be transfer of ownership), but is VALID as to the
void instead of treating the tradition aspect co-owner-seller’s spiritual share.
as having no effect on transferring
ownership to the buyer. Although the SC Exceptions
talks about the effect of declaration of 1. It does not apply when the subject
nullity of a sale, the proper remedy was matter is indivisible in nature or by
actually rescission and the same ends intent.
sought to be achieved would have 2. When the sale of a particular portion of
happened, which is restitution. the thing owned in common is with the
 The problem with the reasoning of Nool v. consent of the other co-owners
CA is that it treats the obligation of the 3. A co-owner who sells one of the two
seller as personal obligations “to do” which lands owned in common with another
would then be covered by paragraph 5 of co-owner, and does not turn-over one-
Article 1409. But the fact is, the obligations half of the proceeds of the sale to the
of the sellers are real obligations “to give” other co-owner, the latter by law and
and therefore do not fall within the category equity may lay exclusive claim to the
of “impossible service” and if indeed the remaining parcel of land.
obligation to deliver ownership can no 4. The effect of the ipso jure transfer of
longer be complied with, the remedy is not ownership under Article 1434 ->
declaration of the sale as void but actually upholds the validity of a sale by one
rescission. who previously did not have, but who
 Cavite Development Bank v. Spouses Syrus subsequently acquired, title to the
Lim: The Latin maxim “nemo dat quod non property sold.
habet” (one cannot give what one does not 5. The binding effect of registration under
have), is properly applicable to the the Torrens System
consummation of a sale.
EXCEPTIONS TO THE RULE ON LEGAL EFFECTS
1. Sale by co-owner of whole property or OF SALE BY A NON-OWNER
definite portion thereof
 The rule in co-ownership is that none of Article 1505: Exceptions
the co-owners may claim any right, 1. When the owner is, by his conduct,
title, or interest to a particular portion precluded from denying the seller’s
of the thing owned in common. authority to sell
 Since a co-owner is entitled to sell his 2. When the contrary is provided for in
undivided share, a sale of the entire recording laws
property by one co-owner without the 3. When the sale is made under statutory
consent of the other co-owners is not power of sale or under the order of a court
null and void. However, only the rights of competent jurisdiction
of the co-owner seller are transferred, 4. When the sale is made in a merchant’s
thereby making the buyer a co-owner store, in accordance with the Code of
of the property. Commerce and special laws
 When a co-owner sells the entire 5. Under Article 1506, the sale by a seller who
property, the sale is valid to his at the time of delivery had voidable title to
spiritual share since “a co-owner is the thing delivered
entitled to sell his undivided share,” 6. In case of movables, under Article 559,
and the proper action to take is not the acquisition of possession in good faith under
nullification of the sale, or for recovery a claim of ownership, where the real owner
of possession of the property owned in has not lost or been deprived of the
common from the other co-owners, but movable, makes the possessor the rightful
for decision or partition of the entire owner of the movable
property. 7. Special rights of an unpaid seller of goods to
resell under Articles 1526 and 1533
1. Owner estopped
 Art. 1434

Sales Reviewer
Atty. RP Santiago
2. Recording Laws; Torrens System  “title has not been avoided at the time of
 Property Registration Decree (PD sale” -> it must cover the consummation
1529) stage
 The general rule that the direct  Art. 1506 talks of “title” or ownership to the
result of a previous void contract property which covers the consummation
cannot be valid is INAPPLICABLE stage
when it will directly contravene the  If the cut-off point under Article 1506 is
Torrens system of registration delivery of the subject matter to the buyer
 Applies to foreclosure sales -> by the seller, if the seller’s voidable title
“mortgagee in good faith” thereto is avoided after the perfection of the
contract of sale but before delivery, the
3. Statutory Power; Court Sale buyer does not obtain good title to the
 Judgment of courts divesting the property.
registered owner of title and
vesting them in the other party are “TITLE” AS TO MOVABLE PROPERTIES
valid although the courts may not  Art. 559 of the Civil Code
be the owner of the land.  By cross reference to Article 1505, even if
 The sale by a sheriff of land levied the owner of a movable has lost it or has
upon at a public auction would been unlawfully deprived thereof, and even
validly transfer ownership to the if he offers to reimburse the buyer, he
highest bidder, although the sheriff cannot recover the movable from the buyer
in executing the certificate of sale who bought it at a merchant store.
has no ownership over said  Tagatac v. Jimenez: Title to the thing sold
property. would not revert to the seller until the sale
has been set aside by a competent court.
4. Sale at Merchant Store Until that is done, the rights of stranger in
 Under paragraph (3) of Article good faith, acquired before resolution of the
1505 of the Civil Code, a person contract are entitled to protection.
who buys a thing at a merchant’s  Aznar v. Yapdiangco: The provisions of
store after the same has been put Article 1506 would not apply to the present
on display threat, acquires a valid possessor since it was essential that his
title to the thing although his seller should have a voidable title at least.
predecessors in interest did not  EDCA Publishing & Distributing Corp. v.
have any right of ownership over Santos: Non-payment of the purchase price
it. by the impostor, although amounting to
 The policy of the law has always fraud, did not amount to unlawful
been that were the rights and deprivation under Article 559 but merely
interests of a vendor come into may be considered vitiation of consent as to
clash with that of an innocent make the contract voidable; but that so
buyer for value, the latter must be long as the contract has not been annulled,
protected -> facilitate commercial it remained valid, and the subsequent sale
sales on movables but to give and delivery by the imposter of the books to
stability to business transactions Santos effectively transferred ownership to
 “Merchant store” – “store” is any Santos.
place where goods are kept for  Article 1506 represents an operative act
sale, or where goods are deposited which would constitute a further exception
and sold by one engaged in buying to the provisions of Article 559, which
and selling them. means:
 Placing of an order for goods and 1. That if the owner has been
the making of payment thereto at unlawfully deprived by means of
a principal office does NOT deceit pertaining to the non-
transform said office into a store, payment of the purchase price, but
for it is a necessary element that the one who takes the movable is
there must also be goods or wares able to sell and deliver the movable
stored therein or on display, and to another person who takes it in
provided also that the firm or good faith and for value before the
person maintaining that office is owner is able to rescind the earlier
actually engaged in the business of sale, the buyer obtains good title
buying and selling. and the original owner has no
cause of action to recover
SALE BY A SELLER WHO HAS VOIDABLE TITLE 2. That unlawful deprivation under
ON THE SUBJECT MATTER SOLD Article 559 cannot take the form of
 Art. 1506 a contract of sale even when deceit
or fraud is used.

Sales Reviewer
Atty. RP Santiago
 That ownership in the thing sold shall not doctrine are not clear-cut and sometimes,
pass to the buyer until full payment of the conflicting, based on the following grounds:
purchase price only if there is a stipulation 1. The general principle of res perit
to that effect. Otherwise, the rule is that domino is now covered by Article 1504
such ownership shall pass from the vendor of the New Civil Code. Unfortunately,
to the vendee upon the actual or Article 1504 which embodies the
constructive delivery of the thing sold even principle is worded to cover only
if the purchase price has not yet been paid. “goods.” (Article 1636 (1) )
 Absent the stipulation noted, delivery of the 2. Article 1538 of the New Civil Code ->
thing sold will effectively transfer ownership cross-reference to Art. 1189 and Article
to the buyer who can in turn transfer it to 1262
another. 3. Article 1480-> cross reference to
Articles 1165 and 1262.
CHAPTER 9  Whether it is the seller or the buyer who

LOSS AND DETERIORATION, FRUITS, AND bears the risk of loss of the subject matter
OTHER BENEFITS from perfection but before delivery,
depends on what is the proper
Introduction interpretation of the “extinguishment of
The discussions hereunder pertain only to sale where obligation” clauses under Articles 1189 and
the subject matter is determinate or certain, since 1282.
the principles have no application to subject matter  Tolentino believes that in reciprocal
which is determinable generic, since genus is not obligations, the extinguishment of the
subject to loss or deterioration (Art. 1263). obligation due to loss of the thing “affects
both debtor and creditor; the entire juridical
BEFORE PERFECTION relation is extinguished.”
 Before the perfection of the contract of sale,  Under Tolentino’s interpretation, the rule on
the rules on loss, deterioration, fruits, and loss under Article 1189 would be different
improvement of the would-be subject from the rule on deterioration and
matter is the same: such loss, deterioration, improvement: the loss of the thing would be
fruits, and improvements shall pertain to for the account of the obligor (seller), while
the would-be seller, since he owns the the deterioration and improvement, would
thing. be for the account of the obligee (buyer).
 Before perfection the would-be buyer and  Art. 1538 -> invokes provisions of loss
the would-be seller are technically legal applicable to contracts in general in Art.
strangers to one another, and there is no 1189
relationship by which one may interpose a  Under Art. 1189, as it is applicable to
claim upon the other. contracts of sale, the following rules shall
 The would-be seller, being the owner of the govern the loss of the thing during the
property he seeks to sell, cannot look at pendency of a condition suspending the
another party (except one who was at fault) efficacy of the seller’s obligation to deliver
to answer for the loss or deterioration of the the subject matter:
property; and neither can the would-be 1. If the thing is lost without the fault of
buyer claim any benefit from the thing. the seller, the obligation shall be
distinguished
AT THE TIME OF PERFECTION 2. If the thing is lost through the fault of
 Art. 1493 the seller, the seller shall be obliged to
 Art. 1494 pay damages.
 Art. 1493 does not hold a contract of sale at
“perfection” to be void when the object  If we were to take Tolentino’s position, the
thereof is lost; the law uses the phrase effect of both Articles 1480 and 1536 would
“without any effect.” be that the risk of loss is still to be borne by
 However, if the subject matter is lost, there the seller form the time of perfection up to
is really no point pursuing the contract since before delivery of thing, but he would no
the seller is not in a position to comply with longer be liable for damages if the thing is
his obligation to deliver the subject matter. lost through fortuitous event. Before
Therefore, the law decrees the same effect delivery, if the determinate subject of the
as if the contract of sale is void. sale is lost through the fault of the seller,
the buyer need not pay the price, but can
AFTER PERFECTION BUT BEFORE DELIVERY recover damages for breach of contract.
 The Tolentino position would then make
1. Loss of subject matter Articles 1480 and 1538 consistent with the
 The general rule that after perfection but provisions of Article 1504.
before delivery, the risk of loss is borne by  Art. 1504 -> the rules it establishes on the
the seller, the statutory bases for such risk of loss pertain specifically to “goods”

Sales Reviewer
Atty. RP Santiago
and it applies the common law principle of only exception to the rule is when the
res perit domino. The term “goods” includes delivery of the goods has been made to the
all chattels personal and growing fruits or buyer and the ownership in the goods has
crops, but not things in action or money of been retained by the seller merely to secure
legal tender. performance by the buyer of his obligations
 THE GENERAL RULE ON THE LAW OF under the contract, although ownership is
SALES: From perfection but before not yet with the buyer, the goods are still at
delivery, the risk of loss of the subject the buyer’s risk. Likewise, if actual delivery
matter is borne by the buyer, except when had been delayed through the fault of either
the subject matter is “goods” in which case the buyer or the seller, the goods are at the
the risk of loss is borne by the seller, from risk of the party at fault.
the perfection up to before delivery of the  Lawyer’s Cooperative v. Tabora: Although
subject matter of the sale. an obligor is relived from his obligation
under the rule that an obligor should be
2. Deterioration, fruits, and improvements held exempt from liability when the loss
 Under Art. 1504, which covers specifically occurs through a fortuitous event,
goods, the gods remain at the seller’s risk nevertheless, as applied to the buyer in a
until the ownership therein is transferred to contract of sale, his obligation does not
the buyer; but when the ownership is pertain to the delivery of the subject
transferred to the buyer, the goods are at matter, but to the payment of the purchase
the buyer’s risk whether actual delivery of price, and the ability to pay in money or
the goods has been made or not. legal tender is never lost through fortuitous
 Art. 1538 -> in case of deterioration or event.
improvement of the thing before its
delivery, the rules in Art. 1189 shall be STRUCTURING THE PROPER DOCTRINE ON
observed, the seller being considered the LOSS, DETERIORATION, FRUITS, AND
debtor. IMPROVEMENTS
 Under Art. 1189, as it is applicable to a  Prior to perfection -> both title and
contract of sale, the following rules shall beneficial interests pertain to the seller, and
govern the deterioration of the thing during therefore he must bear the risk of loss,
the pendency of a condition suspending the deterioration, and benefits from the fruits
efficacy of the seller’s obligation to deliver and improvements.
the subject matter:  After delivery -> effectively transfers title
1. When the thing deteriorates without the and beneficial interest to the buyer, buyer
fault of the seller, the impairment is to bears both the risk of loss and deterioration,
be borne by the buyer as well as the benefits from the fruits and
2. If the thing deteriorates through the improvements of the subject matter of sale.
fault of the seller, the buyer may  It is only after perfection and before
choose between the rescission of the delivery that title and beneficial interests
obligation and its fulfillment, with actually do not pertain to the same person
indemnity for damages in either case since title remains with the seller, but
3. If the thing is improved by its nature, beneficial interest actually pertains to the
or by time, the improvements shall buyer. -> The principle of res perit domino
inure to the benefit of the buyer would not apply since although the seller is
4. If the thing is improved at the expense the formal owner, the buyer during that
of the seller, he shall have no other period is actually the beneficial owner.
right than that granted to the  This is clear from the provisions of the NCC
usufructuary. which govern the responsibilities of the
obligor in an obligation to deliver a
 Art. 1480 determinate thing, all for the benefit of the
 Art. 1537 obligee:
 The rule of res perit domino provided in 1. Art. 1163
Article 1504 on goods, applies ONLY to 2. Art. 1164
“LOSS” and has NO application to issues 3. Art. 1165 and Art. 1170
pertaining to deterioration or fruits and 4. Art. 1166
improvements over the subject matter of
the sale.  When title and beneficial interest over the
 The hybrid rule on the risk of loss under the subject matter of the sale do not pertain to
present Civil Code happens not at the point the same person, who should suffer the loss
of perfection, but at the point of delivery. and deterioration thereof, and benefit from
the fruits and improvements? The
AFTER DELIVERY resolution to this issue would be and should
 Under Article 1504, when ownership of the be that the person who should bear the risk
goods has been transferred to the buyer, of loss should be the party who had greater
the goods shall be at the buyer’s risk. The

Sales Reviewer
Atty. RP Santiago
stake on the subject matter at the point of b. When buyer wrongfully

loss, deterioration, or improvement. neglects/refuses to accept
 Art. 1189 -> although the seller has goods
ownership still over the subject mater, the  Art. 1596
benefits and improvements over the subject
matter are for the account of the obligee- B. SPECIAL REMEDIES OF “UNPAID SELLER” OF
buyer, and in turn he must bear the risk of GOODS
deterioration.  Similar to the doctrine of self-help under
 Article 1504 -> in such case, title did not Article 429 of the Civil Code
determine who bears the risk, because such  In the case of the remedies of the unpaid
title was merely nominal, and the beneficial seller, the minimum requirement is that the
interest is with the buyer, and therefore he goods are in the possession of the seller so
must bear the risk of loss. as to prevent an actual physical tussle with
 C.O.D. sale (Arts. 1524 and 1584) or sale the buyer in the exercise of such remedies.
on approval or trial (Art. 1502) -> the
general rule is that the owner must bear the 1. Definition of “unpaid seller”
risk of loss, which in this case would be the  Art. 1525
owner. In such instances, title that has  The term “unpaid seller” includes
remained with the seller is dominical, and an agent of the seller to whom the
not merely nominal. bill of lading has been indorsed, or
 The unifying doctrine on the risk of loss, consignor or agent who has himself
deterioration, and improvement, the same paid, or is directly responsible for
shall always be for the account of the the price, or any other person who
person or party who has both title and is in the position of a seller
beneficial interest over the property or
subject matter of the sale. 2. Rights of unpaid seller
 When title and beneficial interest do not  When a seller is an “unpaid seller”
merge in the same party, then he who as defined by law, whether or not
bears the risk of loss or deterioration, and ownership over the goods has been
who benefits from the improvement of the transferred to the buyer, the
thing, should be the party who at that point unpaid seller is entitled to the
in time is understood to have the real following rights or remedies:
beneficial interest over the subject matter. 1. Possessory lien
2. Stoppage in transitu
CHAPTER 10 3. Special right of resale
REMEDIES OF PARTIES FOR BREACH OF 4. Special right to rescind
CONTRACT OF SALE
 The four remedies of an unpaid
INTRODUCTION seller have a hierarchical
 Caveat emptor – “let the buyer beware” -> application
belongs to a by-gone age; has no place in  The designation “special” is
contemporary business ethics attached to the rights to resell and
to rescind, because they are rights
REMEDIES IN CASE OF MOVABLES accorded only to the unpaid seller
as technically defined by law, and
A. ORDINARY REMEDIES OF SELLER are not of the same nature as the
1. Movables in general right to rescind accorded under
 Art. 1593 article 1191 of the Civil Code on
reciprocal contracts.
2. Sale of goods
3. Possessory lien
a. Non-payment of price by buyer  GR when it comes to movables:
No When Art. 1524.
Ownership Transfer price  However, in the absence of
transferred of payable stipulation to the contrary, delivery
to buyer ownership on of the goods to the buyer transfers
to buyer certain ownership to the latter, and the
day non-payment of the price does not
Art. 1595. Art. 1595 Art. 1595 prevent such transfer of ownership
par. 1 -> par. 3 par. 2 as a result of tradition to take
action for effect.
specific  If the seller is an unpaid seller as
performance defined by law, notwithstanding
that the ownership in the goods
may have passed to the buyer, the

Sales Reviewer
Atty. RP Santiago
unpaid seller still has a lien on the  Art. 1532 -> how any unpaid
goods or the right to retain them seller may exercise is right of
for the price while he is in stoppage in transitu
possession of them.  Note: When notice of stoppage
 Where the ownership in the goods in transitu is given by the
has not passed to the buyer, the seller to the carrier, or other
unpaid seller has, in addition his bailee in possession of the
other remedies, a right of goods, he must redeliver the
withholding delivery similar to and goods to, or according to the
co-extensive with his right of lien. directions of, the seller. The
 The possessory lien of the unpaid expenses of such delivery
seller is exercised only in the must be borne by the seller.
following instances -> Art. 1527
 Note: Art. 1535 par. 1 g. When goods covered by
negotiable document of title
a. When Negotiable document of  Art. 1532 (last paragraph)
title is issued  It is only when the unpaid
 Art. 1535, par. 2 seller has exercised either his
right to possessory lien or his
b. Part delivery effected right of stoppage in transitu
 Art. 1528 that he can then proceed with
his other special rights of sale
c. Instances when possessory lien or to rescind.
lost
 Art. 1529 5. Special right to resell goods
 The unpaid seller loses his  Notwithstanding that the ownership in
possessory lien when he parts the goods may have passed to the
with physical possession of the buyer, the unpaid seller has a special
goods, as when he delivers the right of resale, but only under the
goods to the carrier. In that conditions provided by law.
case, he still has the remedy
of stoppage in transitu, but a. When right exercisable
only if the buyer has in the  The special right of resale by the
meantime become insolvent unpaid seller can be made only when
he has exercised priorly either his right
4. Stoppage in transitu of possessory lien or stoppage in
 Notwithstanding that the transitu, and under any of the following
ownership in the goods may have conditions:
passed to the buyer, the unpaid 1. The goods are of perishable
seller of the goods has, in case of nature
the insolvency of the buyer, a right 2. Where the seller expressly
of stopping the goods in transitu reserves the right of resale in
after he has parted with the case the buyer should make
possession of them. default
 Article 1530 3. Where the buyer has been in
 Art. 1535, par. 1 default in the payment of the
price for an unreasonable time
a. When negotiable document of (Art. 1533)
title issued
 Article 1535, par. 2.  Hanlon v. Hausserman: the seller has a
right, when the contract of sale is still
b. When buyer deemed “insolvent” executory in stage, to resell the
 Art. 1636 (2) movables subject matter of the sale,
when the buyer fails to pay the
c. When goods deemed in transit purchase price.
 Art. 1531  Katigbak v. CA: if the buyer fails to
take delivery and pay the purchase
d. When goods deemed no longer in price of the subject matter of the
transit contract, the seller, without need of
 Art. 1531 first rescinding the contract judicially, is
entitled to resell the same, and if he is
e. When part delivery already made obliged to sell it for less than the
 Art. 1531 (last paragragh) contract price, the buyer is liable for
the difference.
f. How right exercised

Sales Reviewer
Atty. RP Santiago
or indirectly, buy the goods. (Art.

b. Effect of having exercised right of 1533)
resale
 When the unpaid seller has 6. Special right to rescind
exercised his right of resale, he  Notwithstanding that the
shall not thereafter be liable to the ownership in the goods may have
original buyer upon the contract of passed to the buyer, the unpaid
sale or for any profit made by such seller has a special right to rescind
resale, but may recover from the the sale (Art. 1526)
buyer damages for any loss
occasioned by the breach of the a. When the right may be exercised
contract of sale. (Art. 1533)  An unpaid seller having the right of
lien or having stopped the goods in
c. Transfer of ownership transitu, may rescind the transfer
 Where a resale is made by the of title and resume the ownership
unpaid seller, the buyer acquires a in the goods, where he expressly
good title as against the original reserved the right to do so in case
buyer (Art. 1533). the buyer should make default, or
 This is the special feature of the where the buyer has been in
right of the unpaid seller to resell: default in the payment of the price
not only is he able to destroy or for an unreasonable time. (Art.
obliterate the ownership over the 1534)
goods in the original buyer, he is
also able to transfer ownership to b. Effect of exercise of such right
the subsequent buyer, even if at  The seller shall not thereafter be
the time of tradition, he no longer liable to the buyer upon the
had ownership over the goods. contract of sale, but may recover
 Ordinarily, the destruction or from the buyer damages for any
taking away of ownership in one loss occasioned by the breach of
person and placing it in another the contract. (Art. 1534)
person in such manner can only be
done through court action. But in c. Transfer of title
the case of an unpaid seller, he can  The transfer of title shall not be
effect these, even without judicial held to have been rescinded by an
action. unpaid seller until he has
manifested by notice to the buyer
d. Notice to defaulting buyer or by some other overt act an
 It is not essential to the validity of intention to rescind. It is not
a resale that notice of an intention necessary that such overt act
to resell the goods be given by the should be communicated to the
seller to the original buyer. But buyer, but the giving or failure to
where the right to resell is not give notice to the buyer of the
based on the perishable nature of intention to rescind shall be
the goods or upon an express relevant in any issue involving the
provision of the contract of sale, question whether the buyer had
the giving or failure to give such been in default for an unreasonable
notice shall be relevant in any time before the right of rescission
issue involving the question was asserted. (Art. 1534)
whether the buyer had been in
default for an unreasonable time C. REMEDIES OF BUYER
before the resale was made. It is 1. Failure of seller to deliver
not essential to the validity of a  Art. 1598
resale that notice of the time and
place of such resale should be 2. Breach of seller’s warranty
given by the seller to the original  Under Article 1599, where there is
buyer (Art. 1533). a breach of warranty by the seller
in the sale of goods, the buyer
e. Standard of care and disqualification may, at his election, avail of the ff.
in resale remedies:
 The seller is bound to exercise 1. Accept or keep the good and
reasonable care and judgment in set up against the seller, the
making a resale, and subject to breach of warranty by way of
this requirement may make a recoupment in diminution or
resale either by public or private extinction of the price.
sale. He cannot, however, directly

Sales Reviewer
Atty. RP Santiago
2. Accept or keep the goods and personal property the price of which is
maintain an action against the payable in installments.
seller for damages for the
breach of warranty a. When sale on installments
3. Refuse to accept the goods,  Levy Hermanos, Inc. v. Gervacio: the
and maintain an action against provisions of the Recto Law cannot
the seller for damages for apply to a sale where there is an initial
breach of warranty payment, and the balance payable in
4. Rescind the contract of sale, the future, because the same is not a
and refuse to receive the sale on installment but actually a
goods or if the goods have “straight sale.” Since such a sale is not
already been received, return covered by the Recto Law, the barring
or offer to return them to the effects of the law cannot be made to
seller and recover the price or apply, and the seller may recover the
any part thereof which has unpaid balance of the purchase price
been paid. against the buyer even when the latter
shall have lost by foreclosure the
 When the buyer has claimed and subject matter of the sale. The Court
been granted a remedy in any of held that when there is only one
these ways, no other remedy can payment to be paid in the future, there
thereafter be granted, without is not basis to apply the Recto Law,
prejudice to the buyer’s right to since under the language of then Article
rescind, even if previously he has 1454-A, the buyer needs to have
chosen specific performance when defaulted in the payment of two or
fulfillment has become impossible. more installments to allow the seller to
rescind or foreclose on the chattel
3. Suspension of payments in anticipation mortgage.
of breach
 Art. 1590 b. Loans and Financing Transactions
 The provisions of the Recto Law are
a. Remedy of buyer for pending suit applicable to financing transactions
o The pendency of suit over the derived or arising from sales of
subject matter of the sale movables on installments, even if the
justifies the buyer in underlying contract at issue is a loan
suspending payment of the because the promissory note had been
balance of the purchase price assigned or negotiated by the original
by reason of aforesaid seller.
vindicatory action filed against  Zayas Jr. v. Luneta Motor Company : To
it. rule otherwise would pave the way for
o The assurance made by the subverting the policy underlying Article
seller that the buyer did not 1484 on the foreclosure of chattel
have to worry about the case, mortgages over personal property sold
because it was pure and on installment basis.
simple harassment, is not the  When the seller assigns his credit to
kind of guaranty contemplated another person, the latter may likewise
under the exceptive clause in avail of any of the above remedies. In
Art. 1590 wherein the buyer is other words, having chosen any of the
bound to make payment even aforementioned remedies, the creditor
with the existence of may not thereafter exercise any option
vindicatory action if the seller unless the chosen alternative proves to
should give security for the be ineffectual or unavailing due to no
return of the price. fault on his part.
 In all other cases, where the financing
D. RECTO LAW: SALES OF MOVABLES ON transaction is not derived from a sale,
INSTALLMENTS the provisions of the Recto Law do NOT
apply. The provisions of Article 1484
1. Coverage of the law cannot be applied by analogy or by
 Art. 1484 provides for the remedies of a equity since the provisions apply to a
seller in contracts of sale of personal sale on installments.
property by installments, and incorporates
the provisions of Act. No. 4122 passed in 2. Rationale of Recto Law
1939, known as the “Installment Sales Law”  The object of the Recto Law was to remedy
or the “Recto Law.” the abuses committed in connection with
 Article 1484 -> the vendor may exercise the the foreclosure of chattel mortgages and
following remedies in a contract of sale of was meant to prevent mortgagees from

Sales Reviewer
Atty. RP Santiago
seizing the mortgaged property, buying it a considered as having barred the resort to
foreclosure sale for a low price, and then either the remedies of rescission or
bringing suit against the mortgagor for a foreclosure.
sufficiency judgment.  The mere fact that the seller secured
possession of the property subject of the
3. Remedies provided under Article 1484 sale by installments did NOT necessarily
mean that the seller would resort to a
a. Nature of the remedies under Article 1484 foreclosure of the mortgage constituted
 Article 1484 -> should the buyer of a thereon.
personal property default in the payment of
two or more agreed installments, the article 5. Remedy of rescission
provides that the vendor or seller has the  When the seller chooses the remedy of
option to avail any of the 3 remedies. rescission, then generally, he is under
 The remedies under Article 1484 have been obligation to make restitution, which would
recognized as alternative, NOT cumulative, include the return of any amount of the
in that the exercise of one would bar the purchase price that the buyer may have
exercise of the others. paid.
 The remedies cannot also be pursued  Note: Art. 1486
simultaneously, as when a complaint is filed  The stipulation of the forfeiture of the
to exact fulfillment of the obligation, to amounts paid by the buyer in case of
seize the property purchased and to rescission can also be considered a measure
foreclose the mortgage executed thereof. of recompense for damages suffered by the
 Borbon II v. Servicewide Specialists, Inc. : seller, as this is more rationale since when
The creditor may not thereafter exercise the forfeiture becomes unconscionable, the
any other option, unless the chosen courts may reduce the effect of such
alternative proves to be ineffectual or stipulation pursuant to Article 1486.
unavailing due to no fault on his part. This  Delta Motor Sales Corp. v. Niu Kim Duan : a
rule, in essence, is the difference between stipulation in a contract that the
alternative obligations on the one hand, and installments paid shall not be returned to
alternative remedies, upon the other hand, the vendee is valid insofar as the same may
where in the latter case, the choice not be unconscionable under the
generally becomes conclusive upon the circumstances.
exercise of the remedy.
a. When rescission deemed chosen
b. Non-mixing of effects of remedies  The general rule is that the seller is
 Article 1484 actually has 2 levels of barring deemed to have chosen the remedy of
effects: the first level on the choice of rescission, and can no longer avail of
remedies (vertical); and the second level, the other 2 remedies under Article
on the non-recovery of the unpaid balance 1484, when he has clearly indicated to
of the price when it comes to the remedies end the contract, such as when: (1) he
of rescission and foreclosure (horizontal). sends a notice of rescission, or (2)
 There can be no mixing of the effects of the takes possession of the subject matter,
remedies provided in Article 1484. or (3) when he files an action for
 The rule is that in installment sales, if the rescission.
action instituted is for specific performance
and the mortgaged property is subsequently b. Barring effect of rescission
attached and sold, the sale does not  The present version of the Recto Law
amount to a foreclosure of the mortgage. under Article 1484 only provides for a
barring on recovery of balance only
4. Remedy of Specific performance when it comes to the remedy of
 GR: When the seller has chosen specific foreclosure.
performance, he can no longer seek  Although no barring effect is expressly
rescission nor foreclosure of the chattel provided for the remedy of rescission
mortgage constituted on the thing sold. under Art. 1484, the same is implicit
 EX: However, even if the seller had chosen from the nature of the remedy of
specific performance, but the same has rescission, which requires mutual
become impossible, the seller may still restitution.
choose rescission pursuant to Article 1191.  Where there is no stipulation to the
 The seller is deemed to have chosen specific contrary, the seller is even obliged to
performance to foreclose the resort to the return any portion of the purchase price
two remedies under Article 1484, when he he received from the buyer, although
files an action in court for recovery. he can recover damages.
 Generally, the mere sending of demand  Perhaps it was a good judgment to limit
letters to the buyer to pay the balance of the statutory barring effect of Article
the purchase price should NOT be 1484 to the remedy of foreclosure and

Sales Reviewer
Atty. RP Santiago
allowed the barring effect of rescission buyer, the seller is not obliged to refund
to continue to be governed by the very said payments after foreclosure to the
nature of the remedy itself. buyer.
Rescission Foreclosure c. Barring effect on other securities given for

The two remedies are not the same, and in payment of price
fact seek to achieve opposite results  Cruz v. Filipinas Investment & Finance
Seeks to cancel the Seeks to pursue and Corp.: Where the seller had already
contract and to realize on the foreclosed on the chattel mortgage
waive further claim purchase price of the constituted on the subject property of the
on the purchase contract of sale sale, it sought to recover the deficiency
price judgment by foreclosing on the real estate
Allows the non- The complete barring mortgage constituted by third-party
defaulting party in a effect on the remedy mortgagors, on the ground that Article 1484
reciprocal obligation of foreclosure under prohibited further action “against the
to recover damages, the Recto Law covers purchaser” only, the court held that the
precisely to make any and all further seller could NO longer proceed to foreclose
him again whole claims against the on the real estate mortgage pursuant to the
resulting from the buyer, even for barring effect provided under Article 1484.
breach of the attorney’s fees and The court also held that the further “action”
defaulting party stipulated damages being barred under Article 1484 is not
and interests limited to judicial proceedings but should
include extrajudicial proceedings by virtue
of which the seller may be enabled to exact
6. Foreclosure of Chattel Mortgage constituted recovery of the supposed unsatisfied
on subject property balance of the purchase price from the
purchaser or his privy.
a. When remedy of foreclosure deemed chosen  Ridad v. Filipinas Investment and Finance
 When shall have chosen to foreclose on the Corp: Held that if under the Cruz doctrine a
mortgage constituted on the subject matter seller is prohibited from having a recourse
of the sale, he can no longer seek neither against the additional security put up by a
the remedies of specific performance nor third party insofar as how the burden would
rescission. ultimately fall on the buyer himself is
 Note: an action for foreclosure seeks the concerned, there is no ground why such
same objective as an action for specific seller should not likewise be precluded from
performance -> to recover from the buyer further extrajudicially foreclosing the
the price agreed upon in the contract of additional security put up by the buyer
sale. himself.
 Although generally, the filing of an action  What would be the effect if, instead of
for foreclosure should be the point in which proceeding first on the foreclosure of the
the seller is deemed to have chosen such chattel mortgage constituted on the subject
remedy, and at which time he can no longer matter of the sale, the seller should first
resort to either the remedies of specific proceed to foreclose on the real estate
performance or rescission, yet the Supreme mortgage constituted by a third-party
Court has held that the point by which the mortgagor, and should there be deficiency
seller is deemed to have chosen the remedy judgment, then and only then should the
of foreclosure is only at the time of actual seller proceed to foreclose on the chattel
sale of the subject property at public mortgage?
auction pursuant to the foreclosure  Borbon II v. Servicewide Specialists, Inc.: in
proceedings commenced. the vent that the seller-mortgagee first
seeks the enforcement of the additional
b. Barring effect of foreclosure mortgages, guarantees, or other security
 It is the foreclosure and actual sale at public arrangement, he must then be held to have
auction of the mortgaged chattel that shall lost by waiver or non-choice his lien on the
bar further recovery by the seller of any chattel mortgage of the personal property
balance on the purchaser’s outstanding sold by and mortgaged back to him,
obligation not satisfied by the sale. Prior to although, similar to an action for specific
that point in time, the seller has every right performance, he may still levy on it.
to receive payments on the unpaid balance
of the price from the buyer. d. Extent of barring effect
 Northern Motors, Inc. v. Sapinoso: Although  It follows that in enacting the present Civil
the seller had already filed an action for Code, and adopting the present version of
foreclosure, if prior to the actual sale of the Article 1484 which limits the right of to “any
subject property at public auction, the seller unpaid balance of the price,” then clearly
had received further payments from the the barring effect of the present version of

Sales Reviewer
Atty. RP Santiago
the Recto Law is only on the purchase price, Article 1484 is meant to cover
and cannot cover stipulation in the contract purported lease of personal property
for damages, interests, and attorney’s fees. with option to purchase and are
 Nevertheless, current jurisprudence upholds considered a circumvention of the
the full barring effect on recovery even of prohibition under Article 1484 in order
the present language of Article 1484. to obviate the need to constitute a
chattel mortgage over the movable
e. Perverse buyer-mortgager sold.
 Filipinas Investment & Finance Corp. v.  In case of purported contracts of lease
Ridad: By way of exception to the complete with option to buy, the taking back of
barring effect on the remedy of foreclosure, possession or enjoyment of the leased
the court held that when a defaulting buyer- movable by the seller-lessor would
mortgagor refuses to surrender the chattel amount to both a foreclosure that bars
to the seller to allow the latter to be able to all other actions of whatever nature,
proceed with the foreclosure, then the and not rescission that would still
seller, even after actual foreclosure, should authorize the seller the right to recover
be allowed to recover expenses and damages to make him whole.
attorney’s fees incurred in trying to obtain  Elisco Tool Manufacturing Corp. v. CA:
possession of the chattel. If the main purpose for seeking
 A mere demand to surrender the object recovery of the personal property under
which is not heeded by the mortgagor will a writ of replevin was merely to ensure
not amount to a foreclosure, but the enforcement of the remedy of specific
repossession thereof by the vendor- performance under Article 1484 (1),
mortgagee would have the effect of there would be no barring effect by
foreclosure. reason of the enforcement of the writ.
Therefore, not every deprivation of
E. CONTRACTS TO SELL MOVABLES possession would result in producing
 When the contract governing the sale of the barring effect under Article 1485 of
movables is a contract to sell, then the rules the Civil Code.
on rescission and substantial breach are not  By and large, it seems to be thinking of
applicable, since when the suspensive the SC that a sale of movables on
condition upon which the contract is based installment, when structured as a lease
fails to materialize, it would extinguish the with option to purchase is equivalent to
contract, and consequently there is no a security arrangement whereby the
contract to rescind. subject movables are mortgaged by the
 Nevertheless, the provisions of Article 1597 buyer to the seller. Consequently, when
would apply which would grant the seller the purported lessor takes possession
the right to “rescind” the contract “by giving of the subject movables, the same is
notice of his election to do so to the buyer.” treated legally as a foreclosure and the
barring effect applicable to foreclosure
F. LEASE WITH OPTION TO PURCHASE remedy, not rescission, is given
 Note: Article 1485 -> cross-reference to application.
Article 1484
 Note: Article 1486 IN CASE OF IMMOVABLES
 The SC has recognized that sellers who do
not wish to enter into conditional contracts A. REMEDIES OF SELLER
of sale have often resorted to lease with
option to purchase, but that nevertheless, 1. Anticipatory breach
the underlying contract would not prevent  Art. 1591
the transfer of ownership of the subject  Should such ground not exist, the
matter to the buyer-lessee upon fulfillment provisions of Art. 1191 shall be
of the condition of the full payment of the observed, which means that upon
“rents.” substantial breach by the buyer for
failure to comply with his obligation
a. What is the barring effect on such to pay the price when due, the
contracts? seller may sue for rescission of the
 The issue that arises therefore when it contract of sale.
comes to purported contracts of lease
with option to purchase is whether the 2. Failure of buyer to pay price
taking back of possession or enjoyment  The failure of the buyer to pay the
of the property leased as treated by price in full within the fixed period
Article 1485 carries the concept of does not, by itself, bar the transfer
rescission or foreclosure. of ownership or possession, much
 Filinvest Credit Corp. v. CA: the less dissolve the contract of sale.
rationale behind the Recto Law found in

Sales Reviewer
Atty. RP Santiago
 On failure of the buyer to pay the

price, the seller has the option b. Retroactive application of PD 957
under Article 1592 to rescind the  Eugenio v. Executive Secretary Franklin
contract of sale upon judicial or M. Drilon: The Court held that the
notarial demand. failure to develop a subdivision
 Although Article 1592 also provides constitute legal justification for the
that “after the demand of the non-payment of amortization by the
seller, the court may not grant the buyer on installment under the land
buyer a new term,” nevertheless in purchase agreements entered into
cases of residential immovables, PRIOR to the enactment of PD 957.
the SC has tended to interpret  PNB v. Office of the Presidnet: The
Article 1592 liberally in favor of the Court held that the buyer of a property
buyer to give him every at a foreclosure sale may not
opportunity to comply with his dispossess prior purchasers on
obligation and proceed to take the installments of individual lots therein,
subject immovable. nor to compel them to pay again for the
 Luzon Brokerage v. Maritime Bldg.: lots which they previously bought from
The Court held that Article 1592 the defaulting mortgagor-subdivision
has no application to a contract to developer, based on the provisions of
sell. The said article applies only to PD 957 which may even be applied
ordinary sale transferring retroactively.
ownership simultaneously with the
delivery of the real property sold, 3. Right to Grace Period Stipulated
but not to one in which the seller  When a grace period is provided for in the
retained ownership of the contract of sale, it should be construed as a
immovable object of the sale. right, not an obligation of the debtor, and
when unconditionally conferred, the grace
B. REMEDIES OF BUYER period is effective without further need of
demand either calling for the payment of
1. Suspension of payment the obligation or for honoring the right.
 Art. 1590
C. MACEDA LAW: SALES OF REAL ESTATE ON
2. In case of subdivision or condominium INSTALLMENTS
projects  RA 6552 -> “Realty Installment Buyer
 Sections 23 an d24 of PD 957 provide that Protection Act” (Maceda Law)
no installment payments made by the buyer  Provides for certain protection to particular
in a subdivision or condominium project for buyers of real estate payable on
the lot or unit he contracts to buy shall be installments.
forfeited in favor of the owner or developer  Luzon Brokerage v. Maritime Bldg : Viewed
when the buyer, after due notice to the the enactment of the Maceda Law as a
owner or developer, desists from further confirmation of its jurisprudential rulings
payment due to the failure of the owner or that recognizes the seller’s right of
developer to develop the subdivision or cancellation of sale on installments of
condominium project according to the industrial and commercial properties with
approved plans and within the time limit for full retention of previous payments.
complying with the same. The sections also  Rillo v. CA: Held that in case of contract to
grant to the buyer the option to be sell land, the applicable law is the Maceda
reimbursed the total amount paid. Law which recognizes the conditional sale of
 Relucio v. Brillante-Garfin: held that the all kinds of real estate, whether industrial,
decree vests upon the buyer the option to commercial, or residential, the right of the
demand reimbursement of the total amount seller to cancel the contract upon non-
paid, or to wait for further development of payment of an installment by the buyer
the subdivision or condominium project; which is simply an event that prevents the
and when the latter opts for the latter obligation of the seller to convey title from
alternative by waiting for the proper acquiring binding force.
development of the site, he may not be
ousted from the subdivision. 1. Transactions covered
 It should be noted that the Maceda Law
a. Notice required under Sec. 23 of PD 957 does not cover all sales of realty on
 Sec. 23 of PD 957 does not require that installments, but primarily residential real
a notice be given first by the buyer to estate.
the seller before a demand for refund  Maceda Law covers not only “sales” on
can be made as the notice and demand installments of real estate, but also
can be made in the same letter or “financing” of such acquisitions.
communication.

Sales Reviewer
Atty. RP Santiago
 It expressly covers “all transactions or period for every one year of

contracts involving sale or financing of real installment payments
estate on installment payments, including 2. If the contract is cancelled, the
residential condominium apartments.” seller shall refund to the buyer
 Unlike Article 1592 of the Civil Code, which the cash surrender value of
the SC has interpreted not to be applicable the payments on the property
to contracts to sell, the Maceda Law equivalent to 50% of the total
includes both contracts of sale and contracts payments made and, after five
to sell. years of installments, an
 Maceda Law adopts the same definition of additional 5% every year but
“sale by installments” for sales of movables not to exceed 90% of the total
by installments, which should involve at payments made.
least two installments to be paid in the
future at the time of the perfection of the b. Exercise of grace period
contract.  The right to make use of the grace
period can only be exercised by the
a. Maceda Law Covers Contracts to Sell buyer only once in every 5 years of the
 The employment of the term life of the contract and its extensions, if
“cancellation” under the Maceda Law any.
clearly indicates that it covers contracts  Down payments, deposits, or options
to sell residential real estate on on the contract shall be included in the
installments. computation of the total number of
installments made.
2. Transactions excluded from coverage of law
a. Sales covering industrial c. How cancellation of the contract can be
lots effected
b. Sales covering  The actual cancellation of the contract
commercial buildings (and commercial lots shall take place after 30 days from
by implication) receipt by the buyer of the notice of
c. Sales to tenants under cancellation or the demand for
agrarian reform laws rescission of the contract by a notarial
act and upon full payment of the cash
 The enumeration is not exclusive surrender value to the buyer.
3. Maceda Law cannot be invoked by highest d. Less than two years installments paid
bidder in foreclosure proceedings  In case where less than 2 years of
 The SC has ruled that the terms of the installments were paid, the buyer shall
Maceda Law cannot be invoked by a person still be entitled to a grace period of 60
or entity who acquired the subdivision lots days from the date the installment
in a foreclosure sale on the mortgaged became due.
constituted thereon by the developer. Such  If the buyer fails to pay the
person or entity, although binding itself to installments due at the expiration of
the terms of the contract of sale, is not the the grace period, the seller may cancel
real party to the original installment sales. the contract 30 days from receipt by
the buyer of the notice of cancellation
4. Rights granted or the demand for rescission of the
 The rights granted to a buyer of real estate contract by a notarial act.
in a sale or financing covered by the Maceda
Law, depend on whether or not he has paid e. Compensation rule on amortization
less than or more than two years of payments
installments.  Leano v. CA: although the contract to
sell allows a total of 10 years within
a. At least two years installment paid which to pay the purchase price,
 Where the buyer has paid at least 2 nevertheless, the buyer cannot ignore
years of installments, the buyer is the stipulation on the monthly
entitled to the following rights in case amortization payments required under
he defaults in the payments of the contract by claiming that the 10
succeeding installments: year period within which to pay has not
1. To pay, without additional elapsed. When the buyer fails to pay
interest, the unpaid any monthly amortization, he is under
installments due within the Article 1169 already in default and
total grace period earned by liable for damages stipulated in the
him, which is hereby fixed at contract. Nevertheless, the Court held
the rate of one month grace that the default committed by the
buyer in respect of the obligation could

Sales Reviewer
Atty. RP Santiago
be compensated by the interest and period and before actual cancellation of the
surcharges imposed upon the buyer contract. The deed of sale assignment shall
under the contract. be done by notarial act.
b. To pay in advance any installment or the
5. Interpretation of grace period and mode of full unpaid balance of the purchase price
cancellation any time without interest and to have such
 Although a formal reading of the provisions of full payment of the purchase price
the Maceda Law would imply that once a annotated in the certificate of title covering
buyer fails to avail of the grace period the property.
granted to him, then either rescission or
cancellation of the contract becomes a matter 9. Effect of contrary stipulations
of right on the part of the seller, provided he  Under Section 7 of the Maceda Law -> NULL
complies with the procedure provided for in AND VOID
the Law, the SC has interpreted it otherwise.
 McLaughlin v. CA: would provide for two 10. Maceda Law cannot be availed of by the
grace periods: the first grace period is the developer
one provided for expressly by the law, which  Lagandaon v. CA: The Court held that the
is a minimum of 60 days, and the other Maceda Law has no application to protect
would be the period before rescission or the developer or one who succeeds the
cancellation actually takes effect. The developer.
McLaughlin ruling would therefore encourage
buyers of real estate on installments covered CANCELLATION OF JUDICIAL SALE
by the Maceda Law not to take advantage of  Where a judicial sale is voided without fault
the statutory grace period, because even with of the purchaser, the latter is entitled to
its expiration, they have a jurisprudential reimbursement of the purchase money paid
grace period which allows them to prevent by him.
the rescission or cancellation of their  A judicial sale can only be set aside upon
contracts even after they have received the the return to the buyer of the purchase
demand for rescission or notice of price with simple interest, together with all
cancellation, by paying up the unpaid balance sums paid out by him in improvements
prior to the expiration of the 30-day period introduced on the property taxes, and other
provided. expenses by him.
 Olympia Housing v. Panasiatic Travel Corp :
recently held that the Maceda Law recognizes
the right of the seller to cancel the contract CHAPTER 11
but any such cancellation must be done in RESCISSION IN SALES CONTRACTS COVERING
conformity with the requirements therein IMMOVABLES: CONTRACT OF SALE VERSUS
prescribed. The Court held that in addition to CONTRACT TO SELL
the notarial act of rescission, the seller is
required to refund to the buyer the cash REMEDY OF RESCISSION
surrender value of the payments on the
property and that the actual cancellation of 1. Rescission covered by chapter
the contract can only be deemed to take  Art. 1191
place upon the expiry of a 30-day period  Art. 1592 – in case of sale of immovables
following the receipt by the buyer of the on installments
notice of cancellation or demand for  Art. 1592 applies to all sales of immovables
rescission by a notarial act and the full even when there is no stipulation on
payment of cash surrender value. automatic rescission, because of the use of
the phrase “even though.”
6. “Role” of Maceda Law  “To rescind” – to declare a contract VOID at
 “Policy statement” of the state in protecting its inception and to put on end to it as
the interests of buyers of residential real though it never was. It is not merely to
estate on installments. terminate it and release the parties from
further obligation to each other, but to
7. Retroactive application of law abrogate it from the beginning and to
 Siska Dev. Corp. v. Office of the President : restore the parties to their relative positions
The SC extended the formal requirements as if no contract has been made.
of rescission under the Maceda Law to apply
even to contracts entered into prior to the a. Legal basis of rescission
effectivity of the Maceda Law.  The legal basis of rescission by a party
in reciprocal obligations is “breach” on
8. Other rights granted to buyer under the law the part of the other party or his failure
a. To sell his rights or assign the same to to comply with his obligation.
another person or to reinstate the contract  The breach contemplated in Article
by updating the account during the grace 1191 is the obligor’s failure to comply

Sales Reviewer
Atty. RP Santiago
with an obligation already extant, and cases under Article rescission for lesion
does not cover the failure of a condition 1191 enumerated in Article
to render binding that obligation 1381
b. Restitution as a consequence of a. Rescission of contract of sale by a holder

rescission of right of first refusal
 The last paragraph in Art. 1191 makes  Guzman, Bocaling & Co. v. Bonnevie : A
a cross-reference to Articles 1385 and person in whose favor a right of first refusal
1388 which apply to rescissible or first priority exists over a subject parcel
contracts, where the basis of rescission of land has legal standing to file an action
is “lesion” and not breach of contract. for rescission of a contract of sale executed
over the subject property in favor of a third
c. When forfeiture of payments allowed in person. According to Tolentino, rescission is
rescission a remedy granted by law to the contracting
 Forfeiture of the payments made by the parties and even to third persons to secure
non-defaulting party is allowed as a the reparation for the damages caused to
consequence of rescission, only when them by the contract. The “rescission”
such effect is expressly provided for in covered in this case is one based on lesion,
the contract. and not rescission under Article 1191.
 Note: Art. 1486  Articles 1380 and 1381 (3) – a contract
otherwise valid may nonetheless be
2. “Rescission” not covered subsequently rescinded by reason of injury
 This chapter does not cover the remedy of to third persons, like creditors.
“rescission” as it pertains to rescissible  The remedy of rescission or resolution
contracts defined under Article 1381 where under Article 1191 can only be availed of by
economic damage or lesion is the main a non-defaulting party to the contract.
consideration for allowing the rescission of
what otherwise is a valid contract. b. When principles of rescission for
rescissible contract applied to resolution of
Remedy of Remedy of sale
rescission in Rescission under  Suria v. Intermediate Appellate Court :
rescissible contracts Art. 1191 In ruling that the sellers cannot avail of
Subsidiary in nature Principal in nature and the remedy of rescission under Art.
and cannot be the legal premise of 1191, the reasoning used is flawed
instituted except when which is breach of because it fails to take into
the party suffering the obligation. consideration that a mortgage contract
damage has no other is merely a subsidiary contract, and
legal means to obtain cannot exist without a principal
reparation for the contract. The principal contract is the
damage sustained. obligation to pay the price which is part
Art. 1385 par. 1 – principle of the remedy of and parcel of the contract of sale
rescission pertaining to rescissible contracts entered into between the parties.
applies equally to rescission covered by Art.
1191 c. When rescission should properly have
been applied
3. Need to know which remedy is applicable  Uy v. CA: The Court held that the
rescission effected by the buyer was
Rescission under Rescission for NOT the appropriate remedy since in
Art. 1191 rescissible contracts such case, the seller had delivered and
Rescission on account Rescission by reason did not commit any breach of his
of breach of stipulation of lesion or economic obligation, and the buyer did not suffer
is not predicated on prejudice, the cause of any injury. The better solution for the
injury to economic action is subordinated Court would have been to have allowed
interests of the party to the existence of that rescission on the ground that it violated
plaintiff but on the prejudice, because it is the warranty on the indicated use of
breach of faith by the raison d’ etre as the subject matter. Rescission may
defendant that violates well as the measure of have also been justified for breach of
the reciprocity the right to rescind. warranty against hidden defects.
between them. This  Art. 1545 par. 1 -> entitle the other
rescission is a principal party to rescind.
action retaliatory in
character
The operation of The operation of
Articles 1383 and 1384 Articles 1383 and 1384
DOES NOT apply to is limited to cases of

Sales Reviewer
Atty. RP Santiago
d. Recent affirmation of difference between  Art. 1191 – the courts “shall decree the
two remedies rescission claimed, unless there be just
cause authorizing the fixing of the period”
Rescission (Art. Rescission (Art.  Spouses Benito v. Saguitan-Ruiz: a seller
1381) 1191) cannot unilaterally and extrajudicially
Remedy granted by Refers to rescission rescind a contract of sale where there is no
law to the contracting applicable to express stipulation authorizing it; and that
parties and event to reciprocal obligations. unilateral rescission will not be judicially
third persons to favored or allowed if the breach is not
secure the reparation substantial and fundamental to the
of damages caused to fulfillment of the obligation.
them by a contract,
even if this should be a. When extrajudicial rescission allowed
valid, by restoration  Pangilinan v. CA: There is nothing in
of things to their this law which prohibits the parties
condition at the from entering into an agreement that a
moment prior to the violation of the terms of the contract
celebration of the would cause its cancellation even
contract. It implies a without court intervention. The
contract, which even rationale for the foregoing is that in
if initially valid, contracts providing for automatic
produces a lesion or revocation, judicial intervention is
pecuniary damage to necessary not for purposes of obtaining
someone a judicial declaration of rescinding a
Rescission underArt. 1191 uses the contract already deemed rescinded by
Article 1383 is
term “rescission” the virtue of an agreement providing for
subsidiary action
original term used in rescission without judicial intervention,
limited to cases of the old Civil Code was but in order to determine whether or
rescission for lesion “resolution” not rescission was proper.
under Art. 1381 Resolution is a
principal action which 5. Rescission requires positive act
is based on breach of  Rescission is a remedy that would have no
party automatic application, even when the
Although both presuppose contracts validly factual basis thereof be present in the
entered into and subsisting and both require situation.
mutual restitution when proper  Rescission requires a positive act on the
part of the injured party, since it is legally
possible that the injured party may waive
e. Rescission distinction from an action for rescission and proceed with specific
reconveyance performance.
 Iringan v. CA: held that a mutual
Rescission Action for agreement in a sale allowing rescission
reconveyance under Article 1191 is valid, but it does not
Judicial resolution of a Mutual restitution is grant “automatic rescission,” since
contract gives rise to not necessarily the rescission must be invoked judicially, and
mutual restitution situation that arises in the courts are granted power to deny
an action for rescission should there by grounds to justify
reconveyance the allowance of a term for the performance
In an action for rescission, unlike in an action of the obligation. The party entitled to
for reconveyance predicated on an extrajudicial rescind should apply to the court for a
rescission (rescission by notarial act), the decree of rescission. The operative act
courts, instead of decreeing rescission may which produces the resolution of the
authorize for a just cause the fixing of a period contract is the decree of the court and not
the mere act of the vendor.
6. Bases upon which rescission may prosper

4. Rescission generally judicial in nature
 The power to rescind under Article 1191 is
 Apart from the issue of whether rescission
based ONLY on substantial breach > Art.
must still be exercised as a positive act
1234
when the reciprocal contract is only at the
 It is within the power of the courts to fix a
executory stage, the power to rescind is
period to allow the defaulting party to
generally judicial in nature, and therefore, a
comply with his obligation, even when the
rightful party may demand rescission as
rightful party has the power to rescind.
against the defaulting party only by seeking
 The effect of rescission is mutual restitution,
remedy from the courts.
pursuant to provisions of Article 1385, as

Sales Reviewer
Atty. RP Santiago
cross-referenced to the last paragraph of CONTRACT OF SALE VERSUS CONTRACT TO

Article 1991. SELL
a. Specific law applicable for rescission 1. Importance of proper characterization of

involving sale of real estate contract to sell
 Articles 1591 and 1592 of the Civil  It is the author’s position that both a
Code contract of sale and a contract to sell are
 Maceda Law governed by the genus “sale” as defined by
 Section 23 of PD 957 Article 1458 of the Civil Code.
 Article 1479: “a promise to buy and sell a
7. Only injured party may demand for determinate thing for a price certain is
rescission reciprocally demandable,” which is
 Romeo v. CA: A perfected contract of sale obviously covers a contract to sell.
may either be absolute or conditional. When  Contracts to sell are primarily subject o
ownership is retained until the fulfillment of suspensive conditions, and there must also
a positive condition, the breach of the be governed by the doctrines pertaining to
condition will simply prevent the duty to conditional obligations.
convey title from acquiring an obligatory
force. If the condition is imposed on an 2. Recent rulings that consider contract to sell
obligation of a party which is not complied not covered by the genus sale
with, the other party may either refuse to  Coronel v. CA: Contract to sell may not be
proceed or waive said condition. Where the considered a contract of sale because the
condition is imposed on the perfection of first essential is lacking, which is consent or
the contract itself, the failure of such meeting of the minds, that is consent to
condition would prevent the juridical transfer ownership in exchange for the
relation itself from coming into existence. price. Coronel would consider a contract to
 Under Art. 1545 of the Civil code, when the sell as a bilateral contract, constituted by a
condition is imposed on the performance of real obligation on the part of the buyer to
an obligation, the non-happening of the pay the purchase price, and only a personal
condition may be waived by the injured obligation on the part of the seller to enter
party in spite of the insistence of the into a contract of sale. According to
obligor. Coronel, the happening of a suspensive
condition does not give rise to an executory
8. When installment provides for interests contract of sale subject to an action for
 When a contract provides for a specified specific performance, since the obligation of
amount of installments and the payment of the seller is to enter an contract of sale,
interests, Article 1253 of the Civil Code which is an obligation “to do.” This
requires that each payment actually made characterization of contracts to sell relegate
must first be applied to the payment of them in the same category as option
interest due before any application to the contracts and rights of first refusal, where
principal. being constituted only of personal
 In a contract involving installments with obligations, their breach would not give rise
interest chargeable against the remaining to an action for specific performance.
balance of the obligation, it is the duty of
the creditor-seller to inform the debtor- 3. Rulings characterizing contracts to sell
buyer of the amount of the interest that a. Rationale for parties entering into
falls due and that is applying the installment contracts to sell
payments to cover said interest. Otherwise,  Coronel v. CA: to protect the seller against
the creditor cannot apply the payments to a buyer who intends to buy the property
the interest and then hold the debtor in in installment by withholding ownership
default for non-payment of installments on over the property until the buyer effects
the principal. full payment therefor.
9. No standing of lender b. Requisite stipulations/agreements in

 Creditors do not have such material interest contract to sell
as to allow them to sue for rescission of a  The usual form of such an agreement is
contract of sale – theirs is only a personal making the fulfillment of the buyer’s
right to receive payment for the loan, not obligation to pay in full the purchase
real right over the property subject of the price as the condition upon which:
deed of sale. 1. There shall then arise a
perfected contract
2. The obligation of the seller “to
sell” the subject matter of the
sale would begin to arise

Sales Reviewer
Atty. RP Santiago
3. The obligation of the seller to

transfer ownership of the d. Intended effects of condition determine
subject matter beings to arise. nature of sale
Contract of Sale Contract to Sell
 It would seem that from Coronel v. CA, The non-payment of The payment in full
from the standpoint of perfection, that the price on the of the price is a
the first two above-enumerated part of the buyer or positive suspensive
conditions would give rise to a contract the non-delivery of condition, the non-
to sell, while the third type of condition the subject matter happening of which
would give rise to a conditional contract on the part of the prevents the
of sale. seller, would obligation to sell on
 Unfortunately, the SC has equated constitute a the part of the seller
stipulations (which are looked into at the resolutory condition from materializing at
perfection stage of the contract) with and may therefore all.
actual transfer of ownership, which be the legal basis to
dwells into the performance of the rescind the
obligations under the contract. What contract.
determines the nature of the contract, The NATURE of the conditions agreed upon
and therefore, the available remedies in determines whether the contract is a
case of breach, should be the existence contract to sell or a contract of sale
or non-existence of the requisite
stipulations at the time of perfection, and
not by what the parties did nor fail to do e. Passing of ownership by delivery of
during the performance stage. subject matter
 Tradition does not determine the nature of Contract of Sale Contract to Sell
the contract, but is pursed only as a Ownership of the The delivery of the
consequence of the contract. If the seller subject matter subject matter does
refuses to deliver in spite of a clear generally passes to NOT pass ownership
obligation to do so, that would be a the buyer as a to the buyer even
breach that should entitle the buyer to result of the though he possesses
rescind the contract. On the other hand, tradition thereof the same, under the
when there is an express stipulation that stipulation that
seller will not transfer ownership until ownership shall pass
buyer shall have fully paid the purchase only upon full
price, the refusal of the seller to effect payment of the
tradition until the buyer shall have purchase price.
complied with his own obligation, would
not authorize the buyer to rescind the Note: in other cases,
contract for then there would be no even in the absence
breach. of such express
stipulation, when it is
c. Agreements as to deed of absolute sale clearly evidenced
 The SC has considered important that the seller did
factors in determining whether the not intend to transfer
contract is one of sale or contract to title to the buyer
sell, whether there is a stipulation or until full payment of
promise that the seller shall execute a the purchase price,
deed of absolute sale upon completion the contract was still
of payment of the purchase price by deemed a contract to
the buyer, or whether the agreement sell
between the parties is embodied in a
private document.
 The absence of a formal deed of f. Remedies available in the event of non-
conveyance is taken as a strong fulfillment of condition
indication that the underlying
agreement is a contract to sell, since Contract to sell Contract of sale
there is a strong indication that the
Where the The non-happening
parties did not intend to immediately
suspensive condition of the condition
transfer title, but only transfer after full
has not been would authorize the
payment of the price. However, there
fulfilled, no further seller to rescind the
are also cases where the SC would not
remedy is necessary contract or to waive
consider such factor as determinative.
since ipso jure the the condition and
contract was seek enforcement of
extinguished by the the contract.
non-happening of

Sales Reviewer
Atty. RP Santiago
the condition. i. Summary of distinctions

Contract of sale Contract to sell
However, if there The perfection The perfection of the
has been previous thereof gives rise to contract only gives
delivery to the reciprocal rise to a reciprocal
buyer, although demandable suspensive
seller retains obligations: on the conditional obligation
ownership over the part of the seller, (i.e. non-demandable
subject matter, the obligations to obligations until the
seller still cannot transfer ownership condition happens)
take the law into his and deliver on the part of the
own hands, the possession of the seller to transfer
seller would still subject matter; on ownership, only upon
have to seek court the part of the fulfillment of the
action to recover buyer, to pay a obligation of the
possession from the price certain in buyer to pay the
buyer if the latter money or its price in full. The
refuses to equivalent. obligation of the
voluntarily return seller to transfer
the subject matter. ownership and
Such action is not deliver possession of
for rescission but the subject matter is
actually for recovery conditioned upon full
of possession payment of the price.
Note: The non-fulfillment of the condition, Consequently, in a
which would bring about breach of a conditional
contract of sale or cancellation of the obligation, the
contract to sell, should be distinguished acquisition of rights,
from the “pendency” of the happening of as well as the
the condition. extinguishment, or
loss of those already
g. Substantial breach issue relevant only in acquired, shall
contract of sale depend upon the
happening of the
Contract of sale Contract to sell event which
Rescission can be The doctrine of constitutes the
availed of only in substantial breach condition, and the
case of substantial has no application non-happening of the
breach since the non- condition, i.e., the
happening of the non-payment of the
condition ipso jure price shall extinguish
prevents the the obligation.
obligation from Delivery of the Delivery of the
arising subject matter to subject matter to the
the buyer would buyer, by express
effectively transfer provision of contract,
h. Effect of acceptance of partial payment ownership thereof does not transfer
after “breach” to the buyer, unless ownership to the
 Padilla v. Spouses Paredes: In a there is a buyer
contract to sell, the acceptance of stipulation to the
partial payment cannot be deemed a contrary
waiver of the right to cancel the In case the buyer The failure of the
contract; at best, it can only be fails to comply with buyer to comply with
considered as an act of tolerance on the his obligation to his obligation to pay
part of the seller that could not modify pay the price, the the price would
the contract, absent any written ownership amount to the non-
agreement to the effect signed by the transferred to the happening of the
parties. buyer can be suspensive condition,
revoked only upon and since ownership
the proper exercise has not been
of the remedy of transferred to the
rescission buyer, no further
legal action need be
taken when the
buyer refuses to

Sales Reviewer
Atty. RP Santiago
voluntarily surrender Delivery would By express

the subject matter to transfer agreement,
the seller. ownership to delivery of the
the buyer, and subject matter
therefore does not
4. Crux of distinction rescission must transfer
necessarily be ownership to
Contract of Contract to done judicially the buyer, and
Sale Sell since only the therefore the
A contract of sale and a contract courts can condition is not
to sell are the opposite ways of Performance grant the fulfilled (non-
approaching the same sale stage (when remedy of payment of the
transaction at the executory subject recalling purchase
stage, with respect to the matter has ownership that price), no court
obligation to transfer ownership of been has passed to intervention is
the subject matter. delivered by the buyer and needed to
The reciprocal One where the the seller to reverting it to “rescind” the
obligations reciprocal the buyer) the seller. contract since
created are obligations ownership has
deemed to be created are remained with
subject to one deemed to be the seller.
another as each subject to the
being the full payment of If court
resolutory the purchase intervention is
condition for price as necessary, it is
the other. That constituting the not for the
is why Art. normal rescission of
1191 provides suspensive the contract but
that the “power condition for for the recovery
to rescind” is the obligation of possession
implied in of the seller to from the buyer
reciprocal deliver who is not
obligations. possession entitled thereto
and/or transfer There is no practical difference in
ownership, remedies available to the innocent
although it is party in both a contract of sale
possible that Executory and a contract to sell for purposes
the suspensive stages (the of rescission, since both can be
condition may subject done extrajudicially.
take other form matter has
rather than its not been In a contract of sale, by mere
reference to the delivered to notarial notice of rescission under
full payment of the buyer) Article 1592, the contract may be
the purchase rescinded.
price.
The manner and effect of In a contract to sell, mere notice
extinguishment of obligations of cancellation would be sufficient.
subject to conditions should make
both the contract of sale and the
At perfection contract to sell basically the same GOVERNING PRINCIPLES OF RESCISSION IN
stage (no since in an obligation subject to a CONTRACTS INVOLVING IMMOVABLES
obligation has suspensive condition, the non-  Art. 1191 -> rescission of contracts in
been happening of the condition general
performed) prevents the obligation from  Articles 1591 and 1592 -> govern the power
arising, whereas in an obligation to rescind for sales of immovables
subject to a resolutory condition,  Art. 1592 -> contains the principle that the
the happening of the condition remedy of rescission requires the taking of a
extingushes in almost like manner positive act on the part of the non-defaulting
the obligation as if it never arose. party.
1. Remedy of rescission under Articles

1191 and 1592 have no application to
contract to sell
 Likewise, Article 1380 et seq. have
not application to a contract to sell,

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Atty. RP Santiago
not being included in the a violation of its terms and

enumerated contracts therein, nor is condition, at least a written notice
lesion or damage the basis upon must be sent to the defaulter
which remedy can be sought under a informing him of the same. For such
contract to sell. act is always (cancellation) is always
 Rillo v. CA: held that Articles 1191 provisional. It is always subject to
and 1592 cannot apply to a contract the scrutiny and review by the
to sell since “there can be no courts in case the alleged defaulter
rescission of an obligation that is still brings the matter to the proper
non-existent, the suspensive courts.
condition not having happened.”
 Ong v. CA: Art. 1191 is the obligor’s 4. Recent non-application of equity rulings
failure to comply with an obligation to sale of residential real estate
already extant, not a failure or  In spite of the abundance of
condition to render binding that previous decisions applying equity
obligation. Failure to pay is not even reasoning for treating a contract to
a breach but merely an event which sell as a contract of sale when the
prevents the vendor’s obligation to subject matters involve residential
convey title from acquiring binding real estate, sometimes the SC still
force. adheres to the strict rule that
substantial compliance will not be a
2. Equity resolution on contracts to sell basis to save a buyer who has failed
 Although the principle of substantial to pay the contract price in a
breach and the remedies of contract to sell.
rescission found in Articles 1191 and  Rillo v. CA: The Court recognized
1592 have no application to that since the contract between the
contracts to sell involving parties was a contract to sell, it held
immovables, the SC has applied that Articles 1191 and 1592 on
them, using the principle of equity, rescission cannot apply.
even in cases covering contracts to
sell immovables. 5. Provisions on grace period
 When in a contract to sell of real
3. Requirement of formal notice for property, there is a stipulated grace
cancellation to be effective period within which the buyer is
 Although legal provisions requiring allowed for the payment of the
notarial rescission, such as Article installments, such grace period is a
1592, have no application to right, not an obligation, of the
contracts to sell involving real debtor-buyer.
property, nevertheless, the SC has
required a minimum procedural rule 6. Extrajudicial rescission and rescission
for the “rescission” (i.e., principles applied to contract to sell
cancellation) of a contract to sell  In a contract of sale, a provision
that at least NOTICE be given by the granting the non-defaulting party a
seller to the buyer. right to rescind would be superfluous
 Had possession been transferred to because by law it is inherent in such
the buyer, even in a contract to sell, contract, under Art. 1191.
judicial action is necessary to  But whether expressed or implied in
recover the property from the buyer. a contract of sale, such remedy is
But even then, the court action is judicial in nature. Therefore, in a
not one to rescind, but for recovery contract of sale, it is essential that
of possession, and certainly notice is to be able to avail of extrajudicial
not required to have such cause of rescission, there must be a provision
action. granting the same to the seller.
 Siska Development Corp. v. Office of  The remedy of rescission in
the President: the SC reaffirmed not reciprocal contracts is not absolute.
only the necessity of notice of The third paragraph of Art. 1191 has
rescission in contracts to sell, but been interpreted to give the courts
also reaffirmed the applicability of discretionary power to allow a period
the doctrine that prohibits rescission within which a person in default may
for casual or slight breaches even be permitted to obligation upon
involving contracts to sell. which the claim for rescission is
 Cheng v. Genato: In many cases, based.
although we upheld the validity of a  However, in the case of immovables,
stipulation in a contract to sell the general provisions of Art. 1191
authorizing automatic rescission for must give way to the particular

Sales Reviewer
Atty. RP Santiago
provisions of Article 1592, which the contract “by giving notice of his
provides that when there has been a election to do to the buyer.”
demand made on the buyer for
rescission either judicially or by a THE MACEDA LAW
notarial act, “the court may not  Ra 6552 or the Maceda Law has further
grant him a new term.” blurred the basic distinction between a
 By the nature of a contract to sell, contract of sale and a contract to sell, at
however, rescission is irrelevant least in the specific types of real estate and
because the non-fulfillment of the condominium units covered by said law.
suspensive condition of full payment  By legislative injunctions, the Maceda Law
of purchase price prevents a has decreed that whether it be a contract of
contract of sale from even sale or a contract to sell, the actual rescission
materializing, and therefore there is or cancellation thereof shall take place “thirty
really nothing to resolve or rescind. days from receipt by the buyer of the notice
And certainly, any stipulation of cancellation or the demand for rescission
authorizing the seller to “rescind” of the contract by a notarial act.”
the contract to sell in the event the
buyer fails to fully pay the purchase RECAP OF RULINGS
price is a mere surplusage.
 It is in fact that in a contract of sale 1. At perfection stage
that such a stipulation must appear,
otherwise, the seller cannot a. Requisite contractual stipulations
extrajudicially rescind the contract  In a contract to sell, at perfection,
and has to go to court for such there must be a stipulation or
remedy. agreement that:
 The absence of such provision a. The ownership of the subject
granting the seller the right to matter shall remain with the
rescind extrajudicially should be seller until full payment of the
interpreted to mean that the price AND
contract is a contract to sell, and the b. A specific right is granted to
presence of that provision would the seller to extrajudicially
indicate that it is a contract of sale. rescind or cancel the contract
 What must appear in a contract in in case of default; the absence
order to make it a contract to sell is of such stipulation makes the
a stipulation that the obligation of contract one of contract of sale
the seller to transfer possession
and/or ownership of the subject  The lack of a stipulation allowing the
matter is conditioned upon the buyer seller to rescind the contract in the
fully paying the purchase price; but event the buyer fails to comply with his
not the fact that the seller can obligation to pay the purchase price
rescind if such condition does not clearly prevents the contract from
happen. being classified as a contract to sell.
 A contract of sale and a contract to  CONTRA: However, the Court has also
sell are both perfected contracts. ruled that even in the absence of such
Although the first is binding and stipulations, the contract would still be
demandable, the latter is binding but considered a contract to sell, because
with obligations subject to the absence of deeds of conveyance
suspensive conditions. covering registered land where the
 Just because earnest money has operative act of sale is registration of
been given, does not determine the deed of sale.
whether it is a contract of sale or a
contract to sell, for indeed even in a b. Stipulation on execution of deed of
contract to sell a substantial portion absolute sale
of the purchase price may have been  Where there is a stipulation or
paid, but that alone does not convert promise that the seller shall
it into a contract of sale. execute a deed of absolute sale
upon completion of payment of the
purchase price by the buyer, the
7. Blurring of principles infect contract to agreement is a contract to sell.
sell of movables  CONTRA: Where there is an
 Visayan Sawmill Company Inc. v. express stipulation that the sellers
CA: the Court held inapplicable would execute a final deed of sale
Article 1191. Nevertheless, the Court of absolute sale upon payment of
applied the provisions of Art. 1597 the balance of purchase price, still
which allows the seller to “rescind” not a contract to sell because there

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Atty. RP Santiago
is not stipulation giving the seller 3. Remedies available

the right to unilaterally rescind the
contract the moment the buyer a. When condition on price payment not
fails to pay within a fixed period. fulfilled
c. Nature of condition on payment of Contract of sale Contract to sell

price The seller losses Since ownership was
 In contract sell, payment of the ownership over the retained by the seller
price is a suspensive condition, property when until full payment of
failure of which is not a breach, previously delivered the price, since the
casual or serious, but an event that and cannot recover it contract is
prevents the obligation of the seller until and unless the extinguished, then no
to convey title from acquiring contract is resolved or action is necessary
obligatory force. rescinded other than recover of
possession in case
2. During consummation stage buyer refuses to
a. Legal effect of delivery made voluntarily deliver.
In CONDITIONAL The non-happening of
Contract of Sale Contract to Sell contract of sale, the the condition prevents
Title to the ownership is, by non-happening of the the contract from
property passes agreement, condition may be coming into existence
to the buyer upon reserved in the waived by the obligee (i.e. extinguishes the
the delivery of seller and is not to who may still seek contract) and
the thing sold pass to the buyer specific performance consequently neither
until full payment rescission nor specific
of the purchase performance may be
price. pursued
In CONDITIONAL The issue of breach is
contract of sale, the completely irrelevant
b. Legal-effect of non-payment of price basis of rescission
must be substantial
Contract of Sale Contract to Sell breach
Non-payment of Where ownership Rescission may be It becomes imperative
the purchase is retained by the pursued with forfeiture that the amounts paid
price is a breach, seller until of the amounts paid must be returned and
and when payment of the when that has been there would be no
substantial in price in full, such provided for basis upon which to
nature, would payment is a retain them since
allow the seller to positive supsensive there was no breach
rescind the sale condition, failure upon which a claim of
of which is not damage may be
really a breach but interposed.
an event that
prevents the However, based on
obligation of the equity principles, the
vendor to convey doctrine of substantial
title in accordance breach to allow
with Art. 1184 rescission and court
discretion under Art.
 CONTRA: But prior notice of such 1191 have been made
cancellation is required to make to apply to contracts
the cancellation valid and effective. to sell involving
residential immovables
 Even when the suspensive condition

has not happened, which would
extinguish thereby contract to sell,
nevertheless, such extinguishments can
only have legal effect if notice of
cancellation is given to buyer

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Atty. RP Santiago
transfer ownership obligations of the seller

b. The laws applicable over the subject as to the subject
matter of sale matter of the sale
Contract of sale Contract to sell
Though conditional, The remedies of  Ramos v. CA: held that under the “sale with
the applicable rules rescission being assumption of a mortgage” the formal
are found in Articles incompatible thereto, assumption of mortgage is a condition to
1191 and 1592 the applicable rules are the seller’s consent, so that without
providing for remedy found in Articles 1184 approval by the mortgagee, no sale is
of rescission and 1545. The issue of perfected. And that where the mortgagee
whether breach was has not approved the assumption of
casual or serious under mortgage by the buyer, the seller remains
Article 1191 is the owner and mortgagor of the property
completely irrelevant in and retains the right to redeem the
a contract to sell foreclosed property. Notice that the
gravamen of Ramos was not the perfection
 But there were instances when Article of the valid contract of sale, but rather, the
1191 was made to apply to a contract effect of transfer of ownership, which goes
to sell immovables, with application of into consummation stage.
the doctrine of substantial breach
 But the Maceda Law should always EXPRESS WARRANTIES
apply, whether it is a contract of sale or  The breach of an express warranty makes
a contract to sell, involving installment the seller liable for damages
of residential real estate and residential  Express warranty: requisites
condominium units. 1. It must be an affirmation of fact or
any promise by the seller relating to
the subject matter of the sale
CHAPTER 12 2. The natural tendency of such
CONDITIONS AND WARRANTIES affirmation or promise is to induce
the buyer to purchase the thing
CONDITIONS 3. The buyer purchases the thing
 Art. 1545 relying on such affirmation or
 Unlike in a non-fulfillment of a warranty promise thereon
which would constitute a breach of the
contract, the non-happening of the  Art. 1546
condition, although it may extinguish the
obligation in which it is based, generally IMPLIED WARRANTIES
does not amount to a breach of the contract  Implied warranties are warranties that
of sale. constitute part of every contract of sale,
 If the party has promised that the condition whether the parties were aware of them or
should not happen or be performed, the not, or whether the parties intended them
other party may also treat the non- or not.
performance of the condition as a breach of  Although only a seller is bound by the
warranty. Such stipulation would therefore implied warranties of law, nevertheless, by
elevate the condition to a warranty, and the express contractual stipulation, an agent of
non-happening of the condition would itself the seller may bind himself to such
a breach of such warranty, and entitle the warranties.
other party to sue for damages.
1. Warranty that the seller has right to sell
Condition Warranty  Art. 1547
 Although Article 1547 uses the phrase
Generally goes into Goes into the
“unless a contrary intention appears”
the root of the performance of such
there can be no legal waiver of such
existence of the obligation, and may in
warranty without changing the basic
obligation fact constitute an
nature of the relationship, for the
obligation itself
warranty on the part of the seller that
Must be stipulated by May form part of the
he has the capacity to sell, i.e, to
the parties in order to obligation or contract
transfer ownership of the subject
form part of an by provision of law,
matter pursuant to the sale, is the
obligation without the parties
essence of sale; unless it amounts to
having agreed thereto
clear assumption of risk on the part of
May attach itself either Whether express or
the buyer.
to the obligations of implied, it relates to
the seller to deliver the subject matter
possession and itself or to the

Sales Reviewer
Atty. RP Santiago
seller to the value of the thing sold

2. Warranty against eviction at the time of eviction.
 In a contract of sale, unless a contrary  Art. 1554
intention appears, there is an implied  When the waiver is of a specific
warranty on the part of the seller that case of expected eviction, the
when the ownership is to pass, the waiver has the effect of wiping out
buyer shall from that time have and the warranty as to that specific
enjoy the legal and peaceful possession risk, but not as to eviction caused
of the thing. The vendor shall answer by other reasons not covered in
for eviction even though nothing has the waiver.
been said in the contract on the  When the buyer cannot show that
subject. he is a buyer in good faith, it is not
entitled to the warranty against
a. When there is breach of warranty eviction.
against eviction
 The seller’s implied warranty against 3. Warranty against non-apparent
eviction only applies when the following servitudes
conditions are present:  Under Article 1560, the warranty shall
1. The purchaser has been apply only when the following
deprived of or evicted form the conditions are present:
whole or part of the thing sold 1. The immovable sold is
2. The eviction is by a final encumbered with any non-
judgment apparent burden or servitude,
3. The basis thereof is by virtue not mentioned in the
of a right prior to the sale agreement
made by the seller 2. The nature of such non-
4. The seller has been summoned apparent burden or servitude
and made co-defendant in the is such that it must be
suit for eviction at the instance presumed that the buyer
of the buyer would not have acquired it had
he been aware thereof
 Art. 1557  When the warrant applies, the buyer
 Art. 1549 may ask for rescission of the contract,
unless he should prefer the appropriate
b. Eviction in part remedy
 Art. 1556
a. When warranty not applicable
c. Particular causes given by law 1. If the servitude is mentioned
 Art. 1550 in the agreement
 Art. 1551 2. if the non-apparent burden or
servitude is registered in the
d. Applicability to judicial sale Registry of Deeds, unless
 Art. 1552 there is an express warranty
that the thing is free from all
e. Amounts for which seller is liable in burdens and encumbrances
case of eviction
 Art. 1555 b. Prescriptive period
 Art. 1560 (par. 2) and (par. 3)
f. Waiver of warranty and effects
thereof 4. Warranty against hidden defects
 Although Article 1548 provides that  Under Art. 1561, the seller shall be
the contracting parties to a responsible for warranty against the
contract of sale “may increase, “hidden defect” which means:
diminish, or suppress” the implied a. Only when the nature of the
warranty against eviction, hidden defect is such that it
nevertheless, the effect of waiver should render the subject
depends on the nature of such matter unfit for the use for
waiver, whether it is general or which it is intended
specific waiver, and whether done b. Should diminish its fitness for
in good faith or bad faith on the such use to such an extent
part of the seller. that, had the buyer been
 Note: Art. 1553 aware thereof, he would not
 A general waiver of the warranty have acquired it or would have
does not create the effect of waiver given a lower price for it.
but merely limits the liability of the

Sales Reviewer
Atty. RP Santiago
 The seller is not answerable for patent

defects or those which are visible, or c. Sale of animals with contagious
even for those which are not visible if diseases
the buyer is an expert who, by reason  Art. 1575
of his trade or profession, should have
known them. d. Sale of unfit animals
 The seller is responsible to the buyer  Art. 1575
for any hidden faults or defects in the
thing sold, even though he was not e. Prescriptive period
aware thereof  Art. 1577
 The warrant applies to both movable  Art. 1578
and immovable subject matters
f. Obligation of buyer to return
a. Obligation of seller for breach of  Art. 1579
warranty
 Art. 1568 -> The obligations of the g. Remedies of buyer
seller for breach of warranty  Art. 1580
against hidden defects depends on
whether he had knowledge thereof, IMPLIED WARRANTIES IN SALE OF GOODS
and whether there has been a
waiver of the warranty 1. Warranty as to fitness or quality
 Art. 1562
b. Waiver of warranty  Art. 1564
 If there has been a stipulation  Art. 1563
exempting the seller from hidden
defects: a. Measure of damage in case of breach of
1. If the seller was in fact NOT warranty on quality
aware of the hidden defects,  In case of breach of warranty of
the loss of the thing by virtue quality, such loss, in the absence of
of such defect will not make special circumstances showing
the seller liable at all to the proximate damage of a greater
buyer amount, is the difference between the
2. If the seller was fully aware of value of the goods at the time of
such defect, such waiver is in delivery to the buyer and the value
bad faith, and the seller would they would have had if they had
still be liable for the warranty answered to the warranty.
 Note: Art. 1566 2. Sale of goods by sample

 Art. 1565
c. Choice of remedies to buyer
 Art. 1567 3. Buyer’s option in case of breach of warranty
 Art. 1599
d. If the thing is lost through fortuitous
event or through the fault of the buyer 4. Waiver of remedies by buyer
 Art. 1569  Art. 1599
e. Applicability to judicial sale 5. Obligation of buyer on price

 Art. 1570  Art. 1599
f. Prescriptive period 6. Refusal of seller to accept return of goods

 Art. 1571  Art. 1599
5. Redhibitory effects on animals ADDITIONAL TERMS OF WARRANTIES FOR

 Art. 1576 CONSUMER GOODS
 Consumer Act of the Philippines
a. Sale of team  “consumer products”
 Art. 1572  Note: Art. 68 of the Act
 Art. 1573
b. Animals sold at fairs or public

auction
 Art. 1574

Sales Reviewer
Atty. RP Santiago
note or memorandum evidencing the

CHAPTER 13 contract which would take the case outside
EXTINGUISHMENT OF SALE the Statute of Frauds.
IN GENERAL ‘4. Distinguished from option to purchase

Same grounds by which obligations in general are
extinguished also apply to the extinguishments of A right to redeem Option to purchase
the obligations arising from the contract of sale: Not a separate Generally a principal
1. payment or performance contract, but merely contract and may be
2. loss of the subject matter part of a main contract created independent of
3. condonation or remission of sale, and in fact another contract
4. confusion or merger of the rights of creditor cannot exist unless
and debtor reserved at the time of
5. compensation the perfection of the
6. novation main contract of sale
7. annulment Does not need a In order to be valid the
8. rescission separate consideration option to purchase
9. fulfillment of a resolutory condition in order to be valid must have a
10. prescription and effective consideration separate
11. CONVENTIONAL OR LEGAL REDEMPTION -> and distinct from the
unique in a contract of sale purchase price
In a right of The period of the
CONVENTIONAL REDEMPTION repurchase, the option contract may be
1. Definition maximum period for beyond the 10-year
 Conventional redemption shall take place the exercise of the period
when the seller reserved for himself the right cannot exceed 10
right to repurchase the thing sold, with the years
obligation to return the price of the sale, the Requires in addition a May be exercised by
expenses of the contract, any other tender of payment of notice of its exercise to
legitimate payments made by reason of the the amount required the offeror
sale, and the necessary and useful expenses by law, including
made on the thing sold. consignment thereof if
 Even when a seller is one with a right of tender of payment
repurchase, the buyer would still be cannot be made
subrogated to the seller’s rights and actions effectively on the
even during the period when redemption buyer
can be made by the seller. In other words,
the redemption feature of sale does not
prevent its consummation. 5. Period of redemption
 Unlike a debt which a third party may
satisfy even against the debtor’s will, the When NO period When period agreed
right of repurchase may be exercised only agreed upon upon
by the seller in whom the right is recognized In case of stipulated Should there be an
by a contract, or by any person to whom right to redeem, in the agreement as to the
the right may have been transferred. absence of an express period of redemption,
agreement as to the the period cannot
2. Proper reservation of right to repurchase period when the right exceed 10 years. If it
 Villarica v. CA: The right of repurchase must can be exercised, it exceeds 10 years, the
be reserved by the vendor, by stipulation to shall last 4 years form agreement is valid only
that effect, in the contract of sale. This is the date of the for the first 10 years.
clear from Art. 1601. contract (Art. 1606)
 Torres v. CA: For a sale to be one a retro, it
is necessary that the right to be reserved in  Tayao v. Dulay: When a period of
the same sale contract. redemption is agreed upon by the parties in
a sale a retro, although the stipulation as to
3. Right of repurchase may be proved by parol period may be unclear or void, it is the 10
evidence year period provided in Article 1606 that
 Since a right to repurchase is part of the applies and not the 4-year period provided
contract of sale, it is governed by the therein where there is no agreement as to
Statute of Frauds. period.
 However, when the contract of sale has
been reduced in writing, parol evidence may c. Pendency of action tolls redemption
be adduced to prove the agreement period
granting the seller a right to repurchase the o Pendency of an action in brought in
property sold -> deed of sale is in itself the good faith and relating to the

Sales Reviewer
Atty. RP Santiago
validity of a sale a retro tolls the is exercised through a judicial action

running of the period of within the redemption period and
redemption. simultaneously depositing the
redemption price. The filing of the
d. Non-payment of the price does not affect action itself within the period of
running of redemption period redemption is equivalent to a formal
o Catangcatang v. Legayada: The offer to redeem. Lee Chuy held that
sale was consummated upon the there is actual no prescribed form for
execution of the document and the an offer to be properly effected. It can
delivery of the subject matter… it either be through a formal tender with
was a perfectly valid agreement, consignation, or by filing a complaint in
and the non-payment of the court coupled with consignation of the
balance of the purchase price could redemption price within the prescribed
not have the effect of suspending period.
the efficacy of the provisions
thereof. b. In case of multi-parties
 Art. 1611
6. Possession of subject matter during period  Art. 1612
of redemption  Art. 1613
 In a contract of sale with pacto de retro, the  Art. 1614
buyer has a right to the immediate  Art. 1610
possession of the property sold, unless
otherwise agreed upon. It is basic that in a 8. When redemption not made
pacto de retro sale, the title and ownership  Article 1607
of the property sold are immediately vested  Article 1607 is intended to minimize the
in the buyer a retro, subject only to the evils which the pacto de retro sale has
resolutory condition of repurchase by the caused in the hands of usurers. A judicial
seller a retro within the stipulated period. order is necessary in order to determine the
true nature of the transaction and to
7. How redemption effected prevent the interposition of buyers in good
 Article 1616 faith while the determination is being made.
 Article 1608  What Article 1607 governs therefore is the
 Under Art. 1616, the seller a retro must pay recording of the consolidation, but by
for the useful improvements introduced by operation of law, the lapse of the period of
the buyer a retro. redemption without the seller a retro having
 The exercise of the right of redemption is exercised his right, would consolidate title in
not limited only to the total redemption the buyer.
price enumerated in Article 1616 of the Civil  The proceeding for consolidation of title
Code, since said legal provision is not under Article 1607 is not a mere motion
restrictive nor exclusive. It should be incident to a main action or special
construed with Article 1601 which provides proceeding, but is an ordinary civil action
that legal redemption shall take place when where the complaint or petition must be
the seller reserves the right to repurchase filed.
the thing sold, with the obligation to comply  Notwithstanding Article 1607, the recording
with the provisions of Article 1616 “and in the Registry of Property of the
other stipulations which may have been consolidation of the ownership of the buyer
agreed upon.” is not a condition sine qua non to the
transfer of ownership. The buyer would still
a. How redemption exercised be the owner of the property when the
 Legaspi v. CA: In order to exercise the seller a retro fails to redeem the property
right to repurchase or to redeem, only within the redemption period.
tender of payment is sufficient.  As title is already vested in the buyer a
 Catangcatang v. Legayada: When retro, his failure to consolidate his title
tender of payment cannot be validly under Article 1607 does not impair such title
made, because the buyer cannot be or ownership for the method prescribed
located, it becomes imperative for the thereunder is merely for the purpose of
seller a retro to file a suit for registering the consolidated title.
consignation with the courts of the
redemption price, and failing to do so 9. Grant of 30-day redemption right in case of
within the redemption period, his right litigation under Article 1606
of redemption shall lapse.  When the period of redemption has expired,
 Lee Chuy Realty Corp. v. CA: A formal then ipso jure the right to redeem has been.
offer to redeem, accompanied by a Extinguished. However, even when the right
bona fide tender of redemption price, is to redeem has expired, and there has been
not essential where the right to redeem

Sales Reviewer
Atty. RP Santiago
a previous suit on the nature of the contract debt, and contains nothing impossible
-> last paragraph of Art. 1606 or contrary to law.”
 The rationale for the grant of the 30-day  Equitable mortgage: requisites
period of redemption under Article 1606 is 4. That the parties entered into a
quite clear: should a judgment be finally contract denominated as a
rendered upholding the transaction to be contract of sale
one of sale a retro, then it is but fair to 5. That their intention was to
grant to the seller a final 30-day period secure existing debt by way of
within which to redeem from the time he is mortgage
bound by the judgment finding the contract
to be one of equitable mortgage. b. When presumed equitable mortgage
 If the issue before the court is one whether  Art. 1602
the contract at issue was one of absolute  Art. 1604
sale or a sale a retro, a judgment finding  Article 1602 would also apply even on
the contract to be a sale a retro should not a contract purporting to be an
authorize the application of the 30-day absolute sale, if indeed the real
redemption period under Article 1606 in intention of the parties is that the
favor of the seller who had previously transaction shall secure the payment
allowed the period of redemption to expire. of a debt or the performance of any
In such a case, the seller a retro was other obligation.
negligent or at fault for not having  Art. 1603
exercised his right to redeem during the  The presence of only one of the
redemption period, and should not be circumstances defined in Article 1602
granted a new period. is sufficient for a contract of sale a
retro to be presumed an equitable
a. Feigning equitable mortgage to avail of mortgage.
Art. 1606  Lim v. Calaguas: in order for the
 Even when the sale involved a true sale presumption of equitable mortgage to
a retro, and the seller failed to redeem apply, there must be either:
within the redemption period, there 5. something in the language of
was danger that the seller, in a the contract
desperate move would, feign the 6. in the conduct of the parties
defense of equitable mortgage in a suit which shows clearly and
filed to redeem the property, and beyond doubt that they
knowing that the evidence would still intended the contract to be a
yield a judgment on sale a retro, would mortgage and not a pacto de
nevertheless allow him to avail of the retro sale.
30-day redemption period allowed
under the last paragraph of Article
1606.  Lim v. Calaguas: enumerates the
 Adorable v. Inacala: Where the following as basis to treat the contract
evidence established that there could as an equitable mortgage:
be no honest doubt as to the parties’ 3. The terms used in the deed or
intention that the transaction was power of attorney indicate that
clearly and definitely a sale with pacto the conveyance was intended
de retro, the seller would not be to be a loan secured by a
entitled to the benefit of Article 1606. mortgage
4. The price paid, in relation to
10. Fruits the value of the property, is
 Article 1617 grossly inadequate
 Almeda v. Daluro: held that the provisions 5. The seller, at the time of the
of Article 1617 on fruits applies only when alleged sale was in urgent
the parties have not provided for their need of money
sharing arrangement with respect to the 6. The supposed seller invested
fruits existing at the time of redemption. the money he obtained from
the alleged buyer in making
11. Equitable Mortgage improvements on the property
a. Definition of “equitable mortgage” sold
 Equitable mortgage “as one which 7. The supposed seller remained
although lacking in some formality, or in possession of the land sold
form, or words, or other requisites 8. The seller paid the land tax
demanded by a statute, nevertheless, which is a usual burden
reveals the intention of the parties to attached to ownership
charge real property as security for a 9. The buyer accepted partial
payments from the seller, and

Sales Reviewer
Atty. RP Santiago
such acceptance of partial e. Proof by parole evidence

payment is absolutely  Parole evidence is competent and
incompatible with the idea of admissible in support of the allegations
irrevocability of the title of that an instrument in writing,
ownership of the purchaser at purporting on its face to transfer the
the expiration of the term absolute title to the property, or to
stipulated in the original transfer the title with a right to
contract for the exercise of the repurchase under specified conditions
right of redemption reserved to the seller, was in truth and
10. The seller remained bound for in fact given merely as security for the
the repayment of the money repayment of a loan.
received strongly tends to
show that a mortgage was one f. Effects when sale adjudged as an
intended equitable mortgage
11. The transaction had its origin  Where a contract purporting to be a
in a borrowing of money also sale is actually an equitable mortgage,
tends to show that the the apparent “seller” may ask for the
subsequent transaction reformation of the instrument.
although in the form of a sale  Likewise, the equitable mortgage being
with a right of repurchase was a security contract, the expiration of
in fact intended as a mortgage the purported period of redemption
12. There was a previous debt does not prevent the purported seller
between the parties and this (actually the equitable mortgagor) from
was not extinguished by the extinguishing the main contract of loan,
sale, but remained subsisting. and thereby extinguish also the
But if the previous debt was ancillary equitable mortgage contract,
extinguished by the sale, and so long as the purported buyer
the seller has the privilege of (equitable mortgagee) has not gone
repurchasing within a given through the process of foreclosure.
time, the transaction is a
conditional sale. 12. Pactum Commissorium
 Art. 2088
c. Rationale behind the provisions on  The public policy on pactum commissorium
equitable mortgage applies only when the covering transaction
 The provisions of the Civil Code is a mortgage or other security contracts
governing equitable mortgages guised and has no application to a true sale or
as sale contracts are designed transfer transaction.
primarily to curtail the evils brought  When purported sale a retro is found to be
about by contracts of sale with right an equitable mortgage, the proper remedy
of repurchase, such as the in case the borrower refuses to pay the
circumvention of the usury law and “price” is to foreclose on the mortgage, and
pactum commissorium. there can be no loss of the purported
 It particularly envisions a contracts of seller’s right to redeem since this would
sale with right of repurchase where constitute the process as a pactum
the real intention of the parties is that commissorium. In such a case, the return of
the pretended repurchase price is the redemption price would actually be
money loaned, and in order to secure equivalent to the payment of the principal
the payment of the loan a contract loan, which would have the legal effect of
purporting to be a sale with pacto de extinguishing the equitable mortgage as an
retro is drawn up. ancillary security contract.
d. Applicability to deeds of absolute sale LEGAL REDEMPTION

 Article 1604 expressly provides that the
provisions on equitable mortgage of 1. Definition
Article 1602 shall also apply to a  Art. 1619
contract purporting to be an absolute
sale. And for the provision to apply, two a. Rationale for legal redemption
requisites must be met: o It is intended to minimize co-
1. that the parties entered into a ownership
contract denominated as a contract o The law grants a co-owner the
of sale exercise of the said right of
2. that their intention was to secure redemption when the shares of the
an existing debt by way of other owners are sold to a “third
mortgage person.”

Sales Reviewer
Atty. RP Santiago
2. Legal redemption under Civil Code

d. Sale of credit in litigation
a. Among co-heirs o Art. 1634
o Art. 1088
o There is no right of legal 3. When legal redemption period begins to run
redemption available to the co-  Art. 1623
heirs when the sale covers a  Butte v. Manuel Uy & Sons, Inc.: Notice
particular property of the estate, must be given by the “vendor” or seller.
since the legal right of redemption Notice given by the buyer, even when
applies only to the sale by an heir written, does not start the running of the
of his hereditary right. 30-day period of redemption.
 The 30-day period does not begin to run in
b. Among co-owners the absence of written notification.
o Art. 1620
o The right of redemption of co- a. Notice must cover perfected sale
owners excludes that of adjoining  Spouses Doromal seem to go beyond
owners the requirements of Article 1619, and
o However, the right of redemption perhaps we can anticipate the Court
may be exercised by a co-owner toning down the principle in subsequent
only when the part of the cases. The doctrine requiring a
community property is sold to a perfected contract of sale cannot also
stranger. When the portion is sold be applied in cases of legal pre-emption
to another co-owner, the right such as under Article 1622 which
does not arise because a new covers a situation when an urban land
participant is not added to the co- “is about to be resold.”
ownership.
b. Summation on strict rules on notice
Right of redemption  Hermoso v. CA: Article 1623 stresses
Co-owners Co-heirs the need for notice in writing in 3 other
species of legal redemption:
The SC has Under Art. 1088,
1. Redemption in case where the
construed Art. an heir may
share of all the other co-owners or
1620 to include validly redeem for
any of them are sold to a third
the doctrine that a himself alone the
person
redemption by a hereditary rights
2. Redemption by owners of adjoining
co-owner of the sold by another
lands when a piece of rural land
property owned in co-heir.
not exceeding 1 hectare in area is
common, even
alienated
when he uses his
3. Redemption by owners of adjoining
own fund, within
lands in the sale of a piece of an
the period
urban land so small and so situated
prescribed by law
that the portion thereof cannot be
inures to the
used for any practical purpose
benefit of all other
within a reasonable time, having
co-owners
been bought merely for
speculation.
c. Among adjoining owners
 Francisco v. Boiser: The Court reviewed
Rural land Urban land
the requirements under Article 1623
Art. 1621 Art. 1622
and the case-law that has interpreted
the article, and declared:
Redemption of urban
1. For the 30-day redemption period
land applies only
to begin to run, notice must be
when it involves its
given by the seller, and that notice
“resale,” and
given by the buyer or even by the
therefore there is no
Register of Deeds is not sufficient.
right of redemption
2. When notice is given by the proper
that can be
party (i.e. seller), no particular
exercised by an
form of written notice is prescribed
adjoining owner
under Art. 1623.
when the urban land
3. The filing of the suit for ejectment
is transferred under
or collection of rentals against a
an “exchange” of
co-owner actually dispenses with
properties
the need for a written notice.

Sales Reviewer
Atty. RP Santiago
it to the same extent as the assignor could

have enforced it against the debtor.
c. Exception to written notice requirement
1. Laches – situation when the co-heirs WHAT MAKES ASSIGNMENT DIFFERENT?
lived with the purchaser in the same lot  Project Builders, Inc. v. CA: An assignment of
an dare deemed to have received actual credit is an act of transferring, either
notice of the sale (Alonzo v. IAC). onerously or gratuitously, the right of an
2. Where it is the co-owner himself who assignor to an assignee who would then be
acted as a middleman or intermediary to capable of proceeding against the debtor for
effect the sale to a third party, thus enforcement or satisfaction of the credit. The
having acquired knowledge thereof, the transfer of rights takes place upon perfection
written notice required under Art. 1623 is of the contract, and ownership of the right,
no longer necessary including all appurtenant accessory rights, is
thereupon acquired by the assignee. The
4. Other instances when legal redemption is assignment binds the debtor only upon
granted acquiring knowledge of the assignment but
a. Redemption of homesteads he is entitled, even then, to raise against the
b. Redemption in tax sales assignee the same defenses he could set up
c. Redemption by judgment debtor against the assignor. Where the assignment
d. Redemption in extrajudicial foreclosure is on account of pure liberality on the part of
e. Redemption in judicial foreclosure of the assignor, the rules on donation would
mortgage likewise be pertinent; where valuable
f. Foreclosure of mortgages by banking consideration is involved, the assignment
institutions partakes of the nature of a contract of sale or
g. Period of redemption when rural bank purchase. In an assignment of credit, the
forecloses consent of the debtor is not essential for its
h. Legal right to redeem under Agrarian reform perfection, his knowledge thereof or lack of it
Code affecting only the efficaciousness or
inefficaciousness of any payment he might
make.
CHAPTER 14
ASSIGNMENT 1. Validity and binding effect
 Primarily, the subject matter of
NATURE OF ASSIGNMENT IN THE SCHEME OF assignment is an intangible
THINGS property, whereas the object of
 “Assignment:” sale of credits and other species sale would be tangible
incorporeal rights. property.
 Although sale and assignment are NOT  An assignment is also a consensual
technically the same, they are not however contract -> Art. 1624 cross-
different because they come from the same reference to Art. 1475
root or genus, which happens to be called  “Assignment” should no longer be
“sale” also. Consequently, the law must take used when covering a donation
up special matter peculiar to the sale of involving intangible property which
intangibles. must comply with the solemnities of
 Assignment therefore is a specie of the genus donation and are not perfected by
sale mere consent.
Characteristics of assignment (like genus sale) a. binding effect as to third parties

1. nominate  Art. 1625
2. consensual  Without the public instrument,
3. reciprocal the assignment would still be
4. onerous valid, but it is enforceable only
5. commutative as between the assignor and the
6. Paras: GRATUITOUS and onerous transfers assignee, and their successors-
of credits and other incorporeal rights -> in-interest.
requires the formalities of donation if the  When the assignment is still at
assignment is gratuitous the executory stage, and not
evidenced in writing, it falls
 Tolentino: defines assignment of credits as under the Statute of Frauds
one where the assignor, by legal cause, such since assignment is merely a
as sale, dation in payment, exchange or species of genus sale which is
donation, and without the need of the covered by the Statute of
consent of the debtor, transfers his credit and Frauds
its accessory rights to another, known as the  Another noted exception on the
assignee, who acquires the power to enforce binding effect of a public

Sales Reviewer
Atty. RP Santiago
instrument covering an intangible because it has no physical

assignment is that when the existence.
assignment involves a document  In assignment, the assignor shall be
of title, the assignment does not responsible for the existence and
bind the bailee unless specific legality of the credit at the time of
notice of the transfer covering sale, unless it has been expressly
the document of ittle is given by sold as a doubtful account, in which
the transferor or transferee to case the assignee takes the credit at
the bailee. his own risk.
 Art. 1628
2. Effect of assignment of creditor on  Art. 1629
debtor  Other specific warranties pertaining
 C & C Commercial Corporation v. to assignment:
Philippine National Bank: the 1. Art. 1630 -> Art. 1632 -> Art.
“meeting of minds” in assignment 1633
contemplates that between the 2. Art. 1631
assignor of the credit and his
assignee, there being no necessity ASSIGNMENT OF CREDIT IN LITIGATION
for the consent of the debtor. It is  An assignment of credit is an agreement by
sufficient that the assignment be virtue of which the owner of a credit, known
brought to the debtor’s knowledge in as the assignor, by a legal cause, such as
order to be binding upon him. sale, dacion en pago, exchange or donation,
 The purpose of the notice is only to and without the consent of the debtor,
inform the debtor that from the date transfer his credit and accessory rights to
of the assignment, payment should another, known as the assignee, who
be made to the assignee and not to acquires the power to enforce it to the same
the original creditor. extent as the assignor could enforce it
 The assignment of credit, although against the debtor.
constituting novation, does not  A specific rule on the assignments of credit or
result in extinguishing the debtor’s incorporeal right in litis pendentia is provided
liability, even when the assignment by law, since such assignments are deemed
is effected without his consent. to be speculative on the part of the assignee,
 Art. 1626 and as much as possible, the law would
 Art. 1285 rather benefit the debtor of such credits than
the one who merely speculates for profit. One
3. Transfer of ownership who buys credit under litigation is presumed
 The transfer of title or ownership to be buying for purposes of speculation.
over the subject matter of  Art. 1634
assignment should also be effected  Article 1635 -> The right to redeem on the
not by mere perfection of the part of the debtor shall not exist with respect
assignment, but by the same to the following assignments which the law
manner by which ownership is considers not for speculation
transferred under the species sale,  Art. 1635 -> in the foregoing cases, the
by constructive delivery, such as the assignee has a legitimate purpose for taking
execution of a public instrument. the assignment of credit, and not merely for
 Since assignment falls under the speculation.
genus sale, then the effects of
tradition of sale in general should a. Differentiating from subrogation
also apply to assignment. Except as
to actual or physical delivery, since Subrogation Assignment
the subject of assignment does not Extinguishes the Refers to the same
have physical existence. original obligation and right which passes from
 However, without the execution of gives rise to a new one one person to another
the public instrument, or the The nullity of an old The nullity of an
registration in the Registry of obligation may be obligation is not
Property, in case of immovables, cured by subrogation, remedied by the
such constructive delivery would not such that a new assignment of the
bind third parties. obligation will be creditor’s right to
perfectly valid another
4. Accessories and Accessions Conventional The consent of debtor
 Art. 1627 subrogation requires an is not necessary in
agreement among the order that the
5. Warranties three parties concerned assignment may full
 The warranty against hidden defects – the original creditor, produce legal effects,
generally has no application to an the debtor, and the and what the law

Sales Reviewer
Atty. RP Santiago
new creditor. It is a requires is merely transactions VOID, but would also subject the
new contractual notice to him. A violators to criminal liabilities.
relationship based on creditor, therefore, may
the mutual agreement validly assign his credit TRANSACTIONS COVERED BY LAW
among the necessary and accessories without Section 2 of the Law defines 3 types of transactions
parties the debtor’s consent which are treated as “bulk sales” covered by the
Law:
ASSIGNMENT OF COPYRIGHT 1. Any sale, transfer, mortgage, or
 Intellectual property code assignments of a stock of goods, wares,
 The owner of a copyright may assign it in merchandise, provisions, or materials
whole or in part. Within the scope of the otherwise than in the ordinary course of
assignment, the assignee is entitled to all trade and the regular prosecution of the
the rights and remedies which the business of the seller, mortgagor,
assignor had with respect to the transferfor, or assignor
copyright. 2. Any sale transfer, mortgage, or assignment
 Since the copyright is distinct from the of all, or substantially all, of the business or
property in the material object subject to trade therefore conducted by the seller,
it, consequently, the transfer or mortgagor, transferor, or assignor
assignment of the copyright shall not of 3. Any sale, transfer, mortgage, or assignment
itself constitute a transaction of the of all, or substantially all, of the fixtures and
material object. Nor shall a transfer or equipment used in and about the business
assignment of the sole copy or of one or of the seller, mortgagor, transferor, or
several copies of the work imply transfer assignor.
or assignment of the copyright.
 In the 3 types of transactions covered
ASSIGNMENT AS AN EQUITABLE MORTGAGE by the law, neither motive nor intention
 Like species sale used as a device to secure of the seller, nor the resulting
an obligation, assignment of intangibles is consequence thereof to his estate,
also resorted to as a means to secure loans. constitute an element of what is a bulk
In both cases, the principles pertaining to sale; nor is proof of such intention and
equitable mortgages will apply. result relevant in determining whether
the transaction would fall within the
coverage of the law.
CHAPTER 15  Whether or not the transaction is
BULK SALES LAW meant to defraud creditors, or whether
or not the seller is in a state of
solvency, would be irrelevant.
Rationale and coverage: The Bulk Sales Law (Act No.
 “in the normal course of business” ->
3952, as amended by RA No. 111), which was copied
applies only to the first type of bulk
primarily from American statutes, was actually
sale and has no application at all to the
intended as a species of bankruptcy and fraudulent
subsequent 2 types of transactions.
transactions law meant to protect supply creditors or
businessmen against preferential or fraudulent
BUSINESS COVERED BY LAW
transfers done by merchants.
 People v. Wong: fails to take into
consideration that there are 3 types of bulk
Coverage:
sales enumerated under the Law, and it
In spite the intended rationale of the Law, its
would seem that it sought to enforce and
language does not include fraud or insolvency as an
interpret only the first type of bulk sale.
element of what constitute “bulk sale.”
When it comes to the other 2 types of bulk
Consequently, the Law covers all transactions,
sales, the language of the Law does not
whether done in good faith or not, that fall within the
limit in any way coverage to a particular
description of what is “bulk sale.”
type of business. Therefore, Wong may not
be considered as biding when it comes to
Objective of the law:
the other two types of bulk sales under the
1. To compel the seller in bulk to execute and
Law.
deliver a verified list of his creditors to his
buyer,
“BULK SALES” NOT COVERED BY THE LAW
2. To compel the seller in bulk to give a notice
Even if the transaction falls within the definition of
of intended sale to be sent in advance to
“bulk sale” under Section 2, in the following cases,
said creditors,
the Law would not be made to apply (Section 8, Bulk
3. To use the proceeds to cover payment of
Sales Law):
outstanding liabilities.
1. If the seller, transferor, mortgagor, or
assignor produces and delivers a written
Note: Non-compliance with the requirements of
waiver of the provisions of the Law from his
the Law would not only render certain
creditors as shown by verified statements

Sales Reviewer
Atty. RP Santiago
2. Transactions effected by executors, imprisonment and fine, in the discretion of

administrators, receivers, assignees in the court.
insolvency, or public officers, acting under
legal process 1. On Transaction itself
 Section 4: If the sworn listing of
OBLIGATIONS OF SELLER/ENCUMBRANCER creditors is not prepared and
WHEN TRANSACTION IS A BULK SALE deliverd/and/or the proceeds of the
When a transaction, whether for cash or on credit, is transaction not applied pro-rata to
within the coverage of the Law, it shall be the duty the listed creditors, “any such sale,
of the seller, mortgagor, transferor, assignor, as the transfer, or mortgages shall be
case may be, to perform the following acts: FRAUDULENT and VOID”
1. To delivery of sworn statement of listing of  No legal consequences would flow
creditors – Before receiving from the buyer, from the transaction, including
mortgagee, or agent, or agent, or non-transfer of the ownership to
representative any part of the purchase the subject matter thereof, and not
price thereof, or any promissory note, right of action would accrue from
memorandum, or other evidence therefor, the transaction
to deliver to such buyer, mortgagee, or  The subject matter of the
agent, a written statement of: transaction remains to be owned
a. The names and addresses of all by the seller or assignor, and
creditors to whom said seller or subject to the satisfaction of his
mortgagor may be indebted liability, and the buyer or assignee
b. With the amount of indebtedness has no legal basis to stake a claim
due or owing, or to become due or on said property, even when he
owing by said seller or mortgagor has acted in good faith and
to each of said creditors received possession thereof by way
of delivery.
2. Pro-rata application of proceeds – Apply the  People v. Mapoy: A sale in bulk
purchase or mortgage money to the pro- done without complying with the
rate payment of bona fide claims of the terms of the Law, makes the
creditors as shown in the verified statement transaction fraudulent and void,
but does not change the basic
3. Written advance disclosure to creditors – relationship between the seller,
The seller, transferor, mortgagor, or assignor, or encumbrancer and his
assignor, shall: creditor.
a. at least 10 days before the sale,  Section 5: Although the provision
transfer, or encumbrance, make a obligates the seller, mortgagor,
full detailed inventory of goods, transferor, or assignor in bulk sale
wares, merchandise, provisions, or to make an advance written
materials and to preserve the same disclosure of the transaction to his
b. notify every creditor whose name creditors, nothing in the language
and address is set forth in the of the provision provides an
verified statement at least 10 days adverse consequence on the
before transferring possession transaction itself if such
thereof, personally or by registered requirement is not complied with.
mail, of the price, terms, and In other words, failure to comply
conditions of the sale, transfer and with that requirement does NOT
mortgage or assignment. render the transaction fraudulent
and void.
4. Bulk transfers for nominal value – It shall
be unlawful for any person, firm, or 2. On seller, mortgagor, transferor, or
corporation, as owner of any stock of goods, assignor
wares, merchandise, provisions or  Section 4: Failure to comply with
materials, in bulk, to transfer title to the the obligation to prepare and
same without consideration or for a nominal deliver the sworn listing of
consideration only. creditors and to apply pro rata the
proceeds thereof the listed
CONSEQUENCES OF VIOLATION OF THE LAW creditors shall be deemed a
 Section 11 of the law provides that any violation of the Law which would
person violating any provision thereof, shall, subject him to criminal liability.
upon conviction thereof, be punished by  In addition the sworn statement
imprisonment of not less than 6 months, shall be registered with the
nor more than 5 years, or fine in any sum Department of Trade and Industry.
not exceeding P5,000, or by both such However, non-compliance with this
requirement would not seem to

Sales Reviewer
Atty. RP Santiago
affect the validity of the transfer or mortgagor, transferor, or assignor,

encumbrance. The Law does not to defraud creditors.
consider it a violation.
 Any seller, transferor, mortgagor,
or assignor of any stock of goods, CHAPTER 16
wares, merchandise, provisions, or RETAIL TRADE LIBERALIZATION ACT OF 2000
materials, in bulk, or any person
acting for, or on behalf of any such LIBERAL POLICY UNDER THE ACT
vendor, transferor, mortgagor, or  The act liberalized the Philippine retail
assignor, who shall knowingly or industry to encourage Filipino and foreign
willfully make, or deliver or cause investors to forge an efficient and
to be made or delivered, a competitive retail trade sector in the
statement, which shall not include interest of empowering the Filipino
the names of all such creditors, consumer through lower prices, higher
with the correct amount due and to quality goods, better services, and wider
become due to each of them, or choices.
shall contain any false or untrue
statement, shall be deemed to DEFINITION AND COVERAGE OF “RETAIL
have violated the provision of the TRADE”
Law and subject to criminal
prosecution. Elements of retail trade
 Section 5: Nothing in this section  “Retail trade” – any act, occupation, or
declares the non-compliance by the calling of habitually selling direct to the
seller, mortgagor, or transferor or general public merchandise, commodities,
assignor of the advance notice to or goods, for consumption
his creditors as a violation of the  Elements:
Law. 1. Habitually selling merchandise,
 Section 7: this provision makes it commodities, or goods
“unlawful” for any person, firm, or 2. To the general public
corporation, “as owner of any stock 3. For consumption
of goods, wares, merchandise,
provisions or materials, in bulk, to Exempted transactions
transfer title to the same without 1. Sales by a manufacturer, processor,
consideration or for a nominal laborer, or worker, to the general public of
consideration only. This would the products manufactured, processed, or
subject the seller to criminal produced by him if his capital does not
liability. exceed P100,000
2. Sales by a farmer or agriculturist, selling
3. On the buyer, mortgagee, transferee, the products of his farm, regardless of
or assignee capital
 The law imposes NO direct 3. Sales in restaurant operations by a hotel
obligation on the buyer, owner or inn-keeper irrespective of the
mortgagee, transferee, or assignee amount of capital, provided that the
in bulk sale. restaurant is incidental to the hotel business
 A buyer in bulk sale cannot be 4. Sales to the general public, through a single
deemed to be subject to criminal outlet owned by a manufacturer or products
liability under the Law, although manufactured, processed, or assembled in
criminal lawyers have often used the Philippines, irrespective of capitalization
the argument of the buyer being a 5. Sales to industrial and commercial users or
principal by indispensable consumers who use the products bought by
cooperation, if he was aware of the them to render service to the general public
intent of the seller or conspired and/or produce or manufacture of goods
with the seller. which are in turn sold by them
 Buyer, mortgagee, transferee, or 6. Sales to the government and/or its agencies
assignee would find himself NOT and government-owned and controlled
enititled to the goods or wares, or corporations.
the business for which he had paid
good money for. CATEGORIES OF RETAIL TRADE ENTERPRISES
 Such still Buyer, mortgagee, For purposes of determining who are qualified to
transferee, or assignee would still invest in retail trade in the Philippines, the Act
find himself at the end of a claim provides for 4 categories of retail trade enterprises
suit to recover what he has based on capital level
obtained from a bulk sale, or even
liable for damages for having
conspired with the seller,

Sales Reviewer
Atty. RP Santiago
a. under Category B
Categories of retail trade enterprises 1. limited to not more than
Enterprises with paid-up 60% of total equity of
Category A capital of the equivalent such retail enterprise
Philippine Pesos of less within the first 2 years
than US$2.5 M after the effectivity of the
Enterprises with a Act (or up to March 25,
minimum paid-up capital 2002)
of the equivalent in 2. May wholly own such
Philippine Pesos of US$ retain enterprises 2 years
2.5M, but less than after the effectivity of the
Category B US$7.5 M, provided that Act (starting 26 March
in no case shall the 2002)
investments for
establishing a store be b. May wholly own retail enterprises
less than the equivalent under Category C, provided that
in Philippine Pesos of the investments for establishing a
US$30,000 store is less than US$830,000
Enterprises with a paid- c. May wholly own retail enterprises
up capital of the under Category D
equivalent in Philippine
pesos of US $7.5 M or GRANDFATHER RULE
Category C more, provides that in no  Process of characterizing the citizenship of
case shall the shares in one corporation held by another
investments for corporation by attributing the controlling
establishing a store be interest of the second layer of corporate
less than the equivalent ownership
in Philippine Pesos of US  For purposes of INVESTMENTS, the SEC has
$830,000 adopted the rule that shares belonging to
Enterprises specializing corporations or partnerships at least 60% of
in high-end or luxury the capital of which is owned by Filipino
Category D products with a paid-up citizens shall be considered as Philippine
capital of the equivalent nationality, but if the percentage of Filipino
in Philippine Pesos of US ownership in the corporation or partnership is
$250,000 per store less than 60%, only the number of shares
corresponding to such percentage shall be
WHEN ALIENS MAY INVEST IN RETAIL TRADE counted as of Philippine nationality.
1. Filipino citizens, former natural-born Filipino APPLICATION OF ANTI-DUMMY LAW

citizens who reside in the Philippines, and  The Anti-Dummy Law penalizes Filipinos
domestic partnership, associations, and who permit aliens to use them as nominees
corporations, which are wholly-owned by or dummies to enjoy privileges reserved for
Filipino citizens, may: Filipinos or Filipino corporations.
a. Engage directly in all forms of retail  Specifically, Section 2-A of the Law prohibits
trade aliens from intervening in the management,
b. Invest wholly in local enterprises operation, administration, or control of
that will engage in all forms and in nationalized business.
all categories of retail trade  Aliens may take part in technical aspects,
provided no Filipino can do such technical
2. Other than in the exemptions transactions work, and with express authority from the
(where there are no foreign restrictions on President of the Philippines.
investment or management), alien  Later PD 715 amended the Retail Trade Law
individuals, foreign partnerships, by adding a proviso expressly allowing the
associations, and corporations, and foreign- election of aliens as members of the boards
owned domestic partnership, associations, of directors or the governing bodies of
and corporations, MAY NOT ENGAGE OR corporations or associations engaged in
INVEST in retail trade enterprises under partially nationalized activities in proportion
CATEGORY A to their allowable participation or share in
3. Other than in the exempted transactions, the capital of such entities.
foreign owned domestic partnerships,
associations, and corporations, upon [Ora pro nobis]
registration with SEC and DTI, or in case of
foreign owned single proprietorships, with
the DTI, MAY INVEST IN RETAIL TRADE
ENTERPRISE:


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Sales Reviewer

in the contract to the time the

Lesley Claudio (2A 2012) Page 1 of 69

Art. 1468: Rule to determine whether contract is sale

4. Onerous A. Manifest intention of parties

6. SALE IS TITLE NOT MODE

Lesley Claudio (2A 2012) Page 2 of 69

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Lesley Claudio (2A 2012) Page 4 of 69

 May be PERFECTED as a binding III. Specific incapacity mandated by law (Art.

Lesley Claudio (2A 2012) Page 5 of 69

 Agents do not have individual standing to

Lesley Claudio (2A 2012) Page 6 of 69

Naval v. Enriquez (1904) CHAPTER 3

Lesley Claudio (2A 2012) Page 7 of 69

Lesley Claudio (2A 2012) Page 8 of 69

2. the false appearance must have been

Atilano v. Atilano (1969) Johannes Schuback & Sons Philipppine Trading

Lesley Claudio (2A 2012) Page 9 of 69

is of importance is the meeting of the minds as to

[CLV book: The problem with the doctrine proposed

Lesley Claudio (2A 2012) Page 10 of 69

Lesley Claudio (2A 2012) Page 11 of 69

Lesley Claudio (2A 2012) Page 12 of 69

Republic v. Phil. Resources Development: “a price

Price fixed by third party Contract of sale inefficacious

Lesley Claudio (2A 2012) Page 13 of 69

able to include valid conditional contracts of Inadequacy of price

Lesley Claudio (2A 2012) Page 14 of 69

deed is simulated, fictitious and void. Since there Mate v. CA (1998)

Lesley Claudio (2A 2012) Page 15 of 69

 Upon the receipt of the conditional Bilateral contract – Unilateral contract –

NOTE: Art. 1324 Option not deemed part of renewal of lease

Lesley Claudio (2A 2012) Page 16 of 69

Lesley Claudio (2A 2012) Page 17 of 69

Contract to sell For exception to apply:

5. PERFECTION: OFFER AND ACCEPTANCE Acceptance must be absolute

Lesley Claudio (2A 2012) Page 18 of 69

Lesley Claudio (2A 2012) Page 19 of 69

Performance should not affect perfection Exceptions:

Lesley Claudio (2A 2012) Page 20 of 69

2. When there has been partial  Partial performance must amount to

G. Nature and coverage of partial performance 5. Form in “Sales on return or approval”

Lesley Claudio (2A 2012) Page 21 of 69

CHAPTER 6 2. Types of delivery

Lesley Claudio (2A 2012) Page 22 of 69

allow the buyer a reasonable

Lesley Claudio (2A 2012) Page 23 of 69

7. Traditio Longa Manu the merchandise (i.e., the price), but

Lesley Claudio (2A 2012) Page 24 of 69

COMPLETENESS OF DELIVERY delivery of the goods since the

e. written proof of delivery -> What really defines a piece of

Lesley Claudio (2A 2012) Page 25 of 69

f. When seller is not owner

b. “Sale on acceptance” 7. Seller shall pay expenses of delivery

Lesley Claudio (2A 2012) Page 26 of 69

b. Where property was originally

Lesley Claudio (2A 2012) Page 27 of 69

c. There must be “sameness” of subject d. Land in adverse possession