I.

Definition and A person is not incompetent to contract

merely because of advanced years or by
reason of physical infirmities [Paragas vs
Essential Requisites Heirs of D. Balanco, 2005].

A. DEFINITION OF SALES Exceptions to consent being a

requisite:
Art. 1458. By the contract of sale one of the (1) Expropriation,
contracting parties obligates himself to (2) Ordinary Execution Sale,
transfer the ownership and to deliver a (3) Judicial Foreclosure Sale, and
determinate thing, and the other to pay (4) Extra-Judicial Foreclosure Sale
therefor a price certain in money or its
equivalent. Special Case: If sale involves the conjugal
property of spouses, consent must be given
A contract of sale may be absolute or by both.
conditional.

The essence of a contract of sale is the (2) Object or subject matter

transfer of ownership or that the recipient has Must be determinate or capable of being
the ability to alienate the thing transferred to
determinate, licit and within the commerce of
him.
man, and possible

B. ESSENTIAL REQUISITES OF A
CONTRACT OF SALE (3) Cause or consideration
Refers to “price certain in money or its
equivalent.”
B.1. ESSENTIAL ELEMENTS OF A VALID
It must be real, certain, and pecuniary.
CONTRACT OF SALE
[Coronel vs CA, 1996; De Leon]
B.2. NON-ESSENTIAL ELEMENTS OF A
(1) Consent or meeting of the minds CONTRACT OF SALE
Consent refers to seller’s consent to
(1) Natural – those deemed to exist in
transfer ownership of, and deliver, a
certain contracts in the absence of any
determinate thing, and to buyer’s consent to
contrary stipulations. (Ex. Warranty
pay the price certain.
against eviction, hidden defects)
Being a consensual contract, the contract of (2) Accidental – those which may be
sale is perfected at the moment there is a present or absent depending on the
“meeting of the minds” upon the thing which stipulations of the parties. (Ex.
is the object of the contract and upon the Conditions, interest, penalty)
price. [Art. 1475]

Requisites:
(1) Legal Capacity
(2) Offer and acceptance, and
(3) No vitiation of consent
C. STAGES OF CONTRACT OF SALE E. CHARACTERISTICS OF A CONTRACT
[De Leon] OF SALE
(1) Preparation, conception, (1) Consensual – perfected by mere
negotiation, or generation stage – consent and without any further acts.
from the time the prospective contracting (2) Bilateral and Reciprocal – imposes
parties indicate interest in the contract to correlative obligations on both parties to
the time the contract is perfected the relationship. Consequently, power to
(2) Perfection or “birth” of the rescind is implied.
contract – upon the concurrence of the (3) Principal – can stand on its own and
essential elements of the sale; and does not depend on another contract for
(3) Consummation or “death” of the validity, as contrasted from an accessory
contract – begins when the parties contract.
perform their respective undertakings (4) Onerous – imposes valuable
under the contract of sale, culminating in consideration as prestation, as
the extinguishment thereof. distinguished from a gratuitous contract.
Consequence: all doubts in construing
D. OBLIGATIONS CREATED an onerous contract shall be resolved in
that which gives greater reciprocity of
Art. 1165. When what is to be delivered is a
interests. [Art. 1378]
determinate thing, the creditor, in addition to
the right granted him by Article 1170, may (5) Commutative – because a thing for
compel the debtor to make the delivery. value is exchanged for equal value, as
contrasted from an aleatory contract.
If the thing is indeterminate or generic, he
may ask that the obligation be complied with Test: As long as the party believes in all
at the expense of the debtor. honesty that he is receiving equal for
what he gave up for, then commutative
If the obligor delays, or has promised to
character is complied with.
deliver the same thing to two or more
persons who do not have the same interest, (6) Nominate – given a particular name by
he shall be responsible for any fortuitous law
event until he has effected the delivery.

E.1. SALE IS TITLE AND NOT MODE

(1) Specific or Determ inate Thing – Delivery or tradition is the mode to
capable of particular designation, e.g. this transfer ownership and possession to the
car, the car with plate no. XNY 200 buyer.
(2) Generic or Indeterm inate Thing – When a contract of sale is perfected, the
refers only to a class, to a genus, and seller is merely obligated to transfer
cannot be pointed out with particularity, ownership and to deliver the property.
e.g. a car (genus nunquam perit) Transfer of ownership is effected only upon
delivery.

NATURE OF OBLIGATIONS CREATED PER Sale is merely title that creates the obligation
on the part of the seller to transfer ownership
DEFINITION IN ART.1458 and deliver possession, but on its own, sale is
[Villanueva] not a mode that transfers ownership.
(1) For the SELLER: To transfer ownership [Equatorial Realty Dev. v. Mayfair Theater,
and to deliver possession of the subject 2001]
matter
(2) For the BUYER: To pay the price
F. SALE DISTINGUISHED FROM OTHER Sale
Contract for a Piece
CONTRACTS of Work
For the general For a specific
F.1. DONATION market, whether on customer
Sale Donation hand or not

Onerous Gratuitous Governed by Statute Not within Statute of

of Frauds Frauds
Perfected by mere Must comply with
consent the formalities
required by law. [Art The fact that the object were made by the
745, CC] seller only when customers placed their
orders, does not alter the nature of the
contract of sale, for it only accepted such
When the price of the contract of sale is orders as called for the employment of such
simulated, the sale may be void but the act materials as it ordinarily manufactured or
may be shown to have been in reality a was in a position habitually to manufacture
donation or some other contract. [Art.1471, such. [Celestino Co & Co vs. Collector, 1956:]
CC]
When each product or system executed is
always UNIQUE and could not mass-produce
F.2. BARTER the product because of its very nature, such is
a contract for a piece of work.[Commissioner
Sale Barter
vs. Engineering Equipment and Supply Co.,
Consideration is price Consideration is 1975]
in money or its another thing
equivalent
F.4. DACION EN PAGO
Sale Dacion en pago
Barter is a contract where one of the parties
binds himself to give one thing in No pre-existing debt Pre-existing debt
consideration of the other’s promise to give Creates an obligation Extinguishes the
another thing [Art.1638, CC] obligation (mode of
If consideration consists partly in money and payment)
partly in another thing, the intention of the Price is more freely Price is value of the
parties determines whether the contract is agreed upon, fixed by thing given
one of sale or barter. the parties
If manifest intention is not clear: Barter when Buyer has to pay the Payment is received
the value of thing is more than the amount of price by the debtor before
money or its equivalent; otherwise, sale. contract is perfected
[Art.1468]

There is a novation of the contract of loan into

F.3. CONTRACT FOR A PIECE OF WORK a contract of sale when the creditor agrees to
Contract for a Piece accept a thing in payment of the debt. Hence,
Sale
of Work if the thing given in payment turns out to
Goods are Goods are belong to another, the creditor’s remedy
manufactured or manufactured for should be governed by the law on sales, not
procured in the customer upon his loan. [Baviera]
ordinary course of special order
business
Bilateral prom ise to buy and sell Sale Agency to sell
[Asked in 80, 91]
Not unilaterally Essentially revocable
A promise to buy and sell a determinate thing revocable
for a price certain is reciprocally demandable.
[Art 479, CC]
Like a sale, the thing must be determinate F.7. LEASE
and the price, certain. Sale Lease

Ownership No transfer of
F.5. CONTRACT TO SELL transferred by delivery ownership
Contract of Sale Contract to sell
Ownership is Ownership is only Permanent Temporary
transferred upon transferred upon full
delivery payment of price Seller must be owner Lessor neet not be
at time of delivery owner
Non-payment is a Full payment is a
resolutory condition positive suspensive
condition, hence
non-payment would
not give rise to the G. KINDS OF CONTRACT OF SALE
obligation to (1) Absolute – when sale is not subject to
transfer ownership any condition and the title immediately
passes to the purchaser upon delivery
(2) Conditional – ownership of the object
Conditional Contract remains with the vendor until fulfillment
Contract to sell
of Sale of the condition/s
Sale is already No perfected sale yet
perfected
A subsequent buyer is A subsequent buyer
presumed to be a is presumed to be a
buyer in bad faith buyer in good faith

F.6. AGENCY TO SELL

Sale Agency to sell

Buyer receives the Agent receives good

goods as owner as goods of the
principal
Agent delivers the
price which he got
Buyer pays the price
from his principal
Buyer cannot return Agent can’t return
the object sold as a the goods
general rule

Seller warrants the Agent makes no

thing sold warranty
II. Parties to a Contract (b) Judicial separation of property.
Sale by husband in favor of a concubine
of Sale after he had abandoned his family and
left conjugal home where his wife and
Art. 1489. All persons who have capacity to children lived and from whence they
enter into obligations may enter into a contract derived their support, is void. [Ching v.
of sale Goyanko, Jr., 2006]
(2) Alienage [Art. 39]
A. KINDS OF INCAPACITY
(1) Absolute incapacity – when persons General Rule: Aliens are disqualified
cannot bind themselves at all from purchasing or acquiring real
property.
(2) Relative incapacity – only with regard
to certain persons and certain class of Exception: If acquisition is through
property hereditary succession
(3) Specific incapacity or Special (3) Trusteeship [Art. 39]
disqualifications

A.3. SPECIAL DISQUALIFICATIONS

A.1. ABSOLUTE INCAPACITY [ARTS. 1491-1492] (AGE-PLJ)
[ARTS. 1327, 1397, 139] The sale entered into by agents, guardians,
(1) Minors and executors and adminsitrators shall be
voidable, as it affects only private interests.
(2) Insane or Demented
The sale entered into by public officers,
(3) Deaf-mutes who do not know how to lawyers, justices and judges, and others
write specially disqualified by law shall be void, as
(4) Civil Interdiction it affects public interest.
(5) Judicially-declared Incompetents (Art. (1) Agents - Cannot purchase or acquire
39) property whose administration or sale
was entrusted to them
(a) Prodigal
Exception: Principal gives consent.
(b) Imbeciles
(2) Guardian - Cannot purchase property of
(c) Absence & presumption of death person under his guardianship
(d) Persons not of unsound mind but by Guardianship is a trust of the highest
reason of age, disease, weak mind, and order, and the trustee cannot be allowed
other similar causes, cannot take care of to have any inducement or neglect his
themselves and manage their property ward’s interest. [Phil Trust Co v Roldan,
without outside aid (Easy prey for deceit 1956]
and exploitation)
Art. 1491(2) in relation to Art. 1409 does
not apply where the sale was under a
A.2. RELATIVE INCAPACITY: MARRIED special power attached to the real estate
PERSONS mortgage, pursuant law. Under Act No.
(1) Husband and wife [Art. 1490] 3135, a mortgagee-creditor is allowed, as
an exception, to participate in the bidding
General Rule: Cannot sell property to under the same condition as any other
each other bidder. [Fiestan v. CA, 1990]
Exceptions: (3) Executors and Adm inistrators -
(a) Separation of property in marriage Cannot acquire or purchase property of
settlement, OR estate under their administration.
 Does not apply to purchase of hereditary litigation or levied upon on execution
rights, as these are not under their before the court within whose jurisdiction
administration. or territory they exercise their respective
functions.
The prohibition on executors and
administrators does not apply if the Rationale: to prevent fraud and to
principal consents to the sale. [Distajo v. surround their profession with prestige.
CA, 2000]
Prohibition applies only on sales or
(4) Public Officers and Employees - assignment during the pendency of
Cannot acquire or purchase property of litigation involving the property.
State/any of its subdivisions, GOCC or [Macariola v Asuncion, 1963]
administration, the administration of
(7) Others specially disqualified by
which was entrusted to them.
law
Includes judges and government experts
(a) Unpaid sellers with goods in transit
who, in any manner whatsoever take part
from buying the goods
in the sale.
Requisites: (b) Officer conducting the execution sale
of deputies
(a) Properties must belong to the State,
any of its subdivisions, or of any GOCC Art 1492: The prohibitions in the two
preceding articles (Arts. 1490, 1491) are
(b) Administration of these properties applicable to sales in legal redemption,
are entrusted to the public compromises and renunciations.
officers/officials
Art 1646: The persons disqualified to buy
(5) Lawyers - Cannot acquire or purchase referred to in articles 1490 and 1491, are also
property or rights in litigation in which disqualified to become lessees of the things
they take part by virtue of their profession mentioned therein.
Lawyers may have undue influence over
client; greed may get the better of the
B. EFFECTS OF INCAPACITY
sentiments of loyalty and
disinterestedness. [Valencia v Cabanting,
1991] B.1. ABSOLUTE INCAPACITY
Prohibition is definite and permanent and (1) If both parties are incapacitated:
cannot be cured by ratification. [Rubias v unenforceable [Art. 1403 (3)]
Batiller, 1973]
(2) If only 1 party is incapacitated: voidable
Exceptions: An assignment to a lawyer
Exception: If necessaries are sold and
by his client of an interest in the property delivered to an incapacitated person: pay a
does not violate Art 1491, where:
reasonable price therefor. [Art 1489]
(a) A judgment has been rendered and
has become final; and
B.2. RELATIVE INCAPACITY
(b) In case of contingency fee
Sale between spouses is void.
arrangements: the interest of the lawyer
may be annotated as an adverse claim on Rationale:
the property awarded to his client
(1) To protect 3rd persons who may have
[Director of Lands v Ababa, 1979]
contracted with the spouse
(6) Justices, Judges, prosecuting
(2) To avoid undue advantage of the
attorneys, clerks and other officers
dominant spouse over the weaker spouse.
and em ployees connected with the
adm inistration of justice - Cannot
acquire or purchase property or rights in
(3) To avoid circumvention of the prohibition
against donations between spouses. III. Subject Matter
[Medina v CIR, 1961]
A. REQUISITES OF A VALID SUBJECT
Such prohibition shall likewise apply to MATTER
common law spouses. [Calimlim-Canulas v
Fortun, 1984] [Arts. 1459-1465]

But if already sold to a third person who For Rights:

relied on the title of his immediate seller, (1) Transmisible or personal
reconveyance to the seller spouse is no longer (2) Licit
available [Cruz v CA, 1997]
For Things:
(1) Licit
B.3. SPECIFIC INCAPACITY/ SPECIAL (2) Existing, Future, Contingent
DISQUALIFICATIONS (3) Determinate or determinable
General Rule: Contracts expressly
prohibited by law are VOID and CANNOT BE
RATIFIED. Neither can the right to set-up the A.1. MUST BE LICIT
defense of illegality be waived. [Art. 1409 (7)] [Art. 1459]
Those entered into by public The thing is licit when—
officers/employees, justices and judges, and (1) Within the commerce of man [Art 1347,
lawyers in violation of Art. 1491 are inexistent CC]
and VOID from the beginning. [Rubias v
Batiller, 1973] It is NOT subject to (2) Example of properties that are not within
RATIFICATION. the commerce of man:
Exception: Sales entered into by guardians, (a) Those belonging to the State or its
administrators, and agents (specific political subdivisions intended for
incapacities) in violation of Art. 1491 may be public use or public service. (Art 420)
RATIFIED by means of and in the form of a (b) Church
new contract when the cause of nullity has
ceased to exist. Ratification is valid only from (c) Narcotics or dangerous drugs except
date of execution of the new contract and upon prescription (RA 6425, the
does not retroact. dangerous drugs act of 1972)
(3) When right is not intransmissible [Art
1347]
(4) It does not contemplate a future
inheritance, unless expressly authorized
by law

Kinds of illicit things:

(1) Per Se – of its nature
(2) Per Accidens – due to provision of law.
Art 1347, paragraph 2, characterizes a
contract entered into upon future inheritance
as void. Art. 1347 applies when the following
requisities concur:
(1) Succession has not yet been opened;
(2) The object of the contract forms part of Sale of Things Having Potential Existence
the inheritance; and
Emptio Rei Emptio Rei Spei
(3) The promissor has, with respect to the Speratei
object, an expectancy of a right which is Mere Hope Vain Hope
purely hereditary in nature. [Vda. de Sale of a Sale of a Sale of a
Cabatu v. Spouses Tabu, 2012] thing MERE HOPE VAIN HOPE
expected or or or
future thing expectancy expectancy
Examples of illicit sale
Valid GR: Valid EXC: Void
(1) Sale of future inheritance is void [Art.
1347] Example: Example: Example:
Sale of the Sale of a Sale of a fake
(2) Sale of animals suffering from contagious grain a field valid lottery lottery ticket
diseases [Art 1575] may grow in ticket
(3) Sale of animals if the use or service for a given time
which they are acquired has been stated Deals with a Deals with a thing that
in the contract, and they are found to be future thing currently exists – the hope or
unfit therefor [Art 1575] that is expectancy
(4) Sale of land in violation of Constitutional currently not
prohibition against the transfer of lands in existence
to aliens. [Art XII of Constitution] Subject to Not subject to any condition;
When the subject matter is illicit, the contract the condition The contract comes into
of sale is void [Art. 1409 (7)] that the thing existence immediately
will exist
Future thing
A.2. EXISTING, FUTURE, CONTINGENT is certain as
The goods which form the subject of a to itself, but
contract of sale may either be— incertain as
(1) Existing goods owned or possessed by the to quantity
seller; and quality
(2) Goods to be manufactured, raised, OR In case of doubt, the presumption is in favor
acquired by the seller – “Future Goods”; of emptio rei speratae since it is more in
[Art 1462, CC] keeping with the commutative character of
the contract.
It is valid only as an executory contract to
be fulfilled by acquisition and delivery of (4) Sale of specific things
goods specified. (a) Sale of things in litigation [Art 1381(4)]
(3) Things having potential existence may be Sale of things under litigation entered
the object of a contract of sale. [Art 1461, into by defendant, without the
CC] approval of the litigants or the court,
is rescissible. [Art 1381 (4)]
A sale may be made of a thing which,
though not yet actually in existence is But no rescission where the thing is
reasonably certain to come into existence legally in the possession of 3rd
as the natural increment or usual incident persons who did not act in bad faith
of something in existence already [Art 1385 (2)]
belonging to the seller, and the title will (b) Sale of an undivided interest in a
vest in the buyer the moment the thing thing [Art 1463]
comes into existence. [Sibal vs Valndez,
1927] LEGAL EFFECT: Make the buyer a co-
owner in the thing sold:
 (i) acquire full ownership of his part
(ii) may sell his part even without IV. Obligations of the
consent of other co-owners
(c) Sale of undivided share of a specific
Seller
mass [Art 1464] A. OBLIGATIONS OF THE VENDOR IN
The sale of an undivided share in a GENERAL
specific mass of fungible goods (1) To transfer ownership of the thing [Art.
makes the buyer a co-owner of the 1495]
entire mass in proportion to the
amount he bought. (2) To deliver the thing, with its accessions
and accessories, if any [Arts 1164, 1166]
If later on it was discovered that the
mass of fungible goods contain less (3) To warrant against eviction and against
than what was agreed upon, the hidden defects [Arts 1545-1581]
buyer becomes owner of whole mass (4) To take care of the thing, pending
and seller must make up for the delivery, with proper diligence [Art 1163]
difference. [De Leon]
(5) To pay for the expenses of the deed of
(d) Sale of things subject to resolutory sale [Art1487]
condition [Art 1465]
Examples: Things acquired under
legal or conventional right of B. WHEN SELLER IS NOT THE OWNER
redemption; or subject to reserva General Rule: Ownership is not acquired by
troncal; pacto de retro sale the buyer. One cannot give what one does not
have. [Art 1505]

A.3.DETERMINATE OR DETERMINABLE Exceptions:

A thing is determinate when it is (1) Seller has a right to transfer ownership
particularly designated or physically Seller need not be the owner of the thing
segregated from all others of the same class. at the time of perfection of the contract. It
[Art 1460] is sufficient that seller has a right to
A thing is determinable when it is capable transfer ownership thereof at the time it
of being made determinate at the time the is delivered. [Art. 1459]
contract was entered into without the One who sells something he does not
necessity of a new or further agreement own yet is bound by the sale when he
between the parties. [Art 1460] acquires the thing later. [Bucton vs Gabar,
Art. 1165: If the obligation to deliver is a 1974]
determinate thing, the creditor has the right (2) Estoppel: Owner is, by his conduct,
to compel specific performance and to precluded from denying the seller’s
recover damages for breach of the obligation. authority to sell. [Art. 1434]
[Jurado]
(3) Registered land bought in good faith
Failure to state the exact location of the land
does not make the subject matter General rule: Buyer need not go
indeterminate, so long as it can be located. beyond the Torrens Title
[Camacho v CA, 2007] Exception: When he has actual
The fact that the exact area of the land knowledge of facts and circumstances
specified in the contract of sale is subject to that would impel a reasonably cautious
the result of a survey does not render the man to make further inquiry
subject matter indeterminate. [Heirs of Juan (4) Order of courts; Statutory Sale
San Andres v. Rodriguez, 2000]
 In execution sale, the buyer merely steps
into the shoes of the judgment debtor V. Price
[Rule 39, sec. 33, ROC]
(5) When goods are purchased in Merchant’s
store, Fair, or Market [Art 1505] A. MEANING OF PRICE
(Arts. 1469-1474)
Price signifies the sum stipulated as the
C. SALE BY PERSON HAVING A equivalent of the thing sold and also every
VOIDABLE TITLE incident taken into consideration for the
(1) True owner may recover the thing when fixing of the price put to the debit of the buyer
the ff. requisites concur: and agreed to by him [Inchausti v. Cromwell,
1911]
(a) Subject matter is movable
(b) Owner has either lost the thing or has
been unlawfully deprived. [Art 559] B. REQUISITES FOR A VALID PRICE
(2) Reimbursement is necessary before (1) Certain or ascertainable at the time of
owner can recover when: perfection

(a) Buyer acted in good faith (2) In Money or its equivalent

(b) Acquired at a public auction [Art 559] (a) N.B.: Example of “equivalent”:
Letters of credit
(3) Recovery no longer possible when:
(b) If price is partly in money and partly
(a) Buyer in good faith in another thing: Determine manifest
(b) Acquired it at a merchant’s store, fair intention of the parties to see
or market. [Art 1506] whether it was barter or sale. [Art
1468]
(c) If intention does not clearly appear, it
shall be considered a barter if the
value of the thing exceed the amount
of money or its equivalent. [Art 1468]
(3) Real
When buyer has an intention to pay and
the seller has an expectation to receive
the price
(a) If simulated: Sale is VOID; BUT act
may be shown to have been a
donation or some other act or
contract. [Art 1471]
(b) If Price is false – when the real
consideration is not the price stated
in the contract:
(i) Sale is void
(ii) UNLESS proved to be founded on
another true and lawful price [Art
1353]
C. HOW PRICE IS DETERMINED/WHEN D. INADEQUACY OF PRICE
CERTAIN (ARTS. 1355, 1470)

(1) Fixed by agreement of the parties

General Rule: Does not affect a contract of
(a) Fixing of price cannot be left to the sale’s validity. [Art. 1470]
discretion of one of the parties
The stipulation in a contract of sale which
(b) BUT if such is accepted by the other, states that the consideration is “PhP1 and
sale is perfected. [Art 1473] other valuable considerations” does not
(2) Determination is left to the judgment of a make the contract void. Gross inadequacy of
specified person price does not affect the contract of sale
except that it may indicate a defect in consent.
General Rule: Price fixed by 3rd [Bagnas v. C.A., 1989]
persons designated by the parties is
binding upon them Exceptions:

Exceptions: (1) In Voluntary sales

(a) Where low price indicates a vice of
(a) If unable or unwilling: Sale is
consent, sale may be annulled.
inefficacious unless parties
subsequently agree about the price. (c) Where price is so low to be shocking
to the conscience (fraud, mistake,
(b) If in bad faith/by mistake: Courts may
undue influence), then sale may be
fix price (but mere error in judgment
set aside.
cannot serve as basis for impugning
price fixed) (d) Where price is simulated such as
when the real intention was a
(c) If 3rd person is prevented from fixing donation or some other contract.
price by fault of seller or buyer:
Innocent party may avail of remedies (e) Where the parties did not intend to be
(rescission or fulfillment of obligation, bound at all, sale is void.
with damages) (2) In Involuntary sales
(d) If 3rd person disregards specific A judicial or execution sale is one made by a
instructions/data/procedure, thereby court with respect to the property of a debtor
fixing an arbitrary price for the satisfaction of his indebtedness.
(3) The price is made in reference to another (a) Where price is so low to be shocking
thing, or when the price fixed is the price to the conscience, such that a
of the commodity on a definite day, or in reasonable mind would not be likely
a particular exchange or market, or when to consent to it, then judicial sale will
the amount fixed is above or below the be set aside.
price on such day, exchange or market.
[Art 1472] (b) If in event of a resale, a better price
can be obtained.
When the price is not certain, the contract is
without effect and no obligation arises from it. (3) Rescissible contracts of sale
Exception: When the thing is already Inadequacy of price is a ground for
delivered, the buyer must pay a reasonable rescission of conventional sale under Art
price therefor. This exception only arises 1381 (a-b)
when the means contemplated by the parties
for fixing the price have become ineffectual.
E. WHEN NO PRICE AGREED G. EARNEST MONEY VS OPTION
(ART. 1474) MONEY
[ART. 1482]
(1) Sale is inefficacious [Art. 1474]
(2) But if the thing or part thereof has been Earnest Money – paid in advance of the
delivered and appropriated by the buyer, purchase price agreed upon by the parties in
he must pay a reasonable price therefor. a contract of sale, given by the buyer to the
seller, to bind the latter to the bargain.
(a) What is a reasonable price is a
question of fact dependent on the Limson vs. CA, 2001
circumstances of each particular Option Money Earnest Money
case. [Art 1474]
Separate and distinct Part of purchase
(b) The reasonableness of a price may be consideration from price [Art 1482]
determined on the basis of a the purchase price
company’s balance sheet showing the Given when sale is not Given only when
book value or fair market value of its yet perfected there is already a
shares. [Philippine Free Press vs. CA, sale
2005] When given, the When given, the
Generally, the reasonable price is the market would-be-buyer is not buyer is bound to
price at the time and place fixed by the required to buy, but pay the balance
contract or by law for delivery of goods. may even forfeit it
depending on the
terms of the option
Grantee of option is Buyer manifests his
F. FALSE PRICE VS SIMULATED PRICE still undecided earnest desire to buy
(1) False Price (Relative Sim ulation) – whether or not to buy the property
price stated in the contract is not the true or sell the property
price. Parties intended to be bound. [Baviera]
Effect: Binds the parties to their real
agreement when it does not prejudice 3rd Non-payment of
persons and is not intended for any False Price
Price
purpose contrary to law, morals, public Real price is not Failure of buyer to
policy, etc. declared pay the price
(2) Sim ulated Price (Absolute Contract is void if it Contract is not void
Sim ulation) – price stated in the should not be but gives rise to a
contract is not intended to be paid. proved that it was right to demand
Parties never intended to be bound. founded upon fulfillment or
another casue cancellation of the
Effect: Void for lack of which is true and obligation
cause/consideration, but can be shown lawful [Art 1353]
as a donation or some other contract.
Parties may recover from each other what
they may have given under the contract. There can be sale even when no price is
agreed upon. When the price cannot be
Disagreement on the manner of payment is determined in accordance with Arts 1469-
tantamount to a failure to agree on the price. 1473, the contract is inefficious.
[Toyota Shaw vs. CA, 1995]
Exception: when the thing or part thereof
has been delivered to and appropriated by
the buyer, in which case the buyer has to pay
a reasonable price therefor.
VI. Formation of Form and Type
(a) Offer must be certain as to the
Contract of Sale object and price [Art. 1319]
(b) Business advertisements of
things for sale are not offers but
A. PREPARATORY mere invitations to make an offer
[ART. 1479] Exception: If otherwise provided
(1) Offer [Art. 1475] [Art. 1325]
In General: (c) Advertisements for bidders are
(a) The contract of sale is perfected at simply invitations to make
the moment there is meeting of the proposals. Advertiser is not
minds upon the thing which is the bound to accept the highest or
object of the contract and upon the lowest bid.
price. [Art. 1475, par.1]
Exception: Unless the contrary
(b) From that moment, the parties may appears [Art. 1326]
reciprocally demand performance,
Fixing terms of offer: The person
subject to the provisions of law
governing the form of contracts. [Art. making the offer may fix time, place, and
1475, par. 2] manner of acceptance [Art. 1321]
(c) A private instrument signed by the W hen effective: From the time
defendant reciting that he bought acceptance is communicated to him or
from the plaintiff a property at a his agent. [Art. 1322]
specific address for a specific price to
W hen ineffective: Offer becomes
be paid as soon as a bill of sale is
ineffective upon death, civil interdiction,
signed is not a mere draft but a
insanity, or insolvency of either party
perfected agreement and hence,
before acceptance is conveyed [Art 1323]
obligatory, even if there was no
statement as to area or price per (2) Acceptance
meter. [Goyena v. Tambunting, 1902]
(a) The acceptance must be absolute.
General Rule: Offer may be (b) The acceptance must be plain and
withdrawn at any time without even
unconditional.
communicating such withdrawal to
the interested buyer. (c) To bind the offeror, the offeree must
comply with the conditions of the
Exception: When the offerer has
offer. Where the acceptance was not
allowed the offeree a certain period in accordance with the terms and
to accept, the offer may be withdrawn
conditions of the offer, the offer
at any time before acceptance by lapsed even though the offeree later
communicating such withdrawal. [Art
on was willing to accept the terms
1324, CC] and conditions of the offer.
Exception to the exception:
The acceptance referred to which
Cannot be withdrawn within a certain
determines consent is the acceptance of
period if offer is founded upon a the offer, and not of the goods delivered.
consideration. [Art 1324 and 1479, CC]
[National Grains Authority v. IAC, 1989]
An acceptance may contain a request for
certain changes in the terms of the offer
and yet still be a binding acceptance (but
the requests should be mere suggestions
only, not counter-offers), so long as clear
 that meaning of acceptance is positively (4) Right of First Refusal
and unequivocally to accept offer,
As to enforceability
whether such request is granted or not, a
contract is formed. [Villonco Realty If the right to the first offer is embodied in
Company v. Bormaheco, Inc., 1975] the contract, it should be executed
according to the terms stipulated. This
(3) Option Contract [Arts. 1479, 1324]
juridical relation is not amorphous nor is
(a) Definition it merely preparatory. [Equatorial Realty
Development vs. Mayfair, 1996]
(i) An accepted unilateral promise to
buy or sell supported by a W hen the grantee fails to exercise
consideration distinct from the the right
price [Art 1479]
Only after the grantee fails to exercise its
(ii) An option is not of itself a right of 1st priority under the same terms
purchase, but merely secures the and conditions within the period agreed
privilege to buy. upon, could the grantor validly offer to
sell the property to a 3rd person under
(iii) A consideration for an optional
the same terms as offered to the grantee.
contract is just as important as
[Paranaque Kings vs. CA, 1997]
the consideration for any other
kind of contract. If there was no As to the effects of the violation of
consideration for the option, then the right
it cannot be enforced any more
(a) A sale made in violation of a right of
than any other contract where no
first refusal is valid but rescissible,
consideration exists. [Baviera]
and may be the subject of an action
(b) Elem ents of an Option Contract for specific performance. [Rosencor
Devt. Corp. Vs. Inquing, 2001]
(i) Consent
(b) However, before the sale to the 3rd
(ii) Subject matter: an option right or
person may be rescinded, he must
accepted unilateral offer to buy,
have been actually or constructively
or an option right or accepted
aware of the right of 1st refusal at the
unilateral offer to sell a
time he bought it.
determinate object for a price
certain, including the mannerof (c) The sanction for the enforcement of
payment thereof the right of first refusal against third
persons is based on Art. 19 of NCC, as
(iii) Prestation: a consideration no real right was created on the
separate and distinct from the property.
purchase price for the option
given Distinction from Option Contract
(c) Sale vs. Option Contract Option Contract Right of 1st Refusal
Sale Option Contract Separate No need for a
consideration is separate
Bilateral Unilateral: gives necessary consideration
right to buy or sell,
but imposes no Grantee has the right No right to buy or
obligation on the to buy or sell sell, only a right to
option-holder, aside match the 1st offer to
from consideration buy should the
for the offer grantor decide to
sell
Sale of property Sale of right to
purchase
(5) Mutual Prom ise to Buy and Sell (c) Applies only to executory contracts, not
[Art. 1479] to contracts either totally or partially
performed. [Iñigo v. Estate of Maloto,
A promise to buy and sell a determinate
1967]
thing for a price certain is reciprocally
demandable. (d) Purpose: to prevent fraud or perjury in the
enforcement of obligations
The promise made by one party is the
consideration for the promise made by (e) Ratified when defense fails to object to
the other. [Baviera] the introduction of parol evidence, or ask
questions on cross-examination
B. PERFECTION
[Arts. 1475, 1319, 1325, 1326] Perfection of Sale by Auction [Art 1476]
(1) Contract is perfected when the auctioneer
W hen Perfected accepts the bid by the fall of the hammer
or gavel or in any other customary
(1) Contract of sale is a consensual contract, manner.
hence perfected at the moment of the
meeting of the minds of the parties as to (2) If auction is announced to be “without
the object of the contract and the price. reserve,” goods cannot be withdrawn
[Art 1475] from the sale after the bid is made.

(2) It is the proof of all the essential elements (3) By taking part in the auction and offering
of the contract of sale, and not the mere bidding, the buyer voluntarily submitted
giving of earnest money, which to the terms and conditions of the auction
establishes the existence of a perfected sale announced in the notice.
sale. [Platinum Plans Phils. vs. Cucueco, (4) Puffing/by-bidding is illegal – means
2006] employed by owner to increase the price
of the bids; illegal.

Effect of Perfection
From the moment of the perfection of the C. CONSUMMATION
contract of sale, the parties may reciprocally When parties fulfill their obligations.
demand performance, subject to the
provisions of the Statute of Frauds. [Art 1475]
FORMALITIES OF THE CONTRACT
[Art. 1403 (d) (e)]
Statute of Frauds [Art,1403 (2)]
General rule: No form required as to
(a) Contract or some memorandum thereof validity provided all the essengtial requisites
must be in writing and subscribed by the are present.
party or his agent, otherwise contract is
The sale may be [Art.1483, CC]:
unenforceable; unless ratified by failure to
object to oral evidence or acceptance of (1) Written
benefits under the contract
(2) Oral
(b) Statute of Frauds covers:
(3) Partly written and partly oral
(i) Sale of personal property at price not
(4) Inferred from the conduct of the parties
less than 500 pesos
(ii) Sale not to be performed within 1 year
Sale is consensual, and thus binding when
(iii) Sale of real property or an interest
there is meeting of minds as to price. Such
therein [Art 1358]
sale is valid despite manner of payment, or
even breach as to such manner of payment. If (d) The cession of actions or rights
real price is not stated in the contract, then proceeding from an act appearing in a
the remedy would be reformation of the public document.
contract. Payment has no effect on the
(e) All other contracts where the amount
validity of the sale, for payment merely goes
involved exceeds five hundred pesos must
into the performance of the contract. Failure
appear in writing, even a private one. But
to pay consideration is not lack thereof.
sales of goods, chattels or things in
[Spouses Buenaventura v. CA, 2003]
action are governed by Articles, 1403, No.
Continued possession of the object of an oral 2 and 1405.
contract has been held to constitute partial
performance, where accompanied by other
acts which characterize the continued
possession and refer to the contract of sale. A
tender of payment, declined by the vendor,
has been said to be equivalent to actual
payment, for purposes of determining if there
has been partial performance. [Ortega v.
Leonardo, 1958]

Sale of realty by an agent

Agent’s authority must be in writing,
otherwise the sale is void [Art.1874]

Sale of large cattle

To be valid, transfer of large cattle must be
registered with the municipal treasurer [Sec.
529, Revised Administrative Code]

For public convenience: In a public

docum ent – to compel third parties [Art
1358]
(a) Acts and contracts which have for their
object the creation, transmission,
modification or extinguishment of real
rights over immovable property; sales of
real property or of an interest therein a
governed by Articles 1403, No. 2, and
1405;
(b) The cession, repudiation or renunciation
of hereditary rights or of those of the
conjugal partnership of gains;
(c) The power to administer property, or any
other power which has for its object an
act appearing or which should appear in
a public document, or should prejudice a
third person;
VII. Transfer of GENERAL CONCEPTS
Transfer of ownership is effected even if the
Ownership purchase has been made on credit. Payment
of the purchase price is not essential to
transfer of ownership as long as the property
OBLIGATIONS OF THE VENDOR
sold was delivered.
(1) To transfer ownership of the thing
(2) To deliver the thing, with its accessions
and accessories, if any Intention to transfer ownership
(3) To warrant against eviction and against (1) All forms of delivery shall be coupled with
hidden defects intention of delivering the thing sold.
(4) To take care of the thing, pending (2) Seller must be owner or authorized by
delivery, with proper diligence owner of the thing sold
(5) To pay for the expenses of the deed of
sale W hen right to transfer ownership
must exist: At the time of delivery and not
at the time of perfection of contract of sale.
A. MANNER OF TRANSFER
[ARTS. 1477, 1496-150]
General Rule: Ownership of the thing sold B. CONCEPT OF DELIVERY
shall be transferred to the vendee upon B.1. REQUISITES
actual or constructive delivery thereof [Art (1) Identity – between what must be
1477] delivered and what is actually delivered
Obligation to transfer ownership and to (2) Integrity – in a condition suitable for
deliver is implied in every contract of sale enjoyment
[Arts. 1458-1459]
(3) Intentional
Transfer of ownership requires delivery [Art.
1495]
B.2. WHAT TO DELIVER
Exceptions
(1) Thing sold [Art. 1495]
(1) Contrary stipulation
(2) Fruits [Art. 1164 & 1537] – belong to the
(2) Contract to sell vendee from day of perfection.
(3) Contract of insurance (3) Accessions and accessories [Art. 1166 &
(4) Sale on acceptance/Trial 1537] – in the same condition they were in
on day of perfection
(5) When seller is not the owner or has
voidable title (a) Improvements by seller at his
expense grants him a usufructuary
right [Art 1138, 1189]
(b) No indemnification
(c) But he may remove it to the extent
that there is no damage [Art. 1538]
B.3. WHERE TO DELIVER Loss or destruction of the property prior
(1) A hierarchy is followed: to return falls upon the buyer and makes
him responsible for the purchase price.
(a) Stipulation
Sale on Approval vs Sale or Return
(b) Usage of trade
Sale on Approval Sale or Return
(c) Seller’s place of business (office)
Ownership does not Ownership passes to
(d) Seller’s residence pass upon delivery buyer on delivery
(2) In case of specific goods, which the remaining with the and subsequent
parties knew to be at some other place seller until buyer return revests
when the contract was perfected, that signifies his approval. ownership in the
place is the place of delivery seller.

(3) If goods are at the time of sale are Depends on the Depends on the will
possessed by a third person, then there is character or quality of of the buyer
no delivery until he acknowledges to the goods
buyer that he holds the goods for the Subject to a Subject to a
buyer. suspensive condition resolutory condition
Risk of loss remains Risk of loss remains
B.4. WHEN TO DELIVER with the seller with the buyer
Absent a stipulation as to time, delivery must Express Reservation
be made within a reasonable time; demand
or tender of delivery shall be made at a If it was stipulated that ownership in the
reasonable hour. thing shall not pass to the purchaser until
he has fully paid the price then ownership
remains with seller even when delivery is
C. WHEN DELIVERY DOES NOT made [Art 1478]
TRANSFER TITLE Implied Reservation
(1) Sale on Approval or Trial The following are instances when there is
Title remains with the seller an implied reservation of ownership:
notwithstanding delivery of the goods.
(a) Goods are shipped, but by the bill of
Buyer becomes the owner when he – lading goods are deliverable to the seller
(a) Signifies his approval or acceptance or his agent, or to the order of the seller
to the seller or his agent

(b) Does any other act adopting the (b) Bill of lading is retained by the seller
transaction (i.e. sale to a third person) or his agent.

(c) Retains the goods without giving (c) When the seller of the goods draws
notice of rejection after the time fixed has on the buyer for the price and transmits
expired; if no time has been fixed, after the bill of exchange and bill of lading to
the expiration of a reasonable time [Art the buyer, and the latter does not honor
1502] the bill of exchange by returning the bill
of lading to the seller.
(2) Sale or Return
Buyer becomes owner of the property on
delivery, BUT has the option to revest (3) W hen Sale Not Valid
ownership in the seller instead of paying When the thing sold is a public property
the price by returning the goods within
the time fixed in the contract, or, if no
time is fixed, within a reasonable time.
Otherwise, the sale becomes absolute.
(4) W hen Seller is Not the Owner the buyer [E.g.: Art 1478 where ownership
General Rule: Ownership is not will only pass after full payment of the
acquired by the buyer. One cannot give price]
what one does not have. [Art 1505]
Exceptions:
D.2. CONSTRUCTIVE DELIVERY
(a) Seller has a Right to transfer Execution of public instrument [Art
ownership 1498, first paragraph]
(b) Estoppel: Owner is, by his conduct, General Rule: produces the same legal
precluded from denying the seller’s effects of actual delivery.
authority to sell. [Art. 1434]
Exceptions:
(c) Registered land bought in good faith
(a) The parties intended otherwise.
(d) Order of courts; Statutory Sale
(b) At the time of execution, the subject
(e) When goods are purchased in matter was not subject to the control of
Merchant’s store, Fair, or Market [Art the seller, which control must subsist for
1505] a reasonable length of time after
execution. [Pasagui v Villablanca, 1975]
(5) Sale by Person Having a Voidable
Title “Control” over thing sold must be such
(a) True owner may recover the thing that seller is capable of physically
when the ff. requisites concur: transferring it to buyer.
(i) Subject matter is movable Although parties may stipulate that the
execution of a public instrument is equivalent
(ii) Owner has either lost the thing or
to delivery, this legal fiction holds true only
has been unlawfully deprived.
when there is no impediment that may
[Art 559]
prevent the passing of the property from the
(b) Reimbursement is necessary before vendor to the vendee. [Vda. de Sarmiento v.
owner can recover when: Lesaca, 1960]
(i) Buyer acted in good faith If, notwithstanding execution of the
instrument, the buyer cannot enjoy material
(ii) Acquired at a public auction [Art
tenancy and make use of the object himself
559]
or through another in his name, there is no
(c) Recovery no longer possible when: delivery. [Power Commercial v. CA, 1997]
(i) Buyer in good faith Execution of a public instrument gives rise
only to a prima facie presumption of delivery,
(ii) Acquired it at a merchant’s store,
negated by failure of the buyer to take actual
fair or market. [Art 1506]
possession of land sold. A person who does
not have actual possession cannot transfer
constructive possession by execution and
D. KINDS OF DELIVERY
delivery of public instrument. [Spouses
Santiago v. Villamor, 2012]
D.1. ACTUAL DELIVERY
(1) Deemed made when the thing sold is
placed in the control and possession of Sym bolic Delivery
the vendee [Art. 1497]
Delivery of keys of the place or depositary
(2) Not always essential to passing of title where the movable is stored or kept. [Art
[Art. 1475] 1498]
(3) Parties may agree when and on what Unless otherwise agreed, when symbolic
conditions the ownership shall pass to delivery has been made, the seller is not
obliged to remove tenants to place the buyer (3) By allowing the buyer to use his rights as
in actual possession of the property as he has new owner with the consent of the seller
already complied with his obligation to
transfer ownership of and deliver the thing
sold. [Power Commercial and Industrial Corp. Delivery to a Com m on Carrier
v. CA, 1997; Sabio v. The International
General Rule: Delivery to the courier or
Corporate Bank, Inc., 2001]
carrier is tantamount to delivery to buyer,
whether carrier is named by buyer or not. The
buyer assumes the risk of loss.
Tradition Longa Manu (Long Hand)
Delivery of movable property by mere consent
or agreement, if the thing sold cannot be Exceptions
transferred to the possession of the buyer at
(1) Seller reserved title through the form of
the time of sale. [Art 1499]
the bill of lading, with intent to remain
Example: Seller points to the property the owner, not merely for the purpose of
without actually transferring physical securing payment, OR
possession thereof.
(2) Contrary intention appears in the contract
When an employer assigned all its rights and (i.e. seller is required to deliver goods to
title to all surplus property salvaged by the buyer at the point of destination)
contractor, tradition longa manu takes place.
(3) Delivery by the seller is in breach of the
Delivery is upon the moment a thing is
contract
salvaged. [Board of Liquidators v. Floro, 1960]
(4) F.O.B. (Free on Board or Freight on
Board) - When seller bears the expenses
Tradition Brevi Manu (Short Hand) of transportation up to the F.O.B. point.
Delivery of movable property by mere (5) C.I.F. (Cost, Insurance, Freight) - Price
consent or agreement, if the buyer already quoted includes the costs of the goods,
had it in his possession for any other reason. insurance, and freight charges on the
[Art 1499] goods up to the point of destination.
Happens when the already has possession of (6) F.A.S. (Free Alongside) - Seller bears the
the thing sold before the sale by virtue of expenses of transportation until he
another title (as lessee, borrower, depositary, delivers the goods alongside a vessel at a
etc.) named port.

Tradition Constitutum Possessorium E. DOUBLE SALES

Seller continues to be in possession of the [ART. 1544]
property sold not as owner but in some other General Rule: Prior tempore, prior jure
capacity, like as tenant or lessee. (“First in time, priority in right”) applies.
Requisites
Quasi-traditio (1) 2 or more valid sales;
Mode of delivery of incorporeal things or (2) Same subject matter;
rights. Delivery is effected:
(3) 2 or more buyers with conflicting
(1) By execution of public instrument interests over the rightful ownership of
(2) When such is not applicable, by placing the thing sold;
the titles of ownership in the possession (4) Same seller. [Cheng v Genato, 1998]:
of the buyer
RULES GOVERNING SALE OF MOVABLES, latter's interest in the property sold as of the
IMMOVABLES AND UNREGISTERED time the property was levied upon. [Carumba
LANDS v. CA, 1970]

Sale of Movables Sale of Immovables: Unregistered

Land
Ownership shall be transferred to the person
who may have first taken possession in good (a) Instrument or deeds establishing,
faith. transmitting, acknowledging, modifying
or extinguishing rights with respect to
lands not registered under the Land
Sale of Im m ovables: Registered Land Registration Act or the Spanish Mortgage
Ownership belongs to the person who: Law, are required to be registered in the
Registry of Property to prejudice 3rd
(1) In good faith first recorded the sale in persons, although such registration is
the Registry of Property; or understood to be “without prejudice to a
(2) If there is no inscription of sale on the third party with a better right”. [PD 1528
title, ownership passes to the person who Sec 113]
in good faith was first in possession; or (b) Art. 1544 applies to unregistered land
(3) In the absence thereof, to the person who subject to a conventional sale (because of
presents the oldest title, provided Art. 1358) but NOT to unregistered land
there is good faith. subject to judicial sale.

Possession refers to any of the modes of (c) Unregistered by both buyers, the first
possession in Articles 1497-1501 buyer is preferred.

Oldest Title as to any public document (d) If first buyer did not register but second
showing acquisition of the land in good faith. buyer registered property, second buyer is
To constitute “title,” the transmission of preferred.
ownership must appear in a public document
[Art. 1358 (1)]
F. PROPERTY REGISTRATION DECREE
Registration includes any entry made in
the Primary Entry Book of the registry,
including both registration in its ordinary and Requisites for Registration of Deed of
strict sense and cancellation, annotation, and Sale in Good Faith
even marginal notes. [Cheng v. Genato, 1998]
Pencilled entries on the title are not Purchaser in Good Faith
considered registration. [AFPMBAI v. Court of
Appeals, 1999] One who buys the property of another,
without notice that some other person has a
right to or interest in such property, and who
Second Sale Made by Virtue of pays a full and fair price for the sale, at the
Execution and Attachm ent time of the purchase or before he has notice
of the claim/interest of some other person in
Art. 1544 does NOT apply in cases where the the property. [Agricultural and Home
first sale of an unregistered immovable Extension Development Group v CA, 1992]
occurred prior to an execution sale and the
second sale occurred by virtue of an execution General Rule: As a rule, he who asserts the
sale. This is because a buyer of unregistered status of a purchaser in good faith and for
land at an execution sale only steps into the value has the burden of proving such
shoes of the judgment debtor (the person assertion. [Mathay v CA, 1998]
who sold the property prior to the execution
sale). The second buyer merely acquires the
W hen buyer is presumed to be in bad (c) Documentary tax registration fees – 1.5%
faith of the selling price or zonal value,
whichever is higher
(1) Annotation of adverse claim : Places
any subsequent buyer of the registered
land in bad faith. [Balatbat v CA, 1996]
(2) Annotation of Lis Pendens: Buyer
cannot be considered an innocent
purchaser for value where it ignored the
lis pendens on the title.
(3) A purchaser of a parcel of land cannot
close his eyes to facts which should put a
reasonable man upon his guard, such as
when the property subject of the
purchase is in the possession of persons
other than the seller. A buyer who could
not have failed to know or discover that
the land sold to him was in the adverse
possession of another is a buyer in bad
faith. [Heirs of Ramon Durano v Uy, 2010]

Annotation of
Lis Pendens
Adverse Claim
May be cancelled May be cancelled
even before the action only in one instance,
is finally terminated i.e., after the claim is
for causes which may adjudged invalid or
not be attributable to unmeritorious by the
the claimant Court

The two are not contradictory or repugnant to

one another; nor does the existence of one
automatically nullify the other, and if any of
the registrations should be considered
unnecessary or superfluous, it would be the
notice of lis pendens [A. Doronila Resources
Development Inc v CA, 1988]

Accom panied by vendors duplicate

certificate of title, paym ent of capital
gains tax, and documentary tax
registration fees
Must be accompanied by:
(a) Vendor’s duplicate certificate of title
(b) Payment of capital gains tax – 6% of the
selling price or zonal value, whichever is
higher
VIII. Risk of Loss & In the absence of stipulation, there are two
conflicting views:
Deterioration (1) Res perit creditori or the buyer bears the
risk of loss. This is an exception to the
rule of res perit domino.
A. RES PERIT DOMINO Basis: Art 1504 only covers goods.
[ARTS. 1263, 1189]
Pursuant to Article 1262, if the thing is
Res perit domino: Owner bears risk of loss and destroyed without the fault of the
deterioration debtor/seller, the obligation to pay shall
subsist.
Basis: Ownership is not transferred until
delivery. (2) Res perit domino or the seller bears the
risk of loss.
Basis: The rule on loss is different from
B. PRIOR TO PERFECTION OF
the rule on deterioration for the loss
CONTRACT would be for the account of the seller,
Seller bears risk of loss and deterioration. while the deterioration would be for the
Basis: Res perit domino account of the buyer.
In reciprocal obligations, the
extinguishment of the obligation due to
C. AT TIME OF PERFECTION loss of the thing extinguishes the entire
[ARTS. 1493 AND 1494] juridical relation.
Seller bears risk of loss and deterioration.
Basis: Res perit domino D.2. DETERIORATION
[ART 1189]
Impairment is borne by the BUYER if the
Partial Loss (Or loss
thing deteriorates without the fault of the
which results in
Total Loss seller.
substantial change in
character) If it deteriorates through the fault of the seller,
the buyer may choose between rescission of
Contract is void Buyer may withdraw
obligation and fulfillment, either case with
because the from the contract
indemnity for damages.
object did not
or
exist at the time
of the Buy the remainder at a
transaction. proportionate price
E. AFTER DELIVERY
General Rule: Buyer bears risk of loss and
deterioration.
D. AFTER PERFECTION BUT BEFORE Exceptions [Art 1504 (1) and (2)]
DELIVERY (1) Where delivery has been made either to
the buyer or to the bailee for the buyer,
D.1.LOSS but ownership in the goods has been
retained by the seller merely to secure
General Rule: Stipulations in the contract
performance by the buyer of his
will govern.
obligations under the contract; and
(2) Where actual delivery has been delayed
through the fault of either the buyer or
seller, the goods are at the risk of the
party in fault.
IX. Documents of Title
Terms of the
How negotiated
Document
A. DEFINITION Goods are deliverable By delivery of the
[Art. 1636] to bearer document to another
Endorsed in blank by
the person to whose
A document used in the ordinary course of order the goods were
business in the sale or transfer of goods, as supposed to be
proof of the possession or control of the delivered
goods, or authorizing or purporting to
authorize the possessor of the document to Goods are deliverable By indorsement of
transfer or receive, either by endorsement or to the order of a such person [Art.
by delivery, goods represented by such specified person 1509, CC]
document. [Art. 1636]
Examples: bill of lading, quedan, WHO MAY NEGOTIATE IT?
warehouse receipts, trust receipts, dock [Art.1512]
warrant
(1) Owner
(2) Person to whom the possession or
B. PURPOSE OF DOCUMENTS OF TITLE custody of the document has been
entrusted by the owner
(1) As evidence of possession or control of
(a) If bailee undertakes to deliver the
goods described therein
goods to such person
(2) As a medium of transferring title and
(b) If document is in such form that it
possession over the goods described
may be negotiated by delivery
therein without having to effect actual
delivery thereof [Villanueva] A person to whom a document has been
negotiated acquires:
(3) The custody of a negotiable warehouse
receipts issued to the order of the owner, (1) Title of person negotiating the document,
or to bearer, is a representation of title over goods covered by document
upon which bona fide purchasers for (2) Title of depositor/owner over such goods
value are entitled to rely, despite
breaches of trust or violations of (3) Direct obligation of bailee/carrier to hold
agreement on the part of the apparent possession of goods for him
owner. [Siy Cong Bieng vs. HSBC, 1932]

D. NON-NEGOTIABLE DOCUMENTS OF
C. NEGOTIABLE DOCUMENTS OF TITLE TITLE
Goods described in a non-negotiable
A document of title which states that the document of title are deliverable only to a
goods referred to therein will be delivered to specified person.
the bearer, or to the order of any person
A person to whom a document has been
named in such document [Art. 1508]
negotiated acquires:
(1) Title to goods as against the transferor
(2) Right to notify the bailee of the transfer
thereof
(3) Right, thereafter, to acquire the The levy of an attachment of execution upon
obligation of the to hold goods for him the goods by a creditor of the transferor, may
defeat the title of the transferee and the right
to acquire the obligation of such bailee,
E. WARRANTIES OF SELLER OF when:
DOCUMENTS OF TITLE (1) It was done prior to the notification to
[ART. 1516] such bailee by the transferor of a non-
negotiable document of title or
(2) By a notification to such bailee by the
A person who negotiates a document of title
transferor or a subsequent purchaser
warrants:
from the transferor of a subsequent sale
(1) The genuineness of document of the goods by the transferor. [Art 1514
(3rd par)]
(2) The legal right to negotiate or transfer
A creditor whose debtor is the owner of a
(3) That there is no knowledge of any fact
negotiable document of title shall be entitled
which would impair the validity or worth
to such aid from courts in regard to property
of the document
which cannot be readily attached or levied by
(4) The right to transfer the title to the goods ordinary legal process [Art 1520]
and merchantability or fitness for a
particular purpose, whenever such
warranties would have been implied
He does not warrant that:
(1) Common carrier will fulfill its obligation
to deliver the goods
(2) Previous endorsers will fulfill their
obligation [Art. 1516-1517]
Goods in the hands of the carrier covered by a
negotiable document cannot be attached or
levied upon, unless:
(1) Document is first surrendered to the
carrier; or
(2) Impounded by the court; or
(3) Its negotiation is enjoined. [Art. 1519-
1520]

F. RULES ON LEVY/GARNISHMENT OF
GOODS
[ARTS. 1514, 1519, 1520]
Goods in the hands of the carrier covered by a
negotiable document cannot be attached or
levied upon, unless:
(1) Document is first surrendered to the
carrier; or
(2) Impounded by the court; or
(3) Its negotiation is enjoined. [Art. 1519-1520]
X. Remedies of an Buyer can set up the defense that seller
at any time before judgment could not or
Unpaid Seller did not intend to deliver the goods.
Unless the contrary appears, payment
and delivery are presumed to be
A. DEFINITION OF UNPAID SELLER concurrent acts, and the obligation of
[ART. 1525] each party to perform the contract is
dependent upon the simultaneous
performance by the other party
A seller is considered to be an unpaid seller if
the whole price has not been paid or If ownership has not yet passed to the
tendered, or when check received as a buyer, the seller cannot maintain an
conditional payment was dishonored by non- action for the price, unless it involves (b)
payment or insolvency of the buyer [Baviera] or (c).
An seller is unpaid within such definition
Title to goods passes from the moment
whether or not title has been passed. Partial
payment of the price does not extinguish the the goods are placed at the buyer’s
unpaid seller’s lien. [De Leon] disposal when refusal to accept is without
just cause.
Term also includes:
(1) The agent of the seller to whom the bill of (2) Action for damages [Art. 1596]
lading was endorsed, When ownership has not yet passed and
the buyer, without lawful cause, neglects
(2) The consignor or agent who had paid the or refuses to ACCEPT and PAY for the
price or is responsible for the price goods
(3) Any other person who is in the position of Measure of damages is the ESTIMATED
a seller (i.e. buyer who paid the price and LOSS directly and naturally resulting in
had a right to return the goods). [Baviera] the ordinary course of events from the
buyer’s breach. Not only actual damages,
but also unrealized profits. [De Leon] This
B. JUDICIAL REMEDIES OF UNPAID consists of:
SELLER (a) Where there is available market for
goods: Difference between the
(1) Action for the price [Art. 1595] contract price and the market price at
(a) When the ownership of the goods has the time the goods ought to have
passed to the buyer and he been accepted or if no time was fixed,
wrongfully neglects or refuses to pay at the time of refusal to accept Note:
for the price If the resale was made with diligence,
(b) When the price is payable on a the resale price is evidence of market
certain day and the buyer wrongfully value, taking into account whether or
neglects to pay such price, not the goods could be readily sold
irrespective of delivery or of transfer
(b) Where labor/expense was necessary
of title
for seller to fulfill his obligation:
(c) When the goods cannot readily be
Labor performed and expenses made
resold for a reasonable price, and the
by seller before receiving notice of
buyer wrongfully refuses to accept
buyer’s repudiation or countermand
the goods even before ownership
passed. (c) Profit that the seller would have
made if sale had been fully performed
(3) Rescission by giving the buyer notice of C. ALTERNATIVE REMEDIES OF THE
the election to rescind [Art. 1597] UNPAID SELLER UNDER RECTO LAW
When the goods have not yet been (a) Specific Performance
delivered to the buyer, and the buyer
(b) Cancellation of sale: If vendee fails to pay
repudiated the contract of sale, or
2 or more installments. When the seller
manifested his inability to perform his
cancels the sale by repossessing the
obligations, or has committed a breach of
property sold, he is barred from exacting
the contract of sale.
payment for its price.
Under this rule, rescission would bar an
(c) Foreclosure of Chattel Mortgage: If
action on the contract because it means
vendee fails to pay 2 or more installments
cancellation of the contractual
obligations between the parties. [Baviera] (i) If seller chooses this remedy, he
shall have no further action to
The unpaid seller’s right to rescind for
recover any unpaid balance, and
non-performance is not absolute. Not any stipulation to the contrary shall
allowed to rescind when: be void
(a) There are 3rd persons possessing the (ii) What Art 1484 (3) prohibits is
objects of the contract to whom no “further action against the
bad faith is imputable purchaser to recover any unpaid
(b) Breach is on slight or casual balance of the price;” and although
this Court has construed the word
The seller cannot unilaterally and “action” to mean “any judicial or
extrajudicially rescind a contract absent extrajudicial proceeding by virtue of
express stipulation to do so, except as which the vendor may lawfully be
provided in Art. 1597. enabled to exact recovery of the
supposed unsatisfied balance of
(4) Special rule for sale of movables by the purchase price from the
installments – Recto Law [Arts. 1484, purchaser or his privy,” there is no
1485] occasion at this stage to apply the
Applies in cases of: restrictive provision of the said
article because there has not yet
(a) Sale of movables in installment been a foreclosure sale resulting in
The rule is intended to apply to sales a deficiency. The payment of the
of movables, the price of which is sum of P1,250 of Sapinoso was a
payable in two or more installments, voluntary act on his part and did
but not to straight-term sales where not result from a “further action”
the price is payable in full, after instituted by Northern Motors.
making a down payment because the [Motors vs. Sapinoso, 1970]
law aims to protect improvident (iii) The purpose of the law is to remedy
buyers who may be tempted to buy the abuses committed in
beyond their means. [Levy Hermanos foreclosure of chattel mortgages. It
vs. Gervacio, 1939] prevents mortgagees from seizing
(b) Lease of personal property with the mortgaged property, buying it
option to buy at foreclosure sale for a low price
and then bringing the suit against
the mortgagor for a deficiency
judgment. The almost invariable
result of this procedure was that
the mortgagor found himself minus
the property and still owing
practically the full amount of his
 original indebtedness. [Bachrach
Motor Co., Inc. v. Millan, 1935] XI. Performance of
(iv) Remedies are ALTERNATIVE, not
cumulative. [Nonato vs. IAC, 1985]
Contract
Where the mortgagor unjustifiably
refused to surrender the chattel subject of A. DELIVERY OF THING SOLD
the mortgage upon failure of two or more
installments, or if he concealed the
(1) Sale of m ovables [Arts. 1522, 1537,
chattel to place it beyond the reach of the
1480]
mortgagee, that thereby constrained the
latter to seek court relief, the expenses (a) When Quantity less than expected
incurred for the prosecution of the case,
(i) Buyer may reject all
such as attorney's fees, could rightly be
awarded. [Borbon II v. Servicewide, 1996] (ii) Buyer may accept. If buyer
accepts with knowledge of
seller’s inability to deliver the rest
– buyer pays contract price
(iii) Buyer may accept, If Buyer has
used or disposed prior to knowing
seller’s inability to deliver the
rest, or buyer does not know of
seller’s inability to deliver the rest
– buyer pays fair value
(b) Quantity more than expected
(i) If divisible, buyer may accept only
the contracted quantity, and
reject the rest – buyer pays
contract price
(ii) Buyer may accept all – buyer pays
for all at contract rate
(iii) If indivisible, buyer may reject all
(c) Quality different or different goods
(i) If divisible, buyer may accept the
goods compliant with contract
and reject those that are not
(ii) If indivisible, buyer may reject all
[Art. 1522]
(d) Sale of specific mass of goods
In the sale of fungibles where the
measure or weight has not been
agreed upon nor is there a fixed rate
based upon a measurement, the
subject matter of the sale is a
determinate object – the specific
mass; seller is merely required to
deliver such mass even if actual
 quantity falls short of parties’ (ii) There is no change in price even if
estimate [Art. 1480] area or number turns out to be
greater or lesser than that stated
(e) Delivery by installments
[Art. 1542]
(i) By default, buyer is not bound to
(iii) Exception: when the excess or
accept delivery of goods by
deficiency is no longer reasonable
installments
[Asian v Jalandoni, 1923]
(ii) In a contract of delivery by
(iv) Exception to the exception: when
installment to be paid by
buyer expressly assumes risk on
installment as well, delay or
actual area of the land. [Garcia v
breach may not necessarily mean
Veloso, 1941]
breach of the entire contract;
depending on the circumstances, (v) If the price per unit or measure is
breach may be severable and the not provided for in the contract,
aggrieved party is entitled to then the rules of lump sum sale
damages and not rescission. [Art. should prevail. [Sta. Ana v
1583] Hernandez, 1966]
(2) Sale of im m ovables [Arts. 1539, 1543] If sale for lump sum, the cause of the
(a) Sale at a fixed rate per unit of contract is the thing sold,
measure independent of number/measure.
The law presumes that the purchaser
(i) Seller bound to deliver entire
land, i.e., the entire area stated in had in mind a determinate price for
the contract. real estate and the ascertained area
and quality. The purchaser intended
(ii) If the area is less than that stated,
buyer may rescind or demand a to buy thing in entirety, not just any
proportionate reduction in price. unit of measure or number. [De Leon]
Buyer may only avail of rescission When there is conflict between the
if the area deficiency is 10% or area stipulated in the contract, the
more of total area [Art. 1539] area included within the stipulated
boundaries prevails, provided such
(iii) If a part of the land is not of the boundaries are certain, and no
quality stated in the contract, alteration thereof has been proven.
buyer may rescind or demand a
proportionate reduction in price.
Buyer may only avail of rescission (3) Inspections and Acceptance
if the inferior value of the part of Inspections
the land exceeds 10% of the price Right of Inspection – The buyer has
agreed upon. [Art. 1539] reasonable opportunity to examine the
(iv) If the area turns out to be greater goods upon delivery. If there is a
than that stated, buyer may stipulation that delivery is preconditioned
accept area included and reject on payment, then buyer has no right of
the excess or accept all and pay a inspection until he has paid. [Art.1584]
proportionate increase in price Exception: in case such right of
[Art. 1540] inspection is permitted by agreement or
(b) Sale for a lump sum usage of trade.
(i) Follows the same rule as the sale Acceptance
of a specific mass which is (a) Form
explained above
Express: buyer intimates acceptance
 Implied: Exceptions: Buyer cannot suspend
(i) Goods are delivered to the buyer and payment when:
he does any act in relation to the (a) Seller gives security for the return of
goods delivered that is inconsistent the price in a proper case
with the ownership of the seller.
(b) It has been stipulated that,
(ii) After the lapse of a reasonable time, notwithstanding any such
the buyer retains the goods without contingency, the buyer shall be
intimating to the seller that he has bound to pay [Art. 1590]
rejected them. [Art.1585]
(i) Suspension may continue until
(b) Effect of Refusal to Accept the seller has caused the
If buyer refuses to accept goods, having disturbance or danger to cease
the right to do so, he is not bound to (ii) However, a mere act of trespass
return them to the seller, it being shall not authorize the
sufficient that he notifies the seller of his suspension of the payment.
refusal to accept [Art.1590]
(i) If he voluntarily constitutes himself a (3) Sale of real property
depositary of the goods, he shall be
liable as such. [Art.1587] (a) In the sale of immovable property,
buyer may pay even beyond the
(ii) Unjust refusal to accept still results to expiration of the period agreed upon,
transfer of ownership. In such case, as long as no demand for rescission
title to the goods passes to the buyer of the contract has been made upon
from the moment they are placed at him either judicially or by a notarial
his disposal, except if ownership has act, despite a stipulation providing for
been reserved by the seller [Art.1588] ipso jure rescission [Art.1592]
(b) Mere failure to fulfill the contract
B. PAYMENT OF PRICE does not ipso facto entitle the
offended party to rescind. A judicial
or notarial act is necessary before
[Art. 1582]
rescission can take place, whether or
(1) Payment of interest: not automatic rescission has been
stipulated. A letter informing the
Buyer is liable for interest when:
buyer of automatic rescission is not
(a) Interest is stipulated; demand if such letter is not notarized.
[De Leon]
(c) Thing sold produces fruits or income;
(c) After demand, court may not grant
(d) Buyer is in default - interest accrues
him a new term [Heirs of Escanlar,
from the time of judicial or
et.al. v. CA, 1997]
extrajudicial demand for payment
(d) R.A. 6552 (Maceda Law) applies to
(2) Suspension of payments:
sale or financing of real estate on
General rule: Buyer may suspend installment [Rillo v. Court of
payment when: Appeals,1997]
(a) His ownership or possession of the (i) Buyer is awarded a grace period
thing is disturbed; OR of 1 month per year of
(b) He has reasonable grounds to fear installments paid or 60 days,
such disturbance by a vindicatory whichever is higher, within which
action or a foreclosure of mortgage he may pay without additional
interest.
 May be used once every 5 years of
the life of the contract or any of XII. Warranties
its extensions
A statement or representation made by the
(ii) If contract is to be cancelled, seller contemporaneously and as part of the
seller must first: contract of sale, having reference to the
(1) Give a 30-day notice of character, quality, or title of the goods, and
cancellation, and by which he promises or undertakes to ensure
that certain facts are or shall be as he then
(2) Refund cash surrender value represents.
(CSV) to buyer;
Not every false representation voids the
(3) CSV is equivalent to 50% of contract, only those matters substantially
total payments made affecting the buyer’s interest, not matters of
including deposits, options opinion, judgment, probability, or expectation.
and down-payments plus 5% When the buyer undertakes his own
for every year in excess of 5 investigation, and the seller does nothing to
years of the life of the prevent it from being as full as the buyer
contract or any of its chooses, the buyer cannot afterwards allege
extensions. misrepresentations. [Songco v. Sellner, 1917]
Cancellation of the contract under Section 4 Condition vs. W arranty
of R.A. 6552 as a two-step process. First, the
seller should extend the buyer a grace period Condition Warranty
of at least 60 days from the due date of the Pertains to and Goes into the
installment. Second, at the end of the grace affects the existence performance of an
period, the seller shall furnish the buyer with of the obligation obligation and may,
a notice of cancellation or demand for in itself, be an
rescission through a notarial act, effective 30 obligation
days from the buyer‘s receipt thereof. [Jestra
Development v. Pacifico, 2007] Non-happening does Non-fulfillment
not amount to breach constitutes breach of
of contract contract
Must be stipulated Stipulation or
operation of law
May attach either to Always relates to the
the seller’s duty to subject matter or the
deliver thing or some seller’s obligations
other circumstance as to the subject
matter

If seller has promised that the condition

should happen or be performed, the buyer
may treat the nonperformance of the
condition as a breach of warranty. [Art.1545]

A. EXPRESS WARRANTIES
For there to be express warranty, the
following requisites must concur: (APIR)
(1) An affirmation of fact or any promise
relating to the thing sold;
(2) The natural tendency of such affirmation Express W arranty vs. False
or promise is to induce the buyer to buy; Representation
(3) The buyer buys the thing relying thereon. Express Warranty False Representation
[Art. 1546]
Concealment of facts When concealment
(4) Made before the sale not upon delivery or does not necessarily of facts comes with
any other point amount to false an active
An express warranty can be made by and also representation misstatement of fact
or a partial
be binding on the seller even in the sale of a
statement of fact
second hand article. [Moles v. IAC, 1989]
such that
withholding of that
Express W arranty vs. unsaid portion
Dealer’s/Trader’s Talk makes that which is
stated absolutely
Dealer’s or Trader’s false
Express Warranty
Talk
What is specifically Affirmation of the
However, buyer who
represented as true in value of the thing or
fails to inspect
said document cannot statement of only
condition of property
be considered as the seller’s opinion is
despite ample
mere dealer's talk. not a warranty
opportunity to do so
[Moles v. IAC, 1989] unless:
when there is no
1) The seller made it opposition on the
as an expert; part of seller to
2) It was relied upon inspect cannot later
by the buyer. on allege false
[Art.1546] representation. [Phil
Mftg Co. v Go Jucco,
3) Ordinarily, what 1926]
does not appear on
the face of the
written instrument Reason: buyer’s duty
[Moles v. IAC, 1989] to inspect remains
despite false
representation by
the seller; he has the
duty to exercise due
diligence.

B. IMPLIED WARRANTIES
[ART. 1547]
An implied warranty is derived by law by
implication or inference from the nature of
the transaction or relative situation, or
circumstances of the parties, irrespective of
any intention of the seller to create it. [De
Leon]
(1) Implied Warranty of Title B.2. IMPLIED WARRANTY AGAINST
(2) Implied Warranty against Encumbrance/ ENCUMBRANCE/NON-APPARENT
Non-Apparent Servitudes SERVITUDES
Requisites for breach:
(3) Implied Warranty against Hidden Defects
[Art. 1547] (1) Thing sold is an immovable
(a) Implied warranty as to Merchantable (2) Burden or servitude encumbering the
Quality and Fitness of Goods thing sold is:
(b) Implied warranty against Redhibitory (a) Non-apparent to the naked eye
Defect in the Sale of Animals [Art.
(b) Not mentioned in the agreement
1572]
(c) Of such nature that it must be
(c) Quality and Fitness of Goods in Sale
presumed that the buyer would not
by Sample or Description
have bought it had he been aware of
(4) Other Warranties it
(d) Not recorded in the Registry of
Property unless there is an express
B.1. IMPLIED WARRANTY OF TITLE
warranty that the thing is free from
(1) Implied warranty arises by operation of all burdens and encumbrances
law and need not be stipulated in the [Art.1560]
contract of sale.
(2) Warranty of Seller’s Right to Sell: Seller
warrants his right to sell at the time the B.3. IMPLIED WARRANTY AGAINST
ownership is to pass. HIDDEN DEFECTS
Inapplicable to a sheriff, auctioneer, Requisites for breach:
mortgagee, pledgee, or other person (1) The defect renders the thing sold unfit for
professing to sell by virtue of authority in the use for which it was intended OR
fact or law. [Art. 1547] diminishes its fitness for such use to such
(3) Warranty against Eviction: seller warrants an extent that had the buyer been aware
that buyer, from the time ownership thereof, he would not have bought it or
passes, shall have and enjoy legal and would have paid a lower price;
peaceful possession of the thing. Its (2) The defect is not patent or visible;
requisites are:
(3) The buyer is not an expert who, by reason
(a) Buyer is deprived of the whole or a of his trade or profession, should have
part of the thing sold; known the defect
(b) Eviction is by final judgment (4) The seller is aware of the hidden fault or
(c) Final judgment based on a right prior defect, OR even if he is not aware thereof,
to the sale or an act imputable to the if there is no stipulation to the contrary
vendor [Art. 1566]
(d) Seller is summoned and made co- The buyer must also give notice of such
defendant in the suit for eviction at redhibitory defect within a reasonable time.
the instance of the buyer. [Power The use contemplated must be that which is
Commercial and Industrial Corp. v. CA, stipulated, and in absence of stipulation, that
1997] which is adopted to the nature of the thing,
and to the business of the buyer.
B.4. IMPLIED WARRANTY AS TO The following sales are void [Art. 1575]
MERCHANTABLE QUALITY AND FITNESS (1) Sale of animals suffering from contagious
OF GOODS diseases
Merchantable Quality
(2) Sale of animals unfit for the purpose for
(1) Where the goods are brought by which they are acquired as stated in the
description from a seller who deals in contract
goods of that description [Art.1562]
Veterinarian is liable if he fails to discover
(2) In a sale by sample, if the seller is a or disclose the hidden defect through
dealer in goods of that kind and the ignorance or bad faith. [Art 1576]
defect is not apparent on reasonable
examination of the sample [Art.1566] Seller liable if animal dies within 3 days
after its purchase due to a disease that
Warranty of merchantability is warranty that existed at the time of sale. [Art 1578]
goods are reasonably fit for the general
purpose for which the same are sold.
Warranty of fitness is warranty that goods are C. EFFECTS OF WARRANTIES
suitable for the special purpose of the buyer (1) Natural tendency is to induce buyer to
which will not be satisfied by mere fitness for purchase the subject matter
general purposes. (2) Buyer purchases subject matter relying
In a sale by sample, there is implied warranty thereon
that goods are free from defects not apparent (3) Seller liable for damages in case of
on reasonable examination of sample and breach
which render goods unmerchantable.
[Mendoza v. David, 2004]
“Fitness for a particular purpose”: Where the D. EFFECTS OF WAIVERS
buyer expressly or impliedly makes known to Only applicable to waiver of warranty against
the seller the particular purpose for which the eviction; parties may increase or decrease
goods are acquired AND it appears that the warranty against eviction but the effect
buyer relied on the seller’s skill or judgment depends on good/bad faith of the seller:
[Art.1562(1)]
(1) Seller in bad faith and there is warranty
against eviction – null and void
B.5. IMPLIED WARRANTY AGAINST (2) Buyer without knowledge of a particular
REDHIBITORY DEFECT IN THE SALE OF risk and made general renunciation of
ANIMALS warranty – not waiver but merely limits
[Art. 1572] liability of seller in case of eviction (pay
value of subject matter at the time of
Redhibitory defect – a hidden defect of
eviction)
animals of such nature that expert
knowledge is not sufficient to discover it, even (3) Buyer with knowledge of risk of eviction
in a case where a professional inspection has assumed its consequences and made a
been made waiver – vendor not liable
No warranty in case of [Art. 1574] (4) Waiver to a specific case of eviction –
wipes out warranty as to that specific risk
(1) Animals sold at fairs or public auctions
but not as to eviction caused by other
(2) Livestock sold as condemned reasons
One who purchases real estate with
knowledge of defect or lack of title cannot
claim he acquired title thereto in good faith,
as against true owner of land or of interest
therein. [J.M. Tuason v. CA, 1979]
The same rule must be applied to one who Effects of rescission
has knowledge of facts which should have
(a) Buyer no longer liable for price:
put him upon such inquiry and investigation
Entitled to the return of any part of price
as might be necessary to acquaint him with
paid, concurrently with or immediately
the defects in the title of his vendor. A
after an offer to return the goods
purchaser cannot close his eyes to facts
which should put a reasonable man upon his (b) If seller refuses to accept offer to
guard and then claim that he acted in good return goods: buyer deemed as bailee for
faith under the belief that there was no defect seller and has right of lien to secure
in the title of the vendor. payment of part of price paid
(2) Implied W arranty against Eviction
[Arts. 1555, 1556]
E. BUYER’S OPTIONS IN CASE OF
BREACH OF WARRANTY Total Eviction Partial Eviction
[Art. 1599] Enforce liability for Enforce liability
(1) Express W arranty eviction (demand VICED)

Prescriptive period: Period specified OR

in express warranty OR 4 years, if no Demand from seller: Rescind within 6
period is specified (following the general (VICED) months from delivery
rule on rescission of contracts)
(a) Value of thing (a) If he would not
Rem edies sold at time of have bought the
eviction thing sold without
(a) Accept goods + demand diminution/
the part lost;
extinction of price (b)Income or fruits, if
he has been ordered (b) BUT he must
(b) Accept goods + damages
to deliver them to the return the thing
(c) Refuse to accept goods + damages party who won the without other
eviction suit encumbrances than
(d) Rescind (Refuse to accept or return or
those which it had
offer to return) + recover price paid (c) Costs of eviction
when he acquired it
suit and in a proper
Rescission not available when buyer:
case, suit against
(a) Knew of breach of warranty when he seller for warranty
accepted the goods without protest (d) Expenses of the
(b) Fails to notify the seller about contract, if buyer has
election to rescind within a reasonable paid them
period of time (e) Damages and
(c) Fails to return or offer to return the interests, and
goods to the seller in substantially a good ornamental
condition as they were when delivered, expenses, IF sale was
unless deterioration was due to breach of made in bad faith
warranty
Measure of damages: Difference Rules:
between value of goods at the time of
delivery and the value they would have (a) Buyer need not appeal from decision
had if they had answered to the warranty to hold seller liable for eviction
(b) When adverse possession
commenced before sale, but
prescription period completed after
transfer: seller is not liable
 (c) If property sold for nonpayment of Due to fortuitous
Due to hidden fault
taxes due and not made known to the event or fault of buyer
buyer before the sale: seller liable
price and expenses
(d) Judgment debtor also responsible for BUT NOT damages
eviction in judicial sales, unless it is
otherwise decreed in the judgment
Prescriptive period: 6 mos from
If there is waiver of warranty:
delivery
(a) Seller acted in bad faith: Waiver is
(5) Implied W arranty against
void, seller liable for eviction
Redhibitory Defects of Anim als
(b) Buyer made waiver without
Remedies
knowledge of risks of eviction: Seller
liable only for the value of the thing (a) Withdraw from contract + damages
sold at time of eviction
(b) Demand a proportionate reduction of
(c) Buyer made waiver with knowledge of the price + damages
risks: Seller not liable; buyer assumed
the consequences If sale is rescinded:

(3) Implied W arranty against (a) Buyer must return animal in the
Encum brances [Art. 1560] condition in which it was sold and
delivered
(a) Rescission: Within 1 year from
execution of deed of sale OR (b) Buyer shall be liable for injury due to
his negligence.
(b) Damages: Within 1 year from
execution of deed of sale or discovery of Prescriptive period: 40 days from
the burden or servitude delivery
(4) Implied W arranty against Hidden
Defects [Arts. 1567-1571]
F. WARRANTY IN SALE OF CONSUMER
If thing is not lost: GOODS
(a) Withdraw from contract (accion [RA 7394, Sec 68]
redhibitoria) + damages
If implied warranty accompanies express
(b) Demand a proportionate reduction of warranty, both will be of equal duration.
the price (accion quanti minoris) +
damages Express Warranty Implied Warranty

If thing is lost: (1) Demand repair (1) Retain the goods

within 30 days and recover damages
Due to fortuitous
Due to hidden fault Extendible for causes OR
event or fault of buyer
beyond the control of
(2) Reject the goods,
If seller aware of Demand: the warrantor
defect, buyer may cancel contract and
(a) Price paid minus (2) Demand refund of recover from seller so
demand:
value of thing when it price minus amount much of the purchase
(a) Return of price was lost directly attributable price as has been
(b) Refund of (b) Damages, if seller to the use of the paid + damages
expenses acted in bad faith consumer prior to the
discovery of the non-
(c) Damages conformity
If seller not aware of
defect:
Buyer may demand